<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:
/X/ Preliminary proxy statement / / Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
/ / 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):
/ / $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(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
630/305-9500
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
APRIL 16, 1998
The Annual Meeting of Stockholders of Nicor Inc. will be held at The Northern
Trust Company, 6th Floor Assembly Room, 50 South LaSalle Street, Chicago,
Illinois, on Thursday, April 16, 1998, 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) approval to amend the Articles of Incorporation to increase the number
of authorized shares of Common Stock.
Only stockholders of record on the books of the company at the close of business
on February 17, 1998, 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 6, 1998
IMPORTANT
The company has approximately 36,500 registered stockholders. Your vote is
important, and we urge you to sign, date and mail all proxies you receive
even though you plan to attend. If you attend the meeting you may 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.
[PARKING GARAGES & LOTS 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 April
16, 1998. 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 1997 Annual Report, the Proxy Statement and the Form of Proxy is
scheduled to be mailed on or about March 6, 1998, to all stockholders of record
on February 17, 1998.
VOTING
As of February 17, 1998, the company had outstanding shares of Common Stock,
par value $2.50 per share, and 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. The
affirmative vote of a majority of all the company's outstanding stock and of the
outstanding common stock entitled to vote at the Annual Meeting are required to
approve an Amendment to the Articles of Incorporation to increase the number of
authorized shares of Common Stock (Item 2). Shares not represented at the
meeting, shares represented at the meeting which abstain from voting on
increasing the number of authorized shares of Common Stock, and broker nonvotes
will have the effect of votes against the proposal.
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 FOR
approval to amend the Articles of Incorporation to increase the number of
authorized shares of Common Stock.
<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. 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 cumulate 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 cumulate such votes and vote for less than all of the
nominees named herein.
NOMINEES
The names of the nominees are set forth below along with their business
experience during the last five years and other directorships currently held,
including directorships with companies whose securities are registered with the
Securities and Exchange Commission. Each Director will also be a Director of
Nicor Gas Company, a subsidiary of Nicor Inc.
<TABLE>
<S> <C>
[ROBERT M. ROBERT M. BEAVERS, JR.; Age 54
BEAVERS, JR. PHOTO] Director since 1992
Business experience: Senior Vice President since 1980 as
well as Zone Manager 1980- 1993, McDonald's Corporation
(Restaurants).
Directorship: McDonald's Corporation.
[BRUCE P. BRUCE P. BICKNER; Age 54
BICKNER PHOTO] Director since 1996
Business experience: Chairman of the Board and Chief
Executive Officer since 1988, DEKALB Genetics
Corporation (Agricultural Genetics and 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.
</TABLE>
2
<PAGE> 6
[JOHN H. JOHN H. BIRDSALL, III; Age 54
BIRDSALL, III PHOTO] Director since 1982
Business experience: Private Investor; formerly
President, 1982-1986, Birdsall, Inc., a subsidiary
of Nicor Inc. (Containerized Shipping).
[THOMAS A. THOMAS A. DONAHOE; Age 62
DONAHOE PHOTO]
First nomination as Director
Business experience: Retired; formerly Partner,
1970-1996, as well as Managing Partner --
Operations-Audit Practice, 1995-1996 and Vice
Chairman 1988-1995, Price Waterhouse LLP
(Accounting and Consulting Services).
Directorship: BWAY Corporation.
[THOMAS L. THOMAS L. FISHER; Age 53
FISHER PHOTO] Director since 1988
Business experience: Chairman of the Board since 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, Nicor Gas Company.
3
<PAGE> 7
[JOHN E. JOHN E. JONES; Age 63
JONES PHOTO] Director since 1993
Business experience: Retired; formerly Chairman of the
Board and Chief Executive 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.; BWAY Corporation; Interlake
Corporation; Valmont Industries, Inc.
[DENNIS J. DENNIS J. KELLER; Age 56
KELLER PHOTO] Director since 1994
Business experience: Chairman of the Board and 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. CHARLES S. LOCKE; Age 69
LOCKE PHOTO] Director since 1982
Business experience: Retired; formerly Chairman of the
Board and Chief Executive Officer, 1989-1994, Morton
International, Inc. (Specialized Chemicals and
Salt).
Directorships: Avon Products, Inc.; Thiokol Corporation;
Whitman Corporation.
4
<PAGE> 8
[SIDNEY R. SIDNEY R. PETERSEN; Age 67
PETERSEN PHOTO] Director since 1987
Business experience: Retired; formerly Chairman of the
Board and Chief Executive Officer, 1980-1984,
Getty Oil Company (Integrated Petroleum).
Directorships: Avery Dennison Corporation; Group
Technologies Corporation; Seagull Energy
Corporation; Union Bank of California.
[JOHN RAU PHOTO] JOHN RAU; Age 49
Director since January 1998
Business experience: President and Chief Executive
Officer
since 1997, Chicago Title and Trust Co. and Chicago
Title Insurance Co. (Financial Services); Dean of
the School of Business, 1993-1996, Indiana
University (Bloomington, IN); President and Chief
Executive Officer, 1983-1993, LaSalle National
Bank (Chicago).
Directorships: Borg-Warner Automotive Inc.; Chicago
Title and Trust Co.; Chicago Title Insurance Co.;
First Industrial Realty Trust.
[PATRICIA A. PATRICIA A. WIER; Age 60
WIER PHOTO] Director since 1990
Business experience: 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 1997, there were six meetings of the Board of Directors,
four meetings of the Audit Committee, three meetings of the Compensation
Committee and four 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, Bickner, Birdsall and Toll and
Mrs. Wier (Chairperson) are members, is responsible for recommending to the
Board of Directors the appointment of independent auditors; reviewing the scope,
fees and findings of audits and other services as performed by the independent
auditors; reviewing the activities and findings of the internal audit staff; and
reviewing the company's system of internal controls. Mr. Toll is not standing
for reelection to the Board in 1998.
Members of the Compensation Committee are Messrs. Clark, Jones, Keller, Locke
(Chairperson) 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. Mr. Clark is not
standing for reelection to the Board in 1998.
Members of the Committee on Directors are Messrs. Clark, Jones, Locke and Toll
(Chairperson). 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 Chairpersons 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 4,277 share units for
compensation deferred and dividends paid during 1997, with an average per share
base price of $35.23. Nonofficer Directors also receive a grant of 300 shares of
Nicor 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.
6
<PAGE> 10
SECURITY OWNERSHIP OF MANAGEMENT
Set forth below is the number of shares of the company's Common Stock
beneficially owned by each Director, Director Nominee and executive officer of
the company named in the Summary Compensation Table and by all Directors,
Director Nominees and executive officers as a group as of February 17, 1998,
with sole voting and investment power except as otherwise noted. No Director,
Director Nominee or executive officer beneficially owns more than 1% of the
outstanding shares of Common Stock or any shares of Preferred Stock.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
NAME OF BENEFICIAL OWNER POSITION BENEFICIAL OWNERSHIP
------------------------ -------- --------------------
<S> <C> <C>
Robert M. Beavers, Jr. ............... Director 4,837
Bruce P. Bickner...................... Director 1,600
John H. Birdsall, III................. Director 439,341(1)
Philip S. Cali........................ Executive Officer 10,059(2)(3)
W. H. Clark........................... Director 1,900
David L. Cyranoski.................... Executive Officer 24,091(2)(3)
Thomas A. Donahoe..................... Director Nominee 1,600(3)
Thomas L. Fisher...................... Director and Executive Officer 115,574(2)(3)
Kathleen L. Halloran.................. Executive Officer 11,632(2)
John E. Jones......................... Director 1,900
Dennis J. Keller...................... Director 6,904(4)
Charles S. Locke...................... Director 32,681(4)
Thomas A. Nardi....................... Executive Officer 15,422(2)(3)
Sidney R. Petersen.................... Director 4,729(3)
John Rau.............................. Director 2,000
Daniel R. Toll........................ Director 2,900
Patricia A. Wier...................... Director 10,000(4)
Directors and Executive Officers as a
Group............................... 703,796(1)(2)(3)(4)
Percentage of class................. x.xx
</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, 246,000
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, and 111,700 shares owned by a family member's estate of which Mr.
Birdsall is coexecutor and a beneficiary with shared voting and investment
power.
(2) Includes shares or share equivalents held pursuant to company benefit plans
as follows: (a) shares individuals have a right to acquire or will have the
right to acquire within 60 days through the exercise of
7
<PAGE> 11
stock options: Mr. Cali, 5,000; Mr. Cyranoski, 18,000; Mr. Fisher, 77,000;
Ms. Halloran, 5,000; Mr. Nardi, 11,000; and all Directors and executive
officers as a group, 130,000; (b) shares held by the Savings Investment and
Thrift Trust for: Mr. Cali, 160; Mr. Fisher, 16,880; Mr. Nardi, 1,419; and
all Directors and executive officers as a group, 18,459; and (c) share unit
equivalents credited to their accounts under the Stock Deferral Plan, which
enables officers to defer, and convert, up to 50% of their cash awards from
the Annual Incentive Compensation Plan and/or Long-Term Incentive Plan into
Nicor Common Stock, the receipt of which is deferred: Mr. Cali, 1,734; Mr.
Cyranoski, 3,346; Mr. Fisher, 12,371; Mr. Nardi, 2,917; and all Directors
and executive officers as a group, 21,863.
(3) Includes shares held jointly with a spouse, by a spouse or in trust as
follows: Mr. Cali, 441; Mr. Cyranoski, 2,745; Mr. Donahoe, 1,600; Mr.
Fisher, 9,322; Mr. Nardi, 85; Mr. Petersen, 4,729; and all Directors and
executive officers as a group, 20,054.
(4) The total shares owned by Messrs. Keller and Locke and Mrs. Wier and all
Directors as a group include, respectively, 4,904, 30,781, 5,792 and 41,477
share unit equivalents credited to their accounts under the Directors
Deferred Compensation Plan described on page 6.
Stock ownership guidelines have been established for Directors and officers of
the company and subsidiaries. These guidelines were established to align their
interests with those of the stockholders and to strengthen the focus on
activities that create shareholder value. The guidelines, stated as a multiple
of the Director's annual retainer plus fees or the officer's base salary, are as
follows: Nonofficer Director, three times; Chief Executive Officer, three times;
Senior Vice President or President of a subsidiary, one and a half times; Vice
President, one times; and Assistant Vice President, one-half times. Directors
and officers are asked to comply with these guidelines through ownership of
stock or stock equivalents within five years after inception of the guidelines
(1996) or within five years of becoming a new Director or officer.
In 1997, pursuant to its previously announced $50 million stock purchase
program, the company purchased an aggregate of 399,000 shares of Common Stock
from a Birdsall family trust of which Mr. Birdsall is cotrustee in a series of
transactions for an aggregate purchase price of approximately $13.8 million. The
purchase price in each transaction was determined by the closing price of the
Common Stock on the New York Stock Exchange Composite Transactions as of the
date of each purchase.
8
<PAGE> 12
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 other executive officers.
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 Standard &
Poor's (S&P) Utilities Index shown in the Performance Graph following this
report. The S&P Utilities Index currently includes gas distribution,
pipeline and electric companies. The compensation surveys used in Nicor's
comparison are weighted to the gas distribution industry and include
proprietary surveys prepared by the American Gas Association and Peoples
Energy Corporation, as well as gas utility and general industry surveys
from the Towers Perrin and the Hewitt Associates compensation data banks.
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' 1997
salaries averaged 11.9% 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.
9
<PAGE> 13
Participation in the annual incentive compensation plan, which in 1997
included 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. Annual incentive compensation opportunities are 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. In establishing the actual bonus awards
to be made, the Compensation Committee may take into account facts and
circumstances which exist during the year.
The Chief Executive Officer's annual incentive target award is based
primarily on actual financial performance compared with predetermined
performance objectives. Seventy percent of the target is based on utility
net income and 30% based on nonutility net income.
The other Nicor officers have up to 85% of their annual incentive target
based on goals related to the performance of Nicor Gas, the company's
primary subsidiary, and up to 45% related to the performance of the
nonutility operations. Nicor Gas officers have 100% of their annual
incentive targets based on goals related to the performance of Nicor Gas.
The annual incentive target for Nicor Gas officers is based equally upon
achievement of financial and nonfinancial utility company goals.
Nonfinancial goals relate to growth, cost management and customer
satisfaction. Annual incentive compensation for the executive officers for
1997 ranged from 107% to 120% of target, a result of achieving 125% of the
utility net income goal, 90% of the nonutility net income goal and an
average of 104% of the nonfinancial goals and personal objectives.
The long-term incentive compensation program is primarily comprised of stock
options 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 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 other executive officers who are
responsible for setting and carrying out the company's longer-range strategic
plans.
- Stock options carry a maximum 10-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 specified performance
period (the performance period for 1997 awards was three years except for
one special award with a five-year performance period).
10
<PAGE> 14
- At the end of the restricted period, the stock options automatically
become exercisable. 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 60th percentile of the peer group
comparison.
- 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.
Long-term incentive plan compensation relating to dividend performance units for
executive officers for 1997 was 150% of target and was based on the company's
stock performance relative to the S&P Utility Group for the performance period
1995 through 1997.
CEO Compensation
On April 21, 1997, Mr. Fisher's base salary was increased by $25,000, a 5.2%
increase. The Committee considered the following factors when reviewing Mr.
Fisher'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; 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.
The Committee awarded Mr. Fisher a grant of 30,000 stock options and dividend
performance units on April 17, 1997. The annual target is set at about the 60th
percentile of competitive data for his position as described in this report. The
dividend performance units awarded to Mr. Fisher in 1997 have a performance
period of 1997 through 1999.
Mr. Fisher earned 115% of his target annual incentive compensation award. His
target award was based on the achievement of predefined net income objectives,
70% based on utility performance and 30% based on nonutility performance. Actual
net income performance exceeded the utility goal and resulted in an award of
125% of that target. Actual nonutility net income was below the nonutility goal
and resulted in an award of 90% of that target.
11
<PAGE> 15
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 Internal Revenue Service (IRS) has
interpreted this section of the Act and issued 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 the company's compensation programs. 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. In view of anticipated compensation levels of the covered employees
in fiscal year 1998, the Committee expects that all compensation paid or accrued
will qualify as a tax deductible amount.
Compensation Committee of the Board of Directors of Nicor Inc.
Charles S. Locke, Chairperson W. H. Clark John E. Jones Dennis J.
Keller Sidney R. Petersen
12
<PAGE> 16
STOCK 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 $100 was invested on January 1,
1993, and all dividends were reinvested.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
<TABLE>
<CAPTION>
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) NICOR S&P UTILITIES S&P 500
<S> <C> <C> <C>
1993 117 114 110
1994 100 105 112
1995 127 149 153
1996 173 154 188
1997 212 192 251
</TABLE>
13
<PAGE> 17
SUMMARY COMPENSATION TABLE
The following table shows executive compensation for the years indicated for the
Chief Executive Officer and the four other highest-compensated executive
officers:
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
-------------------------------- ---------- -----------------
OTHER ANNUAL SHARES LONG-TERM ALL OTHER
NAME AND SALARY BONUS COMPENSATION UNDERLYING INCENTIVE PLAN(1) COMPENSATION(2)
PRINCIPAL POSITION YEAR ($) ($) ($) OPTIONS ($) ($)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
T. L. Fisher 1997 520,962 321,173 2,760 30,000 214,110 41,373
Chairman, President and 1996 476,346 266,750 2,620 34,000 141,895 35,917
Chief Executive Officer of 1995 439,481 271,975 2,550 80,000 37,350 31,247
the
Company and Nicor Gas
D. L. Cyranoski 1997 218,423 89,956 0 8,500 65,423 15,435
Senior Vice President, 1996 199,539 87,763 0 9,500 34,515 13,332
Secretary
and Controller of the Company 1995 188,846 56,067 0 23,000 8,404 11,441
and Nicor Gas
T. A. Nardi 1997 200,769 73,188 0 8,000 65,423 10,482
Senior Vice President 1996 185,231 63,329 0 9,000 26,845 9,159
Nonutility
Operations and Business 1995 170,769 64,449 0 23,000 3,735 8,142
Development of the Company
and Senior Vice President
Business Development of Nicor
Gas
P. S. Cali 1997 194,885 73,620 0 7,500 65,423 9,003
Senior Vice President 1996 177,885 78,018 0 8,500 0 7,223
Operations
of Nicor Gas(3) 1995 (3) (3) (3) (3) (3) (3)
K. L. Halloran 1997 193,846 77,240 0 17,500 35,685 12,011
Senior Vice President 1996 161,539 62,499 0 5,500 19,175 9,815
Information Services, Rates 1995 (3) (3) (3) (3) (3) (3)
and
Human Resources of Nicor
Gas(3)
</TABLE>
- ---------------
(1) Payouts under the Dividend Performance Unit program of the Long-Term
Incentive Plan are made in cash or up to 50% can be deferred and converted
into share unit equivalents in the Stock Deferral Plan. Each dividend
performance unit accumulates dividends equivalent to dividends paid on one
share of Nicor Common Stock during a performance period. The payout is
determined by a performance multiplier which ranges from 0 to 1.5 based on
Nicor total shareholder return over the performance period as compared to
the performance of the S&P Utilities Index. Payouts in 1997 relate to the
Dividend Performance Units awarded in 1995 having a 1995-1997 performance
period.
(2) Includes company contributions to the Savings Investment Plan and credits to
the Supplemental Savings Investment Plan for Messrs. Fisher, Cyranoski,
Nardi and Cali and Ms. Halloran of $21,333, $8,944, $7,589, $8,185 and
$7,327, respectively; interest earned in excess of market on deferred salary
for Messrs. Fisher, Cyranoski, Nardi, and Cali and Ms. Halloran of $13,787,
$6,491, $2,893, $818, and $4,684, respectively; and amounts credited under
the 1968 Incentive Compensation Plan for Mr. Fisher of $6,253.
(3) Not an executive officer during 1995.
14
<PAGE> 18
OPTION GRANTS TABLE
The following table shows stock options granted in 1997 to the Chief Executive
Officer and the four other highest-compensated executive officers:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------
NUMBER OF % OF TOTAL
SHARES OPTIONS EXERCISE
UNDERLYING GRANTED TO OR BASE GRANT DATE
OPTIONS EMPLOYEES IN PRICE EXPIRATION PRESENT VALUE(2)
NAME GRANTED(1) FISCAL YEAR ($/SHARE) DATE ($)
---- ---------- ------------ --------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
T. L. Fisher........................ 30,000 22 32.25 04/17/2007 122,100
D. L. Cyranoski..................... 8,500 6 32.25 04/17/2007 34,595
T. A. Nardi......................... 8,000 6 32.25 04/17/2007 32,560
P. S. Cali.......................... 7,500 6 32.25 04/17/2007 30,525
K. L. Halloran...................... 17,500 13 32.25 04/17/2007 71,225
All Stockholders(3)................. N/A N/A N/A N/A 200,691,037
</TABLE>
- ---------------
(1) Options become exercisable on April 18, 2000.
(2) Present value of grants at April 17, 1997, the date of grant, using the
Black-Scholes option-pricing model with the following assumptions: dividend
yield of 4.6%, volatility of 16.9%, risk-free interest rate of 6.6%, and
expected period outstanding of three years. The weighted-average present
value of an option granted in 1997 was $4.07.
(3) For "All Stockholders" the present value is calculated based on the
Black-Scholes value of $4.07 per option at April 17, 1997, and the
outstanding shares of Common Stock on February 17, 1997, the record date of
the 1997 Annual Meeting.
15
<PAGE> 19
AGGREGATED OPTION EXERCISES IN 1997 AND YEAR-END OPTION VALUE TABLE
The following table shows the aggregated stock option exercises in 1997 and the
December 31, 1997 stock option values for the Chief Executive Officer and the
four other highest-compensated executive officers:
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
SHARES UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS AT YEAR
OPTIONS AT YEAR END(2)
END -------------------
SHARES VALUE ----------------- EXERCISABLE/
ACQUIRED REALIZED(1) EXERCISABLE/ UNEXERCISABLE
NAME ON EXERCISE ($) UNEXERCISABLE ($)
---- ----------- ----------- ----------------- -------------------
<S> <C> <C> <C> <C>
T. L. Fisher....................... 0 N/A 77,000/144,000 1,073,438/2,177,000
D. L. Cyranoski.................... 3,500 59,063 18,000/41,000 251,438/620,813
T. A. Nardi........................ 0 N/A 11,000/40,000 155,813/608,875
P. S. Cali......................... 0 N/A 5,000/39,000 86,563/596,938
K. L. Halloran..................... 4,000 37,625 5,000/29,000 73,438/355,938
</TABLE>
- ---------------
(1) Value based on market value of the company's Common Stock at date of
exercise minus the exercise price.
(2) Value based on market value of the company's Common Stock at December 31,
1997, minus the exercise price.
LONG-TERM INCENTIVE PLAN -- AWARDS IN 1997
The following table shows dividend units granted in 1997 to the Chief Executive
Officer and the four other highest-compensated executive officers:
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS UNDER
PERFORMANCE NON-STOCK PRICE-BASED PLAN
NUMBER PERIOD -------------------------------------------
NAME OF UNITS UNTIL PAYMENT THRESHOLD($) TARGET($) MAXIMUM($)
---- -------- -------------- ------------ --------- ----------
<S> <C> <C> <C> <C> <C>
T. L. Fisher................... 30,000 1997 thru 1999 31,350 125,400 188,100
D. L. Cyranoski................ 8,500 1997 thru 1999 8,883 35,530 53,295
T. A. Nardi.................... 8,000 1997 thru 1999 8,360 33,440 50,160
P. S. Cali..................... 7,500 1997 thru 1999 7,838 31,350 47,025
K. L. Halloran................. 7,500 1997 thru 1999 7,838 31,350 47,025
K. L. Halloran................. 10,000 1997 thru 2001 17,450 69,800 104,700
</TABLE>
Each dividend unit accumulates dividends equivalent to dividends paid on one
share of Nicor Common Stock during a performance period and are payable at the
end of the performance period. Estimated future
16
<PAGE> 20
payouts are based on the present Nicor Common Stock dividend rate. If dividends
increase during this period, the dividend equivalents would increase
proportionately. The payout is determined by a performance multiplier which
ranges from 0 to 1.5 based on Nicor total shareholder return over the
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.
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 ............................. $ 38,248 $ 50,997 $ 63,747 $ 76,496 $ 85,871
250,000 ............................. 65,248 86,997 108,747 130,496 146,121
350,000 ............................. 92,248 122,997 153,747 184,496 206,371
450,000 ............................. 119,248 158,997 198,747 238,496 266,621
550,000 ............................. 146,248 194,997 243,747 292,496 326,871
650,000 ............................. 173,248 230,997 288,747 346,496 387,121
750,000 ............................. 200,248 266,997 333,747 400,496 447,371
</TABLE>
The Retirement Plan, which covers all company and Nicor Gas employees hired
through December 31, 1997 and 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. Under the Retirement Plan, an employee may elect
to receive a lump sum benefit at retirement in lieu of semi-monthly payments.
The lump sum payment is based on the actuarial present value of the future
retirement payments utilizing the average yield of the 30-year Treasury Constant
Maturities in effect two months prior to the beginning of the quarter during
which retirement occurs. The benefits are not subject to any reduction for
social security payments or any other offset amounts. Credited years of service
under these arrangements are as follows: Mr. Fisher, 30; Mr. Cyranoski, 31; Mr.
Nardi, 16; Mr. Cali, 20; and Ms. Halloran, 23.
17
<PAGE> 21
CHANGE IN CONTROL ARRANGEMENTS
In the event of a "change in control" of the company, then the following would
apply:
Under the provisions of the company's Long-Term Incentive Plans, all
outstanding stock options, restricted stock and performance units 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% (20% for the 1997 Long-Term Incentive Plan) or more of the voting
power of Nicor; if a tender offer not approved by the Board is made during which
the offeror is or becomes the owner of 25% or more of the company's voting
stock, or as a result of which the offeror could become the owner of 50% or more
of the company's voting stock unless the offer is withdrawn by three business
days prior to its scheduled termination; or if individuals who were the Board's
nominees for election shall not constitute a majority of the Board.
ITEM 2. APPROVAL TO AMEND THE ARTICLES OF INCORPORATION TO INCREASE THE NUMBER
OF AUTHORIZED SHARES OF COMMON STOCK.
(YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL)
The Board of Directors has approved and recommends the adoption of an amendment
to the Articles of Incorporation of Nicor Inc. which will increase the
authorized Common Stock from 80,000,000 shares to 160,000,000 shares. As of
February 17, 1998, shares of Nicor Inc. Common Stock were issued and
outstanding and shares reserved for conversions and various stock
plans. The number of shares unissued and not reserved for future issuance would
be increased from to as a result of this amendment. The
company's Articles of Incorporation also authorize shares of preferred
and preference stock, which will not be changed by the proposed amendment.
The Board of Directors believes that the proposed increase in authorized shares
of Common Stock is desirable to enhance Nicor's flexibility in connection with
possible future actions such as stock dividends, acquisitions, adoption of stock
option or similar employee benefit plans, the funding of capital and operating
expenditures or other corporate purposes. The future issuance of any newly
authorized stock, if any, would be authorized by resolution of the Board of
Directors without further approval of the stockholders, except as required by
18
<PAGE> 22
applicable law or by the rules of the New York Stock Exchange and stockholders
have no preemptive rights to subscribe for additional shares. At this time, no
specific use for the increased shares is planned.
The additional Common Stock would be authorized subject to the same voting
rights which now apply and which are discussed above under the caption "VOTING".
As provided for in the Board of Directors resolution, the Articles of
Incorporation of Nicor Inc. will be amended as follows:
"That Article Five of the Company's Articles of Incorporation, as amended,
be further amended by increasing from 80,000,000 to 160,000,000 the number
of shares of Common Stock, par value $2.50 per share, which the Company
shall have the authority to issue."
Although a proposal to increase the authorized common stock of a company may be
construed as having an anti-takeover effect, since authorized and unissued
shares of common stock could be issued for the purpose of discouraging an
attempt by another person or entity to take control of the company, neither the
management of the company nor the Board of Directors views this proposal in that
light. The proposal has not been prompted by any effort by anyone to gain
control of the company, and the company is not aware of any such effort.
INDEPENDENT AUDITORS
Upon recommendation of the Audit Committee, Arthur Andersen LLP, independent
public accountants, has been reappointed by the Board to audit the accounts of
the company for 1998. Arthur Andersen LLP has audited the accounts of the
company and its predecessor since 1954. A representative of the firm will be
present at the Annual Meeting of Stockholders with the opportunity to make a
statement and 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 6, 1998, 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 1999 Annual Meeting of Stockholders. In addition, written notice must be
received on or before February 14, 1999 and must otherwise comply with the
company's By-Laws in order for stockholder proposals to be presented at the 1999
Annual Meeting.
19
<PAGE> 23
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 the order of the Board of Directors.
DAVID L. CYRANOSKI
Senior Vice President,
Secretary and Controller
March 6, 1998
20
<PAGE> 24
[NICOR LOGO]
NICOR INC.
P.O. Box 3014
Naperville, IL 60566-7014
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, to be held April 16, 1998, 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
Continued from the other side
<TABLE>
<CAPTION>
The Board of Directors recommends a vote FOR both proposals. Indicate your vote by an X in the appropriate boxes.
<S> <C> <C>
1. Election of Directors Nominees:
------------------------------------------------
/ / FOR: 1. R. M. Beavers, Jr. 7. D. J. Keller
ALL Nominees 2. B. P. Bickner 8. C. S. Locke
3. J. H. Birdsall, III 9. S. R. Petersen
/ / WITHHOLD: 4. T. A. Donahoe 10. J. Rau
ALL Nominees 5. T. L. Fisher 11. P.A. Wier
6. J. E. Jones
/ / FOR:
ALL Nominees EXCEPT(1)
</TABLE>
<TABLE>
<S> <C>
(1) To instruct the Trustee to withhold authority to vote for any nominee, write that nominee's name on the line below and mark an
(X) in the "For All EXCEPT" box above.
-----------------------------------------------------------------------------------------------------------
For Against Abstain
2. Approval to amend the Articles of Incorporation to increase the number
of authorized shares of Common Stock. / / / / / /
[NICOR LOGO]
NICOR INC.
P.O. Box 3014
Naperville, IL 60566-7014
630 305-9500
P
R
O
X
Y
Date
---------------------
Please date, sign and mail this instruction card promptly in the enclosed envelope. --------------------------------------------
If you sign the card without marking the boxes it will be considered an instruction Signature of Participant
to vote FOR both items.
</TABLE>
