<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), 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
- --------------------------------------------------------------------------------
(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:
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<PAGE> 2
NICOR INC.
P.O. BOX 3014, NAPERVILLE, ILLINOIS 60566-7014
708/305-9500
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 1, 1996
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 1, 1996, 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 1996.
Only stockholders of record on the books of the company at the close of business
on March 4, 1996, will be entitled to vote at the meeting. The stock transfer
books will not be closed.
DAVID L. CYRANOSKI
Senior Vice President,
Secretary and Controller
March 20, 1996
IMPORTANT
The company has approximately 43,000 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.
[CAMERA READY MAP]
<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 1,
1996. 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
1995 Annual Report, the Proxy Statement and the Form of Proxy is scheduled to be
mailed on or about March 20, 1996, to all stockholders of record on March 4,
1996.
VOTING
As of March 4, 1996, the company had outstanding 50,182,049 shares of Common
Stock, par value $2.50 per share and 176,730 shares of Preferred Stock, par
value $50.00 per share. 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.
ROBERT M. BEAVERS, JR.; Age 52
Director since 1992; Common Shares 2,897
Business experience during last five years: Senior Vice
[PHOTO] President since 1980 as well as Zone Manager 1980-1993,
McDonald's Corporation. (Restaurants)
Directorship: McDonald's Corporation.
BRUCE P. BICKNER; Age 52
First nomination as Director; Common Shares 1,000
Business experience during last five years: Chairman of the
Board and Chief Executive Officer since 1988, DEKALB
Genetics Corporation (Agricultural Genetics
[PHOTO] Technology) as well as Chairman of the Board, 1988-1995,
DEKALB Energy Company. (Gas and Oil Exploration and
Production)
Directorships: Castle Bancgroup Inc.; DEKALB Genetics
Corporation.
2
<PAGE> 6
JOHN H. BIRDSALL, III; Age 52
Director since 1982; Common Shares 1,320,730
[PHOTO] Business experience during last five years: Private
Investor; formerly President, 1982-1986, Birdsall, Inc.,
a subsidiary of NICOR Inc. (Containerized Shipping)
W. H. CLARK; Age 63
Director since 1989; Common Shares 1,300
[PHOTO] Business experience during last five years: Retired;
formerly Chairman of 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; Merrill Lynch &
Co., Inc.; USG Corporation.
THOMAS L. FISHER; Age 51
[PHOTO] Director since 1988; Common Shares 48,987
Business experience during last five years: Chairman of the
Board since January 1, 1996; Chief Executive Officer
since 1995 and President and Chief Operating Officer
since 1994, NICOR Inc., as well as President and Chief
Executive Officer since 1988, Northern Illinois Gas
Company.
3
<PAGE> 7
JOHN E. JONES; Age 61
Director since 1993; Common Shares 1,300
Business experience during last five years: Retired:
formerly Chairman of the Board and Chief Executive
[PHOTO] Officer, 1989-1996 as well as President and Chief
Operating Officer, 1988-1996, CBI Industries, Inc.
(Industrial Construction)
Directorships: Allied Products Corporation; Amsted
Industries, Inc.; Interlake Corporation; Valmont
Industries, Inc.
DENNIS J. KELLER; Age 54
Director since 1994; Common Shares 1,400
Business experience during last five years: Chairman of the
Board and Chief Executive Officer since 1987, DeVry
[PHOTO] 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 67
Director since 1982; Common Shares 1,300
Business experience during last five years: Retired;
formerly Chairman of the Board and Chief Executive
[PHOTO] 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.
4
<PAGE> 8
SIDNEY R. PETERSEN; Age 65
Director since 1987; Common Shares 3,795
Business experience during last five years: Retired;
formerly Chairman of the Board and Chief Executive
[PHOTO] Officer, 1980-1984, Getty Oil Company.
(Integrated Petroleum)
Directorships: Avery Dennison Corporation; Global Natural
Resources Inc.; Group Technologies Corporation; Union
Bank.
DANIEL R. TOLL; Age 68
Director since 1986; Common Shares 2,300
[PHOTO] Business experience during last five years: Corporate
and civic director; formerly President, 1980-1985,
Walter E. Heller International Corporation. (Financial
Services)
Directorships: Brown Group, Inc.; A. P. Green Industries,
Inc.; Kemper National Insurance Company; Lincoln
National Convertible Securities Fund, Inc.; Lincoln
National Income Fund, Inc.; Mallinckrodt Group Inc.
PATRICIA A. WIER; Age 58
Director since 1990; Common Shares 3,313
Business experience during last five years: Faculty,
[PHOTO] University of Chicago Graduate School of Business since
1995, as well as independent business consultant since
1994; formerly President, 1986-1993, Encyclopaedia
Britannica North America, a division of Encyclopaedia
Britannica, Inc. (Publishing)
BOARD AND COMMITTEE MEETINGS
The NICOR Board has an Audit Committee, a Compensation Committee and a Committee
on Directors. During 1995 there were six meetings of the Board of Directors,
four meetings of the Audit Committee, five meetings of the Compensation
Committee and four meetings of the Committee on Directors. All incumbent
Directors attended more than 75% of the aggregate number of meetings of the
Board and Committees on which they served.
5
<PAGE> 9
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, Committee and stockholders 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 6,117 share units for compensation
deferred and dividends paid during 1995, with an average per share base price of
$25.33. 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 was discontinued at the end of the term for Directors in 1995 and
amounts earned through that term were credited to the Director and will be paid
following the Directors' retirement under the terms of the program. Under a
program effective with the 1995-1996 term for Directors, nonofficer 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
6
<PAGE> 10
March 4, 1996, 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 OF BENEFICIAL OWNER POSITION OF BENEFICIAL OWNERSHIP
-------------------------------
<S> <C> <C>
Robert M. Beavers, Jr. ................................. Director 2,897
Bruce P. Bickner........................................ First nomination as Director 1,000
John H. Birdsall, III................................... Director 1,320,730(1)
W. H. Clark............................................. Director 1,300
David L. Cyranoski...................................... Executive Officer 17,721(2)(3)
Thomas L. Fisher........................................ Director and Executive Officer 48,987(2)
John C. Flowers......................................... Executive Officer 13,109(2)(3)
John E. Jones........................................... Director 1,300
Dennis J. Keller........................................ Director 1,400
Charles S. Locke........................................ Director 1,300
Donald W. Lohrentz...................................... Executive Officer 13,130(2)(3)
Thomas A. Nardi......................................... Executive Officer 8,844(2)(3)
Sidney R. Petersen...................................... Director 3,795(3)
Daniel R. Toll.......................................... Director 2,300
Patricia A. Wier........................................ Director 3,313
Directors and Executive Officers as a Group............. 1,441,126(1)(2)(3)
Percentage of class................................. 2.87
</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. Cyranoski, 16,000; Mr. Fisher, 40,000; Mr. Flowers, 10,000; Mr.
Lohrentz, 12,000; Mr. Nardi, 8,000; and all Directors and executive officers
as a group, 86,000, and shares held by the NI-Gas Savings Investment and
Thrift Trust, 1,039 shares for Mr. Flowers and 765 shares for Mr. Nardi.
(3) Includes shares held jointly with a spouse or in trust or as custodian for
family members as follows: Mr. Cyranoski, 1,721; Mr. Flowers, 2,070; Mr.
Lohrentz, 1,130; Mr. Nardi, 79; Mr. Peterson, 3,795; and all Directors and
executive officers as a group, 8,795.
7
<PAGE> 11
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth the only holder known to the company to own
beneficially more than 5% of the company's outstanding Common Stock as of
December 31, 1995:
<TABLE>
<CAPTION>
NUMBER OF
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES OWNED PERCENT OF CLASS
- --------------------------------------------------------------- ------------ ----------------
<S> <C> <C>
First Union Corporation........................................ 2,662,322 5.29
One First Union Center
Charlotte, NC 28288-0137
</TABLE>
A Schedule 13G dated February 12, 1996, has been filed by First Union
Corporation, a holding company, reporting beneficial ownership of the above
Common Stock held by its subsidiaries, First Union National Bank of North
Carolina, First Union National Bank of Florida, First Union National Bank of
Virginia, and First Union National Bank of Washington, DC, in a fiduciary
capacity, with sole voting power as to 2,631,807 shares, shared voting power as
to 200 shares, sole investment power as to 2,290,978 shares and shared
investment power as to 88,264 shares.
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, the retired 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
8
<PAGE> 12
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 generally from 20% below to 20% above targeted
levels. The executive officers' 1995 salaries averaged 6.5% below 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 in 1995 included the Chief
Executive Officer, the retired 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 (about 60% of
target) based on actual net income performance compared to established
performance objectives; and for nonfinancial goals (about 40%) which are
subjective and relate to growth, cost management and customer satisfaction
and safety. 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.
Messrs. Fisher's and Cline's incentive compensation for 1995 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 Messrs. Fisher and 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 1995 ranged from 81% to 102% of
target, a result of achieving 125% of the net income goal under the NICOR
plan, and 100% of the financial goal and 87% of the nonfinancial goals
under the Northern Illinois Gas plan. In addition, a portion of one of the
goals will not be resolved until 1996 and any awards, if earned, will be
reflected in 1996 compensation.
The long-term incentive compensation program is comprised of a stock option plan
and dividend performance units and is intended to focus senior management 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 number 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 set at about
9
<PAGE> 13
the 60th percentile of competitive data for each position. Participants in these
plans are selected by the Compensation Committee and in 1995 included 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 at least 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
total shareholder return during a performance period of at least three
years 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 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.
Messrs. Fisher's and Cline's long-term incentive compensation for 1995 is
described below. Long-term incentive compensation as determined by the earned
dividend performance units for the other executive officers for 1995 was 25% of
target and was based on performance relative to the S&P Utility Group for the
performance period 1993 through 1995.
CEO Compensation
On May 3, 1995, Mr. Fisher, President and Chief Executive Officer of Northern
Illinois Gas and President of NICOR, was promoted to the additional
responsibility of Chief Executive Officer of NICOR succeeding Mr. Cline who
continued as Chairman, NICOR and Northern Illinois Gas through December 31,
1995, at which time Mr. Fisher also succeeded Mr. Cline in these posts. On May
3, Mr. Fisher's base salary was increased by $55,000, a 13.6% increase, and Mr.
Cline's base salary was reduced by $320,000, a 47.8% decrease. The Committee
considered the following factors when reviewing Messrs. Fisher's and Cline's
salaries: their new job responsibility and scope; industry competitive data in
utility and diversified utility companies, as well as general industry; their
past salary adjustments; company performance for 1994 and over a five-year
period, including NICOR earnings, financial condition, return on equity and
total shareholder return; and individual performance, including leadership,
organizational development, shareholder/investor
10
<PAGE> 14
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.
The Committee awarded Mr. Fisher a grant of 80,000 stock options and dividend
performance units on May 3, 1995 of which 36,000 stock options and dividend
performance units were related to Mr. Fisher's annual long-term incentive
compensation target and the remainder were a special grant (awarded in
recognition of Mr. Fisher's promotion at that time to position of Chief
Executive Officer). The annual target is set at about the 60th percentile of
competitive data for his position as described in this report. The stock option
awards vest after one year, are generally exercisable after three years and have
a maximum ten-year term. The dividend performance units awarded to Mr. Fisher in
1995 for his annual award have a performance period of 1995 through 1997. The
dividend performance units awarded under this special grant have a performance
period of 1995 through 1999. Both may be earned subject to the performance
criteria described in this report. A 100% payout of each performance unit award
is achieved if NICOR's total shareholder return performance is in the upper 40%
of the S&P Utilities Index for the respective performance period. If NICOR's
total shareholder return for a performance period is not positive, dividend
performance units will not be earned, regardless of performance relative to the
S&P Utilities Index.
Messrs. Fisher and Cline earned $271,975 and $145,629, respectively, in annual
incentive compensation for performance in the calendar year 1995. This amounted
to 107.5% of Mr. Fisher's target annual incentive compensation award and 107.5%
of Mr. Cline's target annual incentive compensation award based on his prorated
participation in the plan through May 3. Each target award was based on 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
and exceeded the nonutility goal and resulted in an award of 125% of that
target.
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 regulations.
The Compensation Committee has carefully reviewed the impact of Section 162(m)
as it applies to the Company's executive compensation. 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 IRS
regulations. Based on anticipated compensation levels of the covered employees,
the Committee expects 1996 officer compensation to qualify as a tax deductible
amount.
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,
1991, and all dividends were reinvested.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
1991 1992 1993 1994 1995
NICOR................. $109 $125 $147 $126 $160
S & P Utilities....... 115 124 142 131 185
S & P 500............. 130 140 154 157 215
12
<PAGE> 16
SUMMARY COMPENSATION TABLE
The following table shows executive compensation for the years indicated for the
Chief Executive Officer, the retired Chief Executive Officer and the four other
highest compensated executive officers:
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
------------------------------
AWARDS
ANNUAL COMPENSATION ---------- PAYOUTS
-------------------------------- SHARES -----------------
OTHER ANNUAL UNDERLYING LONG-TERM ALL OTHER
NAME AND SALARY BONUS COMPENSATION OPTIONS INCENTIVE PLAN(1) COMPENSATION(2)
PRINCIPAL POSITION YEAR ($) ($) ($) (#) ($) ($)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
T. L. Fisher 1995 439,481 271,975 2,550 80,000 37,350 31,247
Chairman, President and Chief 1994 394,039 197,439 2,500 37,000 -- 26,201
Executive Officer of the Company 1993 369,462 146,134 2,420 40,000 -- 21,824
and Northern Illinois Gas Company
R. G. Cline 1995 469,385 145,629 0 0 56,025 19,714
Retired Chairman and Chief Executive 1994 659,231 371,850 0 0 -- 27,688
Officer of the Company and Chairman 1993 628,846 409,575 0 0 -- 26,412
of Northern Illinois Gas Company
D. L. Cyranoski 1995 188,846 56,067 0 23,000 8,404 11,441
Senior Vice President, Secretary and 1994 171,923 59,720 0 9,000 -- 9,332
Controller of the Company and 1993 162,539 49,223 0 9,000 -- 9,185
Northern Illinois Gas Company
T. A. Nardi 1995 170,769 64,449 0 23,000 3,735 8,142
Senior Vice President Nonutility 1994 137,200 43,418 0 7,000 -- 6,097
Operations and Business Development 1993 (3) (3) (3) (3) (3) (3)
of the Company and Senior Vice
President Business Development of
Northern Illinois Gas Company
D. W. Lohrentz 1995 151,577 37,607 765 6,000 6,537 12,623
Treasurer of the Company and Vice 1994 144,846 43,881 750 7,000 -- 10,851
President of Northern Illinois Gas 1993 139,616 43,778 726 7,000 -- 10,739
Company
J. C. Flowers 1995 146,577 49,621 0 5,000 6,537 10,219
Vice President Human Resources of the 1994 139,846 48,459 0 7,000 -- 7,680
Company and Northern Illinois Gas 1993 134,615 46,985 0 7,000 -- 7,227
Company
</TABLE>
- ---------------
(1) Payouts under the Dividend Performance Unit program of the Long-Term
Incentive Plan are made in cash. Each dividend performance unit accumulates
dividends equivalent to dividends paid on one share of NICOR stock during a
three-year performance period. These accumulated dividends are 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
13
<PAGE> 17
Index. Payouts in 1995 relate to the Dividend Performance Units awarded in
1993 having a 1993-1995 performance period.
(2) Includes company contributions to the NI-Gas Savings Investment Plan and
credits to the Supplemental Savings Investment Plan for Messrs. Fisher,
Cline, Cyranoski, Nardi, Lohrentz and Flowers of $16,559, $19,714, $7,138,
$6,455, $5,704 and $5,541, respectively; interest earned in excess of market
on deferred salary for Messrs. Fisher, Cyranoski, Nardi, Lohrentz and
Flowers of $9,412, $4,303, $1,687, $3,879 and $4,678, respectively; and
amounts credited under the 1968 NI-Gas Incentive Compensation Plan for
Messrs. Fisher and Lohrentz of $5,276 and $3,040, respectively.
(3) Not an executive officer in 1993.
OPTION GRANTS TABLE
The following table shows stock options granted in 1995 to the Chief Executive
Officer, the retired Chief Executive Officer and the four other highest
compensated executive officers:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------- POTENTIAL REALIZABLE VALUE
NUMBER OF AT ASSUMED ANNUAL RATES
SHARES % OF TOTAL OF STOCK PRICE APPRECIATION
UNDERLYING OPTIONS EXERCISE
OPTIONS GRANTED TO OR BASE FOR OPTION TERM(2)
GRANTED(1) EMPLOYEES IN PRICE EXPIRATION ---------------------------
NAME (#) FISCAL YEAR ($/SHARE) DATE 5%($) 10%($)
- ----------------------------------------- ---------- ------------ --------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
All Stockholders(3)...................... N/A N/A N/A N/A 792,427,011 2,007,925,124
T. L. Fisher............................. 80,000 33 24.625 05/03/2005 1,239,200 3,140,000
R. G. Cline.............................. 0 N/A N/A N/A N/A N/A
D. L. Cyranoski.......................... 23,000 10 24.625 05/03/2005 356,270 902,750
T. A. Nardi.............................. 23,000 10 24.625 05/03/2005 356,270 902,750
D. W. Lohrentz........................... 6,000 2 24.625 05/03/2005 92,940 235,500
J. C. Flowers............................ 5,000 2 24.625 05/03/2005 77,450 196,250
</TABLE>
- ---------------
(1) Options become exercisable on May 4, 1998, three years after the date of
grant.
(2) These columns show the value, at May 3, 2005, 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
$24.625, the closing price of the Common Stock on May 3, 1995, and the
outstanding shares of Common Stock on March 6, 1995, the record date of the
1995 annual meeting.
14
<PAGE> 18
AGGREGATED OPTION EXERCISES IN 1995 AND YEAR-END OPTION VALUE TABLE
The following table shows the year-end 1995 stock option values for the Chief
Executive Officer, the retired Chief Executive Officer and the four other
highest compensated executive officers; none of these individuals exercised
options in 1995:
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS OPTIONS AT YEAR
AT YEAR END(#) END($)(1)
-------------- ---------------
EXERCISABLE/ EXERCISABLE/
NAME UNEXERCISABLE UNEXERCISABLE
- ---------------- -------------- ---------------
<S> <C> <C>
T. L. Fisher......................................................................... 0/157,000 0/230,000
R. G. Cline.......................................................................... 135,000/0 1,036,875/0
D. L. Cyranoski...................................................................... 7,000/41,000 55,125/66,125
T. A. Nardi.......................................................................... 4,000/34,000 28,875/66,125
D. W. Lohrentz....................................................................... 5,000/20,000 35,875/17,250
J. C. Flowers........................................................................ 3,000/19,000 18,375/14,375
</TABLE>
- ---------------
(1) Based on market value of the company's Common Stock at December 29, 1995,
minus the exercise price.
LONG-TERM INCENTIVE PLAN -- AWARDS IN 1995
The following table shows dividend performance units granted in 1995 to the
Chief Executive Officer, the retired 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 PAYMENT THRESHOLD($) TARGET($) MAXIMUM($)
- ---------------- ----------- -------------- ------------ --------- ----------
<S> <C> <C> <C> <C> <C>
T. L. Fisher....................................... 36,000 1995 thru 1997 34,515 138,060 207,090
44,000 1995 thru 1999 70,345 281,380 422,070
R. G. Cline........................................ 0 N/A N/A N/A N/A
D. L. Cyranoski.................................... 11,000 1995 thru 1997 10,546 42,185 63,278
12,000 1995 thru 1999 19,185 76,740 115,110
T. A. Nardi........................................ 11,000 1995 thru 1997 10,546 42,185 63,278
12,000 1995 thru 1999 19,185 76,740 115,110
D. W. Lohrentz..................................... 6,000 1995 thru 1997 5,753 23,010 34,515
J. C. Flowers...................................... 5,000 1995 thru 1997 4,794 19,175 28,763
</TABLE>
Each dividend performance unit accumulates dividends equivalent to dividends
paid on one share of NICOR stock during the three-year or five-year period.
Estimated future payouts are based on the present rate of dividends on NICOR
common stock. 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 --
15
<PAGE> 19
the multiplier is based on NICOR total shareholder return over the three-year or
five-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 performance units earned become payable in 1998 or 2000,
three or five years, respectively, after the date of grant.
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
- ------------ -------- -------- -------- -------- --------
<C> <S> <C> <C> <C> <C> <C>
$150,000 ............................ $ 38,462 $ 51,283 $ 64,104 $ 76,925 $ 86,300
250,000 ............................ 65,462 87,283 109,104 130,925 146,550
350,000 ............................ 92,462 123,283 154,104 184,925 206,800
450,000 ............................ 119,462 159,283 199,104 238,925 267,050
550,000 ............................ 146,462 195,283 244,104 292,925 327,300
650,000 ............................ 173,462 231,283 289,104 346,925 387,550
750,000 ............................ 200,462 267,283 334,104 400,925 447,800
</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.
Fisher, 28; Mr. Cline, 35; Mr. Cyranoski, 29; Mr. Nardi, 14; Mr. Lohrentz, 28;
and Mr. Flowers, 27.
Under a 1985 agreement with the company, as amended in 1989, Mr. Cline received
benefits equivalent to those he would have received under the Retirement,
Supplemental Retirement and Savings Investment Plans if he had been employed by
Northern Illinois Gas Company since July 10, 1960, and had been entitled to
16
<PAGE> 20
matching employer contributions under the Savings Investment Plan since that
date plus interest thereon at the PBGC Rate. Benefits under this agreement were
reduced by the value of the vested benefits actually accrued under the company's
Retirement and Supplemental Retirement Plans. Benefits under this agreement were
also 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.
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 1996. 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.
17
<PAGE> 21
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 20, 1996, 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 1997 Annual Meeting of Stockholders. In addition, written notice must be
received on or before March 2, 1997 and must otherwise comply with the company's
By-Laws in order for stockholder proposals to be presented at the 1997 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
Senior Vice President,
Secretary and Controller
March 20, 1996
18
<PAGE> 22
[NICOR LOGO]
P.O. Box 3014
Naperville, IL 60666-7014
PROXY SOLICITED BY THE BOARD OF DIRECTORS
The undersigned appoints Thomas L. Fisher, 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 1, 1996, 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 BOTH
ITEMS.
Continued and to be dated and signed on the other side
<PAGE> 23
CONTINUED FROM THE OTHER SIDE
The Board of Directors recommends a vote FOR both proposals. Indiciate your
vote by an X in the appropriate boxes.
<TABLE>
<CAPTION>
1. Election of Directors Nominees:
---------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
[] FOR: 1. R. M. Beavers, Jr. 7. D. J. Keller 2. Ratification of FOR AGAINST ABSTAIN
ALL Nominees 2. B. P. Bickner 8. C. S. Locke the appointment [ ] [ ] [ ]
3. J. H. Birdaall, III 9. S. R. Peterson of Arthur Andersen LLP
[] WITHHOLD 4. W. H. Clark 10. D. R. Toll as Independent
ALL Nominees 5. T. L. Fisher 11. P. A. Wier auditors for 1996.
6. J. E. Jones
[] FOR:
ALL Nominees EXCEPT (1)
P.O. Box 3014
(1) To withhold authority to vote for any nominee, write that nominee's Naperville, IL 60566-7014
name below and mark an X in the "For ALL EXCEPT" box above. 706 305-9500
---------------------------- ----------------------------------- [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>
