<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
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:
/ / Preliminary proxy statement / / Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
/X/ 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 Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $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 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
/ / 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:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
- --------------------------------------------------------------------------------
<PAGE> 2
NICOR INC.
P.O. BOX 3014, NAPERVILLE, ILLINOIS 60566-7014
708/305-9500
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 3, 1995
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 Wednesday, May 3, 1995, 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; and
(2) ratification of the Board of Directors' appointment of Arthur Andersen
LLP as independent auditors for the company for 1995.
Only stockholders of record on the books of the company at the close of business
on March 6, 1995, 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 22, 1995
IMPORTANT
The company has approximately 44,000 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> 3
The Northern Trust Company is located at 50 South LaSalle Street, the northwest
corner of LaSalle and Monroe Streets. The map below shows parking garages and
lots in the immediate vicinity.
<PAGE> 4
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 May 3,
1995.
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.
A copy of the company's 1994 Annual Report, the Proxy Statement and the Form of
Proxy is scheduled to be mailed on or about March 22, 1995, to all stockholders
of record on March 6, 1995.
VOTING
As of March 6, 1995, the company had outstanding 51,157,328 shares of Common
Stock and 193,254 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 nonvotes") will not
affect the outcome.
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 ratification of appointment of independent auditors. 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.
<PAGE> 5
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>
- ---------------- ROBERT M. BEAVERS, JR.; Age 51
Director since 1992; Common Shares 2,510
Business experience during last five years: Senior Vice President since
[PHOTO] 1980 as well as Zone Manager 1980-1983, McDonald's Corporation.
(Restaurants)
Directorship: McDonald's Corporation.
- ----------------
- ---------------- JOHN H. BIRDSALL, III; Age 51
Director since 1982; Common Shares 1,320,430
[PHOTO] Business experience during last five years: Private Investor; formerly
President, 1982-1986, Birdsall, Inc., a subsidiary of NICOR Inc.
(Containerized Shipping)
- ----------------
</TABLE>
2
<PAGE> 6
<TABLE>
<S> <C>
- ---------------- W. H. CLARK; Age 62
Director since 1989; Common Shares 1,000
Business experience during last five years: Retired; formerly Chairman of
[PHOTO] the Board, 1984-1994 and Chief Executive Officer, 1982-1994 as well as
President, 1982-1990, Nalco Chemical Company. (Specialty Chemicals and
Services)
Directorships: Bethlehem Steel Corporation; Diamond Shamrock, Inc.; James
- ---------------- River Corporation; Northern Trust Corporation; USG Corporation.
- ---------------- RICHARD G. CLINE; Age 60
Director since 1977; Common Shares 278,460
Business experience during last five years: Chairman of the Board and
[PHOTO] Chief Executive Officer since 1986 as well as President, 1990-1994,
NICOR Inc.
Directorships: Pet Incorporated; Whitman Corporation.
- ----------------
- ---------------- THOMAS L. FISHER; Age 50
Director since 1988; Common Shares 8,038
[PHOTO] Business experience during last five years: President and Chief Operating
Officer since 1994, NICOR Inc., as well as President and Chief
Executive Officer since 1988, Northern Illinois Gas Company.
- ----------------
</TABLE>
3
<PAGE> 7
<TABLE>
<S> <C>
- ---------------- JOHN E. JONES; Age 60
Director since 1993; Common Shares 1,000-
Business experience during last five years: Chairman of the Board and
[PHOTO] Chief Executive Officer since 1989 as well as President and Chief
Operating Officer since 1988, CBI Industries, Inc. (Industrial
Construction)
Directorships: Allied Products Corporation; Amsted Industries, Inc.; CBI
- ---------------- Industries, Inc.; Interlake Corporation; Valmont Industries, Inc.
- ---------------- DENNIS J. KELLER; Age 53
Director since 1994; Common Shares 1,000
Business experience during the last five years: Chairman of the Board and
[PHOTO]
Chief Executive Officer since 1987, DeVry Inc., as well as Chairman of
the Board and Chief Executive Officer since 1981, Keller Graduate
School of Management. (Technical and Management Education)
Directorship: DeVry Inc.
- ----------------
- ---------------- CHARLES S. LOCKE; Age 66
Director since 1982; Common Shares 1,000
Business experience during last five years: Retired; formerly Chairman of
[PHOTO] the Board and Chief Executive Officer, 1989-1994, Morton
International, Inc. (Specialized Chemicals, Automotive Safety Products
and Salt); Chairman of the Board and Chief Executive Officer,
1980-1989, Morton Thiokol, Inc. (High Technology Propulsion Systems,
- ---------------- Specialized Chemicals and Salt)
Directorships: Avon Products, Inc.; Thiokol Corporation; Whitman
Corporation.
</TABLE>
4
<PAGE> 8
<TABLE>
<S> <C>
- ---------------- SIDNEY R. PETERSEN; Age 64
Director since 1987; Common Shares 3,325
Business experience during last five years: Retired; formerly Chairman of
[PHOTO] the Board and Chief Executive Officer, 1980-1984, Getty Oil Company.
(Integrated Petroleum)
Directorships: Avery Dennison Corporation; Broadway Stores, Inc.; Global
Natural Resources Inc.; Union Bank; Group Technologies Corporation.
- ----------------
- ---------------- DANIEL R. TOLL; Age 67
Director since 1986; Common Shares 2,000
Business experience during last five years: Corporate and civic director;
[PHOTO] formerly President, 1980-1985, Walter E. Heller International
Corporation. (Financial Services)
Directorships: Brown Group, Inc.; A. P. Green Industries, Inc.; Kemper
Corporation; Kemper National Insurance Company; Lincoln National
- ---------------- Convertible Securities Fund, Inc.; Lincoln National Income Fund, Inc.;
Mallinckrodt Group Inc.
- ---------------- PATRICIA A. WIER; Age 57
Director since 1990; Common Shares 2,867
Business experience during last five years: Independent business
[PHOTO] consultant; formerly President, 1986-1993, Encyclopaedia Britannica
North America, a division of Encyclopaedia Britannica, Inc.
(Publishing)
- ----------------
</TABLE>
BOARD AND COMMITTEE MEETINGS
The NICOR Board has an Audit Committee, a Compensation Committee and a Committee
on Directors. During 1994 there were seven meetings of the Board of Directors,
three meetings of the Audit Committee, five meetings of the Compensation
Committee and five meetings of the Committee on Directors. All incumbent
5
<PAGE> 9
Directors attended more than 75% of the aggregate number of meetings of the
Board and Committees on which they served.
COMMITTEES
The Audit Committee, of which Messrs. Beavers, Birdsall, Keller, and Toll and
Mrs. Wier (Chairman) 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.
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, Jones, 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 $5,000 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 4,406 share units for compensation
deferred and dividends paid during 1994, with an average per share base price of
$25.74. Since 1985, the company has had in place a program under which 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.
This program will be discontinued at the end of the term for Directors in 1995
and amounts earned through the current Directors' term will be credited to the
Director and will be paid following the Directors' retirement under the terms of
the program. Under a program effective with the 1995-
6
<PAGE> 10
1996 term for Directors, Directors will receive a grant of 300 shares of NICOR
Inc. Common Stock, together with a cash award equivalent to the then market
value of the shares, five months following commencement of each term that they
serve.
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 and executive officers of the
company and by all Directors and executive officers as a group as of March 6,
1995, with sole voting and investment power except as otherwise noted. No
Director or executive officer beneficially owns more than 1% of the outstanding
shares of Common Stock except Mr. Birdsall, who beneficially owns 2.6% of the
outstanding shares, and no Director or executive officer owns any shares of
Preferred Stock.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
NAME AND BENEFICIAL OWNER POSITION OF BENEFICIAL OWNERSHIP
------------------------- -------- -----------------------
<S> <C> <C>
Robert M. Beavers, Jr. ................................. Director 2,510
John H. Birdsall, III................................... Director 1,320,430(1)
W. H. Clark............................................. Director 1,000
Richard G. Cline........................................ Director and Executive Officer 278,460(2)
David L. Cyranoski...................................... Executive Officer 8,330(2)(3)
Thomas L. Fisher........................................ Director and Executive Officer 8,038
John C. Flowers......................................... Executive Officer 5,789(2)(3)
John E. Jones........................................... Director 1,000
Dennis J. Keller........................................ Director 1,000
Charles S. Locke........................................ Director 1,000
Donald W. Lohrentz...................................... Executive Officer 6,130(2)(3)
Thomas A. Nardi......................................... Executive Officer 4,779(2)(3)
Sidney R. Petersen...................................... Director 3,325(3)
Daniel R. Toll.......................................... Director 2,000
Patricia A. Wier........................................ Director 2,867
Directors and Executive Officers as a Group............. 1,646,658(1)(2)(3)
Percentage of class................................... 3.21
</TABLE>
- ---------------
(1) Includes 25,200 shares of Common Stock owned through a trust in which Mr.
Birdsall is cotrustee with shared voting and investment power and for which
he disclaims any beneficial interest and 1,049,050 shares of Common Stock
owned through a trust for the benefit of Mr. Birdsall and his family in
which he is cotrustee with shared voting and investment power.
(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, 135,000; Mr. Cyranoski, 7,000; Mr. Flowers, 3,000; Mr.
Lohrentz, 5,000; Mr. Nardi, 4,000; and all Directors and executive officers
as a group, 154,000, and 703 shares held by the NI-Gas Savings Investment
Plan Trust for Mr. Nardi.
7
<PAGE> 11
(3) Includes shares held jointly with a spouse or in trust or as custodian for
family members as follows: Mr. Cyranoski, 1,330; Mr. Flowers, 2,789; Mr.
Lohrentz, 1,130; Mr. Nardi, 76; Mr. Peterson, 3,325; and all Directors and
executive officers as a group, 8,650.
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 other executive officers of the company.
Executive Compensation Philosophy
Executive compensation at 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 following this report. The S&P
Utilities Index 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 executive officers' 1994 salaries
8
<PAGE> 12
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.
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
based upon actual performance compared to predetermined performance
objectives with 70% of the 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. Participation in the
annual incentive compensation plan, which includes the Chief Executive
Officer and the other 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.
The other executive officers have a portion (up to 85%) 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 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 1994 is described below. As noted
above, the other executive officers' target awards 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 the performance of Northern Illinois Gas, as well
as on additional nonfinancial objectives specifically related to the
performance of that business. Annual incentive compensation for the other
executive officers for 1994 ranged from 97.5% to 103.3% of target, a result
of achieving 92.5% of the net income goal under the NICOR plan, and 100% of
the financial goal, 105% of the nonfinancial goals, and 183% of an
individual goal for one officer under the Northern Illinois Gas plan.
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
9
<PAGE> 13
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 other 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 Index
(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 not positive, dividend performance units will not be earned,
regardless of performance relative to the S&P Utilities Index.
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 21, 1994, Mr. Cline's base salary was increased by $35,000, a 5.5%
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 1993 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 $371,850 in annual incentive compensation for performance in
the calendar year 1994. This amounts to 92.5% of Mr. Cline's target annual
incentive compensation award. His target award was based on
10
<PAGE> 14
the achievement of predefined net income objectives, 70% on a utility
performance target and the remainder on a nonutility performance target. Actual
net income performance met the utility goal and resulted in an award of 100% of
that target but was less than the nonutility goal and resulted in an award of
75% of that target.
The Committee awarded Mr. Cline a grant of 60,000 dividend performance units on
April 21, 1994. 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 and 1994 grants of dividend performance units and
options granted to him in 1992 which vest in 1994. No options were awarded to
Mr. Cline in 1994, 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 1994 may be earned at the end of 1996 subject to the
performance criteria described in this report. A 100% payout of the 60,000 units
is achieved if NICOR's total shareholder return performance is in the upper 40%
of the S&P Utilities Index. If NICOR's total shareholder return for the
three-year performance period is not positive, dividend performance units will
not be earned, regardless of performance relative to the S&P Utilities Index.
1993 Tax Act
The Omnibus Budget Reconciliation Act of 1993 added Section 162(m) to the
Internal Revenue Code. This section provides that compensation in excess of $1
million paid or accrued by the company to any of the five most highly
compensated employees is not deductible by the company 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.
The Compensation Committee has carefully reviewed the impact of Section 162(m)
as it applies to tax considerations. It is the Committee's policy to maximize
the effectiveness, as well as the tax deductibility, of the company's executive
compensation programs. Therefore, the Committee considers it to be in the best
interests of the company's stockholders to retain somewhat broader discretion in
determination of performance criteria and administration of the company's Annual
Incentive Programs than that contemplated by the proposed IRS regulations. In
view of anticipated compensation levels of the covered employees in fiscal 1995,
the Committee expects that most, if not all, officer compensation paid or
accrued will qualify as a tax deductible amount and the impact, if any, on the
company of any loss of deductions resulting from Section 162(m) will be
immaterial.
Compensation Committee of the Board of Directors of NICOR Inc.
Charles S. Locke, Chairman W. H. Clark John E. Jones Sidney R. Petersen
11
<PAGE> 15
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 $100 was invested on January 1,
1990, and all dividends were reinvested.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994
<S> <C> <C> <C> <C> <C>
NICOR 101 110 126 148 127
S&P UTILITIES 97 112 121 138 127
S&P 500 97 126 136 150 156
</TABLE>
12
<PAGE> 16
SUMMARY COMPENSATION TABLE
The following table shows executive compensation for the years indicated for the
Chief Executive Officer and the four other highest compensated executive
officers:
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
------------------------------
AWARDS
ANNUAL COMPENSATION ---------- PAYOUTS
-------------------------------- SHARES -----------------
OTHER ANNUAL UNDERLYING LONG-TERM ALL OTHER
NAME AND SALARY BONUS COMPENSATION OPTIONS INCENTIVE PLAN(1) COMPENSATION(2)
PRINCIPAL POSITION YEAR ($) ($) ($) (#) ($) ($)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
R. G. Cline 1994 659,231 371,850 0 0 0 27,688
Chairman and Chief Executive Officer 1993 628,846 409,575 0 0 0 26,412
of the Company and Chairman of 1992 615,000 387,450 0 180,000 240,363 25,830
Northern Illinois Gas Company
T. L. Fisher 1994 394,039 197,439 2,500 37,000 0 26,201
President and Chief Operating Officer 1993 369,462 146,134 2,420 40,000 0 21,824
of the Company and President and 1992 350,231 147,821 2,330 25,000 97,068 18,242
Chief Executive Officer of
Northern Illinois Gas Company
D. L. Cyranoski 1994 171,923 59,720 0 9,000 0 9,332
Vice President, Secretary and 1993 162,539 49,223 0 9,000 0 9,185
Controller of the Company and of 1992 152,385 48,897 0 7,000 0 8,676
Northern Illinois Gas Company
D. W. Lohrentz 1994 144,846 43,881 750 7,000 0 10,851
Treasurer of the Company 1993 139,616 43,778 726 7,000 0 10,739
and Vice President of Northern 1992 127,846 40,580 699 6,000 0 8,959
Illinois Gas Company
J. C. Flowers 1994 139,846 48,459 0 7,000 0 7,680
Vice President Human Resources of the 1993 134,615 46,985 0 7,000 0 7,227
Company and Vice President of 1992 123,154 45,938 0 5,000 0 7,264
Northern Illinois Gas Company
</TABLE>
- ---------------
(1) Value based on number of shares earned under the 1989 NICOR Long-Term
Incentive Plan for a three-year performance period, with shares valued at
the fair market value on the date issued.
(2) Includes company contributions to the NI-Gas Savings Investment Plan and
credits to the Supplemental Savings Investment Plan for Messrs. Cline,
Fisher, Cyranoski, Lohrentz and Flowers of $27,688; $14,895; $6,499;
$5,475; and $5,286, respectively; interest earned in excess of market on
deferred salary for Messrs. Fisher, Cyranoski, Lohrentz and Flowers of
$6,077, $2,833, $2,429, and $2,394, respectively; and amounts credited
under the 1968 NI-Gas Incentive Compensation Plan for Messrs. Fisher and
Lohrentz of $5,229 and $2,947, respectively.
13
<PAGE> 17
OPTION GRANTS TABLE
The following table shows stock options granted in 1994 to the Chief Executive
Officer and the four other highest compensated executive officers:
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES
OF STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM(2)
-------------------------------------------------- --------------------------------
NUMBER OF
SHARES % OF TOTAL
UNDERLYING OPTIONS EXERCISE
OPTIONS GRANTED TO OR BASE
GRANTED(1) EMPLOYEES IN PRICE EXPIRATION
NAME (#) FISCAL YEAR ($/SHARE) DATE 5%($) 10%($)
- -------------------- ---------- ------------ --------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
All Stockholders(3)......................... N/A N/A N/A N/A 929,140,965 2,355,364,284
R. G. Cline................................. 0 0 N/A N/A N/A N/A
T. L. Fisher................................ 37,000 26 27.50 04/22/2004 639,730 1,621,710
D. L. Cyranoski............................. 9,000 6 27.50 04/22/2004 155,610 394,470
D. W. Lohrentz.............................. 7,000 5 27.50 04/22/2004 121,030 306,810
J. C. Flowers............................... 7,000 5 27.50 04/22/2004 121,030 306,810
</TABLE>
- ---------------
(1) Options become exercisable on April 22, 1997, three years after the date of
grant.
(2) These columns show the value, at April 21, 2004, 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.
(3) For "All Stockholders" the potential realizable value is calculated based on
$27.50, the closing price of the Common Stock on April 21, 1994, and the
outstanding shares of Common Stock on February 22, 1994, the record date of
the 1994 annual meeting.
14
<PAGE> 18
AGGREGATED OPTION EXERCISES IN 1994 AND YEAR-END OPTION VALUE TABLE
The following table shows the December 30, 1994, stock option values for the
Chief Executive Officer and the four other highest compensated executive
officers; none of these individuals exercised options in 1994:
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS OPTIONS AT YEAR
AT YEAR END(#) END($)(1)
----------------- ---------------
EXERCISABLE/ EXERCISABLE/
NAME UNEXERCISABLE UNEXERCISABLE
- ---------------- ----------------- ---------------
<S> <C> <C>
R. G. Cline...................................................................... 75,000/60,000 208,125/187,500
T. L. Fisher..................................................................... 0/77,000 0/0
D. L. Cyranoski.................................................................. 7,000/18,000 21,875/0
D. W. Lohrentz................................................................... 5,000/14,000 12,125/0
J. C. Flowers.................................................................... 3,000/14,000 4,125/0
</TABLE>
- ---------------
(1) Based on market value of the company's Common Stock at December 30, 1994,
minus the exercise price.
LONG-TERM INCENTIVE PLAN -- AWARDS IN 1994
The following table shows dividend units granted in 1994 to the Chief Executive
Officer and the four other highest 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 1994 thru 1996 $56,550 $226,200 $339,300
T. L. Fisher.................................................. 37,000 1994 thru 1996 34,873 139,490 209,235
D. L. Cyranoski............................................... 9,000 1994 thru 1996 8,483 33,930 50,895
D. W. Lohrentz................................................ 7,000 1994 thru 1996 6,598 26,390 39,585
J. C. Flowers................................................. 7,000 1994 thru 1996 6,598 26,390 39,585
</TABLE>
Each dividend unit accumulates dividends equivalent to dividends paid on one
share of NICOR stock during the three-year 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
performance period as compared to the performance of the S&P Utilities Index,
except that no awards will be earned if shareholder return for the period is not
positive, regardless of the performance relative to the S&P Utilities Index. All
dividend units earned become payable on April 22, 1997, three years after the
date of grant.
15
<PAGE> 19
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 ............................ $ 38,561 $ 51,415 $ 64,269 $ 77,123 $ 86,498
250,000 ............................ 65,561 87,415 109,269 131,123 146,748
350,000 ............................ 92,561 123,415 154,269 185,123 206,998
450,000 ............................ 119,561 159,415 199,269 239,123 267,248
550,000 ............................ 146,561 195,415 244,269 293,123 327,498
650,000 ............................ 173,561 231,415 289,269 347,123 387,748
750,000 ............................ 200,561 267,415 334,269 401,123 447,998
</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 semi-monthly 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 beginning of the quarter during which retirement occurs. 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, 34; Mr. Fisher, 27; Mr. Cyranoski, 28; and Mr. Lohrentz, 27 and Mr.
Flowers, 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, Supplemental Retirement and
Security Payment Plans. 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> 20
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
the stock of NICOR 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.
ITEM 2. 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 LLP, independent public accountants, to audit the accounts of
the company for 1995. Arthur Andersen LLP 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 23, 1995, 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 1996 Annual Meeting of Stockholders. In addition, notice must be received on
or before March 4, 1996 and must otherwise comply with the company's By-Laws in
order for stockholder proposals to be presented at the 1996 Annual Meeting.
17
<PAGE> 21
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 22, 1995
18
<PAGE> 22
APPENDIX
The following graphic material cannot be transmitted pursuant to EDGAR:
1. A map of the area in Chicago showing parking garages and lots near
The Northern Trust Company, the site of the annual meeting. This
will appear on the page following the Notice of Annual Meeting of
Stockholders.
2. Photographs of the Director nominees that will appear next to their
names and biographical information on pages two through five.
3. Comparison of five-year cumulative total return graph. See table
on page 12 for explanation of graph.
<PAGE> 23
[NICOR LOGO]
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, May 3,1995, 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 ABSCENCE OF SPECIFIC DIRECTION, SIGNED PROXIES WILL BE VOTED FOR BOTH
ITEMS.
Continued and to be dated and signed on the other side
<PAGE> 24
CONTINUED FROM THE OTHER SIDE
The Board of Directors recommends a vote FOR both proposals. Indicate your
vote by an X in the appropriate boxes.
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
For Against Abstain
1. Election of Directors Nominees 2. Ratification of the appointment / / / / / /
----------------------------------------- of Arthur Andersen LLP as
/ / FOR: 1. R. M. Beavers, Jr. 7. D. J. Keller independent auditors for 1995.
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 Nominees 5. T. L. Fisher 11. P. A. Wier
6. J. E. Jones
/ / FOR: P.O. Box 3014
ALL Nominees EXCEPT (1) Naperville, IL 60566-7014
708 305-9500
(1) To withhold authority to vote for any nominee, write that nominee's
name below and mark an X in the "For ALL EXCEPT" box above. [NICOR logo]
___________________________________________________________________
- -------------------------------------------------------------------------
P
R
O
X
Y Date________________________
Please vote, date and sign your name(s) exactly as _______________________________ ____________________________________
shown and mail promptly in the enclosed envelope. Stockholder Signature If Joint Account, ALL should sign
</TABLE>
NICOR 1-9764 2-95
