<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] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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 15, 1999
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 15, 1999, 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) transacting such other business as may properly be brought before the
meeting.
Only stockholders of record on the books of the company at the close of business
on February 12, 1999, will be entitled to vote at the meeting. The stock
transfer books will not be closed.
DAVID L. CYRANOSKI
Senior Vice President,
Secretary and Treasurer
March 5, 1999
IMPORTANT
The company has approximately 34,000 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]
PARKING GARAGES & LOTS
----------------------
[A] N.W. CORNER OF FRANKLIN & MONROE - ENTER ON FRANKLIN
[B] S.W. CORNER OF WELLS & MADISON - ENTER ON MADISON
[C] N.E. CORNER OF WELLS & MADISON - ENTER ON WELLS OF MADISON
[D] S.E. CORNER OF WELLS & MADISON - ENTER ON MONROE
[E] SOUTH SIDE OF ADAMS - GARAGE RUNS WHOLE BLOCK
FROM FRANKLIN TO WELLS - ENTER ON FRANKLIN OR ADAMS
** - ENTRANCES
<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
15, 1999. 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 1998 Annual Report, the Proxy Statement and the form of proxy is
scheduled to be mailed on or about March 5, 1999, to all stockholders of record
on February 12, 1999.
VOTING
As of February 12, 1999, the company had outstanding 47,474,526 shares of Common
Stock, par value $2.50 per share, and 126,354 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 votes of the
shares of the company entitled to vote on the matters to be considered will
constitute a quorum for purposes of the meeting. If a quorum is present, in
person or by proxy, the affirmative vote of the majority of the votes 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.
<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 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.
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>
[PHOTO] ROBERT M. BEAVERS, JR.; Age 55
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.
[PHOTO] BRUCE P. BICKNER; Age 55
Director since 1996
Business experience: Co-President, Monsanto Global Seed
Group (Agricultural Genetics and Technology) since
1998; Chairman of the Board and Chief Executive
Officer, 1988-1998, 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.
</TABLE>
2
<PAGE> 6
<TABLE>
<S> <C>
[PHOTO] JOHN H. BIRDSALL, III; Age 55
Director since 1982
Business experience: Private Investor; formerly President,
1982-1986, Birdsall, Inc., a subsidiary of Nicor Inc.
(Containerized Shipping).
[PHOTO] THOMAS A. DONAHOE; Age 63
Director since 1998
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).
Directorships: Andrew Corporation; BWAY Corporation.
[PHOTO] THOMAS L. FISHER; Age 54
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.
</TABLE>
3
<PAGE> 7
<TABLE>
<S> <C>
[PHOTO] JOHN E. JONES; Age 64
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.
[PHOTO] DENNIS J. KELLER; Age 57
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.
[PHOTO] CHARLES S. LOCKE; Age 70
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: Cordant Technologies Inc.; Whitman Corporation.
</TABLE>
4
<PAGE> 8
<TABLE>
<S> <C>
[PHOTO] SIDNEY R. PETERSEN; Age 68
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; Seagull Energy
Corporation; Sypris Solutions, Inc.; UnionBanCal Corp.
[PHOTO] JOHN RAU; Age 50
Director since 1998
Business experience: President and Chief Executive Officer
since 1997, Chicago Title Corporation (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
Corporation; LaSalle National Bank; First Industrial
Realty Trust.
[PHOTO] PATRICIA A. WIER; Age 61
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).
</TABLE>
BOARD AND COMMITTEE MEETINGS
The Nicor Board has an Audit Committee, a Compensation Committee and a Committee
on Directors. During 1998, there were six meetings of the Board of Directors,
four meetings of the Audit Committee, three meetings of the Compensation
Committee and three 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 Mrs. Wier
(Chairperson) are members, is responsible for recommending to the Board of
Directors the appointment of independent public accountants; reviewing the
scope, fees and findings of audits and other services as performed by the
independent public accountants; 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. 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.
Members of the Committee on Directors are Messrs. Donahoe, Jones (Chairperson),
Locke and Rau. 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 4,571 share units for
compensation deferred and dividends paid during 1998, with an average per share
base price of $41.03. 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 of the Directors and the executive officers of the
company named in the Summary Compensation Table and by all Directors and
executive officers as a group as of February 12, 1999, 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 or any
shares of Preferred Stock.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP
------------------------ --------------------
<S> <C>
Robert M. Beavers, Jr. ..................................... 6,393
Bruce P. Bickner............................................ 2,531
John H. Birdsall, III....................................... 439,641(1)
Philip S. Cali.............................................. 30,632(2)(3)
David L. Cyranoski.......................................... 39,671(2)(3)
Thomas A. Donahoe........................................... 2,621(3)(4)
Thomas L. Fisher............................................ 129,942(2)(3)
Kathleen L. Halloran........................................ 18,478(2)
John E. Jones............................................... 2,200
Dennis J. Keller............................................ 8,282(4)
Charles S. Locke............................................ 34,135(4)
Thomas A. Nardi............................................. 33,171(2)(3)
Sidney R. Petersen.......................................... 5,212(3)
John Rau.................................................... 3,094(4)
Patricia A. Wier............................................ 11,693(4)
Directors and Executive Officers as a Group................. 771,882(1)(2)(3)(4)
Percentage of class....................................... 1.62
</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 111,700 shares owned by a family
member's trust of which Mr. Birdsall is cotrustee 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 stock options: Mr.
Cali, 23,000; Mr. Cyranoski, 32,000; Mr. Fisher, 73,100; Ms. Halloran,
11,000; Mr. Nardi, 27,000; and all Directors and executive officers as a
group, 166,100; (b) shares held by the Savings Investment and Thrift Trust
for: Mr. Cali, 589; Mr. Nardi, 2,144; and all Directors and executive
officers as a group, 3,775; and (c) share unit equivalents credited to their
accounts under the Stock
7
<PAGE> 11
Deferral Plan, which enables officers to defer, and convert, up to 50% of
their cash awards from the Annual Incentive Compensation Plan or Long-Term
Incentive Plan into Nicor Common Stock, the receipt of which is deferred:
Mr. Cali, 2,630; Mr. Cyranoski, 4,359; Mr. Fisher, 18,003; Ms. Halloran,
846; Mr. Nardi, 3,937; and all Directors and executive officers as a group,
31,536.
(3) Includes shares held jointly or in common with a spouse, by a spouse or in
trust as follows: Mr. Cali, 595; Mr. Cyranoski, 3,312; Mr. Donahoe, 1,600;
Mr. Fisher, 38,839; Mr. Nardi, 89; Mr. Petersen, 5,212; and all Directors
and executive officers as a group, 51,030.
(4) The total shares owned by Messrs. Donahoe, Keller, Locke and Rau and Mrs.
Wier and all Directors as a group include, respectively, 721, 5,982, 31,935,
794, 7,023 and 46,455 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.
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
8
<PAGE> 12
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. 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, as well as gas utility
and general industry surveys from the Towers Perrin, Mercer 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' 1998 salaries averaged 10.4% 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.
Participation in the annual incentive compensation plan, which in 1998
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.
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 48% related to the performance of the nonutility
operations. Nicor Gas officers have up to 100% of their annual incentive
targets based on goals related to the performance of Nicor Gas and up to
15% related to the performance of nonutility operations. The annual
incentive target for Nicor Gas officers is based 50% on achievement of
financial utility goals; and 50% on achievement of nonfinancial goals and
personal objectives. The nonfinancial goals relate to growth, cost
management, customer satisfaction and employee and organizational
excellence. Annual incentive compensation for the executive officers for
1998 reflects the achievement of both the utility net income goal and the
nonutility net income goal and an average of 88% 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
9
<PAGE> 13
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 1998 awards was three years).
- 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 Stock Performance Graph shown following
this report). The potential number of dividend performance units 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 compensation relating to dividend performance units for
executive officers for 1998 was 100% of target and was based on the company's
stock performance relative to the S&P Utility Group for the performance period
1996 through 1998.
10
<PAGE> 14
CEO Compensation
On March 23, 1998, Mr. Fisher's base salary was increased by $25,000, a 4.9%
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 26,000 stock options and dividend
performance units on March 10, 1998. 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 1998 have a performance
period of 1998 through 2000. Dividend performance units may be earned subject to
the performance criteria described in this report.
Mr. Fisher's annual incentive compensation for 1998 was based on the achievement
of predefined net income objectives, 70% based on utility performance and 30%
based on nonutility performance.
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 1999, 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 John E. Jones Dennis J. Keller Sidney R.
Petersen
11
<PAGE> 15
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,
1994, and all dividends were reinvested.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
[BAR GRAPH]
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C>
Nicor $ 85 $ 108 $ 147 $ 180 $ 187
S&P Utilities 92 131 135 168 192
S&P 500 101 139 171 228 293
</TABLE>
12
<PAGE> 16
SUMMARY COMPENSATION TABLE
The following table shows executive compensation for the years indicated for the
Chief Executive Officer and the four other highest-compensated executive
officers:
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
ANNUAL ------------------------------
COMPENSATION AWARDS PAYOUTS
----------------- ---------- -----------------
SHARES LONG-TERM ALL OTHER
NAME AND SALARY BONUS UNDERLYING INCENTIVE PLAN(1) COMPENSATION(2)
PRINCIPAL POSITION YEAR ($) ($) OPTIONS ($) ($)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
T. L. Fisher 1998 529,231 294,250 26,000 141,100 48,575
Chairman, President and 1997 520,962 321,173 30,000 214,110 41,373
Chief Executive Officer of the 1996 476,346 266,750 34,000 141,895 35,917
Company and Nicor Gas
D. L. Cyranoski 1998 220,154 74,748 7,500 39,425 18,841
Senior Vice President, Secretary 1997 218,423 89,956 8,500 65,423 15,435
and Treasurer of the Company 1996 199,539 87,763 9,500 34,515 13,332
and Nicor Gas
T. A. Nardi 1998 202,923 78,746 7,000 37,350 13,615
Senior Vice President Nonutility 1997 200,769 73,188 8,000 65,423 10,482
Operations and Business 1996 185,231 63,329 9,000 26,845 9,159
Development of the Company and
Senior Vice President Business
Development of Nicor Gas
P. S. Cali 1998 198,692 69,366 6,500 35,275 11,440
Senior Vice President 1997 194,885 73,620 7,500 65,423 9,003
Operations of Nicor Gas 1996 177,885 78,018 8,500 N/A 7,223
K. L. Halloran 1998 197,692 48,510 6,500 22,825 15,588
Senior Vice President 1997 193,846 77,240 17,500 35,685 12,011
Administration of Nicor Gas 1996 161,539 62,499 5,500 19,175 9,815
</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. Payouts in 1998
relate to the Dividend Performance Units awarded in 1996 having a 1996-1998
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 $25,006, $10,402, $9,588, $10,433 and
$9,391, respectively; interest earned in excess of market on deferred salary
for
13
<PAGE> 17
Messrs. Fisher, Cyranoski, Nardi, and Cali and Ms. Halloran of $18,111, $8,439,
$4,027, $1,007 and $6,197, respectively; and credits under the 1968 Incentive
Compensation Plan for Mr. Fisher of $5,458.
OPTION GRANTS TABLE
The following table shows stock options granted in 1998 to the Chief Executive
Officer and the four other highest-compensated executive officers:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------
NUMBER OF % OF TOTAL
SHARES OPTIONS EXERCISE
UNDERLYING GRANTED TO OR BASE GRANT DATE
OPTIONS EMPLOYEES IN PRICE EXPIRATION PRESENT VALUE(2)
NAME GRANTED(1) FISCAL YEAR ($/SHARE) DATE ($)
---- ---------- ------------ --------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
T. L. Fisher........................ 26,000 23 40.625 03/10/08 117,520
D. L. Cyranoski..................... 7,500 7 40.625 03/10/08 33,900
T. A. Nardi......................... 7,000 6 40.625 03/10/08 31,640
P. S. Cali.......................... 6,500 6 40.625 03/10/08 29,380
K. L. Halloran...................... 6,500 6 40.625 03/10/08 29,380
</TABLE>
- ---------------
(1) Options become exercisable on March 11, 2001.
(2) Present value of grants on March 10, 1998, the date of grant, using the
Black-Scholes option-pricing model with the following assumptions: dividend
yield of 3.9%, volatility of 14.5%, risk-free interest rate of 5.6%, and
expected period outstanding of three years. The weighted-average present
value of an option granted in 1998 was $4.52.
14
<PAGE> 18
AGGREGATED OPTION EXERCISES IN 1998 AND YEAR-END OPTION VALUE TABLE
The following table shows the aggregated stock option exercises in 1998 and the
December 31, 1998 stock option values for the Chief Executive Officer and the
four other highest-compensated executive officers:
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
SHARES UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS AT YEAR
OPTIONS AT YEAR END(2)
END -----------------
SHARES VALUE ----------------- EXERCISABLE/
ACQUIRED REALIZED(1) EXERCISABLE/ UNEXERCISABLE
NAME ON EXERCISE ($) UNEXERCISABLE ($)
---- ----------- ----------- ----------------- -----------------
<S> <C> <C> <C> <C>
T. L. Fisher......................... 83,900 1,408,163 73,100/90,000 1,095,763/818,250
D. L. Cyranoski...................... 9,000 128,250 32,000/25,500 538,125/230,188
T. A. Nardi.......................... 7,000 108,063 27,000/24,000 458,625/217,375
P. S. Cali........................... 5,000 80,938 23,000/22,500 405,375/204,563
K. L. Halloran....................... N/A N/A 11,000/29,500 179,500/262,563
</TABLE>
- ---------------
(1) Value based on market value of the company's Common Stock at date of
exercise minus the exercise price.
(2) Value based on market value of the company's Common Stock at December 31,
1998, minus the exercise price.
LONG-TERM INCENTIVE PLAN -- AWARDS IN 1998
The following table shows dividend units granted in 1998 to the Chief Executive
Officer and the four other highest-compensated executive officers:
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS UNDER
NON-STOCK PRICE-BASED PLAN
NUMBER PERFORMANCE -------------------------------------------
NAME OF UNITS PERIOD THRESHOLD($) TARGET($) MAXIMUM($)
---- -------- -------------- ------------ --------- ----------
<S> <C> <C> <C> <C> <C>
T. L. Fisher................... 26,000 1998 thru 2000 28,730 114,920 172,380
D. L. Cyranoski................ 7,500 1998 thru 2000 8,288 33,150 49,725
T. A. Nardi.................... 7,000 1998 thru 2000 7,735 30,940 46,410
P. S. Cali..................... 6,500 1998 thru 2000 7,183 28,730 43,095
K. L. Halloran................. 6,500 1998 thru 2000 7,183 28,730 43,095
</TABLE>
Each dividend unit accumulates dividends equivalent to the dividends paid on one
share of Nicor Common stock during the performance period. Estimated future
payouts are based on the present Nicor Common Stock dividend rate. If dividends
increase during this period, the dividend equivalents would increase
proportionately.
15
<PAGE> 19
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 ............................. $ 38,133 $ 50,843 $ 63,554 $ 76,265 $ 85,640
250,000 ............................. 65,133 86,843 108,554 130,265 145,890
350,000 ............................. 92,133 122,843 153,554 184,265 206,140
450,000 ............................. 119,133 158,843 198,554 238,265 266,390
550,000 ............................. 146,133 194,843 243,554 292,265 326,640
650,000 ............................. 173,133 230,843 288,554 346,265 386,890
750,000 ............................. 200,133 266,843 333,554 400,265 447,140
</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, 31; Mr. Cyranoski, 32; Mr.
Nardi, 17; Mr. Cali, 21; and Ms. Halloran, 24.
16
<PAGE> 20
CHANGE IN CONTROL ARRANGEMENTS
In the event of a "change in control" of the company, then the following would
apply:
Under the provisions of the 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 of
the control change 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.
INDEPENDENT PUBLIC ACCOUNTANTS
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 1999. 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 5, 1999, 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 2000 Annual Meeting of Stockholders. In addition, written notice must be
received on or before February 15, 2000 and must otherwise comply with the
company's By-Laws in order for stockholder proposals to be presented at the 2000
Annual Meeting.
17
<PAGE> 21
OTHER MATTERS
As of the date of this Proxy Statement, the company knows of no other matters to
be brought before the meeting. If, however, further business is properly
presented, the proxy holders will act in accordance with their best judgment.
By order of the Board of Directors.
DAVID L. CYRANOSKI
Senior Vice President,
Secretary and Treasurer
March 5, 1999
18
<PAGE> 22
[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 15, 1999, or at any adjournment thereof, on the
matter 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 THE ITEM.
Continued and to be dated and signed on the other side
<PAGE> 23
Continued from the other side
<TABLE>
<S><C>
The Board of Directors recommends a vote FOR the proposal. Indicate your vote by an X in the appropriate box.
1. Election of Directors Nominees: / / Mark box to discontinue mailing the Annual Report
--------------------------------------------- for this account.
/ / 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) [NICOR LOGO] NICOR INC.
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. 630 305-9500
- ---------------------------------------------------------------------------
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>
