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Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )


	Filed by the Registrant o
	Filed by a Party other than the Registrant o

	Check the appropriate box:


	o Preliminary Proxy Statement
	o Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
	x Definitive Proxy Statement
	o Definitive Additional Materials
	o Soliciting Material Pursuant to §240.14a-12


	x No fee required.
	o Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.


	3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):


	o Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

Nicor Inc.
P.O. Box 3014, Naperville, Illinois 60566-7014
630/305-9500

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

April 24, 2008

The Annual Meeting of Stockholders of Nicor Inc. (“Nicor”) will be held at The Northern Trust Company, 6th Floor, Assembly Room, 50 South LaSalle Street, Chicago, Illinois, on Thursday, April 24, 2008, at 10:30 a.m. Central Daylight Saving Time, for the following purposes, all as set forth in the accompanying proxy statement:


	1)	elect directors;

	2)	ratify the appointment of Deloitte & Touche LLP as Nicor’s independent registered public accounting firm for 2008;

	3)	amend Article Twelve of Nicor’s Articles of Incorporation to reduce the supermajority voting requirements to simple majority votes;

	4)	deletion of the text of Article Thirteen of Nicor’s Articles of Incorporation;

	5)	opt-out of sections of governing state law imposing a supermajority voting requirement;

	6)	amend Article Fourteen of Nicor’s Articles of Incorporation to reduce the supermajority voting requirement to a simple majority vote; and

	7)	conduct other business properly brought before the meeting.

Only stockholders of record on the books of Nicor at the close of business on February 26, 2008, will be entitled to vote at the meeting. The stock transfer books will not be closed.

Paul C. Gracey, Jr.

Senior Vice President, General Counsel

and Secretary

March 12, 2008

Admission to the 2008 Annual Meeting

If you are a registered stockholder and plan to attend, please detach the admission ticket from the top of the enclosed proxy card and bring it with you to the annual meeting. If you are a stockholder whose shares are held by a broker, bank or other nominee, please request an admission ticket by writing to our principal executive offices at: Nicor Inc., Investor Relations, P.O. Box 3014, Naperville, IL 60566-7014. Evidence of your stock ownership, which you can obtain from your broker, bank or nominee, must accompany your letter. If your request is received by April 7, 2008, an admission ticket will be mailed to you. All other admission tickets can be obtained at the registration table located at The Northern Trust Company lobby beginning at 9:30 a.m. on the day of the annual meeting. An admission ticket (or other proof of stock ownership) and some form of photo identification will be required for admission to the annual meeting. Attendance at the meeting will be limited to stockholders of record as of the record date and one guest per stockholder, and to guests of Nicor.

The Northern Trust Company is located at 50 South LaSalle Street, the northwest corner of LaSalle and Monroe Streets in Chicago, Illinois. The map below shows parking garages and lots in the immediate vicinity.

PROXY STATEMENT

This Proxy Statement is furnished in connection with the solicitation of proxies by the Board of Directors of Nicor Inc. (“Nicor”), P.O. Box 3014, Naperville, Illinois 60566-7014, for use at the Annual Meeting of Stockholders to be held on April 24, 2008. Nicor will bear the cost of making solicitations of proxies from its shareholders and will reimburse banks and brokerage firms for out-of-pocket expenses incurred in connection with this solicitation. In addition to solicitation by mail, officers and employees of Nicor may solicit proxies by telephone, by facsimile or in person. A copy of Nicor’s 2007 Annual Report, the Proxy Statement and the Form of Proxy are scheduled to be mailed on or about March 12, 2008 to all stockholders of record on February 26, 2008.

VOTING

As of February 26, 2008, Nicor had outstanding 45,135,001 shares of Common Stock and 12,018 shares of Preferred Stock. Each share, regardless of class, entitles the holder to one vote on each matter properly brought before the meeting. Stockholders have cumulative voting rights only for the election of Directors, whereby for each share of stock owned, a stockholder is entitled to one vote for each Director nominee and may accumulate the total number of votes (determined by multiplying the number of shares held by the number of Directors to be elected) and cast them all for a single nominee or distribute them among any number of nominees. The presence of a majority of the votes of the shares of Nicor entitled to vote on the matters to be considered will constitute a quorum for purposes of the meeting. If a quorum is present, in person or by proxy, the affirmative vote of the majority of the shares represented at the meeting and entitled to vote on the election of Directors will be required for the election of Directors. As a result, shares represented at the meeting and entitled to vote for Directors, but which withhold votes for Directors, will in effect be counted against the nominees, while shares held in the name of a broker which are represented at the meeting but not authorized to vote on this matter (“broker nonvotes”) will not affect the outcome. With respect to each of the proposals other than the election of Directors (i.e., Proposals 2-6), stockholders may vote in favor of the proposal or against the proposal, or abstain from voting. The affirmative vote of a majority of the shares represented at the meeting and entitled to vote thereon will be required for approval of Proposal 2. Shares represented at the meeting which abstain from voting on this proposal will have the effect of votes against the proposal, while broker nonvotes will not affect the outcome. The affirmative vote of two-thirds of the shares outstanding will be required for approval of Proposal 3. The affirmative vote of 80 percent of the shares outstanding will be required for approval of Proposals 4 and 6. The affirmative vote of a majority of shares outstanding will be required for approval of Proposal 5. With respect to each of Proposals 3-6, shares represented at the meeting which abstain from voting on the proposal and broker nonvotes will have the same effect as votes against the proposal.

You can revoke your proxy at any time before it is exercised by timely delivery to Nicor of a written statement that your proxy is revoked or of a properly executed, later-dated proxy, or by voting by ballot at the meeting. All shares entitled to vote and represented by properly completed proxies received prior to the meeting and not revoked will be voted at the meeting in accordance with the instructions set forth in the proxy. If you do not indicate how your shares should be voted on Proposal 1 or Proposal 2, the shares, if represented by a properly executed proxy, will be voted as the Board of Directors recommends. With respect to each of Proposals 3-6, if you do not indicate how your shares should be voted on the proposal, the shares, if represented by a properly executed proxy, will be counted as abstentions which will have the same effect as a vote against the proposal.

PROPOSAL 1 – ELECTION OF DIRECTORS

The Directors to be elected are to hold office until the next succeeding annual meeting of stockholders or until their successors are elected and qualified. In the event that any Director nominee shall be unable to serve, which is not now contemplated, the proxy holders may, but need not, vote for a substitute nominee. If stockholders withhold authority to vote for specific nominees, the proxies may accumulate such votes and cast them for other nominees. While the Board of Directors does not otherwise presently anticipate cumulating votes pursuant to proxies it obtains as a result of this solicitation, it reserves the discretionary authority to accumulate such votes and vote for less than all of the nominees named herein.

INFORMATION CONCERNING NOMINEES FOR ELECTION AS DIRECTORS

The names of the nominees are set forth below along with their business experience during the last five years and other directorships currently held, including directorships with companies whose securities are registered with the U.S. Securities and Exchange Commission. Each Director will also be a Director of Northern Illinois Gas Company, doing business as Nicor Gas Company (“Nicor Gas”), a subsidiary of Nicor.


		ROBERT M. BEAVERS, JR.; Age 64 Director since 1992 Business experience: Chairman and Chief Executive Officer since 2003, Best Diamond Packaging (Paper Products); Chairman and Chief Executive Officer since 2000, Best Harvest Bakeries (Commercial Bakeries); Senior Vice President, 1980-1999, McDonald’s Corporation (Restaurants).
		BRUCE P. BICKNER; Age 64 Director since 1996 Business experience: Independent consultant since 2002; formerly Chairman and Chief Executive Officer, 1985-2002, DEKALB Genetics Corporation (Agricultural Genetics and Technology); Executive Vice President, 1999-2001, and Co-President Global Seed Group, 1998-1999, Monsanto Company (Agricultural Chemicals and Seed).
		JOHN H. BIRDSALL, III; Age 64 Director since 1982 Business experience: Private investor; formerly President, 1982-1986, Birdsall, Inc., a subsidiary of Nicor. (Containerized Shipping).
		NORMAN R. BOBINS; Age 65 Director since April 2007 Business experience: President and Chief Executive Officer since 2008, Norman Bobins Consultants LLC (Independent Consulting); President and Chief Executive Officer, 2006-2007, ABN AMRO North America; Senior Executive Vice President, 2002-2007, ABN AMRO Bank N.V.; President and Chief Executive Officer, 2003-2007, LaSalle Bank Corporation; Chairman, President and Chief Executive Officer, 2000-2007, LaSalle Bank; and President, 2005-2007, LaSalle Bank Midwest (Financial Institutions). Directorships: AAR Corp.; Metal Management, Inc.


		BRENDA J. GAINES; Age 58 Director since 2006 Business experience: Retired since 2004; formerly Chief Executive Officer 2002-2004, President, 1999-2004, Executive Vice President – Corporate Card Sales, 1994-1999, Diners Club North America, a division of Citigroup (Charge/Credit Cards). Directorships: Federal National Mortgage Association (Fannie Mae); Office Depot, Inc; Tenet Healthcare Corporation.
		RAYMOND A. JEAN; Age 65 Director since 2005 Business experience: Chairman, President and Chief Executive Officer since 2001, Quanex Corporation (Manufacturer – Engineered Materials and Components). Directorships: AMSTED Industries, Inc.; Quanex Corporation.
		DENNIS J. KELLER; Age 66 Director since 1994 Business experience: Board Chair since 1987, Co-Chief Executive Officer 2002-2004 and Chief Executive Officer 1987-2002, DeVry Inc., as well as Board Chair since 2002, DeVry University, Inc. (Technical and Management Education). Directorship: DeVry Inc.
		R. EDEN MARTIN; Age 67 Director since 2005 Business experience: President since 1999, The Commercial Club of Chicago (Civic Group); Of Counsel 2005-2007, Partner 1975-2004, Sidley Austin LLP (Legal Services). Directorship: Aon Corporation.
		GEORGIA R. NELSON; Age 58 Director since 2005 Business experience: President and Chief Executive Officer since June 2005, PTI Resources, LLC (Independent Consulting); President 1999-2005, Midwest Generation EME, LLC (Independent Power Producer); and General Manager 2002-2005, Edison Mission Energy-Americas (Independent Power Producer). Directorship: Ball Corporation; Cummins Inc.


		JOHN RAU; Age 59 Lead Director; Director since 1998 Business experience: President and Chief Executive Officer since 2002, Miami Corporation (Private Asset Management); Chairman, 2000-2002, Chicago Title and Trust Company Foundation (Charitable Foundation); President and Chief Executive Officer, 1997-2000, Chicago Title Corporation (Financial Services). Directorships: First Industrial Realty Trust, Inc.; Wm. Wrigley Jr. Company.
		RUSS M. STROBEL; Age 55 Director since 2004 Business experience: Chairman of the Board since November 2005, Chief Executive Officer since March 2005, President since 2002, Executive Vice President, General Counsel and Secretary, January 2002 - October 2002, Senior Vice President, General Counsel and Secretary, December 2000 - January 2002, Nicor, as well as Chairman since November 2005, Chief Executive Officer since 2003, President since 2002, Executive Vice President, General Counsel and Secretary, January 2002 - October 2002, Senior Vice President, General Counsel and Secretary, December 2000 - January 2002, Nicor Gas Company.

The Board of Directors unanimously recommends that you vote FOR all the nominees listed above.

The following Directors, who have reached the retirement age for Directors specified in Nicor’s Corporate Governance Guidelines, are not standing for reelection to the Board in 2008:

Thomas A. Donahoe; Age 72

Director since 1998

Business experience: Retired since 1996; formerly Partner, 1970-1996, as well as Managing Partner – Operation – Audit Practice, 1995-1996 and Vice Chairman, 1988-1995, Price Waterhouse LLP (Accounting and Consulting Services).

Directorship: Andrew Corporation.

John F. Riordan: Age 72

Director since 2001

Business experience: Retired since 2005; formerly President and Chief Executive Officer, 2000-2005, Gas Technology Institute (Not-For-Profit Research and Education); Vice Chairman, 1998-1999, KN Energy, Inc. (Integrated Natural Gas); President and Chief Executive Officer, 1988-1998, Midcon Corp. (Natural Gas Pipeline). Directorship: National Fuel Gas Company.

DIRECTOR INDEPENDENCE

The Board of Directors has adopted standards for Director independence (Appendix A to this proxy statement) for determining whether a Director is independent from management. These standards are based upon the listing standards of the New York Stock Exchange and applicable laws and regulations. The Board of Directors has affirmatively determined, based on these standards, that the following Directors, all of whom are standing for election to the Board except for Mr. Donahoe and Mr. Riordan, are independent: Messrs. Robert M. Beavers, Jr., Bruce P. Bickner, Norman R. Bobins, John H. Birdsall, III, Thomas A. Donahoe, Raymond A. Jean, Dennis J. Keller, R. Eden Martin, John Rau and John F. Riordan, Ms. Brenda J. Gaines and Ms. Georgia R. Nelson. Mr. Bobins is a former senior executive vice president of ABN AMRO Bank N.V. (“ABN AMRO”). ABN AMRO is a lender and agent under two credit agreements with Nicor and Nicor Gas. A subsidiary of ABN AMRO also leases equipment to a Nicor subsidiary. See Transactions with Related Persons for additional information regarding these transactions. The Board considered these transactions in making its affirmative determination that Mr. Bobins is independent. Mr. Martin is a trustee of the United Way of Greater Chicagoland, a not-for-profit organization. Nicor made approximately $458,000 in contributions to United Way in 2007. The Board considered this information in making its affirmative determination that Mr. Martin is independent. The Board of Directors has also determined that the

only Director who is standing for election to the Board and is not independent is Mr. Russ M. Strobel, Chairman, President and Chief Executive Officer of Nicor. Accordingly, 10 of the 11 Director nominees are independent. The Board has also determined that its Audit Committee, Compensation Committee and Corporate Governance Committee are composed entirely of independent Directors.

EXECUTIVE SESSIONS

Nicor’s corporate governance guidelines provide that non-employee Directors will meet at least annually in executive session without management Directors or management present. In addition, the independent Directors will meet at least three times per year in executive session without management Directors, non-independent Directors or management present. These sessions will take place prior to or following regularly scheduled Board meetings.

The Chairman of the Corporate Governance Committee acts as Lead Director to facilitate communication with the Board and presides over regularly conducted executive sessions where the Chairman of the Board is not present. The Lead Director and each of the other Directors communicate regularly with the Chairman of the Board regarding appropriate agenda topics and other Board-related matters. Security holders may communicate with the Board of Directors by sending correspondence to the Senior Vice President, General Counsel and Secretary, Nicor Inc., P. O. Box 3014, Naperville, Illinois 60566-7014. The Senior Vice President, General Counsel and Secretary will then submit the correspondence to the Board. Interested parties may communicate directly with the Lead Director by sending correspondence to the Chairman of the Corporate Governance Committee, Board of Directors, Nicor Inc., P. O. Box 3014, Naperville, Illinois 60566-7014.

BOARD AND COMMITTEE MEETINGS

The Nicor Board has an Audit Committee, a Compensation Committee and a Corporate Governance Committee. During 2007, there were five meetings of the Board of Directors, five meetings of the Audit Committee, five meetings of the Compensation Committee and four meetings of the Corporate Governance Committee. All incumbent Directors attended 80% or more of the aggregate number of meetings of the Board and Committees on which they served. Directors are expected to attend Nicor’s Annual Meeting of Stockholders and all were in attendance at the April 26, 2007 meeting except Mr. Birdsall.

The charters, which include the functions and responsibilities, for each of the Audit, Compensation and Corporate Governance Committees, as well as Nicor’s Corporate Governance Guidelines and Code of Ethics can be found under Corporate Governance in the Investor Section on Nicor’s Web site at www.nicor.com. Any of the foregoing documents are available in print to any stockholder upon request. Requests may be made in writing to Nicor’s Senior Vice President, General Counsel and Secretary.

COMMITTEES OF THE BOARD OF DIRECTORS

The members of the Audit Committee are Messrs. Bickner (Chairman), Bobins, Donahoe and Martin and Ms. Nelson. Mr. Donahoe is not standing for reelection to the Board in 2008. The Audit Committee is responsible for, among other things, reviewing the operation of Nicor’s internal accounting and audit processes, and reviewing the independence, qualifications and performance of the independent registered public accounting firm. Additional information regarding the Audit Committee is included in this proxy statement under the caption “Audit Committee Report.”

The members of the Compensation Committee are Messrs. Beavers, Birdsall, Jean, Keller (Chairman) and Rau. The Committee is composed of outside directors, none of whom has interlocking relationships with Nicor and all of whom meet the independence requirements of the New York Stock Exchange. The Committee is responsible for, among other things, reviewing and approving or, where appropriate, making recommendations to the Board of Directors relating to executive salaries and benefits. The Committee operates under a written charter adopted by the Board of Directors, which can be found under Corporate Governance in the Investor Section of Nicor’s Web site at www.nicor.com. Additional information regarding the Compensation Committee is included in this proxy statement under the caption “Compensation Committee Report.”

The members of the Corporate Governance Committee are Messrs. Donahoe, Rau (Chairman) and Riordan and Ms. Gaines. Mr. Donahoe and Mr. Riordan are not standing for reelection to the Board in 2008. The Corporate Governance Committee has responsibility for, among other things, (i) developing criteria for selecting directors; (ii) identifying individuals qualified to become members of the Board of Directors and recommending director nominees for the next Annual Meeting of Stockholders; and (iii) developing and recommending to the Board corporate governance guidelines applicable to Nicor. The Corporate Governance Committee will consider written recommendations from shareholders of Nicor regarding potential nominees for election as directors. To be considered for inclusion in the slate of nominees proposed by the Board at the next Annual Meeting of Stockholders of Nicor, such recommendations should be received in writing by the Senior Vice President, General Counsel and Secretary of Nicor no later than November 13, 2008. The Board, in approving (and, in case of vacancies, appointing) such candidates, takes into account many factors, including, at a minimum, size and composition of the Board, the ability to make independent analytical inquiries, general understanding of marketing, finance and other elements relevant to the success of a publicly-traded company in today’s business environment, understanding of Nicor’s businesses on a technical level, other board service, educational and professional background, the possession of fundamental qualities of intelligence, honesty, good judgment, high ethics and standards of integrity, fairness and responsibility, and the diversity of the Board. The Board evaluates each individual in the context of the Board as a whole, with the objective of assembling a group that can best perpetuate the success of the business and represent shareholder interests through the exercise of sound judgment using its diversity of experience in these various areas. The Corporate Governance Committee will not evaluate nominees proposed by shareholders any differently than other nominees to the Board.

DIRECTOR COMPENSATION

DIRECTOR COMPENSATION TABLE

Annual compensation for non-employee Directors for 2007 was comprised of the following components: cash compensation, consisting of annual retainer, meeting and committee fees; and a cash award equal to the market value of 1,200 shares of Nicor Common Stock. Each of these components is described in more detail below. The total compensation paid in 2007 to our non-employee Directors is shown in the following table.


					Change in
					Pension
					Value and
	Fees				Nonqualified
	Earned				Deferred
	or Paid in		Stock		Compensation		Total
Name	Cash ($)		Awards ($)(1)		Earnings ($)(2)		($)

Robert M. Beavers, Jr.		64,500		50,496		263		115,259
Bruce P. Bickner		76,000		50,496		3,167		129,663
John H. Birdsall, III		70,500		50,496		78,293		199,289
Norman R. Bobins		44,250		50,496		0		94,746
Thomas A. Donahoe		69,000		50,496		0		119,496
Brenda J. Gaines		63,000		50,496		0		113,496
Raymond A. Jean		64,500		50,496		644		115,640
Dennis J. Keller		69,500		50,496		422		120,418
R. Eden Martin		64,500		50,496		2,762		117,758
Georgia R. Nelson		64,500		50,496		2,654		117,650
John Rau		75,500		50,496		0		125,996
John F. Riordan		63,000		50,496		0		113,496


(1)		The amounts shown are equal to the value of 1,200 shares of Nicor Common Stock issued under the Directors Stock Value Plan, valued at the closing price on September 4, 2007 of $42.08 per share. All 2007 awards issued under the Directors Stock Value Plan became fully vested on that date.


(2)		Includes interest paid in excess of market rates for the interest equivalent option of the Directors Deferred Compensation Plan (Mr. Bickner, Mr. Jean, Mr. Martin and Ms. Nelson), Capital Accumulation Plan (Mr. Birdsall), as well as the increase in pension value under the Directors Pension Plan (Mr. Beavers and Mr. Keller).

ANNUAL BOARD/COMMITTEE RETAINER AND MEETING FEES

For service on the Boards of Nicor and Nicor Gas, non-employee Directors receive an annual retainer of $50,000, plus a $1,500 fee for each Board, Committee and stockholders meeting attended. Chairmen of the Audit, Compensation and Corporate Governance Committees are paid an additional retainer of $15,000 per year. In addition, Mr. Birdsall serves on the Birdsall, Inc. Board and receives a $1,500 fee for each meeting attended.

DIRECTORS STOCK VALUE PLAN

Under the Directors Stock Value Plan, each non-employee Director receives a cash award on the first business day of the fifth month following their re-election/election to the Board equal to the then market value of 1,200 shares of Nicor Common Stock. Pursuant to an annual election of the Director, such amount may be received half in the form of shares of Nicor Common Stock and the other half in cash, or may be deferred beginning in 2008 into the Deferred Compensation Plan. In 2007, each Director elected to receive half of the cash award in the form of shares of Nicor Common Stock, except for Mr. Bickner and Mr. Riordan who received all cash. The cash award was calculated based on the closing price of Nicor Common Stock on September 4, 2007 of $42.08 per share.

DEFERRED COMPENSATION PLAN

Directors may elect to defer the payment of retainers, fees and Directors Stock Plan awards. Such deferrals are credited with earnings using an interest equivalent option or a share unit option at the election of the Director. The interest equivalent option accrues interest quarterly at a prime interest rate. In 2007, the average prime interest rate for the interest equivalent option was 8.125%. Under the share unit option, deferred amounts are converted into share units based on the market price of Nicor Common Stock at the deferral date, with amounts equal to dividends and distributions paid on Nicor Common Stock during the interim converted to additional share units based on then-current market prices for Nicor’s Common Stock. At retirement, the number of share units in a Director’s account will be converted to interest equivalent units at the then-current market price of Nicor Common Stock and will continue to earn interest until distributed to the Director. A Director may elect to defer payments from his or her account for up to five years subsequent to retirement and to receive payment of his or her account balance in quarterly installments over periods of up to 10 years. Once each year, a Director may switch all or part of the deferred balance between the interest equivalent option and the share unit option. Non-employee Directors as a group received 14,454 share units for compensation deferred and dividends paid during 2007, with an average price per share of $44.71.

CAPITAL ACCUMULATION PLAN

Under the terms of the Capital Accumulation Plan, John H. Birdsall, III deferred a portion of his salary during his employment with Nicor in 1984 and 1985. The deferred amounts earn interest at a rate of 21% per annum. At age 65, Mr. Birdsall will begin receiving installment distributions from the Plan. No other Directors participate in the Capital Accumulation Plan.

DIRECTORS PENSION PLAN

Effective May 3, 1995, the Directors Pension Plan was discontinued for any new non-employee Directors and the accrual of additional benefits ceased. Only those non-employee Directors who were participants prior to May 3, 1995 continue in the Plan – including current Directors Robert M. Beavers, Jr. and Dennis J. Keller. At retirement, the Director will be entitled to annual cash payments of $25,000 over a period of years equal to their participation in the Plan. The discount rate applied in quantifying the present value of the accrued benefit is the same as that rate applied to the Nicor Companies Pension and Retirement Plan.

INSURANCE PLAN

Non-employee Directors also receive insurance coverage up to a maximum amount of $500,000, payable in the event of accidental death or disability. Coverage under this Plan ceases on the date the Director terminates or retires from the Board of Directors.

NON-EMPLOYEE DIRECTOR STOCK OWNERSHIP GUIDELINES

Stock ownership guidelines have been established for non-employee Directors to align their interests with those of the shareholders and to strengthen their focus on activities that create shareholder value. Each non-employee Director is required to own Nicor shares or share equivalents equal to at least three times the Director’s annual retainer plus fees. Non-employee Directors are asked to comply with these guidelines within five years of becoming a Director.

SECURITY OWNERSHIP OF MANAGEMENT

Set forth below is the number of shares of Nicor Common Stock beneficially owned by each of Nicor’s Directors and the executive officers named in the Summary Compensation Table and by all Directors and executive officers as a group as of February 26, 2008, with sole voting and investment power except as otherwise noted, and share units held by Directors under the Directors’ Deferred Compensation Plan and by executive officers under the Stock Deferral Plan. No Director or executive officer beneficially owns more than 1% of the outstanding shares of Common Stock and no Director or executive officer owns any shares of Preferred Stock.


	Shares			Directors’
	Beneficially			Deferral
Name of Beneficial Owner	Owned			Plan Units (1)

Robert M. Beavers, Jr.		15,860			0
Bruce P. Bickner		13,929			0
John H. Birdsall, III		331,241			0
Norman R. Bobins		600			0
Daniel R. Dodge		23,793	(2)		0
Thomas A. Donahoe		9,483	(3)		18,335
Brenda J. Gaines		1,206			0
Paul C. Gracey, Jr.		37,094	(2)(3)		0
Richard L. Hawley		60,669	(2)(3)		0
Raymond A. Jean		4,503			3,518
Dennis J. Keller		5,000			24,459
R. Eden Martin		4,486			2,312
Rick Murrell		64,996	(2)(3)		0
Georgia R. Nelson		1,251			0
John Rau		3,900			15,572
John F. Riordan		2,920	(3)		10,563
Russ M. Strobel		303,939	(2)(3)		0
Directors and Executive Officers as a Group (23 persons)		983,326	(2)(3)
Percentage of class		2.2


1)		Share units held in the Directors’ Deferred Compensation Plan and payable in cash. The value of these share units depends directly on the performance of Nicor Common Stock.

2)		Includes shares or share equivalents held pursuant to employee benefit plans as follows: (a) shares individuals have a right to acquire or will have the right to acquire within 60 days through the exercise of stock options: Mr. Dodge, 14,400; Mr. Gracey, Jr., 28,400; Mr. Hawley, 42,600; Mr. Murrell, 24,800; Mr. Strobel, 222,500; and all executive officers as a group, 390,700; (b) shares held by the Nicor Savings Investment and Thrift Trust


		or Birdsall Retirement Savings Plan for: Mr. Dodge, 2,147; Mr. Hawley, 2,048; Mr. Murrell, 36,638; and all executive officers as a group, 41,647; (c) share unit equivalents credited to their accounts under the Stock Deferral Plan, which enables officers to defer, and convert, up to 50 percent of their cash awards from the Annual Incentive Compensation Plan or Long Term Incentive Plan into Nicor Common Stock, the receipt of which is deferred: Mr. Hawley, 3,815; Mr. Strobel, 31,536; and all executive officers as a group, 50,872; and (d) restricted and deferred restricted shares and units granted under the 1997 Long-Term Incentive Plan which can be forfeited under certain conditions: Mr. Dodge, 4,080; Mr. Gracey, Jr., 4,520; Mr. Hawley, 9,400; Mr. Murrell, 2,120; Mr. Strobel, 24,410; and all executive officers as a group, 59,590.

3)		Includes shares held jointly or in common with a spouse, by a spouse or in trust as follows: Mr. Donahoe, 9,483; Mr. Hawley, 2,707; Mr. Gracey, Jr., 4,120; Mr. Murrell, 1,438; Mr. Riordan, 2,920; Mr. Strobel, 25,493; and all Directors and executive officers as a group, 46,270.

TRANSACTIONS WITH RELATED PERSONS

During 2007, Mr. Bobins was a senior executive vice president of ABN AMRO and the president and chief executive officer of ABN AMRO North America and LaSalle Bank Corporation. Since January 1, 2007, Nicor and ABN AMRO are parties to the following transactions. Nicor and Nicor Gas are parties to a five-year credit agreement with a group of lending institutions that provides for an aggregate lending commitment of up to $600 million. Nicor Gas is also a party to 210-day credit agreement with a group of lending institutions that provides for an aggregate lending commitment of up to $400 million. ABN AMRO is one of several participating lenders under both of these credit agreements. Under the five-year agreement, ABN AMRO serves as a documentation agent and its lending commitment is up to $72 million. Under the 210-day agreement, ABN AMRO serves as syndication agent and its lending commitment is up to $73 million. As neither Nicor nor Nicor Gas has borrowed any money under either of the credit agreements, no indebtedness was outstanding under either agreement during 2007 and no interest was paid or payable. During 2007, Nicor paid ABN AMRO $139,000 as arrangement and facility fees under these two credit agreements. Birdsall, Inc., a subsidiary of Nicor, is the lessee under equipment lease transactions with LaSalle National Leasing Corp. The leases extend through 2012 and provide for installment lease payments. The total payments under the leases from January 1, 2007 until their termination are approximately $2,869,000.

The Corporate Governance Committee of Nicor’s Board of Directors has adopted a written procedure to be followed in connection with related person transactions involving Nicor. The above transactions were reviewed, determined to be fair and reasonable to Nicor, and ratified by the Corporate Governance Committee in accordance with those procedures. Under the procedure, the related person transactions involving executive officers, Directors or Director nominees of Nicor are to be reviewed by the Corporate Governance Committee, which must determine whether to approve or ratify them. Under the procedure, a related person transaction is any transaction in which Nicor participates and the amount involved exceeds $120,000 and in which an executive officer, Director or Director nominee had or will have a direct or indirect material interest. In evaluating a related person transaction, the Corporate Governance Committee considers the relationship or interest of the executive officer, Director or Director nominee involved and the material facts of the transaction. In approving or ratifying the transaction, the Corporate Governance Committee must determine that the transaction is fair and reasonable to Nicor.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Ownership and transactions in Nicor stock by Directors and executive officers of the company are required to be reported to the Securities and Exchange Commission pursuant to Section 16(a) of the Securities Exchange Act of 1934. Nicor believes that during 2007 its Directors and executive officers complied with all such filing requirements.

BENEFICIAL OWNERSHIP OF COMMON STOCK

The following table sets forth information regarding any person or institution that is known to Nicor to be the owner of more than five percent of Nicor’s Common Stock. This information is as of December 31, 2007, which was the date of the most recent publicly available information at the time of preparation of this proxy statement.


	Number of
Name and Address of Beneficial Owner	Common Shares Owned		Percent of Class

Barclays Global Investors, NA(1)		5,167,351		11.45	%
45 Fremont Street
San Francisco, CA 94105


(1)		Barclays Global Investors, NA, filed a Schedule 13G with the U.S. Securities and Exchange Commission on February 6, 2008, reporting the beneficial ownership as of December 31, 2007 for the following: Barclays Global Investors, NA (sole voting power – 861,731 shares, sole disposition power – 1,026,128 shares); Barclays Global Fund Advisors (sole voting and disposition power – 4,047,847 shares); Barclays Global Investors, Ltd. (sole voting and disposition power – 56,467 shares); Barclays Global Investors Canada Limited (sole voting and disposition power – 15,975 shares); and Barclays Global Investors Australia Limited (sole voting power – 20,933 shares, sole disposition power – 20,934 shares).

COMPENSATION COMMITTEE REPORT

The Committee has reviewed and discussed the 2007 Compensation Discussion and Analysis (CD&A) with management. Based on this review and discussion, the Committee recommended to the Board of Directors that the CD&A be included in Nicor’s Annual Report on Form 10-K and Proxy Statement.

Compensation Committee of the Board of Directors of Nicor Inc.


Dennis J. Keller, Chairman	Robert M. Beavers, Jr.	John H. Birdsall, III	Raymond A. Jean	John Rau

EXECUTIVE COMPENSATION

COMPENSATION DISCUSSION AND ANALYSIS

PHILOSOPHY AND OVERVIEW OF COMPENSATION

Nicor’s compensation program is designed to support its business strategy and to be one component in Nicor’s “total rewards” approach. Nicor’s compensation program supports the business strategy by being structured to emphasize financial and operating performance and recognize strategic and operating issues, as each specifically relates to Nicor’s business objectives. In addition, Nicor’s executive compensation is designed to assure that we have capable management motivated to serve shareholder, customer and employee interests.

The goals of Nicor’s executive compensation program are to:


	•	attract, motivate and retain top talent;

	•	provide competitive, market-based plans;

	•	align leadership and shareholder interests;

	•	link rewards with business performance; and

	•	reinforce Nicor’s culture that promotes a successful work environment, helps us achieve business results and supports Nicor’s shared values.

Nicor’s executive compensation program forms a part of Nicor’s “total rewards” approach, which includes intangible benefits of employment with the Company, such as work/life balance, support of community involvement and training opportunities. These total reward intangibles are also considered when setting appropriate levels of tangible compensation, such as salary and incentives.

The compensation program for Nicor’s chief executive officer, chief financial officer and the three most highly compensated officers (the “NEOs”) is discussed below.

The primary elements of Nicor’s 2007 compensation program are outlined in the following chart:


Element	Purpose	Characteristics
Base Salary	Fixed element of pay for an individual’s primary duties and responsibilities	Base salaries are reviewed annually and are set based on competitiveness versus the external market, individual performance and internal equity

Annual Incentive	Paid only upon the achievement of specified annual corporate and/or subsidiary financial or operating goals	Performance-based cash opportunity; amount earned will vary relative to the targeted level based on actual results achieved

Nicor Long-Term Incentive - Performance Cash Units (PCUs)	Paid only upon achievement of specific multi-year performance goals to align management and shareholder interests and reward key executives who have the ability to contribute materially to the long-term success of Nicor	Performance-based long-term cash opportunity; amounts earned/realized will vary from the target award based on relative total shareholder return compared to the companies in the Standard & Poor’s (S&P) Utilities Index over a three-year performance cycle

Nicor Long-Term Incentive - Restricted Stock Units/Restricted Stock/Deferred Restricted Stock	Plan designed to enhance executive stock ownership, align management and shareholder interests and provide an incentive for retention	Value of award grants is dependent upon competitive market pay levels; award vests at the end of a four-year period


Element	Purpose	Characteristics
Tropical Shipping Long-Term Incentive (for Tropical Shipping officers only)	Paid only upon achievement of a specific multi-year performance goal to reward key executives who have the ability to contribute materially to the long-term success of Tropical Shipping	Performance-based long-term cash opportunity; amounts earned/realized will vary from the target award based on return on operating assets over a three-year performance cycle

Employee Benefits	Provide for basic life and income security needs	Fixed component; retirement contributions tied to base salary only or base salary plus annual incentive, depending on the plan

Compensation Committee Role and Use of Consultants

The Compensation Committee of Nicor’s Board of Directors (the “Committee”) is responsible for setting and approving all compensation paid to Nicor’s executive officers and the Committee set and approved 2007 compensation for all NEOs except Mr. Murrell. The Committee has retained an independent consultant to assist it in setting such compensation. Towers Perrin (the “Consultant”) is engaged by and reports directly to the Committee. The Consultant works with the Committee in coordination with management on all aspects of executive rewards. Specifically, the Consultant provides assistance with:


	•	competitive market pay data gathering;

	•	summarizing and communicating market trends related to compensation program design; and

	•	advisory support related to executive pay issues.

In its deliberations, the Committee also meets with the Chief Executive Officer and other members of senior management, as appropriate, to discuss the application of competitive market surveys and incentive program design (pay and performance) relative to the particular structure and needs of Nicor. Specifically, management communicates with the Committee about annual incentive performance goals and targets, and business dynamics that influence pay decisions, including recruiting, retaining and motivating employees. However, management is not involved in the Committee’s final compensation deliberations.

Setting of Compensation

Target total compensation for Nicor’s NEOs is established by reference to competitive market data. Specifically, the Consultant gathers general survey data with respect to energy services and general industry companies’ compensation and data for peer companies of similar size to Nicor in terms of total revenue, as well as, other relevant market practices and trends. This information is then considered in reviewing the recommendations by management regarding the design of the executive pay program and is referred to in setting Nicor’s various elements of compensation. Each NEO’s total compensation is then generally targeted to the median of the competitive market data used in setting his compensation. In addition to reviewing the competitive market information, an executive’s target compensation can vary from the median to account for:


	•	overall corporate financial and operating performance;

	•	the executive’s performance;

	•	the executive’s individual responsibility and experience;

	•	internal pay equity; or

	•	the Chief Executive Officer’s recommendation (as applicable to NEOs other than Mr. Strobel).

Prior years’ awards and payout levels are not factored into the compensation decisions.

The compensation of each NEO, other than Mr. Murrell, is targeted to approximate the median of the survey data for energy services and general industry companies with respect to their position. These surveys reflect the

relevant labor markets in which Nicor competes for executive talent, and therefore make up the competitive market for these positions. In 2007, Mr. Strobel’s total compensation was also compared to the pay provided to the chief executive officers (“CEOs”) of the following companies, as disclosed in their 2006 proxy statements, as a secondary reference point:


Alliant Energy	National Fuel Gas	Peoples Energy	WGL Holdings
DTE Energy	New Jersey Resources	Questar	Williams Companies
Equitable Resources	NSTAR	Southwest Gas	Wisconsin Energy
Keyspan Energy	ONEOK	Western Gas Resources

The Committee has elected to review proxy data for CEOs within this peer group to assist the Committee’s understanding of the current competitive pay levels for the CEO position within Nicor’s industry. The review has historically been limited to the CEO position, as it is the most easily defined and identifiable position across companies. These companies are comparable in terms of size, industry and business operations to Nicor, and provide readily available compensation information for the chief executive officer position. The Committee reviews the composition of this group periodically, as warranted by changes in Nicor’s business and/or industry dynamics.

Mr. Strobel’s pay package is set by the Committee during executive session based on the Committee’s assessment of his individual performance and the financial and operating performance of Nicor. He does not play any role in determining his own compensation.

Mr. Murrell’s 2007 compensation, as the President of Nicor’s Tropical Shipping subsidiary, was set by Nicor’s Chief Executive Officer and approved by Tropical Shipping’s compensation committee.

Accordingly, as used in this Compensation Discussion and Analysis “competitive market data” and “competitive market” means:


	•	by reference to, general survey data with respect to energy services and general industry companies for all NEOs, other than Mr. Murrell;

	•	for Mr. Strobel, also the data for the peer group of companies listed above; and

	•	shipping industry and general industry surveys for Mr. Murrell.

For general survey data, the Committee reviews only aggregate data and does not review data specific to any individual company.

2007 COMPENSATION DISCUSSION

In 2007, consistent with its compensation philosophy for the NEOs, Nicor targeted total direct compensation (the sum of base salary, annual target incentive and long-term incentive target) to approximate the 50^th percentile of the relevant competitive market. To achieve the desired competitive target total direct compensation, Nicor sets each NEO’s base salary, target annual and long-term incentive award values to be near the 50^th percentile of the relevant competitive market. This approach creates some variation compared to the relevant competitive market by component of compensation, but supports Nicor’s philosophy of delivering a level of total compensation that is near the 50^th percentile.

As more fully discussed below, Mr. Murrell’s target long-term incentive value is established to approximate the 60^th percentile of his competitive market. As such, his target total direct compensation is slightly above the 50^th percentile. Generally, Nicor considers pay levels near +/− 15% of the median to be within the targeted range. For 2007, each NEO’s actual base salary, targeted total annual cash compensation and targeted total direct compensation was either within the target range of their competitive market or below.

The following is a discussion of these results with respect to each element of compensation, except that Mr. Murrell’s compensation is discussed separately from that of the other Nicor officers due to the differences in his compensation structure as set by Tropical Shipping.

Base Salary

Base salaries are reviewed annually and are set within a broad-band structure based on individual performance, competitiveness versus the external market, and internal equity. The market 50^th percentile data from the relevant competitive market serve as the market reference points against which executive pay is targeted.

Annual Incentives

Nicor’s financial performance is considered in determining the amount, if any, of awards earned under the annual incentive plans. These annual incentive opportunities are established as a percentage of an NEO’s base salary and are targeted, combined with such base salary, at approximately the 50^th percentile of the NEO’s competitive data, with the opportunity to earn more for superior performance or less for below-target performance. Actual annual incentive payments each year can range from 0% to 150% of the target opportunity.

The actual amount payable depends upon attainment of specified performance goals relating to net income for all the NEOs and for Mr. Dodge also on income before taxes for Nicor’s Other Energy Ventures (“OEV”). Net income was selected as the primary measure of corporate performance, as Nicor believes it is a comprehensive measure that aligns with shareholder interests and summarizes our achievement of budgeted operating and financial goals.

If actual performance for a given goal equals the targeted goal, then the NEO earns an incentive payout equal to 100% of his target opportunity of base salary. If a maximum performance is achieved, then the NEO can receive 150% of target opportunity. If performance for a given goal is below an established threshold amount, then no amount is payable. Following are the performance measures used for 2007 and actual performance results:


							Actual
	Threshold		Targeted		Maximum		Performance
Performance Measures*	Goal		Goal		Goal		Results		Payout%

Nicor Gas Net Income	$	49.4	$	61.7	$	74.0	$	61.6		99	%
Nicor Non-Utility Net Income	$	50.0	$	62.5	$	75.0	$	68.9		126	%
Other Energy Ventures Income	$	21.0	$	26.2	$	31.4	$	29.8		135	%


*		Dollar amounts are in millions. The net income performance measures are based on Nicor’s GAAP results, which are adjusted for certain items, principally the exclusion from income of mercury recoveries. The OEV Income target and actual goal results are both based on GAAP income before taxes for the OEV businesses except for Nicor Enerchange for which GAAP results are adjusted for fair value accounting versus accrual accounting for gas in storage and certain energy-related contracts.

For 2007, the target opportunity as a percentage of base salary for each of the Nicor NEOs, the weighting of each goal in determining their annual incentive and actual payout based on results achieved were as follows:


					Actual% of
	Targeted% of 2007			Weighting of Performance	2007 Base
Named Executive Officer	Base Salary			Measures	Salary Earned
Russ M. Strobel		90	%	65% Nicor Gas Net Income		97.6	%
				35% Non-Utility Net Income

Richard L. Hawley		55	%	65% Nicor Gas Net Income		59.6	%
				35% Non-Utility Net Income

Daniel R. Dodge		40	%	70% Other Energy Ventures Income		49.7	%
				30% Nicor Gas Net Income

Paul C. Gracey, Jr.		40	%	65% Nicor Gas Net Income		43.4	%
				35% Non-Utility Net Income

The Committee may make appropriate upward or downward adjustments to the Nicor annual incentive payments if, after taking into consideration all of the facts and circumstances of the performance period, it determines that adjustments are warranted. No upward or downward adjustments were made to the 2007 payments.

Long-Term Incentives

In 2007, Nicor targeted 50% of target long-term incentive compensation to the Nicor NEOs through performance cash units (“PCUs”) and 50% through time-vested restricted stock units (“RSUs”). This award mix was established based on:


	•	Nicor’s stated compensation principles to align leadership interests with shareholders;

	•	linking rewards with business performance;

	•	competitive market practices; and

	•	retention of key talent.

PCUs awarded in 2007 have a performance period of 2007 through 2009, with each performance unit valued at $1.00. Performance units are earned at the end of the three-year performance period depending on Nicor’s three-year total shareholder return (i.e., the value received by shareholders in increased stock price, as well as dividends) relative to the other companies in the S&P Utilities Index. The potential number of performance units earned can range from 0% to 200% of the number granted. A payout of 100% of the units granted is achieved when Nicor’s performance is at the 60th percentile of the total shareholder return for the companies in the S&P Utilities Index. Zero payout is made if Nicor’s performance is below the 25th percentile and 200% payout is made if Nicor’s performance is at the 90th percentile or higher. The Committee in its discretion may make downward adjustments to awards of performance units. No adjustments were made to the 2007 payments.

RSUs vest based on continued employment at the end of a four-year period, retirement, change in control, death or disability. Generally, at the time of vesting, shares of Nicor’s Common Stock are delivered to the NEO. However, except in the case of change in control, death or disability, Mr. Strobel’s shares are not delivered until six months following his separation of service. The delivery of Mr. Strobel’s stock is deferred until following his termination of employment as otherwise it is anticipated that the amount payable could exceed the limits on deductible, non-performance-based compensation under Section 162(m) of the Internal Revenue Code. Accordingly, in order to allow the payment of the RSUs to Mr. Strobel to be deductible to Nicor, they are deferred until after he is no longer an NEO.

Except in the case of grants made to newly hired executives as an inducement to employment, all equity grants are made only once during the year, at the regularly scheduled March meeting of the Committee.

Employee Benefits

The NEOs participate in health, welfare and qualified retirement programs available to all employees. Nicor also provides NEOs with the option to participate in, and accrue benefits under, various nonqualified retirement plans. The NEOs are also eligible to participate in deferred compensation arrangements, the Salary Deferral Plan and the Stock Deferral Plan. Participation in these nonqualified plans is intended to provide executives with the opportunity to accumulate benefits over time and is part of Nicor’s overall total rewards program. For a fuller explanation of these plans, see the narratives following the Pension Benefits Table, the Nonqualified Deferred Compensation Table and the Other Potential Post-Employment Payments narrative.

Change in Control Benefits

Nicor does not have employment or severance agreements. However, Nicor has entered into change in control agreements with all of the NEOs which provide severance and other benefits in the event that the executive’s employment is terminated without cause or by the executive due to a constructive termination in conjunction with a change in control event. In Mr. Strobel’s case, he is also eligible to terminate his employment for any reason during a 12-month period that begins 90 days after the change in control and be eligible for the severance and other benefits provided by his agreement.

These agreements are intended to accomplish the following objectives:


	•	reduce the distraction of the NEOs that would result from the personal uncertainties caused by a pending or threatened change in control,

	•	encourage the NEOs’ full attention and dedication to Nicor,

	•	provide the NEOs with compensation and benefit arrangements upon a change in control which are competitive with those of similarly situated corporations, and

	•	retain key talent.

The change in control agreements provide for severance and other benefits if the executive’s employment is terminated by the executive for “good reason” or by Nicor without “cause” during a period of 180 days prior to, and two years following, a change in control. For a description of the severance and other benefits that each NEO would receive under the terms of the change in control agreements, see the Other Potential Post-Employment Payments narrative.

In late 2007, the Committee reviewed the existing change in control agreements and consulted with the Consultant regarding market practices. The Committee determined that the terms and conditions of the agreements are in keeping with competitive market practices, the stated goals of Nicor’s compensation philosophy and Nicor’s overall total rewards philosophy.

Mr. Murrell’s Compensation Program

Mr. Murrell was designated as an executive officer by Nicor’s Board late in 2007. His 2007 compensation, which was established before he was designated as an executive officer, was set by Nicor’s Chief Executive Officer, based on competitive market data provided by the Consultant and recommendations of senior officers of Nicor, and was approved by Tropical Shipping’s compensation committee. Because of the differences in Tropical Shipping’s business from that of Nicor’s, the forms of compensation for Mr. Murrell differed from Nicor’s other NEOs.

For Mr. Murrell, the targeted annual incentive amount was 55% of his base salary. If performance is at target, Mr. Murrell receives 100% of his targeted annual incentive. If performance is at maximum or above, he would receive up to 190% of his targeted incentive. If a given goal is below threshold, then no amount is payable.

For 2007, his annual incentive award was based 80% on achieving an operating income goal of $47.4 million, and based 20% on achievement of other goals relating to Tropical Shipping’s business performance. The operating income goal was the only goal material to the determination of his annual incentive. The business performance goals were selected to create an incentive to focus on, and achieve, objectives related to 2007 business performance. Mr. Murrell’s actual annual incentive was 42.6% of his base salary based on Tropical Shipping’s operating income of $45.4 million and the results of his other goals.

In 2007, Mr. Murrell received a targeted long-term incentive award of 80% of his base salary. His targeted award was comprised of 70% through Tropical Shipping’s long-term cash incentive plan and 30% through Nicor’s long-term incentive plan.

Tropical Shipping’s long-term cash incentive plan provides Mr. Murrell with the opportunity to earn a percentage of his base salary at the end of a three-year performance period based on Tropical Shipping’s return on operating assets over such period. A payout of 100% of this target award is achieved if Tropical Shipping’s average return on operating assets, over the three-year period 2007-2009, is at least 18.4%. Zero payout is made if Tropical Shipping’s performance is below 14%; 200% payout is made if Tropical Shipping’s performance is 22.8% or higher.

As with the other NEOs, Mr. Murrell is eligible to participate in the full range of general employee benefits, and is covered by the same plans on the same terms, as provided to all full-time salaried Tropical Shipping employees. Mr. Murrell is also eligible to participate in the Nicor Stock Deferral Plan and the Capital Accumulation Plan.

In addition, Mr. Murrell has entered into a change in control agreement with Tropical Shipping for the same reasons, and with essentially the same terms and conditions, as the Nicor change in control agreements described

above, except that under his agreement, a change in control also occurs upon a change in control of Tropical Shipping.

STOCK OWNERSHIP GUIDELINES

Consistent with the Nicor’s philosophy that management interests should be aligned with shareholder interests, the Company requires that all officers retain Nicor’s Common Stock and stock equivalents at least equal in value to certain ownership levels. Executives have five years to achieve the required ownership levels. The 2007 stock ownership guidelines are as follows:


	Ownership Multiple
Executive	(of base salary)

CEO		3.0 times
CFO, EVPs, SVPs and Subsidiary President		1.5 times
Other Senior Officers		1.0 times

ACCOUNTING IMPACT AND TAX DEDUCTIBILITY OF COMPENSATION

The Committee reviews projections of the estimated accounting (pro forma expense) and tax impact of all material elements of the executive compensation program. Generally, an accounting expense is accrued over the requisite service period of the particular pay element (generally equal to the performance period) and Nicor realizes a tax deduction upon payment to the executive.

Section 162(m) of the Internal Revenue Code (“Section 162(m)”) generally provides that publicly held corporations may not deduct in any one taxable year certain compensation in excess of $1 million paid to the NEOs. To the extent that any cash compensation for any NEO, otherwise deductible for a particular tax year, would not be deductible in that year because of the limitations of Section 162(m), the Committee has mandated that such compensation will be deferred until it would be deductible; however, the Committee at its sole discretion may approve payment of non-deductible compensation from time to time if it deems circumstances warrant it.

Currently, the compensation programs for the PCUs are structured in a manner to be deductible under Section 162(m). In addition, as discussed above, Nicor has structured the payment of Mr. Strobel’s RSUs to be made generally after he is no longer subject to the restrictions on deductible compensation under Section 162(m).

SUMMARY COMPENSATION TABLE

The following table summarizes the total compensation of the Chief Executive Officer, the Chief Financial Officer, and the three other highest-compensated executive officers in 2007:


											Change in
											Pension Value
											and Nonqualified
									Non-Equity		Deferred
					Stock		Option		Incentive Plan		Compensation		All Other
			Salary		Awards		Awards		Compensation		Earnings		Compensation
Name & Principal Position	Year		($)(1)		($)(2)		($)(3)		($)(4)		($)(5)		($)(6)		Total ($)
R. M. Strobel		2007		694,308		468,198		0		692,996		38,247		136,668		2,030,417
Chairman, President and		2006		637,885		345,671		116,573		780,000		37,308		137,717		2,055,154
Chief Executive Officer of Nicor and Nicor Gas

R. L. Hawley		2007		396,077		176,624		0		238,590		5,708		78,616		895,615
Executive Vice President		2006		378,942		144,612		49,036		288,750		3,352		75,698		940,390
and Chief Financial Officer of Nicor and Nicor Gas

R. Murrell		2007		400,000		84,992		0		454,000		24,721		20,627		984,340
Chairman and President of Tropical Shipping &
Construction Company Ltd

D. R. Dodge		2007		277,862		147,201		0		139,601		296		41,928		606,888
Executive Vice President		2006		266,092		81,869		21,660		161,400		0		54,075		585,096
Diversified Ventures of Nicor

P. C. Gracey, Jr.		2007		309,077		84,979		0		135,780		694		47,554		578,084
Senior Vice President, General Counsel and Secretary of Nicor and Nicor Gas		2006		293,639		69,292		23,615		178,800		632		48,167		614,145


(1)		Executives, excluding Mr. Murrell, may elect to defer up to 20% of their salary into the Salary Deferral Plan. Any deferred portions of the above amounts are also shown in the Nonqualified Deferred Compensation Table.

(2)		Includes performance cash units, restricted stock units, restricted stock and deferred restricted stock described more fully below in the Narrative to the Summary Compensation Table and Grants of Plan-Based Awards Table. Value of stock awards was determined under FAS 123R based on the assumptions set forth in the footnotes to the financial statements of Nicor’s 2007 Form 10-K, which are incorporated herein by reference. Participants may elect to defer receipt of up to 50% of their total performance cash units award into the Stock Deferral Plan. Any deferred portions of the above amounts are also shown in the Nonqualified Deferred Compensation Table. Payments from the performance cash units are made the year following the end of the three-year performance cycle, when results of the goals have been verified and approved by the Compensation Committee.

(3)		Represents stock option awards granted March 16, 2005, which vested on March 16, 2006 after one year of service. Amounts shown for 2006, represent the expense realized for the period January 1 through March 15, 2006 under FAS 123R based on the assumptions set forth in the footnotes to the financial statements of Nicor’s 2006 Form 10-K, which are incorporated herein by reference.

(4)		Represents amounts earned in the Nicor’s annual incentive plan and Tropical Shipping’s long-term incentive plan as discussed in the Compensation Discussion & Analysis. Participants may elect to defer receipt of up to 50% of their total incentive award shown above into the Stock Deferral Plan and, except for Mr. Murrell, up to 20% of their total incentive award into the Salary Deferral Plan. Any deferred portions of the above amounts are also shown in the Nonqualified Deferred Compensation Table. Payments from the annual incentive plan and Tropical Shipping’s long-term incentive plan are made following the year end, when results of the goals have been verified and approved by the Compensation Committee.


(5)		Represents changes in the defined benefit pension plan and the interest earned in excess of market for deferred compensation plans. The increase in nonqualified pension values for Mr. Strobel in 2007 and 2006 was $23,534 and $28,121, respectively. Balances in the Salary Deferral Plan are credited with an interest rate equal to 130% of Mergent’s Corporate Bond Rate as defined in the Plan. The average interest rate credited for 2007 and 2006 was 7.82% and 7.84%, respectively. Interest in excess of market is determined by comparison to the 120% federal long-term monthly rate published by the Internal Revenue Service (“IRS”) which for 2007 and 2006 averaged 5.79% and 5.84%, respectively. Amounts shown are the difference, or the interest in excess of market, between these two average rates. Interest earned in excess of market in the Salary Deferral Plan in 2007 for Mr. Strobel, Mr. Hawley, Mr. Dodge and Mr. Gracey, Jr. was $14,713, $5,708, $296 and $694, respectively, and in 2006 for Mr. Strobel, Mr. Hawley and Mr. Gracey, Jr. was $9,187, $3,352 and $632, respectively. The balance in the Capital Accumulation Plan is credited with a set interest rate of 21% as defined in the plan. Interest in excess of market is determined by comparison to the federal long-term rate published by the IRS at the time the plan was established, and also at the time the amounts were deferred, (14% and 16%). The amount shown is the difference, or the interest in excess of market, between these two rates. Interest earned in excess of market in the Capital Accumulation Plan in 2007 for Mr. Murrell was $24,721.

(6)		This includes all other compensation for 2007 and 2006 that is not disclosed in the prior columns. Amounts shown for 2007 include company contributions to the 401(k) Plans for Mr. Strobel, Mr. Hawley, Mr. Murrell, Mr. Dodge and Mr. Gracey, Jr. of $15,188, $15,188, $20,627, $15,188 and $15,188, respectively. Also included are company contributions to the Supplementary Savings Plan for Mr. Strobel, Mr. Hawley, Mr. Dodge and Mr. Gracey, Jr. of $26,992, $8,874, $1,693 and $5,675, respectively; and company contributions to the Supplemental Senior Officer Retirement Plan for Mr. Strobel, Mr. Hawley, Mr. Dodge and Mr. Gracey, Jr. of $83,238, $38,080, $25,048 and $26,691, respectively, all of which are also included in the Nonqualified Deferred Compensation Table. Amounts shown also include perquisites and personal benefits in 2007 for Mr. Strobel and Mr. Hawley of $7,700 car allowance each, $3,250 and $1,925, respectively, for flexible spending, intended to be used for legal or financial advice or for unpaid medical expenses, and for Mr. Hawley $5,990 for executive physical. Also included for Mr. Strobel and Mr. Hawley are expenses for air travel club membership, spouse travel, meals and entertainment, none of which are more than 10% of the total perquisites and benefits. Executive officers, other than Mr. Murrell, also receive a greater long-term disability benefit than other employees of the company. However, there is no incremental cost to the company for such greater benefit.

GRANTS OF PLAN-BASED AWARDS

The following table shows performance awards, performance units and restricted stock units granted to the Chief Executive Officer, the Chief Financial Officer, and the three other highest-compensated executive officers in 2007:


															All Other
															Stock
															Awards:		Grant Date
															Number of		Fair Value
			Estimated Future Payouts Under						Estimated Future Payouts Under						Shares of		of Stock
	Grant		Non-Equity Incentive Plan Awards (2)						Equity Incentive Plan Awards (3)						Stock or		and Option
	Date		Threshold		Target		Maximum		Threshold		Target		Maximum		Units (#)		Awards
Name	(1)		($)		($)		($)		(#)		(#)		(#)		(4)		($)(5)
R. M. Strobel		3/22/2007								146,450		585,800		1,171,600		12,860		627,825
		N/A		319,500		639,000		958,500

R. L. Hawley		3/22/2007								52,500		210,000		420,000		4,610		225,060
		N/A		110,000		220,000		330,000

R. Murrell		3/22/2007								12,000		48,000		96,000		1,050		51,261
		N/A		56,000		224,000		448,000
		N/A		110,000		220,000		418,000

D. R. Dodge		3/22/2007								22,825		91,300		182,600		2,010		98,128
		N/A		56,200		112,400		168,600

P. C. Gracey, Jr.		3/22/2007								25,425		101,700		203,400		2,230		108,869
		N/A		62,600		125,200		187,800


(1)		Grant Date is not applicable for non-equity incentive plan awards.

(2)		Amounts shown for all, excluding Mr. Murrell, represent possible payment levels under the 2007 Nicor annual incentive plan. Threshold payout is 50% and maximum payout is 150% of target. The amounts shown for Mr. Murrell represent possible payment levels under the 2007 Tropical Shipping long-term incentive plan and the 2007 Tropical Shipping annual incentive plan, respectively. Threshold payout for the Tropical Shipping annual incentive is 50% and maximum payout is 190% of target. For a full description of the Tropical Shipping long-term incentive plan and the vesting and award criteria, see the narrative following this table and the Compensation Discussion and Analysis.

(3)		For a full description of the performance cash units and the vesting and award criteria, see the narrative following this table and the Compensation Discussion and Analysis.

(4)		The restricted stock units will vest on March 22, 2011, four years after the date of the grant. For a full description of vesting and dividends, see the narrative following this table and the Compensation Discussion and Analysis.

(5)		Grant date fair value is the number of restricted stock units awarded times the closing price of $48.82 for Nicor Common Stock on the date of grant.

Narrative to the Summary Compensation Table and Grants of Plan-Based Awards Table

Restricted stock units have a four-year restriction period. The shares vest and are delivered at the end of the restriction period if the officer is continuously employed during that period, except for Mr. Strobel, whose shares vest after four years but are not delivered until the earliest of his death, his disability, a change in control, or the six-month anniversary of his separation from service. Until the shares are forfeited or delivered, the participant holding the restricted stock unit has the right of receiving dividends equivalent to the amount of dividends that would be paid on a share of Nicor Common Stock, but is not able to vote the underlying shares. In the case of death, disability or retirement, restricted stock units held more than one year after date of grant will vest immediately and the underlying shares will be delivered (with a six-month delay in the event of retirement). In the case of a change in control, restricted stock units will vest immediately and the underlying shares will be delivered. In all other cases, unvested restricted stock units will be forfeited.

Performance cash unit awards generally are payable on December 31, 2009, provided that the executive is employed by Nicor on such date. However, in the case of death, disability or retirement, performance units held more than one year from the date of grant will be eligible for payout at the end of the performance period based on the normal per-unit performance/payout guidelines. In the event of a change in control, outstanding performance cash units may be paid out in such a manner as determined by the Committee. In all other cases, performance units held less than three years are immediately forfeited.

The Tropical Shipping long-term incentive award is generally payable on December 31, 2009, provided the executive is employed by Tropical Shipping on such date. However, in the case of death, disability or retirement, the award will be eligible for payout at the end of the performance period based on a prorated value of the earned incentive. In all other cases, the long-term incentive award will be immediately forfeited. In the event of termination following a change in control, the target value will be prorated and paid out.

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END

The following table shows performance units, stock options, restricted stock units, restricted stock and deferred restricted stock awards that remain outstanding at December 31, 2007 for the Chief Executive Officer, the Chief Financial Officer, and the three other highest-compensated executive officers:


	Option Awards								Stock Awards
															Equity
													Equity		Incentive Plan
													Incentive		Awards:
											Market		Plan Awards:		Market or
	Number of		Number of						Number		Value of		Number of		Payout Value
	Securities		Securities						of Shares		Shares or		Unearned		of Unearned
	Underlying		Underlying						or Units of		Units of		Shares, Units		Shares, Units
	Unexercised		Unexercised						Stock That		Stock That		or Other		or Other
	Options (#)		Options (#)		Option		Option		Have Not		Have Not		Rights That		Rights That
	Exercisable		Unexercisable		Exercise		Expiration		Vested (#)		Vested ($)		Have Not		Have Not
Name	(1)		(1)		Price ($)		Date		(2)		(3)		Vested (#)(4)		Vested ($)(5)
R. M. Strobel		10,000				39.375		12/20/10		11,550		489,143		121,875		121,875
		12,900				36.82		03/14/11		12,860		544,621		146,450		146,450
		18,400				45.05		03/21/12
		52,100				26.97		03/20/13
		51,600				36.34		03/18/14
				77,500		37.23		03/17/15

R. L. Hawley		10,000				36.34		03/18/14		4,790		202,857		50,525		50,525
				32,600		37.23		03/17/15		4,610		195,234		52,500		52,500

R. Murrell		3,500				40.625		03/10/08		1,070		45,315		11,250		11,250
		4,000				38.0625		03/09/09		1,050		44,468		12,000		12,000
		3,500				45.05		03/21/12
		6,800				36.34		03/18/14
				7,000		37.23		03/17/15

D. R. Dodge				14,400		37.23		03/17/15		2,070		87,665		21,850		21,850
										2,010		85,124		22,825		22,825

P. C. Gracey, Jr.		12,700				36.34		03/18/14		2,290		96,982		24,225		24,225
				15,700		37.23		03/17/15		2,230		94,441		25,425		25,425


(1)		All options shown are vested, but remain unexercisable for three years from grant date. All options expire 10 years after grant. Options shown for Mr. Strobel, Mr. Hawley, Mr. Murrell, Mr. Dodge and Mr. Gracey, Jr. of 77,500, 32,600, 7,000, 14,400 and 15,700, respectively, will be exercisable on March 17, 2008.

(2)		Shares shown represent restricted stock units, restricted stock or deferred restricted stock. Stock shown for Mr. Strobel, Mr. Hawley, Mr. Murrell, Mr. Dodge and Mr. Gracey, Jr. of 11,550, 4,790, 1,070, 2,070 and 2,290, respectively, will vest on March 16, 2010. Stock units shown for Mr. Strobel, Mr. Hawley, Mr. Murrell, Mr. Dodge and Mr. Gracey, Jr. of 12,860, 4,610, 1,050, 2,010 and 2,230, respectively, will vest on March 22, 2011. All stock shares/units will vest in full upon a change in control, or if held more than one year, upon


		termination due to death or disability. In addition, stock units held more than one year vest in full upon termination due to retirement.

(3)		Value is based on $42.35 per share, the closing price of Nicor’s Common Stock at December 31, 2007.

(4)		All amounts shown represent performance units, whose payout is determined by a performance multiplier which ranges from 25% to 200% based on Nicor’s total shareholder return (TSR) over a three-year performance period as compared to the performance of the other companies in the S&P Utilities Index. No payout is made if the performance threshold is not met. Units shown for Mr. Strobel, Mr. Hawley, Mr. Murrell, Mr. Dodge and Mr. Gracey, Jr. of 121,875, 50,525, 11,250, 21,850 and 24,225, respectively, have a performance period of January 1, 2006 to December 31, 2008, at which time they will vest, and are presented based on achieving the threshold, 25% of target, on the performance goal. This is based on the performance level that was achieved for the performance goal for these units in 2007. Units shown for Mr. Strobel, Mr. Hawley, Mr. Murrell, Mr. Dodge and Mr. Gracey, Jr. of 146,450, 52,500, 12,000, 22,825 and 25,425, respectively, have a performance period of January 1, 2007 to December 31, 2009, at which time they will vest, and are presented based on achieving the threshold, 25% of target, on the performance goal. This is based on the performance level that was achieved for the performance goal for these units in 2007.

(5)		Performance units are valued at $1.00 each.

OPTION EXERCISES AND STOCK VESTED

The following table shows the stock options exercised and the performance units and restricted stock awards that vested during 2007 for the Chief Executive Officer, the Chief Financial Officer, and the three other highest-compensated executive officers:


	Option Awards				Stock Awards
					Number of
	Number of		Value Realized		Shares or Units
	Shares Acquired		on Exercise		Acquired on		Value Realized
Name	on Exercise (#)		($)(1)		Vesting (#)(2)		on Vesting ($)(2)

R. M. Strobel						175,050		175,050


R. L. Hawley		30,000		421,000		73,521		73,521


R. Murrell						15,949		15,949


D. R. Dodge		30,700		363,787		34,342		107,896


P. C. Gracey, Jr.						35,399		35,399


(1)		The value realized upon exercise of options does not include the value of any related payments by the NEO whether in payment of the exercise price or related taxes.

(2)		Performance units having a performance period of January 1, 2005 to December 31, 2007 have vested and will be paid out in 2008, for Mr. Strobel, Mr. Hawley, Mr. Murrell, Mr. Dodge and Mr. Gracey, Jr. of 175,050, 73,521, 15,949, 32,676 and 35,399, respectively. The TSR performance achieved for the end of the three-year period was at 33.3 percentile resulting in a 38.9% payout of units. Each unit has a value of $1.00 and is paid out in cash. Participants may elect to defer up to 50% of their performance cash units earned into the Stock Deferral Plan. Included in the amounts shown above are deferrals for Mr. Strobel and Mr. Hawley of $87,525 and $7,352, respectively, all of which are also included in the Nonqualified Deferred Compensation Table. Restricted stock shares for Mr. Dodge of 1,666 vested on January 17, 2007. The value realized upon vesting of this restricted stock is calculated based on the closing price of $45.15 for Nicor Common Stock on January 17, 2007.

PENSION BENEFITS

The following table shows the actuarial present value of the accumulated vested benefit under the defined benefit plan as of October 1, 2007, the measurement date used in Nicor’s financial statements, for the Chief Executive Officer, the Chief Financial Officer, and the three other highest-compensated executive officers:

Number of

Present Value of

Payments

Years Credited

Accumulated

During 2007

Name

Plan Name

Service (#)

Benefit ($)

($)

R. M. Strobel

Nicor Gas Supplementary Retirement Plan

434,765

R. L. Hawley

N/A

R. Murrell

N/A

D. R. Dodge

N/A

P. C. Gracey, Jr.

N/A

Nicor has agreed to pay Mr. Strobel an annual retirement benefit for life of $50,000 or its actuarial equivalent. The default payment is a lump sum although he may elect an annuity. For the valuation method and all material assumptions applied in quantifying the present value of the current accrued benefit shown above, see the Postretirement Benefits footnote to the financial statements in Nicor’s 2007 Form 10-K.

NONQUALIFIED DEFERRED COMPENSATION

The following table shows the aggregated deferred compensation activity in the Salary Deferral Plan, the Stock Deferral Plan, the Supplementary Savings Plan, the Supplemental Senior Officer Retirement Plan and the Capital Accumulation Plan for the Chief Executive Officer, the Chief Financial Officer, and the three other highest-compensated executive officers during 2007:


	Executive		Registrant		Aggregate		Aggregate		Aggregate
	Contributions		Contributions		Earnings in		Withdrawals/		Balance at
Name	in 2007 ($)(1)		in 2007 ($)(2)		2007 ($)(3)		Distributions ($)		12/31/07 ($)(4)

R. M. Strobel		642,053		110,230		13,688		0		3,164,059
R. L. Hawley		94,678		46,954		14,543		0		718,675
R. Murrell		0		0		72,291		0		412,978
D. R. Dodge		55,706		26,740		13,680		0		248,918
P. C. Gracey, Jr.		0		32,367		8,971		0		184,182


(1)		Included in the executive contributions shown are compensation reported in the Summary Compensation Table in the current year as salary for Mr. Strobel, Mr. Hawley and Mr. Dodge of $69,431, $39,608 and $27,786, respectively; and reported as non-equity incentive plan compensation for Mr. Strobel, Mr. Hawley and Mr. Dodge of $485,097, $47,718 and $27,920, respectively; and reported as stock award compensation for Mr. Strobel and Mr. Hawley of ($31,911) and ($2,681), respectively. These amounts were negative due to the actual results for the three-year plan being less than estimated and expensed for the two prior years as required under FAS 123R. The non-equity incentive plan and stock award compensation will not be credited to deferred plan accounts until 2008.

(2)		Included in the registrant contributions shown are compensation reported in the Summary Compensation Table in the current year as other compensation, for contributions to the Supplementary Savings Plan for Mr. Strobel, Mr. Hawley, Mr. Dodge and Mr. Gracey, Jr. of $20,994, $6,902, $1,317 and $4,414, respectively, and contributions earned and vested in 2007, but which will not be credited to plan accounts until 2008 in the Supplementary Savings Plan and the Supplemental Senior Officer Retirement Plan for Mr. Strobel, Mr. Hawley, Mr. Dodge and Mr. Gracey, Jr. of $89,236, $40,052, $25,424 and $27,953, respectively.

(3)		Included in the aggregate earnings shown is compensation reported in the Summary Compensation Table in the current year as above market earnings for Mr. Strobel, Mr. Hawley, Mr. Murrell, Mr. Dodge and Mr. Gracey, Jr. of $14,713, $5,708, $24,721, $296 and $694, respectively.


(4)		Included in the aggregate balances shown is compensation reported in the Summary Compensation Tables in previous years for Mr. Strobel, Mr. Hawley, Mr. Dodge and Mr. Gracey, Jr. of $2,015,381, $491,720, $121,765 and $132,147, respectively. Amounts shown include portions not vested as of December 31, 2007 for Mr. Strobel, Mr. Hawley and Mr. Dodge in the amounts of $11,768, $5,754 and $264, respectively. However, in the case of a change in control, these amounts would vest immediately.

The Salary Deferral Plan allows executives and managers of Nicor and Nicor Gas to defer up to 10% of their salary and/or up to 20% of their annual incentive plan payout and earn an interest rate equal to 130% of Mergent’s Corporate Bond Rate as defined in the plan. The average interest rate earned in 2007 was 7.82%. Plan balances are distributed after retirement or termination in installments or a lump sum as elected by the participant. Withdrawals during employment are only allowed in extreme hardship cases.

The Stock Deferral Plan allows executives to defer up to 50% of their annual incentive payout and/or up to 50% of their long-term plan performance units or Tropical Shipping long-term incentive payout. Deferrals are converted to Nicor’s stock equivalents. As defined in the plan, balances earn dividends equivalent to the dividends paid on Nicor’s Common Stock. Dividends paid on a share of Nicor’s Common Stock in 2007 were $1.86. At the election of the participant, dividends may be paid in cash or may be reinvested in the plan and converted into more stock equivalents. Participants may elect to have their deferrals, and dividends reinvested, distributed to them in a lump sum as early as three years after deferral, or after retirement in a lump sum or up to 15 annual installments.

The Supplementary Savings Plan is credited with amounts the executive would have received under the company’s 401(k) plan except for the fact that the IRS Code puts annual limits on employee and company contributions into the 401(k) plan. When the participant reaches the IRS annual limit in the 401(k) plan, then the amounts for company contributions above the IRS annual limit are credited to the Supplementary Savings Plan to assure the participants receive benefits comparable to what they would have received if the IRS did not place limits in the 401(k) plan. At the election of the participant, when they reach the 401(k) plan limits and are no longer able to defer salary into the 401(k) plan, they may switch and defer into the Supplementary Savings Plan. As defined in the plan, balances earn an interest rate equivalent to the Vanguard Retirement Savings Trust III Fund rate in the 401(k) plan. Participants may elect distribution in a lump sum or installments to start at retirement or by age 701/2. Mr. Murrell is not eligible to participate in this plan.

The Supplemental Senior Officer Retirement Plan is a defined contribution plan covering executive officers of Nicor and Nicor Gas hired after December 31, 1997, under which they receive an annual credit of 6% of base salary and annual incentive. They are vested after the earlier of three years, attaining age 60, or in the event of a change in control. Mr. Strobel, Mr. Hawley, Mr. Dodge and Mr. Gracey, Jr. are vested. They may elect to receive their benefit either in a lump sum or from 10 to 15 annual installments after retirement. No withdrawals are allowed during employment. As defined in the plan, they may elect to have amounts credited to their accounts accrue a return equivalent to the results of one or more of 10 specified Vanguard funds which are also available under the company’s 401(k) plan. They may change their investment vehicles up to four times a month. While the accounts will remain an unfunded obligation of Nicor, Nicor has created a trust for its own benefit that will hold investments reflecting these obligations.

The Capital Accumulation Plan allowed participants to defer a portion of their salary during 1984 and 1985. The deferred amounts earn interest at a rate of 21% per annum. At age 65, or retirement if later, Mr. Murrell will begin receiving installment distributions from the plan until age 80. No other NEOs participate in this plan.

OTHER POTENTIAL POST-EMPLOYMENT PAYMENTS

The compensation payable to each NEO of Nicor upon voluntary termination, retirement, termination following a change of control and in the event of disability or death of the executive is discussed below. The tables reflect incremental compensation to each of the NEOs of Nicor in the event of termination of such executive’s employment. The amounts shown assume that such termination was effective as of December 31, 2007, and represent estimates of the amounts, in excess of that earned and vested, which would be paid out to the executives upon their termination. Amounts earned and vested are shown in tables previous to this section (see the Nonqualified Deferred Compensation Table, the Pensions Benefits Table and the Stock Awards columns in the

Outstanding Equity Awards at Fiscal Year-End Table). The actual amounts to be paid out can only be determined at the time of such executive’s separation from the company.

Payments made upon Termination

Regardless of the manner in which a NEO’s employment terminates (including after a change in control or for cause), he is entitled to receive amounts earned during his term of employment consistent with other non-executive employees such as unused accrued vacation pay and accrued base salary, vested deferred compensation, amounts accrued and vested through retirement plans, and outstanding vested stock options (except if the termination is for cause, then outstanding vested stock options are immediately cancelled and future Capital Accumulation Plan benefits are forfeited).

Payments made upon Retirement

In the event of the retirement of a NEO (including after a change in control), in addition to the items named above:


	•	All stock options held more than one year become immediately exercisable and remain exercisable for their full term. Unvested stock options are cancelled.

	•	The NEO will be eligible for payout from outstanding performance units held more than one year on the same basis as other participants. Performance units held less than one year from grant to retirement date will be cancelled.

	•	All unvested restricted stock units and deferred restricted stock held for at least one year will vest and be eligible for immediate payout. Unvested restricted stock held more than one year will accelerate vesting only upon Compensation Committee discretion. Deferred restricted stock, restricted stock and restricted stock units held less than one year are cancelled.

	•	The NEO, excluding Mr. Murrell, will continue to receive health and welfare benefits, including for his dependents if applicable, on the same basis as other retirees with similar lengths of service.

	•	The NEO, excluding Mr. Murrell, will receive retiree life insurance coverage on the same basis as other retirees.

	•	The NEO will be eligible to receive a payout from the applicable annual incentive plan (discussed in the Compensation Discussion and Analysis), prorated as to retirement date, depending on the achievement of the plan’s measures.

Payments made upon Death or Disability

In the event of the death or disability of a NEO, in addition to the benefits listed above, the NEO will receive benefits under the company’s disability plan or payments under the company’s life insurance plan, as appropriate. In addition, unvested deferred restricted stock, restricted stock and restricted stock units held more than one year will vest upon death or disability.

In addition to the above, Mr. Dodge participates in the Security Payment Plan. This plan provides an annuity in case of disability or death during employment. The benefit is based on the Nicor Companies Pension and Retirement Plan formula except age and service are calculated to age 65 and offset by any benefits received through any other company plan (including the company’s short- and long-term disability plans and the retirement plan) and worker’s compensation. In the case of disability, the benefit from this plan would be totally offset by the company’s short- and long-term disability plans until age 66, when the long-term disability plan benefit ends. Starting at age 66, Mr. Dodge would then be eligible to receive annual payments for life of $97,245. In the case of death, the annual annuity value of this benefit, payable for life to the spouse of Mr. Dodge would be $97,245 (with a 50% reduction when he would have turned 55).

Payments made upon a Termination Following a Change in Control

All NEOs are covered by a Change in Control Agreement (CICA) that defines compensation in the event of termination related to a change in control (as defined in the CICA). The CICAs generally provide that, if within 180 days prior to or two years following a change in control the executive officer’s employment is terminated without cause or by the executive due to a constructive termination (and, in the case of Mr. Strobel, by Mr. Strobel for any reason during the 12-month period beginning 90 days after a change in control), then the executive becomes entitled to the following benefits: (1) payment of an amount equal to three times (a) the sum of the executive’s annual base salary and (b) the greater of the average bonus for the last two years or the current year target bonus; (2) payment of an amount equal to the greater of a prorated current year target bonus or the amount of the current year bonus otherwise payable to the executive with respect to the performance period in which the termination date occurs; (3) full vesting of amounts deferred and accrued plus credit for an additional three years of contributions under the Supplemental Senior Officer Retirement Plan, based on the severance payment described in (1) as compensation earned over the severance period (except for Mr. Murrell, who does not participate in this plan); (4) cash payments of an amount equal to the unvested portion and an additional three years of company contributions to the 401(k) Plans equal to the amount that would have been made over the severance period had employment continued; (5) full vesting of all outstanding stock option awards, which would continue to be exercisable for their full term or until the executive’s earlier death; (6) all forfeiture conditions on any stock incentive, deferred stock unit, restricted stock or restricted stock unit incentive awards lapse immediately, unless subject to performance-based criteria, whereby forfeiture conditions shall lapse on a prorated portion of the stock; (7) full vesting and prorated payout of performance units and other long-term cash incentive awards; (8) up to a three-year continuation of welfare benefits; and (9) outplacement and legal fees and other expenses. In addition, if any payments to the executive are subject to the excise tax on “parachute payments,” the company will make an additional payment to the executive so that the executive will receive net benefits as if no excise tax was payable.

If a NEO is permanently disabled or dies during the two-year change in control period, the CICA generally provides for payments of the accrued base salary and any accrued paid time off through the termination date not previously paid; an amount equal to the greater of a prorated current year target bonus or the amount of the current year bonus otherwise payable to the executive with respect to the performance period in which the termination date occurs; and all amounts previously deferred by or accrued to the benefit of the executive under any nonqualified deferred compensation plan sponsored by Nicor. In addition, the CICA provides that the executive is entitled to receive disability benefits or death benefits, as applicable, at least equal to the greater of those provided under the most favorable disability or death benefit plans applicable to senior company executives in effect immediately before the termination date, or those provided under the most favorable disability plan of the company or death benefit plan provided to the executive at any time during the 90-day period immediately before the date of the change in control.

If a NEO voluntarily terminates for other than good reason, retirement, permanent disability or death, then he receives only the benefits noted above under “Payments made upon Termination.”

The CICAs are automatically extended for an additional year on each December 31 unless either party gives notice to the contrary by the preceding June 30. The CICAs are also extended automatically for two years following any change in control while they are in effect.

Potential Payments upon Termination due to Retirement, Death, Disability or a Change in Control

The tables below include the estimated incremental benefits of multiple post-employment termination distributions. Because all NEOs are fully vested in all retirement programs, no incremental value (other than the final contribution to the defined contribution plan) is recognized related to the termination event.


							Termination
							Without Cause
Mr. R. M. Strobel							following a Change
Benefit	Retirement ($)		Death ($)		Disability ($)		in Control ($)

Cash Severance		0		0		0		4,166,025
Cash LTIP Award		0		0		0		519,286
Unvested Deferred Compensation		11,768		11,768		11,768		11,768
Equity
Restricted Stock		489,143		489,143		489,143		1,033,764
Unexercisable Options		396,800		396,800		396,800		396,800
Subtotal		885,943		885,943		885,943		1,430,564
Retirement Benefits
Defined Contribution Plans		0		0		0		531,168
Subtotal		0		0		0		531,168
Other Benefits
Health & Welfare		0		0		0		23,832
Outplacement		0		0		0		35,000
Tax Gross-Ups		0		0		0		2,375,758
Subtotal		0		0		0		2,434,590
TOTAL		897,711		897,711		897,711		9,093,401


							Termination
							Without Cause
Mr. R. L. Hawley							following a Change
Benefit	Retirement ($)		Death ($)		Disability ($)		in Control ($)

Cash Severance		0		0		0		1,979,535
Cash LTIP Award		0		0		0		204,357
Unvested Deferred Compensation		5,754		5,754		5,754		5,754
Equity
Restricted Stock		0		202,857		202,857		398,090
Unexercisable Options		166,912		166,912		166,912		166,912
Subtotal		166,912		369,769		369,769		565,002
Retirement Benefits
Defined Contribution Plans		0		0		0		252,391
Subtotal		0		0		0		252,391
Other Benefits
Health & Welfare		0		0		0		41,480
Outplacement		0		0		0		30,000
Tax Gross-Ups		0		0		0		1,015,744
Subtotal		0		0		0		1,087,224
TOTAL		172,666		375,523		375,523		4,094,263


							Termination
							Without Cause
Mr. R. Murrell							following a Change
Benefit	Retirement ($)		Death ($)		Disability ($)		in Control ($)

Cash Severance		0		0		0		1,975,595
Cash LTIP Award		0		0		0		260,390
Unvested Deferred Compensation		0		0		0		0
Equity
Restricted Stock		0		45,315		45,315		89,782
Unexercisable Options		35,840		35,840		35,840		35,840
Subtotal		35,840		81,155		81,155		125,622
Retirement Benefits
Defined Contribution Plans		0		0		0		88,500
Subtotal		0		0		0		88,500
Other Benefits
Health & Welfare		0		0		0		47,163
Outplacement		0		0		0		30,000
Tax Gross-Ups		0		0		0		726,170
Subtotal		0		0		0		803,333
TOTAL		35,840		81,155		81,155		3,253,440


							Termination
							Without Cause
Mr. D. R. Dodge							following a Change
Benefit	Retirement ($)		Death ($)(1)		Disability ($)		in Control ($)

Cash Severance		0		0		0		1,232,844
Cash LTIP Award		0		0		0		88,537
Unvested Deferred Compensation		264		264		264		264
Equity
Restricted Stock		0		87,665		87,665		172,788
Unexercisable Options		73,728		73,728		73,728		73,728
Subtotal		73,728		161,393		161,393		246,516
Retirement Benefits
Defined Contribution Plans		0		0		0		157,188
Subtotal		0		0		0		157,188
Other Benefits
Health & Welfare		0		0		0		40,529
Outplacement		0		0		0		30,000
Tax Gross-Ups		0		0		0		611,057
Subtotal		0		0		0		681,586
TOTAL		73,992		161,657		161,657		2,406,935


(1)		This does not include the annual annuity payable to Mr. Dodge’s spouse from the Security Payment Plan, as discussed under the “Payments made upon Death and Disability” above.


							Termination
							Without Cause
Mr. P. C. Gracey, Jr.							following a Change
Benefit	Retirement ($)		Death ($)		Disability ($)		in Control ($)

Cash Severance		0		0		0		1,395,801
Cash LTIP Award		0		0		0		98,319
Unvested Deferred Compensation		0		0		0		0
Equity
Restricted Stock		0		96,982		96,982		191,422
Unexercisable Options		80,384		80,384		80,384		80,384
Subtotal		80,384		177,366		177,366		271,806
Retirement Benefits
Defined Contribution Plans		0		0		0		177,965
Subtotal		0		0		0		177,965
Other Benefits
Health & Welfare		0		0		0		43,989
Outplacement		0		0		0		30,000
Tax Gross-Ups		0		0		0		716,025
Subtotal		0		0		0		790,014
TOTAL		80,384		177,366		177,366		2,733,905

AUDIT COMMITTEE REPORT

The Audit Committee consists of five members of the Board of Directors. Each member of the Committee is independent of Nicor and its management, as defined by the New York Stock Exchange listing standards. The Board of Directors has determined that Mr. Donahoe is an “audit committee financial expert.” The Audit Committee operates under a written charter adopted by the Board of Directors, which can be found under “Corporate Governance” in the investor section of Nicor’s Web site at www.nicor.com.

The Committee has reviewed and discussed Nicor’s quarterly financial statements and the audited financial statements for the year ended December 31, 2007 with management and Deloitte & Touche LLP, Nicor’s independent registered public accounting firm. The Committee has also discussed with Deloitte & Touche LLP the matters required to be discussed by Statement on Auditing Standards No. 61, Communication with Audit Committees, as amended, and Public Company Accounting Oversight Board Auditing Standard No. 5, An Audit Of Internal Control Over Financial Reporting That Is Integrated With An Audit Of Financial Statements.

The Committee has received from Deloitte & Touche LLP the written disclosures required by Independence Standard No. 1, Independence Discussions With Audit Committees, issued by the Independence Standards Board, regarding their independence. The Committee has discussed with Deloitte & Touche LLP their independence and considered whether the provision of non-audit services referred to in this proxy statement under “Independent Registered Public Accounting Firm” is compatible with maintaining their independence.

Based on the reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors that the audited financial statements for the year ended December 31, 2007 be included in Nicor’s Annual Report on Form 10-K for 2007.

Audit Committee of the Board of Directors of Nicor Inc.


Bruce P. Bickner, Chairman	Norman R. Bobins	Thomas A. Donahoe	R. Eden Martin	Georgia R. Nelson

PROPOSAL 2 – RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM

The Audit Committee has selected the firm of Deloitte & Touche LLP as Nicor’s independent registered public accounting firm for 2008. Deloitte & Touche LLP has served as Nicor’s independent registered public accounting firm since May 2002.

Representatives of Deloitte & Touche LLP will be present at the Annual Meeting of Stockholders with the opportunity to make a statement if they desire to do so, and will be available to respond to appropriate questions.

The Board of Directors unanimously recommends that you vote FOR proposal 2.

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

PRINCIPAL ACCOUNTANT FEES AND SERVICES

The following is a summary of the Deloitte & Touche LLP fees for professional services rendered for the years ended December 31, 2007 and 2006:


Fee Category	2007		2006

Audit Fees	$	2,295,000	$	2,352,000
Audit-Related Fees		392,000		360,000
Tax Fees		60,000		55,000
All Other Fees		16,000		12,000

Total Fees	$	2,763,000	$	2,779,000

Audit Fees

Consists of fees billed for professional services rendered for the audit of Nicor’s consolidated and Nicor Gas’ financial statements, review of the interim financial statements included in quarterly reports, and services in connection with statutory and regulatory filings.

Audit-Related Fees

Consists of fees for assurance and related services that are reasonably related to the performance of the audit of Nicor’s consolidated and Nicor Gas’ financial statements and are not reported under “Audit Fees.” These services include employee benefit plan audits, attest services that are not required by statute or regulation and consultations concerning financial accounting and reporting standards.

Tax Fees

The 2007 and 2006 fees related to tax return review and preparation assistance.

All Other Fees

Consists of fees for research tools and accounting training provided to Nicor staff.

Audit Committee Pre-Approval Policies and Procedures

In accordance with the Sarbanes-Oxley Act of 2002, the Audit Committee’s policy is to pre-approve all audit and non-audit services provided by Deloitte & Touche LLP. On an ongoing basis, management of Nicor defines and communicates specific projects and categories of service for which the advance approval of the Audit Committee is requested. The Audit Committee reviews these requests and advises management if the Committee approves the engagement of Deloitte & Touche LLP. On a periodic basis, Nicor’s management reports to the Audit Committee regarding the actual spending for such projects and services compared to the approved amounts. In 2007, one $500 item in the “All Other Fees” category was inadvertently not approved in advance by the Committee.

PROPOSAL 3 – AMEND ARTICLE TWELVE OF NICOR’S ARTICLES OF INCORPORATION TO
REDUCE THE SUPERMAJORITY VOTING REQUIREMENTS TO SIMPLE MAJORITY VOTES

Background of the Proposed Amendment

At the 2007 Annual Meeting, a stockholder proposal was presented recommending “adoption of a simple majority stockholder vote requirement applicable to the greatest number of shareholder voting issues possible.” A majority of votes cast at the 2007 Annual Meeting were cast in favor of that stockholder proposal. In response to the shareholder vote, the Board examined those provisions of Nicor’s Articles of Incorporation which required a “supermajority” vote (a vote greater than a simple majority) and adopted resolutions to amend Nicor’s Articles of Incorporation to reduce supermajority voting requirements to simple majority votes, other than those provisions which applied to Nicor’s preferred stock. The Board will submit the proposed amendments, including this proposed amendment to Article Twelve, to a vote of shareholder approval at the Annual Meeting.

Supermajority Voting Requirements of Article Twelve

Article Twelve requires an affirmative vote of two-thirds of outstanding shares of stock entitled to vote to eliminate cumulative voting rights established by Nicor’s Articles of Incorporation or to approve certain transactions when a majority of the Board has not been in office for at least three years or 80% of the Board has not approved the transaction. A two-thirds vote is also required to amend these supermajority voting requirements.

Proposed Amended Article Twelve

Below is the proposed amended Article Twelve. Language that is struck through is deleted from the previous Article Twelve. Language that is underlined is added to the previous Article Twelve.

Article Twelve

Paragraph 1: Except as otherwise expressly provided in Article Five or in this Article Twelve, amendments to these Articles of Incorporation must be approved by the holders of a majority of the outstanding shares of stock entitled to vote thereon and, if class voting is required with respect to any such amendment to these Articles of Incorporation, by the holders of a majority of the outstanding shares of each class of stock entitled to vote as a class thereon. Notwithstanding the above, any amendment to these Articles of Incorporation eliminating cumulative voting rights must be approved by the holders of two-thirds of the outstanding shares of stock entitled to vote thereon and, if class voting is required with respect to any such amendment, by the holders of two-thirds of the outstanding shares of each class of stock entitled to vote as a class thereon.

Paragraph 2. Except as otherwise expressly provided in Article Five, if the following actions are approved by at least 80% of all Directors of the Company and 80% of all Directors of the Company who have been in office for at least three years, and if at the time of approval Directors who have been in office for at least three years constitute a majority of the Board of Directors, such actions must be approved by the holders of a majority of the outstanding shares of stock entitled to vote thereon and, if class voting is required with respect to any such action, by the holders of a majority of the outstanding shares of each class of stock entitled to vote as a class thereon:

(1) a plan of merger wherein the Company merges into another ~~corporation~~ entity or wherein one or more ~~corporations~~ entities (other than solvent ~~corporations~~ entities at least 90% of the outstanding ~~shares~~ equity securities of each class of which are owned by the Company) merge into the Company, or a plan of consolidation with one or more~~corporations~~ entities or a plan of mandatory share exchange with another ~~corporation~~ entity,

(2) a sale, lease, exchange or other disposition of all, or substantially all, of the Company’s property and assets, with or without goodwill, if not made in the usual and regular course of the Company’s business, and

(3) the voluntary dissolution of the Company by a vote of shareholders.

In all other cases, the foregoing actions must be approved by the holders of two-thirds of the outstanding shares of stock entitled to vote thereon and, if class voting is required with respect to any such action, by the holders of two-thirds of the outstanding shares of each class of stock entitled to vote as a class thereon.

Paragraph 3. No amendments to these Articles of Incorporation shall change, repeal or make inoperative any of the provisions of this Article Twelve in such a way as to lower the voting requirements specified therein unless such amendment receives the affirmative vote of the holders of two-thirds of all outstanding shares of stock entitled to vote thereon and, if class voting is required with respect to any such amendment, by the holders of two-thirds of the outstanding shares of each class of stock entitled to vote as a class thereon.

Effect of the Amendment

The proposed amended Article Twelve reduces the voting requirement to a simple majority vote of the shareholders for (a) elimination of cumulative voting rights established by the Illinois Business Corporation Act (the “Act”), (b) approval of certain transactions and (c) any further amendment of Article Twelve. The effects of the reduction in voting requirement for (a) through (c) are discussed below.

Under Section 7.40 of the Act, cumulative voting rights are established for election of directors of an Illinois corporation unless the corporation’s articles of incorporation specifically limit or eliminate cumulative voting rights. Nicor is an Illinois corporation and its Articles of Incorporation do not contain any provision which limits or eliminates cumulative voting rights. Rather, Nicor’s Article Twelve specifies that a two-thirds vote of shareholders would be required to include such a provision in Nicor’s Articles of Incorporation. Approval of the proposed amendment to Article Twelve would not eliminate cumulative voting rights. However, it would reduce the vote required to approve a subsequent amendment to Nicor’s Articles of Incorporation to eliminate cumulative voting rights.

Approval of a simple majority of shareholders is required for certain key transactions, such as a merger involving Nicor, the sale of all of Nicor’s assets or dissolution of Nicor. However, Article Twelve requires the approval of two-thirds of shareholders when those same transactions are commenced and a majority of the Board has not been in office for at least three years or 80% of the Board has not approved the transaction. The supermajority vote requirement is intended to curb abusive takeover attempts, which are more attainable during periods when the Board has not met Article Twelve’s incumbency or approval requirements. Reducing the voting requirement for such transactions to a simple majority may increase the risk of a hostile takeover attempt.

Generally, any amendments to the Articles of Incorporation must be approved by a majority of the shareholders. Eliminating the supermajority voting requirement for the amendment of Article Twelve simply removes an exception to this standard approach.

In addition to the elimination of supermajority voting requirements, the proposed amendment replaces the terms “corporation” or “corporations” with the terms “entity” or “entities” and the term “shares” with “equity securities.” These replacements would eliminate supermajority voting requirements that would otherwise apply under the Act to a merger between Nicor and a limited liability company.

Shareholder Vote Required to Adopt the Proposed Amended Article Twelve

An affirmative vote of two-thirds of the shares outstanding is required to amend Article Twelve as proposed.

Proxies validly voted in accordance with the instructions on the proxy card will be voted on this proposal in the manner specified by the shareholder. If shareholders do not specify the manner in which their shares are to be voted on this proposal, such shares will be counted as abstentions. Abstentions on this proposal will have the same effect as a vote against the proposal; brokers will not have discretionary vote on this proposal.

THE BOARD OF DIRECTORS MAKES NO VOTING RECOMMENDATION WITH RESPECT TO THIS PROPOSAL.

PROPOSAL 4 – DELETION OF THE TEXT OF ARTICLE THIRTEEN OF NICOR’S ARTICLES OF INCORPORATION

Background of the Proposed Amendment

At the 2007 Annual Meeting, a stockholder proposal was presented recommending “adoption of a simple majority stockholder vote requirement applicable to the greatest number of shareholder voting issues possible.” A majority of votes cast at the 2007 Annual Meeting were cast in favor of that stockholder proposal. In response to the shareholder vote, the Board examined those provisions of Nicor’s Articles of Incorporation which required a “supermajority” vote (a vote greater than a simple majority) and adopted resolutions to amend Nicor’s Articles of Incorporation to reduce supermajority voting requirements to simple majority votes, other than those provisions which applied to Nicor’s preferred stock. The Board will submit the proposed amendments, including this proposed amendment to Article Thirteen, to a vote of shareholder approval at the Annual Meeting.

Supermajority Voting Requirements of Article Thirteen

Article Thirteen requires an affirmative vote of 80% of outstanding shares of stock entitled to vote to approve certain business combinations with any shareholder owning more than 5% of Nicor’s outstanding stock (known as an “interested shareholder”) which do not meet prescribed approval, price and procedure requirements. Approval by 80% of shareholders is also required to amend this supermajority voting requirement.

Proposed Deletion of the Text of Article Thirteen

Below is the proposed amendment to the Articles of Incorporation deleting the text of Article Thirteen. Language that is struck through is deleted from the previous Article Thirteen. Language that is underlined is added to the previous Article Thirteen.

Article Thirteen

[RESERVED]


A.	~~Vote Required for Certain Business Transactions~~

(1) Higher Vote for Certain Business Transactions. In addition to any affirmative vote required by law or the Articles of Incorporation and except as otherwise expressly provided in paragraph B of this Article Thirteen, the following Extraordinary Business Transactions (as hereinafter defined) shall require the affirmative vote of the holders of at least 80% of the combined voting power of the then outstanding shares of all classes and series of the Company entitled to vote generally in the election of directors (the “Voting Shares”) voting together as a single class:

~~(a) any merger, consolidation or share exchange of the Company with or involving any Interested Shareholder (as hereinafter defined);~~

(b) any sale, lease, exchange or other disposition in one transaction or a series of transactions to or with any Interested Shareholder of any assets of the Company having an aggregate Fair Market Value (as hereinafter defined) equal to 10% or more of the Company’s total assets or 10% or more of the going concern value of the Company as determined by the Board of Directors; or

(c) the issuance or transfer by the Company or any Subsidiary (as hereinafter defined) to any Interested Shareholder in one transaction or a series of transactions of any securities of the Company or any Subsidiary in exchange for the sale or lease of any assets with an aggregate Fair Market Value in excess of $5,000,000.

(2) Definition of “Extraordinary Business Transaction.” The term “Extraordinary Business Transaction” as used in this Article Thirteen shall mean any transaction which is referred to in any one or more of clauses (a) through (c) of subparagraph (1) of this paragraph A.


B.	~~When Higher Vote Is Not Required~~

The provision of subparagraph (1) of paragraph A of this Article Thirteen shall not be applicable to any particular Extraordinary Business Transaction, and such Extraordinary Business Transaction shall require only such affirmative vote as is required by law and any other provision of the Company’s Articles of Incorporation if all of the conditions specified in either of the following subparagraphs (1) or (2) of this paragraph B are met:

(1) Approval by Continuing Directors. The Extraordinary Business Transaction shall have been approved by the affirmative vote of two-thirds of the Continuing Directors (as hereinafter defined) and the Continuing Directors shall constitute a majority of the Board of Directors.

~~(2) Price and Procedure Requirements. All of the following conditions shall have been met:~~

(a) The Extraordinary Business Transaction shall provide for consideration to be received by all holders of common stock in exchange for all their shares, and the aggregate amount of the cash and the Fair Market Value as of the date of consummation of the Extraordinary Business Transaction of consideration other than cash to be received per share by holders of common stock in such Extraordinary Business Transaction shall be at least equal to the higher of (i) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers’ fees) paid by such Interested Shareholder in acquiring any of the Company’s common stock within the two-year period preceding the date of consummation of the Extraordinary Business Transaction and (ii) the book value per share of the Company’s common stock as shown on the Company’s then most recently published financial statements; and

(b) A proxy statement describing the proposed Extraordinary Business Transaction and complying with the requirements of the Securities Exchange Act of 1934 and the rules and regulations thereunder as in effect on January 1, 1987 shall be mailed to shareholders of the Company at least 30 days prior to the consummation of such Extraordinary Business Transaction (whether or not such proxy statement is then required to be mailed pursuant to such Act or subsequent provisions) and shall contain (i) any recommendations as to the advisability of the Extraordinary Business Transaction which the Continuing Directors, or any of them, may choose to state and (ii) any opinions received by the Board of Directors from independent experts as to the fairness of the terms of the Extraordinary Business Transaction from the point of view of the remaining common shareholders of the Company (such experts to be selected by a majority of the Continuing Directors and to be paid a reasonable fee for their services by the Company).


C.	~~Certain Definitions~~

~~For the purposes of this Article Thirteen:~~

~~(1) A “person” shall mean any individual, firm, corporation, partnership, trust or other entity.~~

(2) “Interested Shareholder” shall mean any person (other than the Company or any Subsidiary) who or which (a) is the beneficial owner, directly or indirectly, of Voting Shares conveying 5% or more of the combined voting power of the outstanding Voting Shares; or (b) is an Affiliate or Associate of the Company and at any time within the two-year period immediately prior to the date in question was the beneficial owner, directly or indirectly, of Voting Shares conveying 5% or more of the combined voting power of the then outstanding Voting Shares.

(3) A person shall be a “beneficial owner” of any Voting Shares (a) which such person or any of its Affiliates or Associates beneficially owns, directly or indirectly; (b) which such person or any of its

Affiliates or Associates has (1) the right to acquire (whether such right is exercisable immediately or only after the passage of time), pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, or (2) the right to vote or direct the vote pursuant to any agreement, arrangement or understanding; or (c) which are beneficially owned, directly or indirectly, by any other person which such person or any of its Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any Voting Shares.

(4) For the purpose of determining whether a person is an Interested Shareholder pursuant to subparagraph (2) of this paragraph C, the number of Voting Shares deemed to be outstanding shall include shares deemed owned by such person through application of subparagraph (3) of this paragraph C but shall not include any other Voting Shares which may be issuable to other persons pursuant to any agreement, arrangement or understanding, or upon exercise of conversion rights, exchange rights warrants or options, or otherwise.

(5) “Affiliate” and “Associate” shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, in effect on January 1, 1987.

(6) “Subsidiary” means any corporation of which a majority of any class of equity security is owned, directly or indirectly, by the Company; provided, however, that for the purpose of the definition of Interested Shareholder set forth in subparagraph (2) of this paragraph C, the term “Subsidiary” shall mean only a corporation of which a majority of each class of equity security is owned, directly or indirectly, by the Company.

(7) “Continuing Directors” means any member of the Board of Directors of the Company who was such prior to the time an Interested Shareholder became an Interested Shareholder or a person designated (whether before or after election as a director) to be a Continuing Director by a majority of the Continuing Directors.

(8) “Fair Market Value” of other consideration referred to in Sections A and B of this Article Thirteen shall be determined in good faith by the Board of Directors of the Company and concurred in by a majority of the Continuing Directors.

(9) A majority of the Continuing Directors shall have the power and duty to determine, for the purposes of this Article Thirteen, (a) whether a person is an Interested Shareholder, (b) the number of Voting Shares beneficially owned by any person, (c) whether a person is an Affiliate or Associate of another, (d) whether an Interested Shareholder has an agreement, arrangement or understanding with another, and (e) whether a particular transaction is an Extraordinary Business Transaction for the purpose of this Article Thirteen.


D.	~~Amendment or Repeal~~

Notwithstanding any other provisions of these Articles of Incorporation or the By-Laws of the Company (and notwithstanding the fact that a lesser percentage may be specified by law, these Articles of Incorporation or the By-Laws of the Company), the affirmative vote of the holders of at least 80% of the combined voting power of the then outstanding shares of all classes and series of the Company entitled to vote generally in the election of directors, voting together as a single class, shall be required to amend or repeal, or adopt any provisions inconsistent with, this Article Thirteen; provided, further, that such 80% vote shall not be required for any such amendment or repeal which is unanimously recommended to the shareholders by the Board of Directors (a) at a time when no other entity owns or to the knowledge of any director proposes to acquire 5% or more of the Company’s Voting Shares, or (b) if all of such directors are Continuing Directors within the meaning of this Article Thirteen.

Effect of the Amendment

Article Thirteen is intended to operate as a defensive measure to fend off hostile offers, by making a merger or the assumption of control by a principal shareholder more difficult. In addition, Article Thirteen allows the Board to retain veto power over some transactions which the Board may believe are not in the best interests of the Company.

The text of Article Thirteen mirrors language recommended by governing state laws: Sections 7.85 and 11.75 of the Act. Article Thirteen is broader than Sections 7.85 and 11.75 in that it considers an interested shareholder any shareholder owning 5% of Nicor’s outstanding stock; by contrast, Sections 7.85 and 11.75 require an interested shareholder to own at least 15% of a company’s outstanding stock. The proposed amended Article Thirteen eliminates the supermajority voting requirement established by Nicor’s Articles of Incorporation regarding business combinations with interested shareholders by deleting the entire text of Article Thirteen.

Despite amendment of Article Thirteen, Sections 7.85 and 11.75 of the Act would operate to continue enforcing a supermajority voting requirement for transactions with interested shareholders, unless Nicor’s shareholders elect to not be governed by those sections of the Act. The Board has adopted a resolution for Nicor to opt-out of these sections of the Act, and is submitting that proposal, as Proposal 5 of this Proxy Statement, to a shareholder vote at the Annual Meeting. If a majority of shareholders elect to not be governed by Sections 7.85 and 11.75, the election to opt-out will not be effective until twelve months after the adoption of the amendment and will not apply to any business combination between Nicor and any person that became an interested shareholder on or before the adoption of the amendment. If the shareholders vote to opt-out of Sections 7.85 and 11.75 and adopt this Proposal 4, once the amendment to opt-out is effective, a transaction with an interested shareholder will be subject to shareholder approval only if it qualifies as a (1) merger, (2) sale of all (or substantially all) of the Company’s assets, or (3) voluntary dissolution of the Company, pursuant to Article Twelve of the Articles of Incorporation.

Overall, opting out of the supermajority voting requirement established by Article Thirteen will increase the potential of transactions with interested shareholders, some of which may be considered hostile by the Board.

Shareholder Vote Required to Adopt the Proposed Amended Article Thirteen

An affirmative vote of 80% of shares outstanding is required to amend Article Thirteen as proposed.

THE BOARD OF DIRECTORS MAKES NO VOTING RECOMMENDATION WITH RESPECT TO THIS PROPOSAL.

PROPOSAL 5 – OPT-OUT OF SECTIONS OF GOVERNING STATE LAW IMPOSING A
SUPERMAJORITY VOTING REQUIREMENT

Background of the Proposed Amendment

At the 2007 Annual Meeting, a stockholder proposal was presented recommending “adoption of a simple majority stockholder vote requirement applicable to the greatest number of shareholder voting issues possible.” A majority of votes cast at the 2007 Annual Meeting were cast in favor of that stockholder proposal. In response to the shareholder vote, the Board examined those provisions of Nicor’s Articles of Incorporation which required a “supermajority” vote (a vote greater than a simple majority) and adopted resolutions to amend Nicor’s Articles of Incorporation to reduce supermajority voting requirements to simple majority votes, other than those provisions which applied to Nicor’s preferred stock. The Board will submit the proposed amendments, including this proposed amendment electing to opt-out of sections of governing state law which impose a supermajority voting requirement, to a vote of shareholder approval at the Annual Meeting.

Supermajority Voting Requirements of Governing State Law

Sections 7.85 and 11.75 of the Act provide, in general, that a shareholder acquiring more than 15% of the outstanding voting shares of a corporation subject to the statute (referred to as an “interested shareholder”) may not engage in certain “business combinations” (as defined in Section 11.75, which definition generally includes certain mergers, consolidations, assets sales, security issuances or provision of non-pro-rata financial benefits involving an interested shareholder) with the corporation unless: (i) prior to such time two-thirds of the corporation’s disinterested directors approved the business combination and (ii) the business combination meets certain price and procedure requirements. Unless a majority of the shareholders affirmatively elect not to be governed by them, Sections 7.85 and 11.75 will operate to enforce this supermajority voting requirement.

Proposed New Article Thirteen A

Below is the proposed new Article Thirteen A.

Article Thirteen A

The Company elects not to be governed by Section 7.85, Vote Required for Certain Business Combinations, or by Section 11.75, Business Combinations with Interested Shareholders, of the Illinois Business Corporation Act of 1983, as amended.

Effect of the Amendment

Sections 7.85 and 11.75 are intended to operate as takeover defensive measures. Under some circumstances, Sections 7.85 and 11.75 may make it more difficult for a person who would be an interested shareholder to effect various business combinations with Nicor. Sections 7.85 and 11.75 also might have the effect of limiting the ability of a potential acquirer to make a two-tiered bid for Nicor in which all shareholders would not be treated equally. If Nicor elects not to be governed by Sections 7.85 and 11.75, under some circumstances, its Board and/or minority shareholders could have reduced or no influence over certain business combinations.

Adoption of the proposed new Article Thirteen A would result in Nicor not being subject to the supermajority voting requirements of Sections 7.85 and 11.75. The election to opt-out will not be effective until twelve months after the adoption of the amendment and will not apply to any business combination between Nicor and any person that became an interested shareholder on or before the adoption of the amendment. However, interested shareholders that are exempt from the election to opt-out may circumvent this exemption by transferring shares of Nicor stock; transferees would not be subject to the same exemption.

Business combinations with interested shareholders may continue to be governed by Article Thirteen of the Articles of Incorporation. However, the Board has submitted to the shareholders for approval a proposal for the elimination of the supermajority voting requirements of Article Thirteen, as Proposal 4 of this Proxy Statement. If the shareholders vote to opt-out of Sections 7.85 and 11.75 and adopt Proposal 4, once Article Thirteen A is effective, a transaction with an interested shareholder will be subject to shareholder approval only if it qualifies as a (1) merger, (2) sale of all (or substantially all) of the Company’s assets, or (3) voluntary dissolution of the Company, pursuant to Article Twelve of the Articles of Incorporation.

Overall, opting out of supermajority voting requirements established by governing state law increases the potential of transactions with interested shareholders, some of which may be considered hostile by the Board.

Shareholder Vote Required to Adopt the Proposed New Article Thirteen A

An affirmative vote of a majority of outstanding voting shares is required to add new Article Thirteen A to opt-out of Sections 7.85 and 11.75 of the Act.

THE BOARD OF DIRECTORS MAKES NO VOTING RECOMMENDATION WITH RESPECT TO THIS PROPOSAL.

PROPOSAL 6 – AMEND ARTICLE FOURTEEN OF NICOR’S ARTICLES OF INCORPORATION TO REDUCE THE SUPERMAJORITY VOTING REQUIREMENT TO A SIMPLE MAJORITY VOTE

Background of the Proposed Amendment

At the 2007 Annual Meeting, a stockholder proposal was presented recommending “adoption of a simple majority stockholder vote requirement applicable to the greatest number of shareholder voting issues possible.” A majority of votes cast at the 2007 Annual Meeting were cast in favor of that stockholder proposal. In response to the shareholder vote, the Board examined those provisions of Nicor’s Articles of Incorporation which required a “supermajority” vote (a vote greater than a simple majority) and adopted resolutions to amend Nicor’s Articles of Incorporation to reduce supermajority voting requirements to simple majority votes, other than those provisions which applied to Nicor’s preferred stock. The Board will submit the proposed amendments, including this proposed amendment to Article Fourteen, to a vote of shareholder approval at the Annual Meeting.

Supermajority Voting Requirements of Article Fourteen

Article Fourteen prohibits the shareholders taking action by written consent of such shareholders without a meeting. Further, Article Fourteen requires an affirmative vote of 80% of outstanding shares of stock entitled to vote to remove or otherwise amend this prohibition on shareholder action by written consent.

Proposed Amended Article Fourteen

Below is the proposed amended Article Fourteen. Language that is struck through is deleted from the previous Article Fourteen.

Article Fourteen

Any action required or permitted to be taken by the shareholders of the Company, whether voting as a class or otherwise, must be taken at a duly called annual or special meeting of shareholders of the Company and may not be taken by written consent of such shareholders without a meeting, except that the Board of Directors at any time may by resolution provide that the holders of Preferred Stock or Preference Stock may take any action required or permitted to be taken by such holders by consent in writing without a meeting.

Notwithstanding any other provisions of these Articles of Incorporation or the By-Laws of the Company (and notwithstanding the fact that a lesser percentage may be specified by law, these Articles of Incorporation or the By-Laws of the Company), the affirmative vote of the holders of at least 80% of the combined voting power of the then outstanding shares of all classes and series of the Company entitled to vote generally in the election of directors (“Voting Shares”), voting together as a single class, share be required to amend or repeal, or adopt any provisions inconsistent with, this Article Fourteen provided; further, that such 80% vote shall not be required for any such amendment or repeal which is unanimously recommended to the shareholders by the Board of Directors (a) at a time when no other entity owns or to the knowledge of any director proposes to acquire 5% or more of the Company’s Voting Shares, or (b) if all of such directors are Continuing Directors within the meaning of Article Thirteen.

Effect of the Amendment

The proposed amended Article Fourteen eliminates the supermajority voting requirement for further amending Article Fourteen. Adoption of this proposal by the shareholders would not allow the shareholders to act by written consent. It would allow a majority of shareholders to amend Article Fourteen such that Article Fourteen would allow shareholders to act by written consent in the future. However, even if the shareholders could act by written consent, Nicor, as a widely-held, publicly traded company, has so many shareholders, it would be difficult for the

shareholders to act without conducting a meeting. Therefore, eliminating the supermajority voting requirement for amendments to Article Fourteen has little or no impact.

Shareholder Vote Required to Adopt the Proposed Amended Article Fourteen

An affirmative vote of 80% of shares outstanding is required to amend Article Fourteen as proposed.

THE BOARD OF DIRECTORS MAKES NO VOTING RECOMMENDATION WITH RESPECT TO THIS PROPOSAL.

STOCKHOLDER PROPOSALS

Stockholder proposals must be received at Nicor’s General Office, attention Senior Vice President, General Counsel and Secretary, P.O. Box 3014, Naperville, Illinois 60566-7014 on or before November 13, 2008, and must otherwise comply with U.S. Securities and Exchange Commission requirements to be eligible for inclusion in the Proxy Statement and the Form of Proxy relating to the 2009 Annual Meeting of Stockholders. In addition, written notice must be received on or before January 22, 2009 and must otherwise comply with Nicor’s By-Laws in order for stockholder proposals or nominations to be presented at the 2009 Annual Meeting.

OTHER MATTERS

As of the date of this Proxy Statement, Nicor knows of no other matters to be brought before the meeting. If, however, further business is properly presented, the proxy holders will act in accordance with their best judgment.

By order of the Board of Directors.

PAUL C. GRACEY, JR.

Senior Vice President, General Counsel

and Secretary

March 12, 2008

Appendix A

NICOR INC.

STANDARDS FOR DIRECTOR INDEPENDENCE

The following standards, established by the New York Stock Exchange, have been adopted by the Board of Directors (the “Board”) to determine whether a Director of the Company is independent:

No Director qualifies as “independent” unless the Board affirmatively determines that the Director has no material relationship with the Company (either directly or as a partner, shareholder or officer of an organization that has a relationship with the Company).

A Director is not independent if:


	•	The Director is, or has been within the last five years, an employee of the Company, or an immediate family member is, or has been within the last five years, an executive officer, of the Company.

	•	A Director has received, or has an immediate family member who has received, during any twelve-month period within the last three years more than $75,000 in direct compensation from the Company, other than Director and committee fees and pension or other forms of deferred compensation for prior service (provided such compensation is not contingent in any way on continued service).

	•	(A) The Director or an immediate family member is a current partner of a firm that is the Company’s internal or external auditor; (B) the Director is a current employee of such a firm; (C) the Director has an immediate family member who is a current employee of such a firm and who participates in the firm’s audit, assurance or tax compliance (but not tax planning) practice; or (D) the Director or an immediate family member was within the last five years (but is no longer) a partner or employee of such a firm and personally worked on the Company’s audit within that time.

	•	The Director or an immediate family member is, or has been within the last three years, employed as an executive officer of another company where any of the Company’s present executive officers at the same time serves or served on that company’s compensation committee.

	•	The Director is a current employee, or an immediate family member is a current executive officer, of a company that has made payments to, or received payments from, the Company for property or services in an amount which, in any of the last three fiscal years, exceeds the greater of $1 million, or 2% of such other company’s consolidated gross revenues.

	•	An “immediate family member” includes a person’s spouse, parents, children, siblings, mothers and fathers-in-law, sons and daughters-in-law, brothers and sisters-in-law, and anyone (other than domestic employees) who shares such person’s home.

The Board has established the following additional categorical standards of independence to assist it in making independence determinations:

Business Relationships. Any payments by the Company for goods or services, or other contractual arrangements to: (i) a business employing, or 10% or more owned by, a Director or an immediate family member; or (ii) an entity for which a Director or an immediate family member serves as a Director or in a similar capacity, must be made in the ordinary course of business and on substantially the same terms as those prevailing at the time for comparable transactions with non-affiliated persons. The following relationships are not considered material relationships that would impair a Director’s independence:


	•	If a Director (or an immediate family member) is an officer or Director of another company that does business with the Company and the annual sales to, or purchases from the Company during such other company’s preceding fiscal year are less than 2% of the gross annual revenues of such company; and

	•	If a Director is a partner, officer or employee of an investment bank or consulting firm, the Director (or an immediate family member) does not personally perform any investment banking or consulting services

A-1


		for the Company, and the annual fees paid to the firm by the Company during such firm’s preceding fiscal year does not exceed $250,000.

Relationships with Charitable Organizations. A Director’s independence will not be considered impaired solely for the reason that a Director or an immediate family member is a Director, officer or trustee of a university, foundation or other not-for-profit organization that receives from the Company and its direct and indirect subsidiaries during any of the prior three fiscal years, contributions in any single fiscal year not exceeding the greater of $1 million, or 2% of such charitable organization’s consolidated gross revenues during such charitable organization’s fiscal year. (Any automatic matching of employee charitable contributions by the Company or its direct or indirect subsidiaries is not included in the Company’s contributions for this purpose.) All contributions by the Company in excess of $100,000 to not-for-profit entities with which a Director is affiliated, will be reported to the Corporate Governance Committee, and may be considered in making independence determinations.

For purposes of these standards, “Company” shall mean Nicor Inc. and its direct and indirect subsidiaries.

A-2


		VOTE BY INTERNET - www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.
1844 Ferry Road Naperville, IL 60563-9600

		ELECTRONIC DELIVERY OF FUTURE SHAREHOLDER COMMUNICATIONS If you would like to reduce the costs incurred by Nicor Inc. in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access shareholder communications electronically in future years.

		VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions.

		VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Nicor Inc., c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.


TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:	NICIN1	KEEP THIS PORTION FOR YOUR RECORDS


		DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.

NICOR INC.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE NOMINEES LISTED BELOW.

Vote on Directors

For

Withhold

For All

To withhold authority to vote for any individual nominee(s), mark “For All Except” and write the number(s) of the nominee’s on the line below.

Election of Directors

All

Except

Nominees;

01. R. M. Beavers, Jr.
02. B. P. Bickner
03. J. H. Birdsall, III
04. N. R. Bobins
05. B. J. Gaines
06. R. A. Jean

07. D. J. Keller
08. R. E. Martin
09. G. R. Nelson
10. J. Rau
11. R. M. Strobel

For

Against

Abstain

Vote On Proposals

THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” PROPOSAL 2.

For

Against

Abstain

Deletion of the text of Article Thirteen of Nicor’s Articles of Incorporation.

Ratification of appointment of Deloitte & Touche LLP as Nicor’s independent registered public accounting firm for 2008.

Opt-out of sections of governing state law imposing a supermajority voting requirement.

THE BOARD OF DIRECTORS MAKES NO VOTING RECOMMENDATION FOR PROPOSALS 3, 4, 5, AND 6.

Amend Article Fourteen of Nicor’s Articles of Incorporation to reduce the supermajority voting requirement to a simple majority vote.

Amend Article Twelve of Nicor’s Articles of Incorporation to reduce the supermajority voting requirements to simple majority votes.

Yes

Please indicate if you plan to attend this meeting.

Please vote, date, and sign your name(s) exactly as shown and mail promptly in the enclosed envelope.

Signature [PLEASE SIGN WITHIN BOX]

Date

Signature (Joint Owners)

Date




ADMISSION TICKET

	You are cordially invited to attend the annual meeting of shareholders of Nicor Inc. to be held on Thursday, April 24, 2008 at 10:30 a.m. at the Northern Trust Company, 6th Floor Assembly Room, 50 LaSalle Street, Chicago, Illinois.

	You should present this admission ticket, and a form of personal identification, in order to gain admittance to the meeting. This ticket admits only the shareholder(s) listed on the reverse side and one guest, and is not transferable. If shares are held in the name of a broker, trust, bank or other nominee, you should bring with you a proxy or letter from your broker, trustee, bank or nominee confirming your beneficial ownership of the shares.

Nicor Inc.
1844 Ferry Road
Naperville, IL 60563-9600

Proxy Solicited by the Board of Directors

The undersigned appoints Russ M. Strobel, Robert M. Beavers, Jr., John H. Birdsall, III, or any of them, proxies to vote all shares of stock which the undersigned is entitled to vote at the annual meeting of shareholders of Nicor Inc., to be held April 24, 2008 or at any adjournment thereof, on the matter as set forth in the Proxy Statement and on all matters properly presented at the meeting.

This instruction and proxy card is also solicited by the Board of Directors of Nicor Inc. for persons who participate in (1) the Nicor Companies Savings Investment Plan, (2) the Nicor Gas Thrift Plan, and (3) the Birdsall, Inc. Retirement Savings Plan. By signing this instruction and proxy card, or by voting by phone or Internet, the undersigned hereby instructs Vanguard Fiduciary Trust Company, the trustee of each of the Plans named above, to exercise the voting rights relating to any shares of Common Stock of Nicor Inc. allocable to his or her account(s) as of February 26, 2008. The trustee will tabulate the votes received from all participants by April 21, 2008 and shall vote the shares of Nicor Common Stock for which it does not receive voting instruction in the same proportion as the shares voted under the Plans pursuant to instruction.

Proxies will be voted as directed.

In the absence of specific direction, signed proxies will be voted in accordance with the recommendations of the Board of Directors for Proposals 1 and 2, and as abstentions for Proposals 3, 4, 5 and 6.


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