<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.
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(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:
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(2) Form, schedule or registration statement no.:
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(3) Filing party:
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(4) Date filed:
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<PAGE> 2
NICOR INC.
P.O. BOX 3014, NAPERVILLE, ILLINOIS 60566-7014
630/305-9500
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
APRIL 20, 2000
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 20, 2000, 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 be brought before the meeting.
Only stockholders of record on the books of the company at the close of
business on February 23, 2000, will be entitled to vote at the meeting. The
stock transfer books will not be closed.
DAVID L. CYRANOSKI
Senior Vice President, Secretary,
Treasurer and Controller
March 8, 2000
- --------------------------------------------------------------------------------
IMPORTANT
The company has approximately 31,600 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.
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<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 20, 2000. Nicor will pay the cost of soliciting proxies. In addition to
solicitation by mail, officers and employees of the company may solicit proxies
by telephone, by facsimile or in person. A copy of the company's 1999 Annual
Report, the Proxy Statement and the form of proxy is scheduled to be mailed on
or about March 8, 2000, to all stockholders of record on February 23, 2000.
VOTING
As of February 23, 2000, the company had outstanding 46,707,181 shares of
Common Stock and 126,016 shares of Preferred Stock. Each share, regardless of
class, entitles the holder to one vote on each matter properly brought before
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 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.
You can revoke your proxy at any time before it is exercised by timely
delivery of a properly executed, later-dated proxy or by voting by ballot at the
meeting. All shares entitled to vote and represented by properly completed
proxies received prior to the meeting and not revoked will be voted at the
meeting in accordance with your instructions. If you do not indicate how your
shares should be voted on a matter, the shares represented will be voted as the
Board of Directors recommends.
<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 56
Director since 1992
Business experience: Chairman and Chief Executive Officer
since January 1, 2000, Best Harvest Bakeries; Senior
Vice President 1980-1999, as well as Zone Manager 1980-
1993, McDonald's Corporation (Restaurants).
[PHOTO] BRUCE P. BICKNER; Age 56
Director since 1996
Business experience: Executive Vice President, Monsanto
Company - Agricultural Sector (Agricultural Chemicals,
Genetics and Technology) since 1999; 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).
Directorship: Castle Bancgroup Inc.
</TABLE>
2
<PAGE> 6
<TABLE>
<S> <C>
[PHOTO] JOHN H. BIRDSALL, III; Age 56
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 64
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 55
Director since 1988
Business experience: Chairman of the Board since 1996,
Chief Executive Officer since 1995 and President 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 65
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; Valmont Industries,
Inc.
[PHOTO] DENNIS J. KELLER; Age 58
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] WILLIAM A. OSBORN; Age 52
Director since 1999
Business experience: Chairman of the Board and Chief
Executive Officer since 1995, as well as President
since 1993, Northern Trust Corporation (Banking and
Trust Services).
Directorship: Northern Trust Corporation.
</TABLE>
4
<PAGE> 8
<TABLE>
<S> <C>
[PHOTO] SIDNEY R. PETERSEN; Age 69
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; Sypris
Solutions, Inc.; UnionBanCal Corp.
[PHOTO] JOHN RAU; Age 51
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).
Directorships: Borg-Warner Automotive Inc.; Chicago Title
Corporation; divine interVentures, Inc. (in
registration); LaSalle Bank N.A.; First Industrial
Realty Trust, Inc.
[PHOTO] PATRICIA A. WIER; Age 62
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 1999, there were seven meetings of the Board of
Directors, three meetings of the Audit Committee, five meetings of the
Compensation Committee and three meetings of the Committee on Directors. All
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<PAGE> 9
incumbent 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 and 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. Mr. Locke is not
standing for reelection to the Board in 2000.
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 5,547 share units
for compensation deferred and dividends paid during 1999, with an average per
share price of $37.90. 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.
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<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 23, 2000, with sole voting and
investment power except as otherwise noted, and share units held in the
Directors' Deferred Compensation Plan. No Director or executive officer
beneficially owns more than 1% of the outstanding shares of Common Stock except
Mr. Birdsall, who beneficially owns 1.6% of the outstanding shares, and no
Director or executive officer owns any shares of Preferred Stock.
<TABLE>
<CAPTION>
SHARES DIRECTORS'
BENEFICIALLY DEFERRAL
NAME OF BENEFICIAL OWNER OWNED PLAN (1) TOTAL
------------------------ ------------ ---------- ---------
<S> <C> <C> <C>
Robert M. Beavers, Jr.................................. 7,032 0 7,032
Bruce P. Bickner....................................... 3,848 0 3,848
John H. Birdsall, III.................................. 757,829(2) 0 757,829
Philip S. Cali......................................... 50,723(3)(4) 0 50,723
David L. Cyranoski..................................... 59,045(3)(4) 0 59,045
Thomas A. Donahoe...................................... 4,200(4) 1,782 5,982
Thomas L. Fisher....................................... 223,449(3)(4) 0 223,449
Kathleen L. Halloran................................... 44,297(3) 0 44,297
John E. Jones.......................................... 2,500 5,044 7,544
Dennis J. Keller....................................... 2,600 7,325 9,925
Charles S. Locke....................................... 2,500 33,306 35,806
Thomas A. Nardi........................................ 8,444(3)(4) 0 8,444
William A. Osborn...................................... 1,000 0 1,000
Sidney R. Petersen..................................... 5,743(4) 0 5,743
John Rau............................................... 2,600 1,545 4,145
Patricia A. Wier....................................... 5,178 8,470 13,648
Directors and Executive Officers as a Group............ 1,194,560(2)(3)(4) 57,472 1,252,032
Percentage of class.................................. 2.54
</TABLE>
- ---------------
(1) Share units held in the Directors' Deferred Compensation Plan and payable in
cash. The value of these share units depends directly on the performance of
Nicor Common Stock.
(2) Includes 262,526 shares held by a corporation of which Mr. Birdsall is
president, the stock of which is owned by a trust of which he is trustee,
and 55,362 shares held by a trust of which he is trustee, with sole voting
and investment power, and 25,200 shares owned by 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
7
<PAGE> 11
shares owned by a trust of which Mr. Birdsall is cotrustee and a beneficiary
with shared voting and investment power.
(3) 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, 39,000; Mr. Cyranoski, 50,000; Mr. Fisher, 137,100; Ms. Halloran,
34,000; and all Directors and executive officers as a group, 267,600; (b)
shares held by the Savings Investment and Thrift Trust for: Mr. Cali, 3,168;
Mr. Fisher, 20,133; Ms. Halloran, 1,393; Mr. Nardi, 4,032; and all Directors
and executive officers as a group, 31,186; 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 or Long-Term Incentive Plan into Nicor
Common Stock, the receipt of which is deferred: Mr. Cali, 3,738; Mr.
Cyranoski, 5,045; Mr. Fisher, 26,696; Ms. Halloran, 2,272; Mr. Nardi, 3,684;
and all Directors and executive officers as a group, 43,408.
(4) Includes shares held jointly or in common with a spouse, by a spouse or in
trust as follows: Mr. Cali, 834; Mr. Cyranoski, 4,000; Mr. Donahoe, 4,200;
Mr. Fisher, 39,520; Mr. Nardi, 92; Mr. Petersen, 5,743; and all Directors
and executive officers as a group, 56,028.
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;
Executive Vice President, 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.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Ownership of and transactions in company stock by executive officers and
Directors of the company are required to be reported to the Securities and
Exchange Commission pursuant to Section 16 of the Securities Exchange Act of
1934. During 1999, Bruce P. Bickner, a Director, was inadvertently late in
filing required SEC reports covering 257 shares acquired on April 1, 1999 and
190 shares acquired July 1, 1999.
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<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. 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' 1999 salaries averaged 8.92%
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 1999
included the Chief Executive Officer and the other executive officers, is
extended to those positions that play the most important
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<PAGE> 13
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.
For 1999, Nicor officers had 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 30% related to the performance of the
nonutility operations. Nicor Gas officers had 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 was based 60% upon
achievement of financial utility goals; and 40% on achievement of
nonfinancial goals and personal objectives. The nonfinancial goals related
to growth, customer satisfaction and employee and organizational
excellence. Annual incentive compensation for the executive officers for
1999 reflected the achievement of 90% of the utility net income goal and
75% of the nonutility net income goal and an average of 97% 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. At the end of the restricted period, the stock options
automatically become exercisable.
Each dividend performance unit accrues dividend equivalents at the rate
dividends are paid on a share of Nicor Common Stock over a specified
performance period (the performance period for 1999 awards was three
years).
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
10
<PAGE> 14
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 two cycles of dividend
performance units for executive officers for 1999 was 0% and 75% of target for
the performance periods 1997 through 1999 and 1995 through 1999 respectively,
based on the company's stock performance relative to the S&P Utilities Index.
In late 1999, the Compensation Committee recommended that the Board approve
certain change in control arrangements, including the agreements with Mr. Fisher
and other executive officers referred to under "Change in Control Arrangements."
The Compensation Committee made the recommendation to assure that Nicor would
have the continued full attention and dedication of these executives if a change
in control should become possible or occur, by reducing the distraction that
could otherwise result from the personal uncertainties that a potential or
actual change in control would entail.
CEO Compensation
On March 22, 1999, Mr. Fisher's base salary was increased by $35,000, a
6.5% 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 35,000 stock options and
dividend performance units on March 9, 1999. 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 1999 have a
performance period of 1999 through 2001. Dividend performance units may be
earned subject to the performance criteria described in this report.
Mr. Fisher's annual incentive compensation for 1999 was based on the
achievement of predefined net income objectives, 70% based on utility
performance and 30% based on nonutility performance.
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 2000, 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
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<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, 1995, and all dividends were reinvested.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
[PERFORMANCE CHART]
<TABLE>
<CAPTION>
NICOR S&P UTILITIES S&P 500
----- ------------- -------
<S> <C> <C> <C>
1995 127.00 142.00 138.00
1996 172.00 146.00 169.00
1997 211.00 181.00 225.00
1998 219.00 208.00 290.00
1999 176.00 190.00 351.00
</TABLE>
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<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
------------------- ---------- -----------------
SHARES
NAME AND UNDERLYING LONG-TERM ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS INCENTIVE PLAN(1) COMPENSATION(2)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
T. L. Fisher 1999 $563,923 $268,983 35,000 $229,845 $ 55,877
Chairman, President and 1998 529,231 294,250 26,000 141,100 48,575
Chief Executive Officer of 1997 520,962 321,173 30,000 214,110 41,373
the Company and Nicor Gas
P. S. Cali 1999 $234,173 $ 92,963 8,000 $ 62,685 $ 13,468
Executive Vice President 1998 198,692 69,366 6,500 35,275 11,440
Operations of the Company 1997 194,885 73,620 7,500 65,423 9,003
and Nicor Gas
K. L. Halloran 1999 $233,808 $ 87,472 8,000 $ 0 $ 18,888
Executive Vice President 1998 197,692 48,510 6,500 22,825 15,588
Finance and Administration of 1997 193,846 77,240 17,500 35,685 12,011
the Company and Nicor Gas
D. L. Cyranoski 1999 $228,616 $ 73,482 8,500 $ 62,685 $ 21,426
Senior Vice President, 1998 220,154 74,748 7,500 39,425 18,841
Secretary, Treasurer and 1997 218,423 89,956 8,500 65,423 15,435
Controller of the Company
and Nicor Gas
T. A. Nardi 1999 $214,693 $ 56,203 8,000 $ 62,685 $257,641
Senior Vice President 1998 202,923 78,746 7,000 37,350 13,615
Market Development of the 1997 200,769 73,188 8,000 65,423 10,482
Company and Nicor Gas
</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 1999
relate to the Dividend Performance Units awarded in 1995 having a 1995-1999
performance period. No payout was made for awards in 1997 having a 1997-1999
performance period.
(2) Amounts shown for 1999 include company contributions to the Savings
Investment Plan and credits to the Supplemental Savings Investment Plan for
Mr. Fisher, Mr. Cali, Ms. Halloran, Mr. Cyranoski and Mr. Nardi of $26,645,
$12,292, $10,998, $10,802, and $10,144, respectively; interest earned in
excess of
14
<PAGE> 18
market on deferred salary for Mr. Fisher, Mr. Cali, Ms. Halloran, Mr.
Cyranoski and Mr. Nardi of $22,856, $1,176, $7,890, $10,624, and $5,297,
respectively; credits under the 1968 Incentive Compensation Plan for Mr.
Fisher of $6,376; and a payment to Mr. Nardi of $242,200 in connection with
his resignation.
OPTION GRANTS TABLE
The following table shows stock options granted in 1999 to the Chief
Executive Officer and the four other highest-compensated executive officers:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------
NUMBER OF % OF TOTAL
SHARES OPTIONS EXERCISE
UNDERLYING GRANTED TO OR BASE GRANT DATE
OPTIONS EMPLOYEES IN PRICE EXPIRATION PRESENT VALUE(2)
NAME GRANTED(1) FISCAL YEAR ($/SHARE) DATE ($)
---- ---------- ------------ --------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
T. L. Fisher........................... 35,000 23 38.0625 3/9/09 123,200
P. S. Cali............................. 8,000 5 38.0625 3/9/09 28,160
K. L. Halloran......................... 8,000 5 38.0625 3/9/09 28,160
D. L. Cyranoski........................ 8,500 6 38.0625 3/9/09 29,920
T. A. Nardi............................ 8,000 5 38.0625 3/9/09 28,160
</TABLE>
- ---------------
(1) Options become exercisable on March 10, 2002.
(2) Present value of grants on March 9, 1999, the date of grant, using the
Black-Scholes option-pricing model with the following assumptions: dividend
yield of 4.6%, volatility of 14.7%, risk-free interest rate of 5.2%, and
expected period outstanding of three years. The weighted-average present
value of an option granted in 1999 was $3.52.
15
<PAGE> 19
AGGREGATED OPTION EXERCISES IN 1999 AND YEAR-END OPTION VALUE TABLE
The following table shows the December 31, 1999 stock option values for the
Chief Executive Officer and the four other highest-compensated officers, none of
whom exercised options in 1999:
<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT YEAR-END AT YEAR-END (1)
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE ($)
---- ------------------------- -----------------------------
<S> <C> <C>
T. L. Fisher.................................... 107,100/91,000 527,538/7,500
P. S. Cali...................................... 31,500/22,000 217,250/1,875
K. L. Halloran.................................. 16,500/32,000 95,625/4,375
D. L. Cyranoski................................. 41,500/24,500 266,500/2,125
T. A. Nardi..................................... 36,000/23,000 233,625/2,000
</TABLE>
- ---------------
(1) Value based on market value of the company's Common Stock at December 31,
1999, minus the exercise price.
LONG-TERM INCENTIVE PLAN -- AWARDS IN 1999
The following table shows dividend units granted in 1999 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................... 35,000 1999 thru 2001 40,775 163,100 244,650
P. S. Cali..................... 8,000 1999 thru 2001 9,320 37,280 55,920
K. L. Halloran................. 8,000 1999 thru 2001 9,320 37,280 55,920
D. L. Cyranoski................ 8,500 1999 thru 2001 9,903 39,610 59,415
T. A. Nardi.................... 8,000 1999 thru 2001 9,320 37,280 55,920
</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. 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.
16
<PAGE> 20
RETIREMENT BENEFITS UNDER RETIREMENT PLANS
The following table shows the estimated annual benefits under the company's
retirement plans on a straight life annuity basis at age 65 for various
compensation bases and years of service classifications.
<TABLE>
<CAPTION>
YEARS OF SERVICE
BASE ----------------------------------------------------------------
COMPENSATION 15 20 25 30 35
- ------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
$150,000 ............................. $ 38,009 $ 50,678 $ 63,348 $ 76,017 $ 85,392
250,000 ............................. 65,009 86,678 108,348 130,017 145,642
350,000 ............................. 92,009 122,678 153,348 184,017 205,892
450,000 ............................. 119,009 158,678 198,348 238,017 266,142
550,000 ............................. 146,009 194,678 243,348 292,017 326,392
650,000 ............................. 173,009 230,678 288,348 346,017 386,642
750,000 ............................. 200,009 266,678 333,348 400,017 446,892
</TABLE>
The Retirement Plan, which covers all Nicor 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, 32; Mr. Cali, 22; Ms.
Halloran, 25; and Mr. Cyranoski, 33. Mr. Nardi resigned with 18 years of
service.
OTHER COMPENSATION ARRANGEMENTS
Mr. Nardi, Senior Vice President Market Development, resigned effective
January 19, 2000. In connection with his resignation, Mr. Nardi received a
payment of $242,200 (as set forth in the Summary Compensation Table). In
addition, he was granted stock appreciation rights covering 51,000 shares of
Nicor Common Stock, exercisable for three years following his resignation, under
which he has the right to receive in cash the amount by which the market price
of Nicor Common Stock at the time of exercise exceeds specified base prices.
These stock appreciation rights were granted to replace Mr. Nardi's vested
options which were canceled as a result of his resignation and contain base
prices averaging $29.00 per share, equal to the exercise prices of the options
that were canceled.
17
<PAGE> 21
CHANGE IN CONTROL ARRANGEMENTS
In the event of a "change in control" of Nicor, the following would
generally occur:
Under the provisions of the company's Long-Term Incentive Plan, 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;
Under the terms of the Capital Accumulation Plan, under which certain
executive officers and Directors deferred a portion of their salary or
other compensation 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; and
Under the terms of the Stock Deferral Plan, balances will be distributed
as soon as practical.
In general, a change in control occurs if any person or group is or becomes
a beneficial owner of or has accepted for payment 20% or more of the outstanding
Common Stock or securities with 20% or more of the combined voting power of all
Nicor voting securities; if the shareholders approve a plan of complete
liquidation or dissolution of Nicor; if individuals who were the Board's
nominees for election shall not constitute a majority of the Board following the
election; or upon consummation of a reorganization, merger, consolidation, or
other business combination involving Nicor or the sale or other disposition of
more than 50% of the operating assets of Nicor on a consolidated basis, unless
Nicor stockholders continue to own at least 60% of the resulting entity in
substantially the same proportion, no person thereby becomes the beneficial
owner of 20% or more of the Common Stock or voting securities of the resulting
entity, and members of the Nicor Board become at least a majority of the Board
of the resulting entity. In addition, a change in control will occur for
purposes of any stock-based award if a tender offer not approved by the Board is
made whereby the offeror could become the owner of 50% or more of Nicor's voting
stock unless the offer is withdrawn by three business days prior to its
scheduled termination.
The Board of Directors has authorized and intends to have Nicor enter into
change in control agreements with Mr. Fisher, Mr. Cali and Ms. Halloran. For
purposes of these agreements, a change in control is the same as noted above.
These agreements generally provide for continued employment for two years
following a change in control in their then current positions at no less than
their current compensation and benefits, and for the following upon termination
of the executive's employment by the executive for "good reason" or by Nicor
without "cause" (as defined in the change in control agreement) during that
period: (1) payment of an amount equal to three times the sum of the executive's
annual base salary and the greater of the average bonus for the last two years
or the current year target bonus; (2) full vesting plus credit for an additional
three years of age and service in the pension/supplementary retirement plan; (3)
full vesting and an additional three years
18
<PAGE> 22
of company contributions to the Savings Investment Plan; (4) full vesting of all
outstanding stock incentive awards, which would continue to be exercisable for
their full term or until the executive's earlier death; (5) at least a three
year continuation of welfare benefits; and (6) outplacement and legal fees and
other expenses. In addition, if any payments to the executive are subject to the
excise tax on "parachute payments," Nicor will make an additional payment to the
executive so that the executive will receive net benefits as if no excise tax
were payable. The agreements would continue through December 31, 2001, and would
be automatically extended for an additional year at that date and on each
December 31 thereafter unless either party gives notice to the contrary by the
preceding June 30. The agreements are also extended automatically for two years
following any change in control while they are in effect.
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 Nicor for 2000. Arthur Andersen LLP has audited the accounts of
Nicor 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 8, 2000,
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 2001 Annual Meeting of Stockholders. In addition, written notice
must be received on or before February 19, 2001 and must otherwise comply with
Nicor's By-Laws in order for stockholder proposals to be presented at the 2001
Annual Meeting.
OTHER MATTERS
As of the date of this Proxy Statement, Nicor 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,
Treasurer and Controller
March 8, 2000
19
<PAGE> 23
NICOR INC.
[NICOR LOGO] 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 Nicor
Inc., to be held April 20, 2000, or at any adjournment thereof, on the
matter set forth in the Proxy Statement and on all other matters properly
presented at the meeting.
PROXIES WILL BE VOTED AS DIRECTED.
IN THE ABSENCE OF SPECIFIC DIRECTION, SIGNED PROXIES WILL BE VOTED FOR ALL
NOMINEES LISTED ON THE REVERSE SIDE.
Continued and to be dated and signed on the other side
<PAGE> 24
Continued from the other side
The Board of Directors recommends a vote FOR all nominees listed below.
Indicate your vote by an X in the appropriate box.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1. Election of Directors Nominees: [ ] Mark box to discontinue mailing the Annual Report for
[ ] FOR: 1. R. M. Beavers, Jr. 7. D. J. Keller this account.
[ ] ALL Nominees 2. B. P. Bickner 8. W. A. Osborn
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 [NICOR LOGO] NICOR INC.
6. J. E. Jones P.O. Box 3014
[ ] FOR: Naperville, IL 60566-7014
[ ] ALL Nominees EXCEPT (1) 630 305-9500
(1)To withhold authority to vote for any nominee, write that nominee's
name below and mark an X in the "For ALL EXCEPT" box above.
--------------------------------------------------------------------
P
R
O
X
Date
Y ---------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
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>
