<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant /X/
Filed by a party other than the registrant / /
Check the appropriate box:
/X/ Preliminary proxy statement
/ / Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
NICOR Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Charter)
NICOR Inc.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14a-6(i)(1), or
14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of transaction:
/X/ 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.
(1) Amount previously paid:
$125.00
(2) Form, schedule or registration statement no.:
001-07297
(3) Filing party:
Bowne of Detroit
(4) Date filed:
2/3/94
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1Set forth the amount on which the filing fee is calculated and state how it was
determined.
<PAGE> 2
[LOGO]
March 9, 1994
Dear Fellow Stockholder:
You are cordially invited to attend your Company's Annual Meeting of
Stockholders on Thursday, April 21, 1994, at 10:30 a.m., Central Daylight Saving
Time. The meeting will be held in Chicago at The Northern Trust Company, 50
South LaSalle Street, 6th Floor Assembly Room.
In addition to the election of Directors and ratification of appointment of
auditors, the agenda for this year's meeting includes important proposals to
amend Article Ten and add Article Fifteen to the Company's Articles of
Incorporation. The proposed amendments are primarily a result of changes to the
Illinois Business Corporation Act of 1983 that became effective January 1, 1994.
An amendment to Article Ten would permit the discretionary indemnification of
certain agents of the Company, which is now mandatory; make mandatory the
advancement of expenses for certain litigation involving directors, officers or
employees, which is now discretionary; and otherwise conform it to current law.
The addition of Article Fifteen would limit the personal liability of the
Company's Directors for monetary damages in certain circumstances arising from
breach of fiduciary duty to the Company or its stockholders.
Passage of the amendment to Article Ten and the addition of Article Fifteen will
help NICOR attract and retain qualified men and women to serve as directors by
providing protection against litigation in appropriate situations. Your Board of
Directors has unanimously approved both proposals and encourages you to do the
same. A summary of each proposal, as well as the full text, is included in the
proxy statement. Please read them carefully.
Each vote counts, and it is important that your shares be represented at the
meeting regardless of the size of your holdings. Therefore, I urge you to sign,
date and mail your proxy promptly. Even if you have already returned a signed
proxy, you can still vote your shares personally at the meeting.
I look forward to seeing you on April 21 to review the progress of the Company
and to discuss our future plans.
Sincerely,
RICHARD G. CLINE
Chairman, President and Chief
Executive Officer
<PAGE> 3
The Northern Trust Company is located at the northwest corner of LaSalle and
Monroe streets. The map below shows parking garages and lots in the immediate
vicinity.
{P/U Camera Ready Map}
<PAGE> 4
NICOR INC.
P.O. BOX 3014, NAPERVILLE, ILLINOIS 60566-7014
708/305-9500
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
APRIL 21, 1994
The annual meeting of stockholders of NICOR Inc. will be held at The Northern
Trust Company, 6th Floor Assembly Room, 50 South LaSalle Street, Chicago,
Illinois, on Thursday, April 21, 1994, at 10:30 a.m., Central Daylight Saving
Time, for the following purposes, all as set forth in the accompanying proxy
statement:
(1) election of a Board of Directors;
(2) amendment of Article Ten of the Company's Articles of Incorporation
concerning indemnification and advancement of expenses;
(3) addition of Article Fifteen to the Company's Articles of Incorporation
limiting Director liability; and
(4) ratification of the Board of Directors' appointment of Arthur Andersen
& Co. as independent auditors for the Company for 1994.
Only stockholders of record on the books of the Company at the close of business
on February 22, 1994, will be entitled to vote at the meeting. The stock
transfer books will not be closed.
DAVID L. CYRANOSKI
Vice President, Secretary
and Controller
March 9, 1994
IMPORTANT
The Company has about 46,000 registered stockholders. In order that there may be
a proper representation at the meeting, you are urged to vote, sign and mail all
proxies you receive even though you plan to attend. If you attend the meeting
you may, if you wish, vote personally on all matters brought before the meeting.
Your prompt action in returning your proxy will be greatly appreciated. A return
envelope, requiring no postage if mailed in the United States, is enclosed for
your convenience.
<PAGE> 5
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of proxies
by the Board of Directors of NICOR Inc., P.O. Box 3014, Naperville, Illinois
60566-7014, for use at the annual meeting of stockholders to be held on April
21, 1994.
The cost of soliciting proxies will be borne by the Company. In addition to
solicitation by mail, officers and regular employees of the Company may solicit
proxies by telephone, by facsimile or in person. Morrow & Co., Inc. has been
retained by the Company to assist in the solicitation of proxies for a fee of
approximately $6,000 plus expenses.
A copy of the Company's 1993 Annual Report, the Proxy Statement and the Form of
Proxy is scheduled to be mailed on or about March 9, 1994, to all stockholders
of record on February 22, 1994.
VOTING
As of February 22, 1994, the Company had outstanding shares of Common
Stock, shares of Preference Stock and shares of Preferred Stock. Each
share outstanding on the record date for the meeting, regardless of class,
entitles the holder thereof to one vote upon each matter to be voted upon at the
meeting. Stockholders have cumulative voting rights in the election of
Directors. 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. A majority of the outstanding shares of the Company 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 election, while shares held in
the name of a broker which are represented at the meeting but not authorized to
vote on this matter ("broker non-votes") will not affect the outcome. The
proposed amendment to Article Ten and the proposal to add a new Article Fifteen
to the Company's Articles of Incorporation will each require the affirmative
vote of a majority of the shares of Common Stock, Preference Stock and Preferred
Stock outstanding, voting together as a single class. Shares of stock as to
which authority to vote on these items is withheld, and broker non-votes, will
therefore have the effect of votes against these proposals.
Any stockholder giving a proxy will have the right to revoke it at any time
prior to the voting thereof by giving written notice to the Secretary of the
Company. All shares represented by valid proxies will be voted at the meeting or
at any adjournment thereof as directed by the stockholders. In the absence of
specific direction to the contrary, the shares represented by valid proxies will
be voted FOR the election as Directors of all nominees herein named and, unless
otherwise specified, FOR all other proposed items. In the event that any
Director nominee shall be unable to serve, which is not now contemplated, the
proxy holders may, but need
<PAGE> 6
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.
ITEM 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.
NOMINEES
The names of the nominees and certain additional information concerning them are
set forth below. This information includes business experience during the last
five years and other directorships currently held with companies whose
securities are registered with the Securities and Exchange Commission. Each
Director will also be a Director of Northern Illinois Gas Company, a subsidiary
of NICOR Inc.
<TABLE>
<S> <C>
[PHOTO] ROBERT M. BEAVERS, JR.; Age 50
Director since 1992; Common Shares 2,484
Business experience during last five years: Senior Vice President since
1980 as well as Zone Manager 1980-1993, McDonald's Corporation.
(Restaurant Industry)
Directorship: McDonald's Corporation.
[PHOTO] JOHN H. BIRDSALL, III; Age 50
Director since 1982; Common Shares 271,380
Business experience during last five years: Private Investor; formerly
President of Birdsall, Inc., a subsidiary of NICOR Inc., 1982-1986.
(Containerized Shipping)
</TABLE>
2
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<TABLE>
<S> <C>
[photo] W. H. CLARK; Age 61
Director since 1989; Common Shares 1,000
Business experience during last five years: Chairman of the Board since
1984 and Chief Executive Officer since 1982 as well as President,
1982-1990, Nalco Chemical Company. (Producer of specialty chemicals
and related services)
Directorships: Bethlehem Steel Corporation; James River Corporation; Nalco
Chemical Company; Northern Trust Corporation; USG Corporation.
[photo] RICHARD G. CLINE; Age 59
Director since 1977; Common Shares 243,460
Business experience during last five years: Chairman of the Board and
Chief Executive Officer since 1986 as well as President since 1990,
NICOR Inc.
Directorships: Pet Incorporated; Whitman Corporation.
[photo] THOMAS L. FISHER; Age 49
Director since 1988; Common Shares 7,148
Business experience during last five years: President and Chief Executive
Officer, Northern Illinois Gas Company, since 1988.
</TABLE>
3
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<TABLE>
<S> <C>
[photo] JOHN E. JONES; Age 59
Director since 1993; Common Shares 1,000
Business experience during last five years: Chairman of the Board and
Chief Executive Officer, CBI Industries, Inc., since 1989 as well as
President and Chief Operating Officer since 1988. (Industrial
Construction)
Directorships: Allied Products Corporation; Amsted Industries, Inc.; CBI
Industries, Inc.; Interlake Corporation; Valmont Industries, Inc.
[photo] DENNIS J. KELLER; Age 52
First nomination as Director; Common Shares 1,000
Business experience during last five years: Chairman of the Board and
Chief Executive Officer, DeVry Inc., since 1987 as well as Chairman of
the Board and Chief Executive Officer, Keller Graduate School of
Management, since 1981. (Technical and Management Education)
Directorship: DeVry Inc.
[photo] CHARLES S. LOCKE; Age 65
Director since 1982; Common Shares 1,000
Business experience during last five years: Chairman of the Board and
Chief Executive Officer, Morton International, Inc., since 1989
(Manufacturer and marketer of specialty chemicals, automotive safety
products and salt); Chairman of the Board and Chief Executive Officer,
Morton Thiokol, Inc., 1980-1989. (Manufacturer and marketer of high
technology propulsion systems, specialty chemicals and salt) Mr. Locke
has indicated that he intends to retire from Morton International,
Inc. on March 31, 1994.
Directorships: Avon Products, Inc.; Morton International, Inc.; Thiokol
Corporation; Whitman Corporation.
</TABLE>
4
<PAGE> 9
<TABLE>
<S> <C>
[photo] SIDNEY R. PETERSEN; Age 63
Director since 1987; Common Shares 3,130
Business experience during last five years: Retired; formerly Chairman of
the Board and Chief Executive Officer, Getty Oil Company, 1980-1984.
(Integrated Petroleum Industry)
Directorships: Avery Dennison Corporation; Carter Hawley Hale Stores,
Inc.; Global Natural Resources Inc.; Union Bank.
[photo] DANIEL R. TOLL; Age 66
Director since 1986; Common Shares 2,000
Business experience during last five years: Corporate and civic director;
formerly President, Walter E. Heller International Corporation,
1980-1985. (Financial Services)
Directorships: Brown Group, Inc.; A. P. Green Industries, Inc.; IMCERA
Group, Inc.; Kemper Corporation; Kemper National Insurance Company;
Lincoln National Convertible Securities Fund, Inc.; Lincoln National
Income Fund, Inc.
[photo] PATRICIA A. WIER; Age 56
Director since 1990; Common Shares 2,698
Business experience during last five years: Independent business
consultant; formerly President, Encyclopaedia Britannica North
America, 1986-1993; Encyclopaedia Britannica North America is a
division of Encyclopaedia Britannica, Inc. (Producer and marketer of
reference works and educational products)
</TABLE>
BOARD AND COMMITTEE MEETINGS
The NICOR Board has an Audit Committee, a Compensation Committee and a Committee
on Directors. During 1993 there were eight meetings of the Board of Directors,
three meetings of the Audit Committee, five meetings of the Compensation
Committee and four meetings of the Committee on Directors. All incumbent
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Directors attended more than 75% of the aggregate number of meetings of the
Board and Committees on which they served, except Mrs. Wier, who attended 73%.
COMMITTEES
The Audit Committee, of which Messrs. Beavers, Judy (Chairman) and Toll and Mrs.
Wier are members, is responsible for recommending to the Board of Directors the
appointment of independent auditors, reviewing the scope, fees and findings of
audits and other services as performed by the independent auditors, reviewing
the activities and findings of the internal audit staff and reviewing the
Company's system of internal controls. Mr. Paul R. Judy is not standing for
reelection to the Board in 1994.
Members of the Compensation Committee are Messrs. Clark, Jones, Locke (Chairman)
and Petersen. The Committee is responsible for reviewing and approving or, where
appropriate, making recommendations to the Board of Directors relating to
executive changes, salaries and benefits.
The Committee on Directors members are Messrs. Clark, Judy, Locke and Toll
(Chairman). The Committee is responsible for recommending Director nominees,
Board committee members and nonmanagement Directors' compensation to the Board
of Directors. Stockholders may recommend Director nominees for consideration by
the Committee at any time in writing, giving pertinent background information.
DIRECTORS' COMPENSATION
Directors who are not Company or subsidiary officers receive an annual retainer
of $25,000, plus a $1,000 fee for each Board and Committee meeting attended.
Committee Chairmen are paid an additional retainer of $3,000 per year. Directors
may elect to defer the payment of retainers and fees using an interest
equivalent option or a share unit option. The interest equivalent option accrues
interest quarterly at a prime interest rate. 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 into
additional share units based on then current market prices for the Company's
Common Stock. At retirement, the Director will be entitled to a cash payment
based on the number of share units then held and the then current market price
of NICOR Common Stock. Once each year a Director may switch all or part of the
balance between the interest equivalent option and the share unit option.
Nonofficer Directors as a group received 3,284 share units for compensation
deferred and dividends paid during 1993, with an average per share base price of
$27.85. Directors who are not eligible to receive a pension from the Company or
any of its subsidiaries will receive a pension equal to the annual retainer paid
to nonemployee Directors at the time of retirement from the Board for a period
equal to the number of years served as a Director but not to exceed ten years.
Birdsall, Inc., a subsidiary of NICOR Inc., asked Mr. Birdsall to assist in
attaining reinstatement of the reinvestment provisions of Subpart F of the
Internal Revenue Code as they relate to controlled foreign shipping companies.
In accordance with their agreement, Birdsall, Inc. paid Mr. Birdsall $115,000
during
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1993. In order to facilitate his work, Mr. Birdsall was named Vice Chairman of
Birdsall, Inc., Tropical Shipping and Construction Co., Ltd., and Tropical
Shipping, Inc. Because of the limited scope and duration of his assignment, Mr.
Birdsall continued to receive his annual retainer and Director's fees.
SECURITY OWNERSHIP OF MANAGEMENT
Set forth below is the number of shares of the Company's Common Stock
beneficially owned by each of the Directors, Director nominee and executive
officers of the Company and by all Directors, Director nominee and executive
officers as a group as of February 22, 1994, with sole voting or investment
power except as otherwise noted. No Director, Director nominee or executive
officer owns more than 1% of the outstanding shares of Common Stock or any
shares of Preference or Preferred Stock.
<TABLE>
<CAPTION>
AMOUNT AND
NAME OF BENEFICIAL OWNER POSITION NATURE OF OWNERSHIP
------------------------------- -------------------
<S> <C> <C>
Robert M. Beavers, Jr........................................... Director 2,484
John H. Birdsall, III........................................... Director 271,380(1)
W. H. Clark..................................................... Director 1,000
Richard G. Cline................................................ Director and Executive Officer 243,460(2)
David L. Cyranoski.............................................. Executive Officer 7,963(2)(3)
Thomas L. Fisher................................................ Director and Executive Officer 7,148
John C. Flowers................................................. Executive Officer 7,924(2)(3)
John E. Jones................................................... Director 1,000
Paul R. Judy.................................................... Director 10,000
Dennis J. Keller................................................ Director Nominee 1,000
John J. Lannon.................................................. Executive Officer 7,060(3)
Charles S. Locke................................................ Director 1,000
Donald W. Lohrentz.............................................. Executive Officer 6,130(2)(3)
Sidney R. Petersen.............................................. Director 3,130(3)
Daniel R. Toll.................................................. Director 2,000
Patricia A. Wier................................................ Director 2,698
Directors, Director Nominee and Executive Officers as a Group... 575,377(1)(2)(3)
Percentage of class........................................... 1.07
</TABLE>
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(1) Includes 25,200 shares of Common Stock owned through a trust, in which Mr.
Birdsall disclaims any beneficial interest. Mr. Birdsall amended his SEC
initial statement of beneficial ownership report earlier this year to
include shares held as custodian for family members that were inadvertently
omitted from that report.
(2) Includes shares which the following individuals have a right to acquire or
will have a right to acquire within 60 days through the exercise of stock
options: Mr. Cline, 75,000; Mr. Cyranoski, 7,000; Mr. Flowers, 3,000; Mr.
Lohrentz, 5,000; and all Directors and executive officers as a group,
90,000.
(3) Includes shares held jointly with a spouse or in trust or as custodian for
family members as follows: Mr. Cyranoski, 963; Mr. Flowers, 4,924; Mr.
Lannon, 226; Mr. Lohrentz, 1,130; Mr. Petersen, 3,130; and all Directors
and executive officers as a group, 10,373.
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REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON EXECUTIVE
COMPENSATION
The following information regarding compensation is given with respect to the
Chief Executive Officer and the four other highest paid executive officers of
the Company.
Executive Compensation Philosophy
Executive compensation in NICOR is intended to assure that the Company has
management capable and motivated to serve customer, employee and stockholder
interests. NICOR's executive compensation program is based upon two objectives:
1) Provide market-competitive compensation opportunities; and
2) Create strong links between shareholder value, financial
performance and the pay of the Company's top officers.
To achieve these objectives, the Compensation Committee reviews executive
assignments, responsibilities and performance. The Committee establishes or,
where appropriate, makes recommendations to the Board of Directors for executive
compensation program design and participation; salaries; and incentive
compensation opportunities, performance objectives and awards. The Committee is
composed of outside directors, none of whom has interlocking relationships with
Company executives. The Committee has access to compensation consultants and to
competitive pay and industry compensation practices.
NICOR's executive compensation program has two components -- annual compensation
and long-term incentive compensation.
The annual compensation program is composed of base salary and annual incentive
compensation.
Individual salaries are set within salary ranges based on periodic
comparison to actual pay for comparable positions in the gas utility,
diversified utility and general industries which are blended together for
comparison purposes. This blended group is different than the S&P Utilities
Index shown in the Performance Graph at the end of this section. The S&P
Utilities group includes gas distribution, pipeline, electric and
communication companies. The compensation surveys used in NICOR's
comparison are more heavily weighted to the gas distribution industry and
include proprietary surveys prepared by the American Gas Association,
Peoples Energy and Southern California Gas as well as gas utility and
general industry surveys from the Towers Perrin Compensation Data Bank. The
midpoints of the base salary ranges are targeted at the 50th percentile of
the competitive data for each position with minimums and maximums from 20%
below to 20% above targeted levels. The named executive officers' 1993
salaries averaged 4% above those midpoints. In establishing actual salaries
and merit adjustments related to these ranges, the Committee considers
individual performance, potential, experience and changes in duties and
responsibilities since the previous salary review.
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<PAGE> 13
Annual incentive compensation opportunities are also based on periodic
reviews of comparable positions in the same manner as described previously
for salaries. Annual incentive awards are targeted at about the 60th
percentile of the competitive data. Awards are earned for financial goals
(70% to 100% of target) based upon actual performance compared to
predetermined performance objectives with more than half the financial
target based on the net income results of the Company's utility operations
and the remainder based on the net income results of the nonutility and
corporate operations; and for nonfinancial goals (0% to 30%) which are
subjective and related to strategic objectives for enhancing stockholder
value. Participation in the annual incentive compensation plan, which
includes the Chief Executive Officer and the four other highest compensated
executive officers, is extended to those positions that play the most
important roles in carrying out the Company's annual operating plans, and
also reflects competitive practice.
Messrs. Fisher, Cyranoski and Lohrentz have a portion (up to 62.5%) of
their annual incentive target award based on participation in an annual
incentive plan related entirely to the performance of Northern Illinois
Gas, the Company's primary subsidiary. Awards are earned for financial
goals (50% of target) based on actual net income performance compared to
established performance objectives; and for nonfinancial goals (50%) which
are subjective and relate to the generation of new load, the cost of
purchased gas, income from nontraditional sources, quality items concerned
with safety and customer service, installation cost of new or replacement
services and general corporate items. A participant may also have
individual goals (up to 25% of total bonus target) which are part of the
nonfinancial goal target and which are subjective and relate to the
participant's area of responsibility.
Mr. Cline's incentive compensation for 1993 is described below. Annual
incentive compensation for Messrs. Fisher, Lannon, Cyranoski and Lohrentz
for 1993 ranged from 97% to 107.5% of target, a result of achieving 100% of
the financial goal and 125% of the nonfinancial goals under the NICOR plan,
and 110% of the financial goal and 73% of the nonfinancial goals under the
Northern Illinois Gas plan. Mr. Lannon's target award was established on
the same basis described for Mr. Cline, while the awards for Messrs.
Fisher, Cyranoski and Lohrentz were based on participation in the NICOR
plan and the Northern Illinois Gas plan. Their individual target awards
were structured to reflect this combined participation and were established
with the same general approach as applied to Mr. Cline. As a result of
their combined participation, a proportionately higher percentage of their
total annual incentive targets and payouts was based on performance of
Northern Illinois Gas as well as on additional nonfinancial objectives
specifically related to the performance of that business.
The long-term incentive compensation program is comprised of a stock option plan
and dividend performance units and is intended to focus senior management
clearly on the Company's long-term objective of creating value for shareholders.
Under this program, participants generally receive periodic grants of stock
options and an equal amount of dividend performance units with a combined target
award value based on periodic comparison to awards for comparable positions as
described in the salary section above. The target awards are
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set at about the 60th percentile of competitive data for each position.
Participants in these plans are selected by the Compensation Committee and
include the Chief Executive Officer and the four other highest compensated
executive officers as well as other Company and subsidiary officers who are
responsible for setting and carrying out the Company's longer-range strategic
plans.
- The stock options carry a maximum ten-year term and are issued at market
value.
- Both stock options and dividend performance units vest after one year,
but the exercise of stock options is generally restricted for a
three-year period.
- Each dividend performance unit accrues dividend equivalents at the rate
dividends are paid on a share of NICOR stock over a three-year
performance period.
- At the end of the three-year period, the stock options automatically
become exercisable. The dividend performance units can be earned based
upon objectives established by the Compensation Committee for NICOR's
three-year total shareholder return relative to the S&P Utilities group
(the same peer group used in the Performance Graph shown following this
report). The potential number of dividend equivalents earned can range
from 0% to 150% of the number granted. A 100% payout is achieved when
NICOR's performance is in the upper 40% of the peer group comparisons.
- If NICOR's total shareholder return for the three-year performance period
is negative, dividend performance units will not be earned, regardless of
performance relative to the S&P Utilities group.
Through this combination of stock options and dividend performance units, the
long-term incentive compensation program is designed to motivate participants to
manage the Company so as to achieve increases in total shareholder return,
rewarding them on the same basis that shareholders are rewarded -- through
increases in stock price and dividends. From time to time, the Company may also
make restricted stock grants to selected key individuals.
CEO Compensation
On April 12, 1993, Mr. Cline's base salary was increased by $20,000, a 3.25%
increase. The Committee considered the following factors when reviewing Mr.
Cline's salary: his job responsibility and scope; industry competitive data in
utility and diversified utility companies, as well as general industry; his past
salary adjustments; company performance for 1992 and over a five-year period,
including NICOR earnings, financial condition, return on equity and total
shareholder return; and individual performance, including leadership,
organization development, shareholder/investor relations and
civic/community/industry activities. The Committee did not attach any specific
weighting to any one factor, and noted that some factors were more subjective
than others.
Mr. Cline earned $409,575 in annual incentive compensation for performance in
the calendar year 1993. This amounts to 107.5% of Mr. Cline's target annual
incentive compensation award. Seventy percent of his target
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<PAGE> 15
award was based on the achievement of predefined net income objectives, one half
on a utility performance target and the remainder on a nonutility performance
target. The remaining 30% of his target award was based on a subjective
evaluation of his performance compared to predefined nonfinancial objectives
related to the Company's long-term strategies. Actual net income performance
exceeded the utility goal and resulted in an award of 110% of that target but
was less than the nonutility goal and resulted in an award of 90% of that
target; actual performance was judged to exceed the nonfinancial goals and
resulted in an award of 125% of target.
Messrs. Cline, Fisher and Lannon had performance unit grants outstanding from
the 1989 NICOR Long-Term Incentive Plan, under which no awards were paid for the
1991-1993 plan cycle. Performance objectives for this period were based upon
achieving target compounded aggregate earnings per share growth over 1988-1990
average levels in combination with achieving a defined level of return on
equity. While actual return on equity performance results exceeded target,
actual earnings per share growth was less than the required threshold
established for this performance period and thus there was no payout. No
performance units remain outstanding, and the Company does not plan to issue any
further performance units under this plan.
The Committee awarded Mr. Cline a grant of 60,000 dividend performance units on
April 15, 1993. In making the grant, the Committee set his long-term incentive
target at about the 60th percentile of competitive data for his position taking
into account both the 1993 grant of dividend performance units and options
granted to him in 1992 which vest in 1993. No options were awarded to Mr. Cline
in 1993, as he received a grant of 180,000 stock options in 1992 which vest and
become exercisable in equal installments over the years 1993, 1994 and 1995,
and, at the time of that grant, it was anticipated that no additional stock
options would be granted in 1993 or 1994. The dividend performance units awarded
to Mr. Cline in 1993 may be earned at the end of 1995 subject to the performance
criteria described in this report. A 100% payout of the 60,000 units is achieved
when NICOR's total shareholder return performance is in the upper 40% of the S&P
Utilities group.
1993 Tax Act
The Omnibus Budget Reconciliation Act of 1993 added Section 162(m) to the
Internal Revenue Code. This section limits the tax deductibility of certain
executive compensation in excess of $1 million paid or accrued by the Company
for the five highest compensated employees unless it meets procedural criteria
mandated by law. The IRS has interpreted this section of the Act and issued
proposed regulations. The criteria for preserving compensation deductibility are
complex and could be subject to further modification.
At this time, it is not anticipated that any of the executive officers named in
the Summary Compensation Table will receive compensation in 1994 which would not
be tax deductible, with the possible exception of a small portion of Mr. Cline's
potential 1994 incentive compensation. The Committee has not made any
11
<PAGE> 16
determination with respect to the Company's total compensation program as it may
be affected by these tax law changes in future years.
Compensation Committee of the Board of Directors of NICOR Inc.
Charles S. Locke, Chairman W. H. Clark John E. Jones Sidney R. Petersen
PERFORMANCE GRAPH
The following graph shows a five-year comparison of cumulative total returns for
NICOR Common Stock, the S&P Utilities Index and the S&P 500 Index as of December
31 of each of the years indicated, assuming $100 was invested on January 1,
1989, and all dividends were reinvested.
[Camera-Ready Chart]
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) NICOR Inc. S&P Utilities S&P 500
- ------------------------------- ------------ ------------- --------------
<S> <C> <C> <C>
January 1, 1989 100 100 100
1989 155 147 132
1990 156 143 128
1991 170 164 166
1992 196 178 179
1993 230 204 197
</TABLE>
12
<PAGE> 17
SUMMARY COMPENSATION TABLE
The following table shows executive compensation for the years indicated for the
Chief Executive Officer and the four other most highly compensated executive
officers:
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
---------------------------
AWARDS PAYOUTS
ANNUAL COMPENSATION ---------- --------------
-------------------------------- SHARES LONG-TERM
OTHER ANNUAL UNDERLYING INCENTIVE PLAN ALL OTHER
NAME AND SALARY BONUS COMPENSATION OPTIONS(1) PAYOUTS(2) COMPENSATION(3)
PRINCIPAL POSITION YEAR ($) ($) ($) (#) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
R. G. Cline 1993 628,846 409,575 0 0 0 26,412
Chairman, President and 1992 615,000 387,450 0 180,000 240,363 25,830
Chief Executive Officer 1991 605,769 221,400 (4) 15,000 478,977 (4)
T. L. Fisher 1993 369,462 146,134 2,420 40,000 0 21,824
President and Chief Executive Officer of 1992 350,231 147,821 2,330 25,000 97,068 18,242
Northern Illinois Gas Company 1991 328,846 145,047 (4) 6,000 289,390 (4)
J. J. Lannon 1993 230,923 100,620 3,630 20,000 0 25,364
Senior Vice President and Chief 1992 220,308 94,080 3,495 15,000 54,786 16,145
Financial Officer 1991 208,308 61,056 (4) 4,000 164,088 (4)
D. L. Cyranoski 1993 162,539 49,223 0 9,000 0 9,185
Vice President, Secretary and 1992 152,385 48,897 0 7,000 0 8,676
Controller of the Company and of 1991 (5) (5) (5) (5) (5) (5)
Northern Illinois Gas Company
D. W. Lohrentz 1993 139,616 43,778 726 7,000 0 10,739
Treasurer of the Company 1992 127,846 40,580 699 6,000 0 8,959
and Vice President of Northern 1991 120,846 36,390 (4) 4,000 0 (4)
Illinois Gas Company
</TABLE>
- ---------------
(1) Restated to reflect two-for-one stock split in April 1993.
(2) Value based on number of shares earned under the 1989 NICOR Long-Term
Incentive Plan for each three-year performance period, with shares valued
at the fair market value on the date issued.
(3) Includes Company contributions to the NI-Gas Savings Investment Plan and
credits to the Supplemental Savings Investment Plan for Messrs. Cline,
Fisher, Lannon, Cyranoski and Lohrentz of $26,412, $9,905, $7,708, $6,144
and $5,278, respectively; interest earned in excess of market on deferred
salary for Messrs. Fisher, Lannon, Cyranoski and Lohrentz of $6,844,
$5,777, $3,041 and $2,548, respectively; and amounts credited under the
1968 NI-Gas Incentive Compensation Plan for Messrs. Fisher, Lannon and
Lohrentz of $5,075, $11,879 and $2,913, respectively.
(4) Data not required.
(5) Not an executive officer during 1991.
13
<PAGE> 18
OPTION GRANTS TABLE
The following table shows stock options granted in 1993 to the Chief Executive
Officer and the four other most highly compensated executive officers:
<TABLE>
<CAPTION>
POTENTIAL RELIZABLE VALUE
AT ASSUMED ANNUAL RATES
OF STOCK PRICE
APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM(3)
-------------------------------------------------- ---------------------------
NUMBER OF
SHARES % OF TOTAL
UNDERLYING OPTIONS EXERCISE
OPTIONS GRANTED TO OR BASE
GRANTED(1) EMPLOYEES IN PRICE(2) EXPIRATION
NAME (#) FISCAL YEAR ($/SHARE) DATE 5%($) 10%($)
- --------------------------------------- ---------- ------------ --------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
All Stockholders(4).................... N/A N/A N/A N/A 1,016,078,882 2,574,810,881
R. G. Cline............................ 0 0 0 -- 0 0
T. L. Fisher........................... 40,000 25 28.9375 04/16/2003 728,000 1,844,800
J. J. Lannon........................... 20,000 12 28.9375 04/16/2003 364,000 922,400
D. L. Cyranoski........................ 9,000 6 28.9375 04/16/2003 163,800 415,080
D. W. Lohrentz......................... 7,000 4 28.9375 04/16/2003 127,400 322,840
</TABLE>
- ---------------
(1) Options become exercisable on April 16, 1996, three years from the date of
grant.
(2) Restated to reflect two-for-one stock split in April 1993.
(3) These columns show the value, at April 15, 2003, of the options granted (and
the increase in value of shares of all stockholders) assuming 5% and 10%
annual rates of appreciation over the ten-year term of the options pursuant
to requirements of the Securities and Exchange Commission and do not
constitute any prediction by the Company that these rates of appreciation
will be realized. This table does not use the alternative of a grant date
valuation because of the inherent unreliability of any such calculation.
(4) For "All Stockholders" the potential realizable value is calculated based on
$28.9375, the closing price of the Common Stock on April 15, 1993, and the
outstanding shares of Common Stock on that date.
14
<PAGE> 19
AGGREGATED OPTION EXERCISES IN 1993 AND YEAR-END VALUE TABLE
The following table shows the aggregated stock option exercises in 1993 and the
December 31, 1993 stock option values for the Chief Executive Officer and the
four other most highly compensated executive officers:
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS OPTIONS AT YEAR
AT YEAR END(#)(1) END($)(3)
SHARES VALUE ----------------- ----------------
ACQUIRED REALIZED EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE(1) (2)($) UNEXERCISABLE UNEXERCISABLE
- ------------------------------------------------------ -------------- -------- ----------------- ----------------
<S> <C> <C> <C> <C>
R. G. Cline........................................... 107,400 943,613 15,000/120,000 99,375/1,005,000
T. L. Fisher.......................................... 31,000 238,275 0/ 40,000 0/0
J. J. Lannon.......................................... 19,000 160,750 0/ 20,000 0/0
D. L. Cyranoski....................................... 8,000 61,500 7,000/ 9,000 58,625/0
D. W. Lohrentz........................................ 5,000 43,750 5,000/ 7,000 38,375/0
</TABLE>
- ---------------
(1) Restated to reflect two-for-one stock split in April 1993.
(2) Based on market value of the Company's Common Stock at date of exercise
minus the exercise price.
(3) Based on market value of the Company's Common Stock at December 31, 1993,
minus the exercise price.
LONG-TERM INCENTIVE PLAN -- AWARDS IN 1993
The following table shows dividend units granted in 1993 to the Chief Executive
Officer and the four other most highly compensated executive officers:
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS UNDER
PERFORMANCE NON-STOCK PRICE-BASED PLAN
NUMBER PERIOD -------------------------------
NAME OF UNITS UNTIL PAYOUT THRESHOLD TARGET MAXIMUM
- ----------------------------------------------------------- -------- -------------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
R. G. Cline................................................ 60,000 1993 thru 1995 $54,900 $219,600 $329,400
T. L. Fisher............................................... 40,000 1993 thru 1995 36,600 146,400 219,600
J. J. Lannon............................................... 20,000 1993 thru 1995 18,300 73,200 109,800
D. L. Cyranoski............................................ 9,000 1993 thru 1995 8,235 32,940 49,410
D. W. Lohrentz............................................. 7,000 1993 thru 1995 6,405 25,620 38,430
</TABLE>
Each dividend unit accumulates dividends equivalent to dividends paid on one
share of NICOR stock during the three-year performance period. If dividends
increase during this period, the dividend equivalents would increase
proportionately. The payout is modified by a performance multiplier which ranges
from 0 to 1.5; the multiplier is based on NICOR total shareholder return over
the three-year period as compared to the performance of the S&P Utility Group,
except that no awards will be earned if shareholder return for the period is
negative, regardless of the performance relative to the S&P Utility Group. All
dividend units earned become payable following the end of the performance
period.
15
<PAGE> 20
RETIREMENT BENEFITS UNDER RETIREMENT PLANS
The following table shows the estimated annual benefits under the Company's
retirement plans on a straight life annuity basis at age 65 for various
compensation bases and years of service classifications.
<TABLE>
<CAPTION>
YEARS OF SERVICE
BASE ------------------------------------------------------------
COMPENSATION 15 20 25 30 35
- ------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$150,000............................ $ 38,660 $ 51,547 $ 64,434 $ 77,321 $ 86,696
250,000............................ 65,660 87,547 109,434 131,321 146,946
350,000............................ 92,660 123,547 154,434 185,321 207,196
450,000............................ 119,660 159,547 199,434 239,321 267,446
550,000............................ 146,660 195,547 244,434 293,321 327,696
650,000............................ 173,660 231,547 289,434 347,321 387,946
750,000............................ 200,660 267,547 334,434 401,321 448,196
</TABLE>
The Retirement Plan, which covers all Company and Northern Illinois Gas Company
employees not covered by a bargaining agreement, including executive officers of
the Company, is an actuarially based, defined benefit plan with benefits
determined by "Base Compensation" (highest annual average of base salary for any
consecutive 60-month period) and years of service. The base salary for this
purpose is the amount shown under "Salary" in the Summary Compensation Table.
Benefits payable under the Retirement Plan in excess of the limitations under
the Internal Revenue Code will be paid under the terms of the Supplemental
Retirement Plan and those payments and payments pursuant to the agreement with
Mr. Cline discussed below will be paid from general funds of the Company. Under
the Retirement Plan, at retirement an employee may elect to receive a lump sum
benefit in lieu of semimonthly payments. The lump sum payment is based on the
actuarial present value of the future retirement payments utilizing the Pension
Benefit Guaranty Corporation termination interest rate ("PBGC Rate") in effect
at the time of the retirement. The benefits are not subject to any deduction for
Social Security payments or any other offset amounts. Credited years of service
under these arrangements are as follows: Mr. Cline, 33; Mr. Fisher, 26; Mr.
Lannon, 27; Mr. Cyranoski, 27; and Mr. Lohrentz, 26.
Under a 1985 agreement with the Company, as amended in 1989, Mr. Cline is
entitled to receive benefits equivalent to those he would have received under
the Retirement, Supplemental Retirement, Savings Investment and Security Payment
Plans if he had been employed by Northern Illinois Gas Company since July 10,
1960, and had been entitled to matching employer contributions under the Savings
Investment Plan since that date plus interest thereon at the PBGC Rate. Benefits
under this agreement will be reduced by the value of the vested benefits
actually accrued under the Company's Retirement Plan, Supplemental Retirement
Plan and Security Payment Plan. Benefits under this agreement will also be
reduced by the value of the vested benefit accrued under a prior employer's
plans at the date of this agreement, and by interest thereon from that date
forward at the PBGC Rate.
16
<PAGE> 21
CHANGE IN CONTROL ARRANGEMENTS
In the event of a "change in control" of the Company, then the following would
apply:
Under the provisions of the 1989 Long-Term Incentive Plan, all outstanding
stock options and restricted stock will automatically become fully
exercisable and/or vested;
Under the terms of the Salary Deferral Plan, any deferred balance account
shall be determined as though the participant retired and distributed as
soon as practical; and,
Under the terms of the Capital Accumulation Plan, under which certain
executive officers deferred a portion of their salary in 1984 and 1985, the
amount deferred shall be credited at an interest rate of 20 percent per
annum from the date of deferral, less amounts already received, and
distributed as soon as practical following termination within two years for
any reason other than death or total and permanent disability.
A change in control occurs if any person or group is or becomes a beneficial
owner of 30% or more of the voting power of NICOR, if a tender offer is made for
NICOR stock which has not been negotiated and approved by the Board of
Directors, or if individuals who were the Board's nominees for election shall
not constitute a majority of the Board.
17
<PAGE> 22
PROPOSED AMENDMENTS TO THE COMPANY'S
ARTICLES OF INCORPORATION
In 1993, the Illinois Business Corporation Act of 1983 (the "IBCA") was amended
to allow Illinois corporations greater flexibility in advancing expenses to
persons serving as directors and officers and in other capacities to enable them
to defend against litigation involving them because of their corporate position,
and to permit Illinois corporations to limit the monetary liability of directors
in certain circumstances. The Company is proposing to amend its Articles of
Incorporation to reflect these changes, as well as to make certain other changes
in the indemnification provision of the Articles as summarized below. The
Company believes that providing these protections for persons serving as
directors and in other capacities is important in enabling the Company to
attract and retain qualified men and women to serve in these capacities, and the
Board of Directors has therefore unanimously approved these amendments and
recommends their approval by shareholders. The amendments are summarized in
Items 2 and 3 below and the full text of the amendments is attached hereto.
Shareholders are urged to carefully review this material.
ITEM 2. PROPOSED AMENDMENT TO THE ARTICLES OF INCORPORATION PROVIDING FOR
INDEMNIFICATION AND THE ADVANCEMENT OF EXPENSES
(YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ADOPTION)
Illinois law regarding the indemnification of directors, officers and persons
serving in other corporate capacities was amended in 1993 to provide more
flexibility to corporations in the advancement of expenses and in certain other
respects. Present Article Ten, which provides for such indemnification, was
included in the Company's initial Articles of Incorporation in 1976 and has not
been amended, despite a number of changes since that time in the provisions of
the Illinois law governing these matters. The Board of Directors believes that
the changes in the Illinois statute governing the advancement of expenses make
it appropriate at this time to generally review and revise the provisions of the
Company's Articles of Incorporation governing these matters. The Board of
Directors has therefore voted unanimously to adopt an amendment to Article Ten
of the Articles of Incorporation of the Company to revise the provisions
covering indemnification and the advancement of expenses to directors, officers,
employees and agents to better reflect the current provisions of the Illinois
law and to make certain other changes, as more fully discussed below. The Board
of Directors believes that the amendment will assist the Company in obtaining
and retaining highly qualified individuals as directors, officers and employees
of the Company. Article Ten as it is proposed to be amended is set forth in
Exhibit A-1 to the Proxy Statement and present Article Ten is set forth in
Exhibit A-2, and the following discussion is qualified in its entirety by
reference to those exhibits.
The primary changes that would be accomplished by this amendment are as follows:
1. Paragraph 1 of new Article Ten would require mandatory
indemnification of directors, officers and employees of the Company against
all expenses (including attorneys' fees), judgments, fines and
18
<PAGE> 23
amounts paid in settlement actually and reasonably incurred by them in
connection with any threatened, pending or completed action, suit or
proceeding to which they are or were a party or are threatened to be made a
party, to the fullest extent permitted by the IBCA or other applicable laws
as they now exist or may be amended in the future. This differs from
present Paragraph 1 of Article Ten primarily in that the present Article
also mandates such indemnification of persons serving at the request of the
Company in any other capacity, which could include agents. The Board of
Directors of the Company would retain the discretion to provide for the
indemnification of, and advancement of expenses to, agents pursuant to
Paragraph 5 of the proposed amendment, but the Company would no longer be
required to do so. The Board of Directors believes that it is in the best
interest of the Company to be able to review such other claims on a
case-by-case basis. The amendment also expressly incorporates future
changes in applicable laws, which the present Article Ten does not.
2. The standards and procedures for determining whether an individual
is entitled to indemnification included in the first three paragraphs of
present Article Ten have not been included in the proposed amendment
because certain standards and procedures are mandated by the IBCA and are
subject to change, and because those set forth in present Article Ten
differ in some respects from those set forth in the present statute. In
particular, Paragraph 3 of present Article Ten provides that, in the
absence of a quorum of directors who are not involved in the litigation
which is the subject of a claim for indemnification, the determination of
whether a person who has not been successful on the merits has met the
applicable indemnification standards would be made by an arbitration panel
selected in the manner set forth therein. The IBCA requires that, unless
ordered by a court (and with certain exceptions in the case of claims by or
in the right of the Company), this determination is to be made (a) by a
quorum of directors who are not parties to such action, or (b) if a quorum
is not obtainable or if the independent quorum of directors so directs, by
independent legal counsel, or (c) by shareholders.
3. Paragraph 4 of present Article Ten permits (but does not require)
the Company to advance costs, expenses and fees in connection with any such
litigation to an indemnified person at the discretion of the Board of
Directors, subject to the final determination of that person's right to
indemnification, as permitted by the IBCA as previously in effect. The
Illinois Legislature amended the IBCA in 1993 to permit the advancement of
expenses by a corporation to a person claiming indemnification upon receipt
of an undertaking to repay such amount if it shall ultimately be determined
that such person is not entitled to be indemnified, thereby eliminating the
requirement for a specific board authorization and replacing the prior
requirement of an affirmative finding that such person was entitled to
indemnification with the requirement that repayment would be necessary only
if it was ultimately determined that such person was not entitled to be
indemnified. Paragraph 2 of the proposed amendment would require the
advancement of expenses to the fullest extent permitted by law now or in
the future in the case of directors, officers and employees, while leaving
the advancement of expenses for agents to the discretion of the Board of
Directors under Paragraph 5 of the proposed amendment.
19
<PAGE> 24
4. Paragraph 4 provides that indemnification and advances provided for
under Article Ten shall continue as to any person who has ceased to be a
director, officer, employee or agent, which is expressly permitted by the
IBCA but not covered in present Article Ten except in the case of the
heirs, executors, and administrators of the indemnified person.
Certain of these changes, particularly those mandating the advancement of
expenses without prior specific Board approval and those specifying that such
advances need not be repaid absent a finding that the person is not entitled to
such indemnification, as permitted by the 1993 amendment to the IBCA, expand the
benefits provided by present Article Ten and thus may benefit the Company's
Directors, officers and employees at the Company's expense. Shareholders should
therefore be aware that, in addition to this amendment benefitting the Company,
Directors would benefit from the added protection afforded by the proposed
amendment to Article Ten and thus have a personal interest in the adoption of
this amendment.
The new provisions, if approved by the shareholders, would become effective upon
issuance of a certificate of amendment by the Illinois Secretary of State, which
would be expected shortly following the annual meeting. The new provisions would
apply to claims arising before or after the effectiveness of the amendment.
However, the Company knows of no threatened, pending or completed matter which
would give rise to any claims under the amended Article Ten.
The Board recommends a vote FOR the adoption of Item 2.
ITEM 3. PROPOSED AMENDMENT TO THE ARTICLES OF INCORPORATION LIMITING THE
LIABILITY OF DIRECTORS.
(YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ADOPTION)
Illinois law was recently modified to permit Illinois corporations to include in
their Articles of Incorporation a provision limiting the liability of directors
for monetary damages under certain circumstances. Delaware and other states have
in recent years changed their corporate laws to permit such provisions, and many
public corporations organized under the laws of those states have adopted such
provisions. These actions by Illinois and other states reflect a concern with
the extent of shareholder litigation in recent years and the resulting increased
legal expense to corporations and the increased expense and other difficulties
encountered by corporations in obtaining adequate directors' and officers'
liability insurance, as well as the increased vulnerability of directors to
potentially large claims for monetary damages, even in situations in which
directors act honestly and in good faith.
The Company's Board of Directors has considered the reasons for these changes in
state laws, the reasons that other companies have added such provisions and the
value of such a provision to the Company and its shareholders. The Board of
Directors believes that this provision, which is consistent with the recent
modification of Illinois law, will aid the Company's ability to continue to find
and retain well-qualified
20
<PAGE> 25
individuals to serve as Directors of the Company. The Company's Board of
Directors has therefore voted unanimously for the adoption of an amendment to
the Articles of Incorporation of the Company to add a new Article Fifteen in the
form set forth in Exhibit B to the Proxy Statement which would limit the
liability of directors for monetary damages under certain circumstances, as
summarized below.
The limitation on liability imposed by proposed Article Fifteen does not
eliminate the fiduciary responsibility of directors but would only eliminate the
personal liability of directors for monetary damages to the Company or its
shareholders for breach of their fiduciary duty as a director. However, it would
not eliminate directors' liability for any breach of their duty of loyalty to
the Company or its shareholders, for acts or omissions not in good faith or that
involve intentional misconduct or a knowing violation of law, for any
transaction from which the directors derive an improper personal benefit, or for
permitting certain distributions to shareholders in violation of the IBCA. The
amendment would only apply to claims for monetary damages and would not prevent
suits seeking injunctive relief, nor would it in any way limit other types of
claims against directors, such as claims arising under federal or state
securities laws. It only applies to claims by the Company or its shareholders
and not to claims by other parties, and only to claims against directors as such
and not to claims against officers (including directors who are also officers)
for liabilities they may incur in their capacity as officers.
Shareholders should be aware that, except as indicated, the amendment would
eliminate monetary liability for grossly negligent conduct (including such
conduct in acquisition transactions) and that, in addition to the benefit to the
Company, Directors would benefit from the added protection afforded by proposed
Article Fifteen and thus have a personal interest in the adoption of this
Article.
The limitation would only apply prospectively, and would not affect any
liability of a director for any act or omission occurring before the effective
date of the new Article Fifteen. If approved by shareholders, new Article
Fifteen would become effective upon the issuance of a certificate of amendment
by the Illinois Secretary of State, which would be expected shortly following
the annual meeting. The Company knows of no pending or threatened litigation
against any director that would have been affected by a limitation such as
proposed Article Fifteen.
The Board recommends a vote FOR the adoption of Item 3.
21
<PAGE> 26
ITEM 4. APPOINTMENT OF INDEPENDENT AUDITORS
(YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION)
The Board of Directors recommends that the stockholders ratify the appointment
of Arthur Andersen & Co., independent public accountants, to audit the accounts
of the Company for 1994. Arthur Andersen & Co. has audited the accounts of the
Company and its predecessor since 1954. If the stockholders do not ratify this
appointment, other independent auditors will be considered by the Board upon
recommendation of the Audit Committee. A representative of the firm will be
present at the annual meeting with the opportunity to make a statement and to
respond to appropriate questions.
STOCKHOLDER PROPOSALS
Stockholder proposals must be received at the Company's General Office, P.O. Box
3014, Naperville, Illinois 60566-7014 on or before November 9, 1994, and must
otherwise comply with Securities and Exchange Commission requirements to be
eligible for inclusion in the Proxy Statement and the Form of Proxy relating to
the 1995 annual meeting of stockholders. In addition, notice must be received on
or before February 20, 1995, and must otherwise comply with the Company's
By-Laws in order for stockholder proposals to be presented at the 1995 annual
meeting.
OTHER MATTERS
As of the date of this Proxy Statement, the Company 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.
DAVID L. CYRANOSKI
Vice President, Secretary
and Controller
March 9, 1994
22
<PAGE> 27
EXHIBIT A-1
PROPOSED ARTICLE
ARTICLE TEN
Paragraph 1: The Corporation shall indemnify, to the fullest extent permitted
under the laws of the State of Illinois and any other applicable laws, as they
now exist or as they may be amended in the future, any person who was or is a
party, or is threatened to be made a party, to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (including, without limitation, an action by or in the right of
the Corporation), by reason of the fact that he or she is or was a Director,
officer or employee of the Corporation, or is or was serving at the request of
the Corporation as a Director, officer or employee of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by such person in connection with
such action, suit or proceeding.
Paragraph 2: Expenses incurred by such a Director, officer or employee in
defending a civil or criminal action, suit or proceeding shall be paid by the
Corporation in advance of the final disposition of such action, suit or
proceeding, to the fullest extent permitted under the laws of the State of
Illinois and any other applicable laws, as they now exist or as they may be
amended in the future.
Paragraph 3: The rights provided by or granted under this Article Ten are not
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled.
Paragraph 4: The indemnification and advancement of expenses provided by or
granted under this Article Ten shall continue as to a person who has ceased to
be a Director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of that person.
Paragraph 5: The Board of Directors may, by resolution, extend the
indemnification and advancement of expenses provisions of this Article Ten to
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding by reason of the
fact that he or she is or was an agent of the Corporation or is or was serving
at the request of the Corporation as an agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise.
23
<PAGE> 28
EXHIBIT A-2
CURRENT ARTICLE
ARTICLE TEN
Paragraph 1: Any person made a party to or involved in any litigation (which
term shall include any actual or threatened civil, criminal or administrative
action, arbitration proceeding, claim, suit, proceeding or appeals therefrom) by
reason of the fact that he at any time was or is a Director, officer or employee
of the Corporation, or by reason of the fact that, at the request of the
Corporation, he served or is serving, in any capacity, any corporation,
not-for-profit corporation, trade association or other entity, shall (to the
fullest extent permitted by law) be indemnified by the Corporation against all
liabilities and all expenses reasonably incurred by him arising out of or in
connection with such litigation, except in relation to matters as to which (a)
it shall be finally adjudged in such litigation that such person breached his
duty to the Corporation, or (b) such person failed to act in good faith for a
purpose which he reasonably believed to be in the best interests of the
Corporation, or (c) in the case of criminal litigation, such person had
reasonable cause to believe that his conduct was unlawful.
Paragraph 2: Except as provided in paragraph 1 above, the termination of any
litigation by judgment, settlement, conviction or upon a plea of nolo
contendere, or its equivalent, shall not create a presumption that the person
seeking indemnification did not meet the applicable indemnification standard set
forth in paragraph 1 above.
Paragraph 3: Except where a person has been successful on the merits with
respect to such litigation, any indemnification hereunder shall be made only
after (a) the Board of Directors (acting by a quorum consisting of Directors who
were not involved in such litigation) determine that such person met the
applicable indemnification standard set forth in paragraph 1 above; or (b) in
the absence of such a quorum, a panel selected in the following manner
determines that such person met the applicable indemnification standard set
forth in paragraph 1 above: one member of such panel shall be selected by the
members of the Board of Directors who were not involved in such litigation, or,
if there should be no such Directors, then by the senior-ranking officer or
employee of the Corporation who was not involved in such litigation; one member
of such panel shall be selected by the person seeking indemnification; and the
third member of such panel shall be selected by the first two members. Such
panel shall make such determination by arbitration in accordance with the laws
of the State of Illinois. Judgment upon the award rendered by such panel may be
entered in any court having jurisdiction thereof.
Paragraph 4: Advances may be made by the Corporation against costs, expenses and
fees arising out of, or in connection with, such litigation at the discretion
of, and upon such terms (but always subject to the final determination of a
person's right to indemnification) as may be determined by, the Board of
Directors.
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<PAGE> 29
Paragraph 5: The right of indemnification provided hereunder shall not be deemed
exclusive of any other right to which any person may be entitled, or of any
other indemnification which may lawfully be granted to any person in addition to
the indemnification provided hereunder. Indemnification provided hereunder
shall, in the case of death of the person entitled to indemnification, inure to
the benefit of his heirs, executors or other lawful representatives.
EXHIBIT B
ARTICLE FIFTEEN
No Director of the Corporation shall have any personal liability to the
Corporation or its shareholders for monetary damages for breach of fiduciary
duty as a Director, provided that this Article Fifteen does not eliminate or
limit the liability of a Director (i) for any breach of the Director's duty of
loyalty to the Corporation or its shareholders, (ii) for acts or omissions not
in good faith or that involve intentional misconduct or a knowing violation of
law, (iii) under Section 8.65 of the Illinois Business Corporation Act of 1983,
as amended, or (iv) for any transaction from which the Director derived an
improper personal benefit. This Article Fifteen shall not eliminate or limit the
liability of a Director for any act or omission occurring before the date when
this Article Fifteen becomes effective.
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<PAGE> 30
NICOR
P.O. Box 3014
Naperville, Illinois 60566-7014
PROXY SOLICITED BY THE BOARD OF DIRECTORS
The undersigned appoints Richard G. Cline, John H. Birdsall, III, Charles S.
Locke, or any of them, proxies to vote all shares of stock which the
undersigned is entitled to vote at the annual meeting of stockholders of the
company, April 21, 1994, or at any adjournment thereof, on all matters as set
forth in the Proxy Statement and on all other matters properly presented at the
meeting.
PROXIES WILL BE VOTED AS DIRECTED. IN THE ABSENCE OF SPECIFIC
DIRECTION, SIGNED PROXIES WILL BE VOTED FOR ALL ITEMS.
(Continued and to be dated and signed on the other side)
<PAGE> 31
(Continued from the other side)
The Board of Directors recommends a vote FOR all proposals. Indicate your vote
by an X in the appropriate boxes.
1. Election of Directors Nominees:
FOR - 1. R. M. Beavers, Jr. 7. D. J. Keller
ALL Nominees / / 2. J. H. Birdsall, III 8. C. S. Locke
3. W. H. Clark 9. S. R. Petersen
WITHHOLD - 4. R. G. Cline 10. D. R. Toll
ALL Nominess / / 5. T. L. Fisher 11. P. A. Wier
6. J. E. Jones
FOR -
All Nominees / /
EXCEPT (1)
For Against Abstain
2. Amendment of Article Ten of the / / / / / /
Company's Articles of Incorporation
concerning indemnification and
advancement of expenses
3. Addition of Article Fifteen to the / / / / / /
Company's Articles of Incorporation
limiting Director liability
4. Ratification of the appointment / / / / / /
of Arthur Andersen & Co. as
independent auditors for 1994
(1) To withhold authority to vote for any nominee, write that nominee's name
on the line below and mark an (X) in the "For ALL EXCEPT" box above.
_______________________________________________________________________________
P
R
O
X
Y Date __________________
Please vote, date and sign your name(s) exactly as shown and mail promptly in
the enclosed envelope.
____________________________________ _____________________________________
Signature of Stockholder If Joint Account, ALL should sign
