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<SEC-DOCUMENT>0000072020-01-000002.txt : 20010313
<SEC-HEADER>0000072020-01-000002.hdr.sgml : 20010313
ACCESSION NUMBER: 0000072020-01-000002
CONFORMED SUBMISSION TYPE: 10-K405
PUBLIC DOCUMENT COUNT: 5
CONFORMED PERIOD OF REPORT: 20001231
FILED AS OF DATE: 20010312
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: NICOR INC
CENTRAL INDEX KEY: 0000072020
STANDARD INDUSTRIAL CLASSIFICATION: NATURAL GAS DISTRIBUTION [4924]
IRS NUMBER: 362855175
STATE OF INCORPORATION: IL
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 10-K405
SEC ACT:
SEC FILE NUMBER: 001-07297
FILM NUMBER: 1566665
BUSINESS ADDRESS:
STREET 1: 1844 FERRY RD
CITY: NAPERVILLE
STATE: IL
ZIP: 60563
BUSINESS PHONE: 6303059500
MAIL ADDRESS:
STREET 1: PO BOX 3014
CITY: NAPERVILLE
STATE: IL
ZIP: 60566-7014
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K405
<SEQUENCE>1
<FILENAME>0001.txt
<DESCRIPTION>ANNUAL REPORT FOR 2000
<TEXT>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 2000
or
[ ] Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
I.R.S
Employer
Commission Registrant, State of Incorporation, Identification
File Number Address and Telephone Number Number
- ---------------- ------------------------------------- ---------------
1-7297 Nicor Inc. 36-2855175
(An Illinois Corporation)
1844 Ferry Road
Naperville, Illinois 60563-9600
(630) 305-9500
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
Common Stock, par value $2.50 per share New York Stock Exchange
including Preference Stock purchase right Chicago Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
As of February 28, 2001, 45,370,776 common shares were outstanding. The
aggregate market value of voting securities held by non-affiliates of the
registrant was approximately $1.6 billion.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the company's 2001 Annual Meeting Definitive Proxy Statement, dated
March 8, 2001, are incorporated by reference into Part III.
<PAGE>
Nicor Inc. Page i
Table of Contents
Item No.
Part I
1. Business ....................................................... 1
2. Properties ..................................................... 5
3. Legal Proceedings............................................... 5
4. Submission of Matters to a Vote of
Security Holders.............................................. 5
Executive Officers of the Registrant............................ 6
Part II
5. Market for Registrant's Common Equity
and Related Stockholder Matters .............................. 7
6. Selected Financial Data ........................................ 8
7. Management's Discussion and Analysis of
Financial Condition and Results of Operations................. 9
7A. Quantitative and Qualitative
Disclosures about Market Risk................................. 20
8. Financial Statements and Supplementary Data..................... 21
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure........................... 39
Part III
10. Directors and Executive Officers of
the Registrant... ............................................ 40
11. Executive Compensation.......................................... 40
12. Security Ownership of Certain
Beneficial Owners and Management.............................. 40
13. Certain Relationships and Related
Transactions.................................................. 40
Part IV
14. Exhibits, Financial Statement
Schedules, and Reports on Form 8-K............................ 40
Signatures...................................................... 42
Exhibit Index................................................... 43
Glossary
Degree day.........The extent to which the daily average temperature falls
below 65 degrees Fahrenheit. Normal weather for Nicor
Gas' service territory is about 6,100 degree days.
FERC...............Federal Energy Regulatory Commission, the agency that
regulates the interstat transportation of natural gas, oil
and electricity.
ICC................Illinois Commerce Commission, the agency that regulates
investor-owned Illinois utilities.
Mcf, MMcf, Bcf.....Thousand cubic feet, million cubic feet, billion cubic feet.
PBR................Performance-based rate, a plan that provides economic
incentives based on performance.
PGA................Purchased Gas Adjustment, a rate mechanism designed to allow
utilities, like Nicor Gas, to recover their gas costs without
markup.
TEU................Twenty-foot equivalent unit, a measure of volume in
containerized shipping equal to one 20-foot-long
container.
<PAGE>
Nicor Inc. Page 1
PART I
Item 1. Business
Nicor Inc. (Nicor), incorporated in 1976, is a holding company. Its principal
subsidiaries are Northern Illinois Gas Company (doing business as Nicor Gas
Company), one of the nation's largest distributors of natural gas, and Tropical
Shipping, a leading transporter of containerized freight in the Caribbean. Gas
distribution is Nicor's primary business, representing approximately 90 percent
of consolidated operating income and assets in a typical year. Nicor also owns
several unregulated energy-related ventures, including a partnership in Nicor
Energy, a provider of energy products and services. Nicor had approximately
3,300 employees at year-end 2000.
Financial information on Nicor's major business segments is included in Business
Segment and Geographic Information beginning on page 34. Certain terms used
herein are defined in the glossary on page i.
GAS DISTRIBUTION
General
Nicor Gas, a regulated natural gas distribution utility, serves nearly 2 million
customers, in a service territory that encompasses most of the northern third of
Illinois, excluding the city of Chicago. The company's service territory is
diverse and has grown steadily over the years, providing the company with a
well-balanced mix of residential, commercial and industrial customers. In 2000,
residential customers accounted for 43 percent of natural gas deliveries, while
commercial and industrial customers accounted for 25 percent and 32 percent,
respectively. Nicor Gas' large residential customer base provides relative
stability during weak economic periods. In addition, the company's industrial
and commercial customer base is well diversified, lessening the impact of
industry-specific economic swings. See Gas Distribution Statistics on page 16
for operating revenues, deliveries and customers by customer classification.
Gas deliveries are seasonal since about one-half are used for space heating.
Typically, about 70 percent of deliveries and revenues occur from October
through March. Fluctuations in weather have the potential to significantly
impact year-to-year comparisons of operating income and cash flow. To provide
protection from the financial impact of unusually warm weather, Nicor Gas
entered into an agreement with a third party designed to protect the company's
2001 earnings and cash flow if weather is warmer than 5,700 degree days,
approximately the same level as actual degree days in 2000. To partially offset
the cost of this earnings protection, Nicor Gas has also agreed to pay the third
party if weather for 2001 is colder than 6,100 degree days, which is
approximately normal for Nicor Gas' service territory.
Nicor Gas maintains franchise agreements with most of the communities it serves,
allowing it to construct, operate and maintain distribution facilities in those
communities. Franchise agreement terms range up to 50 years. Currently, less
than 5 percent of the agreements will expire within five years. The company has
approximately 2,200 employees.
Customer Services
In addition to gas sales to all customer classes, Nicor Gas provides
transportation service to commercial and industrial customers who purchase their
own gas supplies. Beginning in 1999, the company's Customer Select(R) voluntary
pilot program also allowed residential customers in certain communities to
Nicor Inc. Page 2
Item 1. Business (continued)
choose their natural gas supplier. Nicor Gas supports customer choice and has
filed with the Illinois Commerce Commission (ICC) to permanently expand the
Customer Select program to all of its customers. Additional information on the
program is presented under the heading Unbundling on page 15. Transportation
customers have options that include the use of the company's storage system and
the ability to choose varying supply backup levels and service options. The
company receives a margin generally comparable to gas sales for transportation
service with full supply backup.
In recent years, Nicor Gas has been pursuing several nontraditional activities.
These activities include finding innovative ways to utilize its physical assets
by providing natural gas storage and transmission-related services to marketers,
other gas distribution companies and electric power generation facilities.
Sources of Gas Supply
Nicor Gas purchases gas supplies in the open market by contracting directly with
producers and marketers. Pipeline transportation and purchased storage services
are contracted for at rates regulated by the Federal Energy Regulatory
Commission (FERC). Firm pipeline capacity and purchased storage services held by
the company that are temporarily not needed can be released in the secondary
market under FERC-mandated capacity release provisions, with proceeds reducing
the company's cost of gas charged to customers.
The company's peak day requirements are met through utilization of company-owned
storage facilities, firm pipeline capacity, purchased storage services and other
supply arrangements. Nicor Gas has been able to obtain sufficient supplies of
natural gas to meet customer requirements. The company believes natural gas
supply availability will be sufficient to meet market demands in the foreseeable
future.
Gas supply. Nicor Gas maintains a diversified portfolio of gas supply contracts.
Firm gas supply contracts are diversified by supplier, producing region,
quantity and available transportation. Contract pricing is generally tied to
published price indices so as to approximate current market prices. The
contracts also generally provide for the payment of fixed demand charges to
ensure the availability of supplies on any given day and are generally
negotiated annually.
The company also purchases gas supplies on the spot market to fulfill its supply
requirements or to take advantage of favorable short-term pricing. Spot gas
purchases accounted for about one-half of the company's total gas purchases in
the last three years.
Customers served under the company's transportation service tariffs purchase
their own gas supplies. About one-half of the gas that the company delivered in
2000 was purchased by transportation customers directly from producers and
marketers rather than from the company.
Pipeline transportation. Nicor Gas is directly connected to seven interstate
pipelines which provide access to most of the major natural gas producing
regions in North America. The company's primary firm transportation contracts
are with: Natural Gas Pipeline Company of America, which accounts for about
two-thirds of the contracted capacity, Midwestern Gas Transmission Company and
Northern Natural Gas Company. Nearly all of the contracted capacity will expire
by 2004.
Storage. Nicor Gas owns and operates seven underground gas storage facilities.
This storage system is one of the largest in the gas distribution industry. With
about 140 Bcf of top storage capacity, the system is designed to meet about 55
percent of the company's peak day deliveries and approximately 30 percent
<PAGE>
Nicor Inc. Page 3
Item 1. Business (continued)
of its normal winter deliveries. In addition to the company-owned facilities,
Nicor Gas purchases about 40 Bcf of storage service. Storage provides supply
flexibility and improves reliability of deliveries.
Competition/Demand
Nicor Gas is one of the largest utility energy suppliers in Illinois, delivering
about one-third of all utility energy consumed in the state. Substantially all
single-family homes in Nicor Gas' service territory are heated with natural gas.
The company's natural gas services compete with other forms of energy, such as
electricity and oil, based on such factors as price, service and reliability.
Significant factors that impact demand for natural gas include weather, economic
conditions and the price of natural gas.
The energy industry has undergone fundamental changes over the past several
years. In 1997, Illinois adopted legislation directing the process of
deregulating the state's electric utility industry. All customers will be given
a choice of electric supplier by 2002. While natural gas prices increased
significantly in 2000, Nicor Gas has traditionally maintained a pricing
advantage over electricity and expects to maintain an advantage in the
foreseeable future.
Additional information on competition and demand is presented in Factors
Affecting Business Performance beginning on page 14.
Regulation
Nicor Gas is regulated by the ICC, which establishes the rules and regulations
governing utility rates and services in Illinois. Rates are generally designed
to allow the company to recover its costs and provide an opportunity to earn a
fair return for its investors. Changes in the regulatory environment could
affect the longer-term performance of Nicor Gas.
The cost of gas the company purchases for customers is recovered through a
monthly gas supply charge, which accounted for approximately 70 percent of a
typical residential customer's annual bill in the last three years. The
company's cost of gas is passed on to the customer without markup.
Nicor Gas' performance-based rate (PBR) plan for natural gas costs went into
effect January 1, 2000. Under the PBR plan, Nicor Gas' total gas supply costs
are compared to a market-sensitive benchmark. Annual savings and losses relative
to the benchmark are shared equally with customers. After 2001, the ICC is
required to review the plan. Additional information on the plan is presented
under the heading Performance-based rate plan beginning on page 14.
Customer Select, a voluntary pilot program that offers customers a choice of
natural gas suppliers, is in its fourth year. Additional information on the
program is presented under the heading Unbundling on page 15.
Properties
The gas distribution, transmission and storage system includes approximately
30,000 miles of steel, plastic and cast iron main; approximately 27,000 miles of
steel, plastic/aluminum composite, plastic and copper service pipe connecting
the mains to customers' premises; and seven underground storage fields.
<PAGE>
Nicor Inc. Page 4
Item 1. Business (concluded)
Other properties include buildings, land, motor vehicles, meters, regulators,
compressors, construction equipment, tools, communication and computer
equipment, software and office equipment.
The principal real properties are held under easements, permits, or licenses or
in fee. Land in fee is owned for essentially all administrative offices and for
certain transmission mains and underground storage fields. Substantially all
properties are subject to the lien of the indenture securing the company's First
Mortgage Bonds.
SHIPPING
Tropical Shipping is one of the largest containerized cargo carriers in the
Caribbean, a region characterized by modest market growth and intense
competition. Tropical Shipping's financial results can be significantly affected
by general economic conditions in the United States and the Caribbean. The
company's shipments consist primarily of southbound cargo such as building
materials, food and other necessities for developers, manufacturers and
residents in the Caribbean, as well as tourist-related shipments intended for
use in hotels and resorts, and on cruise ships. The balance of Tropical
Shipping's cargo consists of northbound shipments of agricultural products and
apparel, and interisland shipments. The company also provides additional related
services including inland transportation and cargo insurance.
Tropical Shipping's fleet consists of 11 owned vessels and 5 chartered vessels
with a container capacity totaling approximately 4,800 TEUs. In 1999, Tropical
Shipping ordered the construction of two vessels to replace chartered capacity
and to support growth. These vessels are currently scheduled for completion in
late 2001 and early 2002. In addition, the company owns containers,
container-handling equipment, chassis and other equipment. Real property,
approximately half of which is leased, includes office buildings, cargo handling
facilities and warehouses located in the United States, as well as in some of
the ports served.
Additional information about Tropical Shipping's business is presented under
Shipping on page 17.
OTHER ENERGY VENTURES
Nicor has several smaller ventures that provide products and services that meet
customers' energy needs. Additional information pertaining to these ventures is
presented under Other energy ventures on page 18.
ENVIRONMENTAL MATTERS
For information on environmental matters, see Contingencies beginning on page
37.
<PAGE>
Nicor Inc. Page 5
Item 2. Properties
Information with respect to this item concerning Nicor and its major
subsidiaries' properties is included in Item 1, Business, beginning on page 1,
and is incorporated herein by reference. These properties are suitable, adequate
and utilized in the company's operations.
Item 3. Legal Proceedings
See Contingencies beginning on page 37, which is incorporated herein by
reference. One of the lawsuits referred to under Mercury Program involves five
previous class actions that have been consolidated before a single judge. On
March 7, 2001, the Circuit Court of Cook County entered an order dismissing the
pending consolidated class action complaint without prejudice and allowing
plaintiffs to file an amended consolidated class action complaint.
Item 4. Submission of Matters to a Vote of Security Holders
None.
<PAGE>
Nicor Inc. Page 6
Executive Officers of the Registrant
Executive officers of the company are elected annually by the Board of
Directors.
Name Age Current Position and Background
- ----------------------------- ------ ---------------------------------------
Thomas L. Fisher 56 Chairman, Nicor and Nicor Gas (since
1996); Chief Executive Officer, Nicor
(since 1995) and Nicor Gas (since
1988); and President, Nicor (since
1994) and Nicor Gas (since 1988).
Philip S. Cali 53 Executive Vice President Operations,
Nicor and Nicor Gas (since 1999); and
Senior Vice President Operations,
Nicor Gas (1995-1999).
Kathleen L. Halloran 48 Executive Vice President Finance and
Administration, Nicor and Nicor Gas
(since 1999); Senior Vice President
Administration, Nicor Gas (1998-1999);
Senior Vice President Information
Services, Rates and Human Resources,
Nicor Gas (1996-1998); and Vice
President Information Services, Rates
and Human Resources, Nicor Gas
(1995-1996).
Russ M. Strobel 48 Senior Vice President, General Counsel
and Corporate Secretary, Nicor and
Nicor Gas (since 2000); Partner,
Altheimer & Gray (2000); and Partner,
Jenner & Block (1986-2000).
George M. Behrens 45 Vice President Administration and
Treasurer, Nicor and Nicor Gas (since
1999); Vice President and Controller,
Nicor and Nicor Gas (1998-1999); Vice
President Accounting, Nicor Gas
(1996-1998); and Vice President and
Treasurer, Tropical Shipping
(1991-1996).
<PAGE>
Nicor Inc. Page 7
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
Nicor common stock is listed on the New York and Chicago Stock Exchanges. At
February 28, 2001, there were approximately 29,000 common stockholders of
record.
Stock price
------------------------------------ Dividends
Quarter High Low declared
------------ ----------- ----------- ---------
2000
First $ 36.38 $ 29.38 $ .415
Second 37.50 32.06 .415
Third 40.06 32.13 .415
Fourth 43.88 32.19 .415
1999
First $ 42.94 $ 34.69 $ .39
Second 39.50 34.13 .39
Third 40.00 35.69 .39
Fourth 39.38 31.19 .39
------------------------------------------------
Nicor Inc. Page 8
Item 6. Selected Financial Data
Year ended December 31
---------------------------------------------------
(millions, except per
share data) 2000 1999 1998 1997 1996
--------- --------- --------- ---------- --------
Operating revenues $ 2,298.1 $ 1,615.2 $ 1,465.1 $1,992.6 $ 1,850.7
Operating income $ 94.1 $ 212.0 $ 208.6 $ 229.8 $ 233.1
Net income
Continuing operations $ 46.7 $ 124.4 $ 116.4 $ 127.9 $ 121.2
Discontinued operations - - - - 15.0
--------- --------- --------- -------- --------
$ 46.7 $ 124.4 $ 116.4 $ 127.9 $ 136.2
========= ========= ========= ======== ========
Basic earnings per
common share
Continuing operations $ 1.01 $ 2.63 $ 2.43 $ 2.62 $ 2.42
Discontinued operations - - - - .30
--------- --------- --------- -------- --------
$ 1.01 $ 2.63 $ 2.43 $ 2.62 $ 2.72
========= ========= ========= ======== ========
Diluted earnings per
common share
Continuing operations $ 1.00 $ 2.62 $ 2.42 $ 2.61 $ 2.41
Discontinued operations - - - - .30
--------- --------- --------- -------- --------
$ 1.00 $ 2.62 $ 2.42 $ 2.61 $ 2.71
========= ========= ========= ======== ========
Dividends declared per
common share $ 1.66 $ 1.56 $ 1.48 $ 1.40 $ 1.32
Property, plant and
equipment
Gross $ 3,576.6 $ 3,483.1 $ 3,379.8 $3,267.7 $ 3,192.7
Net 1,729.6 1,735.2 1,731.8 1,735.8 1,771.9
Total assets $ 2,885.4 $ 2,451.8 $ 2,364.6 $2,394.6 $ 2,438.6
Capitalization
Long-term debt, net of
current maturities $ 347.1 $ 436.1 $ 557.3 $ 550.2 $ 518.0
Redeemable preferred
stock 6.3 6.3 6.3 6.4 7.5
Common equity 707.8 787.7 759.0 744.0 729.6
--------- --------- --------- --------- --------
$ 1,061.2 $ 1,230.1 $ 1,322.6 $1,300.6 $ 1,255.1
========= ========= ========= ========= ========
<PAGE>
Nicor Inc. Page 9
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The purpose of this financial review is to explain changes in Nicor's operating
results and financial condition from 1998 to 2000, and to discuss business
trends and uncertainties that might affect Nicor. Certain terms used herein are
defined in the glossary on page i.
SUMMARY
Nicor's two major business segments are gas distribution and shipping, with gas
distribution representing about 90 percent of consolidated operating income and
assets in a typical year.
Nicor's 2000 diluted earnings per common share decreased to $1.00 from $2.62 a
year ago. Net income decreased $77.7 million to $46.7 million. These decreases
resulted from an unusual pretax charge of $148 million recorded as operating
expense in the third quarter of 2000 related to the company's mercury inspection
and repair program described beginning on page 37. The after-tax effect of this
charge on 2000 earnings was $1.94 per share. Excluding the unusual charge, net
income increased $12 million from a year ago to $136.4 million, or $2.94 diluted
earnings per common share, due to improvements in operating results in all
business segments.
Nicor's 1999 diluted earnings per common share increased to $2.62 from $2.42 in
1998, due primarily to a positive contribution from nonoperating items and
improved gas distribution operating results. Nicor's 1999 net income increased
$8 million to $124.4 million.
Per share results in both 2000 and 1999 benefited from the company's common
stock repurchase programs.
Operating income. Operating income (loss) by business segment is presented
below:
(millions) 2000 1999 1998
--------- -------- --------
Gas distribution $ 64.9 $ 191.7 $ 185.5
Shipping 25.7 22.5 27.6
Other energy ventures 6.5 1.3 (1.9)
Corporate and eliminations (3.0) (3.5) (2.6)
--------- -------- --------
$ 94.1 $ 212.0 $ 208.6
========= ======== ========
The following summarizes operating income comparisons by business segment:
o Gas distribution operating income decreased $126.8 million in 2000 to $64.9
million. Excluding the effect of the unusual mercury-related charge, gas
distribution operating income increased $21.2 million, or 11 percent, to $212.9
million in 2000. The impact of the mercury-related charge more than offset
improvements from higher gas deliveries, contributions from the
performance-based rate (PBR) plan for gas costs and increased income from
power-generation services. Gas deliveries rose to 526 Bcf in 2000 compared with
508 Bcf in 1999 due to 8 percent colder weather and customer additions. In 1999,
gas distribution operating income increased $6.2 million due to higher
deliveries related primarily to 9 percent colder weather than the prior year.
Results for both years also include increased operating and maintenance expenses
and depreciation.
Nicor Inc. Page 10
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
o Containerized shipping operating income increased $3.2 million to $25.7
million in 2000. The improvement is primarily a result of record volumes shipped
due to continued strong economic conditions in the Caribbean region and growth
in tourism, and modest rate improvements. In 1999, shipping operating income
decreased $5.1 million from 1998, due to pressure on rates, higher operating
expenses and a decline in charter revenues. These factors more than offset the
additional revenues generated from increased volumes shipped.
o Operating income from other energy ventures increased $5.2 million in 2000 to
$6.5 million due to better results from Nicor's technology, wholesale natural
gas marketing and retail energy services businesses. The $3.2 million increase
in 1999 from 1998 reflects lower branding costs and improvements in operating
income from Nicor's wholesale natural gas marketing business.
Nonoperating items. Other income for 2000 is $15.6 million, down from $23.2
million a year ago, as a number of improvements in 2000 did not match various
nonoperating benefits in 1999. Results for 2000 reflect the positive impact of
higher property sale gains and improved results from both Nicor's retail energy
services joint venture and an investment in a cargo container leasing business.
In 1999, other income increased $7.7 million to $23.2 million as several
positive factors, including interest benefits on tax-related matters and a gain
on the sale of Nicor's interest in an electronic energy trading system, more
than offset a decline in property sale gains and the write-off of software
development costs. Nicor's retail energy services joint venture also contributed
to the improvement in 1999.
Interest expense rose 8 percent in 2000 to $48.6 million due primarily to
increased average borrowings. In 1999, interest expense of $45.1 million was 3
percent lower than 1998 due primarily to refinancing at lower interest rates and
reduced average borrowing levels.
The lower-than-normal effective income tax rate of 23.6 percent in 2000 is due
to the effect of the unusual charge by Nicor Gas related to its mercury program
described beginning on page 37. Excluding the mercury-related charge, the
combined effective income tax rate was 34.8 percent, which is comparable to the
1999 and 1998 rates.
2001 Outlook. Management currently estimates 2001 diluted earnings per common
share to be in the range of $3.00 to $3.15, assuming a return to normal weather
and excluding any mercury-related adjustments. Although management believes the
foregoing forward-looking statement about its earnings expectations is based on
reasonable assumptions, actual results may vary materially from stated
expectations. Factors that could cause materially different results include, but
are not limited to, natural gas prices, interest rates, borrowing needs, weather
conditions, economic and market conditions, legislative and regulatory actions,
asset sales, PBR plan results, and any future mercury-related charges or
credits.
RESULTS OF OPERATIONS
Details of various financial and operating information by segment can be found
in the tables throughout this review. The following discussion summarizes the
major items impacting Nicor's results of operations.
Nicor Inc. Page 11
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
Operating revenues. Operating revenues by business segment are presented below:
(millions) 2000 1999 1998
--------- --------- ---------
Gas distribution $1,896.0 $1,326.2 $1,229.0
Shipping 248.3 229.9 224.5
Other energy ventures 169.9 61.0 11.6
Corporate and eliminations (16.1) (1.9) -
--------- --------- ---------
$2,298.1 $1,615.2 $1,465.1
========= ========= =========
Nicor's operating revenues rose sharply to almost $2.3 billion in 2000. Gas
distribution revenues increased over 40 percent reflecting significantly higher
natural gas prices and related revenue taxes, which are both passed directly
through to customers without markup; increased deliveries resulting from colder
weather and customer additions; and benefits generated from the PBR plan.
Shipping revenues rose by $18.4 million, or 8 percent, due to record volumes and
higher average rates. The increase in other energy ventures was due primarily to
revenues at Nicor's wholesale natural gas marketing business.
In 1999, Nicor's operating revenues increased slightly to more than $1.6 billion
from about $1.5 billion in 1998. Gas distribution revenues increased nearly $100
million due to higher deliveries of natural gas and higher natural gas prices.
Partially offsetting this increase was the impact of customers switching from
sales to transportation service, which reduces revenue but generally has no
impact on margin. Shipping revenues rose by more than $5 million as the impact
of higher volumes shipped more than offset a decline in charter revenue and
lower average rates. Revenues generated from Nicor's wholesale natural gas
marketing business accounted for the increase in the other energy ventures
category.
Gas distribution margin. Gas distribution margin, defined as operating revenues
less cost of gas and revenue taxes, which are both passed directly through to
customers without markup, increased $31.7 million in 2000 to $518.9 million and
$17.8 million in 1999 to $487.2 million. Improvements in 2000 reflect results
from the PBR plan, the impact of colder weather compared to 1999, customer
additions, and increased income from power-generation services. Colder weather
was the largest factor contributing to increased margin during 1999.
Operating and maintenance. In 2000, operating and maintenance expenses increased
$30.9 million to $386.9 million due largely to higher volume-related expenses in
the shipping segment. A larger provision for uncollectible accounts and weather
insurance premiums in the gas distribution segment also contributed to the
increase. The $18 million increase in 1999 to $356 million was due to higher
volume-related costs in the shipping segment and higher costs in the gas
distribution segment caused, in part, by increased information technology
spending. In the gas distribution segment, operating and maintenance expenses
were partially offset by net pension credits of $19.9 million, $13.3 million and
$14.7 million in 2000, 1999 and 1998, respectively. The increase in the 2000
credit resulted principally from favorable pension fund investment returns.
Other operating expense. Other operating expense in 2000 reflects estimated
costs associated with the company's mercury inspection and repair program.
Additional information about this program is presented under the heading Mercury
program beginning on page 37.
Nicor Inc. Page 12
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
FINANCIAL CONDITION AND LIQUIDITY
The company believes it has access to adequate resources to meet its needs for
capital expenditures, debt redemptions, dividend payments and working capital.
These resources include net cash flow from operating activities, access to
capital markets, lines of credit and short-term investments.
Operating cash flows. Net cash flow provided from operating activities was
$230.2 million, $205.7 million and $368.4 million in 2000, 1999 and 1998,
respectively. Typically, year-to-year changes in operating cash flow result
largely from fluctuations in working capital items occurring mainly in the gas
distribution segment because of factors including weather, the price of gas, the
timing of collections from customers and gas purchasing practices. The company
generally relies on short-term financing to meet such temporary increases in
working capital needs.
Capital expenditures. Capital expenditures by business segment are presented
below:
Estimated
(millions) 2001 2000 1999 1998
---------- ---------- ---------- ----------
Gas distribution $ 140 $ 124.6 $ 127.4 $ 112.6
Shipping 35 33.8 26.0 23.3
Other energy ventures - - .6 .3
---------- ---------- ---------- ----------
$ 175 $ 158.4 $ 154.0 $ 136.2
========== ========== ========== ==========
Gas distribution capital expenditures were higher in 2000 and 1999 than in 1998
due primarily to enhancements to the company's operating system. The estimated
increase in capital expenditures for 2001 is related mostly to information
technology projects and improvements to the company's operating system.
Shipping segment capital expenditures increased in 2000 due, in part, to the
construction of a new warehouse which was completed in 2000 and the construction
of two vessels expected to be completed in 2001 and 2002. In 1999, the increase
in expenditures was related, in part, to costs associated with the construction
of the warehouse. In both periods, expenditures for information technology also
contributed to the increase. Higher expenditures are expected in 2001 due
primarily to additional vessel progress payments and the replacement of
freight-handling equipment.
Other investments. Nicor invested $10 million, $12 million and $15 million in
2000, 1999 and 1998, respectively, in a cargo container leasing business and
will likely make a similar investment in 2001. The company also invested $2
million, $2 million and $8 million in 2000, 1999 and 1998, respectively, in
affordable housing tax credit funds.
Financing activities. Nicor Gas has the highest long-term debt ratings given in
the gas distribution industry. Interest coverage for 2000 was negatively
affected by the unusual mercury-related charge.
2000 1999 1998
-------- -------- ---------
Long-term debt, net of current maturities,
as a percent of capitalization 32.7% 35.5% 42.1%
Times interest earned, before income taxes 2.2 5.2 4.8
Nicor Inc. Page 13
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
Long-term debt. At December 31, 2000, Nicor Gas had $250 million of First
Mortgage Bonds remaining available for issuance under a December 1998 shelf
registration filing. Net proceeds from securities issued are typically used for
refinancing certain outstanding First Mortgage Bonds, construction programs to
the extent not provided by internally generated funds, and general corporate
purposes.
In February 2001, Nicor Gas issued $75 million of First Mortgage Bonds due in
2011 at 6.625%. A portion of the net proceeds replaced $50 million of 5.875%
First Mortgage Bonds due May 1, 2000 that had been temporarily refinanced
through the issuance of unsecured notes. The remainder of the net proceeds
replenished a portion of corporate funds used previously to redeem $50 million
of 8.25% First Mortgage Bonds due in 2024.
In January 2000, Nicor Gas issued $50 million of adjustable-rate unsecured notes
due in 2001 at an initial rate of 6.11% to fund the redemption of $50 million of
unsecured notes at 5.065% due in 2000.
During 1999, Nicor Gas issued $50 million of First Mortgage Bonds at 5.37% due
in 2009 and $50 million of unsecured notes at 5.065% due in 2000. Redemptions of
First Mortgage Bonds during 1999 were as follows: $50 million at 5.875% due in
2000, $50 million at 7.375% due in 2023 and $50 million at 8.25% due in 2024.
In 1998, Nicor Gas issued First Mortgage Bonds as follows: $50 million at 5.75%
due in 2003 and $50 million at 6.58% due in 2028. Redemptions of First Mortgage
Bonds during 1998 were as follows: $25 million at 5.875% due in 1998, $25
million at 6.25% due in 1999 and $75 million at 8.25% due in 2022.
Short-term debt. Nicor and Nicor Gas maintain short-term line of credit
agreements with major domestic and foreign banks. At December 31, 2000, these
agreements, which serve as backup for the issuance of commercial paper, totaled
$532.5 million. Nicor had $442 million and $342.5 million of commercial paper
outstanding at year-end 2000 and 1999, respectively.
Common stock. In the third quarter of 2000, Nicor completed a $50 million common
stock repurchase program initiated in June 1999 and announced a new $50 million
common stock repurchase program. Purchases are being made as market conditions
permit through open market transactions and to the extent cash flow is available
after other cash needs or investment opportunities. The company purchased and
retired 1.4 million, .6 million and .7 million common shares in 2000, 1999 and
1998, respectively, at a cost of $50 million, $23 million and $28 million. At
December 31, 2000, approximately $31.5 million remained authorized for the
repurchase of common stock under the existing program. Since January 1990, the
company has repurchased almost one quarter of its outstanding stock.
Nicor increased its quarterly common stock dividend rate during 2000 by 6.4
percent, which was the thirteenth consecutive year of an increase. The company
paid dividends on its common stock of $75.7 million, $72.9 million and $70
million in 2000, 1999 and 1998, respectively.
Other. Restrictions imposed by regulatory agencies and loan agreements limiting
the amount of subsidiary net assets that can be transferred to Nicor are not
expected to have a material impact on the company's ability to meet its cash
obligations.
Nicor Inc. Page 14
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
FACTORS AFFECTING BUSINESS PERFORMANCE
The following factors can impact year-to-year comparisons and may affect the
future performance of Nicor's businesses.
Gas distribution. Nicor Gas, a regulated natural gas distribution utility,
serves nearly 2 million customers in a service territory that encompasses most
of the northern third of Illinois, excluding the city of Chicago. The region's
economy is diverse and has grown steadily over the years, providing Nicor Gas
with a well-balanced mix of residential, commercial and industrial customers. In
2000, residential, commercial and industrial customers accounted for 43 percent,
25 percent and 32 percent of natural gas deliveries, respectively.
Weather. Since about one-half of gas deliveries are used for space heating,
fluctuations in weather have the potential to significantly impact year-to-year
comparisons of operating income and cash flow. Nicor Gas entered into an
agreement with a third party designed to protect the company's 2001 earnings and
cash flow if weather is warmer than 5,700 degree days, approximately the same
level as actual degree days in 2000. To partially offset the cost of this
earnings protection, Nicor Gas has also agreed to pay the third party if weather
for 2001 is colder than 6,100 degree days, which is approximately normal for
Nicor Gas' service territory. As a result, this weather hedge limits the
earnings impact of large variations in weather. Nicor estimates that, excluding
weather protection, every 100-degree-day variation in weather has an impact on
earnings per share of approximately 2-1/2 cents.
Demand and natural gas prices. In addition to the impact of weather, significant
changes in economic conditions or natural gas prices can impact customer gas
usage. However, Nicor Gas' large residential customer base provides relative
stability during weak economic periods. Also, the industrial and commercial
customer base is well diversified, lessening the impact of industry-specific
economic swings. Nicor Gas' growth in deliveries has traditionally come from a
combination of customer additions and increased usage among existing commercial
and industrial customers. Deliveries to power-generation facilities have also
contributed to growth. While the company anticipates continued growth in
deliveries attributable to these factors, a partial offset is expected as
customers install more energy-efficient equipment.
Natural gas prices increased significantly during 2000. Changes in the price of
natural gas have no direct impact on Nicor Gas' margin since gas costs are
passed directly through to customers without markup under the company's
Purchased Gas Adjustment (PGA). However, the unprecedented level of current gas
prices will likely have an adverse effect on accounts receivable collections,
customer demand, company gas usage expenses, financing costs and customer
service expenses. In January 2001, Nicor Gas announced its intention to
institute a 12-month budget plan to allow customers the opportunity to manage
the effects of high winter bills. The new plan, which has been approved, will
create a temporary lag in collections from participating customers, but provides
for recovery of carrying costs.
Performance-based rate plan. Nicor Gas' PBR plan for natural gas costs went into
effect in 2000. Under the PBR plan, Nicor Gas' total gas supply costs are
compared to a benchmark tied to a market index. Savings and losses relative to
the benchmark are shared equally with customers. Assuming a benchmark of $1
billion, each one-percent deviation from the benchmark would affect net income
by about $3
Nicor Inc. Page 15
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
million. After 2001 the ICC is required to review the plan. Transportation
customers, who are responsible for their own gas supplies, are generally not
affected by the PBR plan.
Generally, higher natural gas prices would not significantly affect PBR plan
risk since the PBR benchmark is tied to market prices. However, the
unprecedented high natural gas prices experienced at the end of 2000 and into
2001, combined with demand variability, may impact PBR plan results since any
performance variance from the benchmark may be significantly greater in
magnitude. The company does have strategies in place to manage these risk
factors. In addition, PBR plan results are shared equally with customers.
Competition. Nicor Gas competes with other energy suppliers based on such
factors as price, service and reliability. The company is well positioned to
deal with the possibility of fuel switching by customers because it has rates
and services designed to compete against alternative fuels. In addition, the
company has a rate which allows negotiation with potential bypass customers, and
no customer has bypassed since the rate became effective in 1987. Nicor Gas also
offers commercial and industrial customers flexibility and alternatives in rates
and service, increasing its ability to compete in these markets.
Storage and supply. Direct connection to seven interstate pipelines and
extensive underground storage capacity provide the company and its
transportation customers with flexibility and alternatives for gas supply
procurement and storage services. In addition, in an effort to ensure supply
reliability, the company purchases gas from several different producing regions
under varied contract terms.
Unbundling. The company's voluntary pilot program, Customer Select(R), offers a
choice of natural gas suppliers to all commercial and industrial customers and
more than 270,000 residential customers in 16 communities. In the program's
first three years, about 37 percent of eligible business customers and 22
percent of eligible residential customers signed up. The choice of another
natural gas commodity supplier has no direct impact on Nicor Gas' operating
income because natural gas costs are passed directly through to customers
without markup under the PGA. Nicor Gas continues to deliver the natural gas,
maintain its distribution system and respond to emergencies.
Nicor Gas received approval in November 2000 to continue the current Customer
Select pilot program for another year. The company's August 2000 filing with the
ICC to permanently expand the Customer Select program to include all of its
customers is currently in the public hearing process, which may take up to 11
months.
Nontraditional activities. In order to generate additional contributions to
earnings growth, Nicor Gas continues to pursue several nontraditional
activities, including the Chicago Hub, which provides interruptible
transportation and storage service to interstate natural gas pipeline shippers.
The Chicago area has become a major market hub for natural gas, and demand for
storage- and transmission-related services by marketers, other gas distribution
companies and electric power-generation facilities is expected to increase
significantly.
Nicor Gas is also developing the property surrounding its corporate
headquarters, and the company continues to assess its other nonstrategic real
estate holdings. The gas distribution property development project is expected
to continue for a number of years.
Nicor Inc. Page 16
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
Gas Distribution Statistics
2000 1999 1998
--------- --------- ---------
Operating revenues (millions)
Sales
Residential $ 1,353.9 $ 899.8 $ 813.6
Commercial 236.0 172.3 189.4
Industrial 37.0 24.5 27.5
--------- --------- ---------
1,626.9 1,096.6 1,030.5
--------- --------- ---------
Transportation
Residential 6.7 1.7 -
Commercial 78.9 70.3 57.2
Industrial 47.5 43.7 39.2
Other 6.2 4.2 1.6
--------- --------- ---------
139.3 119.9 98.0
--------- --------- ---------
Other revenues
Revenue taxes 101.7 84.6 79.8
Performance-based rate plan 12.2 - -
Chicago Hub 6.3 6.0 4.1
Other 9.6 19.1 16.6
--------- --------- ---------
Revenue taxes and other 129.8 109.7 100.5
--------- --------- ---------
$ 1,896.0 $ 1,326.2 $ 1,229.0
========= ========= =========
Deliveries (Bcf)
Sales
Residential 219.0 209.0 192.4
Commercial 38.4 39.8 44.3
Industrial 6.2 6.1 7.1
--------- --------- ---------
263.6 254.9 243.8
--------- --------- ---------
Transportation
Residential 4.4 .9 -
Commercial 94.0 82.1 67.5
Industrial 163.9 170.2 175.7
--------- --------- ---------
262.3 253.2 243.2
--------- --------- ---------
525.9 508.1 487.0
========= ========= =========
Year-end customers (thousands)
Sales
Residential 1,746.3 1,753.0 1,737.6
Commercial 98.9 108.9 127.9
Industrial 6.6 7.4 9.1
--------- --------- ---------
1,851.8 1,869.3 1,874.6
--------- --------- ---------
Transportation
Residential 52.8 16.2 -
Commercial 68.7 57.2 35.9
Industrial 7.4 6.6 5.0
--------- --------- ---------
128.9 80.0 40.9
--------- --------- ---------
1,980.7 1,949.3 1,915.5
========= ========= =========
Other statistics
Degree days (normal 6,116) 5,717 5,272 4,834
Colder (warmer) than normal (7)% (14)% (21)%
Average gas cost per Mcf sold $ 4.80 $ 2.93 $ 2.76
Nicor Inc. Page 17
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations (continued)
Regulation. Nicor Gas is regulated by the ICC, which establishes the rules and
regulations governing utility rates and services in Illinois. Rates are
generally designed to allow the company to recover its costs and provide an
opportunity to earn a fair return for its investors. Significant changes in the
regulatory environment could affect the longer-term performance of Nicor Gas.
Shipping. Tropical Shipping is one of the largest containerized cargo carriers
in the Caribbean, a region characterized by modest market growth and intense
competition. Tropical Shipping has a reputation for providing quality, on-time
delivery service -- a reputation that has helped the company establish a
dominant position in many of the markets it serves. The company is the top
carrier of U.S. exports from the East Coast to the Caribbean.
The company's shipments consist primarily of southbound cargo such as building
materials, food and other necessities for developers, manufacturers and
residents in the Caribbean, as well as tourist-related shipments intended for
use in hotels and resorts, and on cruise ships. The balance of Tropical
Shipping's cargo consists of northbound shipments of agricultural products and
apparel, and interisland shipments.
Tropical Shipping's financial results can be significantly affected by general
economic conditions in the United States and the Caribbean. Economic development
is expected to be supported by the 1999 Caribbean Basin Trade Partnership Act,
which is intended to give Caribbean markets parity with those markets operating
under the North American Free Trade Agreement (NAFTA) in terms of manufacturing
and trade incentives.
The Caribbean marketplace is very competitive with global carriers recently
establishing a presence in several markets that Tropical Shipping serves.
Additionally, the Ocean Shipping Reform Act, which allows confidential contracts
between shipping companies and their customers, created the potential for
further price competition when it went into effect during 1999. Tropical
Shipping is continuing to meet these challenges by focusing on superior customer
service, controlling costs, and maximizing the efficiency and utilization of its
vessel fleet and shore assets. In 1999, Tropical Shipping ordered the
construction of two vessels to replace chartered capacity and to support growth.
The vessels are expected to be delivered in late 2001 and early 2002. The
company also replaced its Miami warehouse during 2000 with a larger and more
flexible facility.
Shipping Statistics
2000 1999 1998
---------- ---------- ----------
TEUs shipped (thousands)
Southbound 136.6 126.5 119.4
Northbound 17.9 17.6 16.1
Interisland 6.9 8.3 8.7
---------- ---------- ----------
161.4 152.4 144.2
========== ========== ==========
Other statistics
Revenue per TEU $ 1,523 $ 1,508 $ 1,526
Ports served 22 23 23
Vessels operated 16 17 17
<PAGE>
Nicor Inc. Page 18
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
Other energy ventures. Nicor is involved in several unregulated energy ventures
that leverage the company's reputation, location, assets and expertise into new
income-producing opportunities. These ventures include Nicor Energy, Nicor
Enerchange, Nicor Services, Horizon Pipeline and other energy-related
opportunities.
Nicor Energy. Nicor Energy is a 50/50 joint venture with Dynegy Inc. that was
formed in 1997 to offer natural gas, electricity and related energy services
primarily to retail customers in the Midwest region. Unlike Nicor Gas, Nicor
Energy may profit from the sale of natural gas as a commodity. The company
currently serves close to 100,000 natural gas customers and approximately 3,000
electric customers, primarily in Illinois. The company is also expanding its
presence in other midwestern states as deregulation progresses.
After four years of operations, Nicor Energy was modestly profitable in
generating pretax nonoperating income for Nicor of $1.4 million in 2000 compared
with a loss of $.4 million in 1999. Factors expected to contribute to its future
success are an increased customer base resulting in economies of scale, the
quality and experience of its management team, an efficient back-room operation
and relatively low customer-acquisition costs.
Nicor Enerchange. Nicor Enerchange is an unregulated natural gas marketing
company formed in 1998 to engage in wholesale marketing and trading of natural
gas supply services in the Midwest. Nicor Enerchange also administers the
Chicago Hub for a fee. The company focuses on niche opportunities that allow it
to leverage its unique knowledge of natural gas movement in and around the
Midwest. Nicor Enerchange contributed $3 million of operating income in 2000,
compared with $2 million in 1999.
Nicor Services. Nicor Services offers maintenance and repair contracts on inside
gas piping and on residential and business space heating, water heating and air
conditioning equipment. Nicor Services contributed $1 million in operating
income in 2000, compared with $50,000 in 1999.
Horizon Pipeline. Horizon Pipeline is a 50/50 joint venture between Nicor and
Natural Gas Pipeline Company of America, a subsidiary of Kinder Morgan, Inc.
Excellent progress was made in 2000 to obtain approval to construct and operate
a 74-mile, 36-inch pipeline from Joliet, Illinois to near the Wisconsin/Illinois
border. The project has received Federal Regulatory Energy Commission (FERC)
support. Final certification is awaiting an environmental review and is expected
to be received in the spring of 2001. The pipeline capacity is nearly fully
subscribed under 10-year agreements, with Nicor Gas having contracted for
approximately 80 percent of the 380 MMcf per day initial capacity. Assuming
timely FERC approval, construction on the $80 million pipeline should begin in
the summer of 2001 with completion expected in 2002.
Other. Nicor has a number of other energy-related businesses engaged in
activities such as pipeline design and construction, corrosion protection
services and energy system design and construction. Nicor also is participating
in the development of the market for natural gas vehicles. Combined, these
services and activities contributed $2.5 million of operating income to Nicor in
2000 compared with a loss of $.7 million in 1999.
Nicor Inc. Page 19
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
Market risk. The company is exposed to market risk in the normal course of its
business operations, including the risk of loss arising from adverse changes in
natural gas commodity prices and interest rates.
Commodity price risk. The company has established policies and procedures
governing the management of commodity price risks and the use of derivative
commodity instruments to hedge its exposure to such risks. A risk management
committee exists to oversee compliance with such policies and procedures.
Nicor's regulated utility, Nicor Gas, is generally not exposed to market risk
caused by changes in commodity prices. This is due to current Illinois rate
regulation allowing the recovery of all natural gas supply costs from customers.
Although the company has a PBR plan for natural gas costs, the plan does not
directly expose the company to commodity price risk because actual gas costs are
compared to a market-sensitive benchmark as opposed to a fixed benchmark.
Nicor's unregulated energy businesses are subject to natural gas commodity price
risk, arising primarily from fixed-price purchase and sale agreements and
natural gas inventories. Derivative commodity instruments such as futures,
options, forwards and swaps may be used to hedge this risk. Open positions are
restricted by policy to an immaterial amount. To manage credit risk inherent in
the company's commodity price risk management programs, the company contracts
with creditworthy counterparties and limits its exposure to any one
counterparty.
Interest rate risk. Nicor is also exposed to changes in interest rates,
primarily as a result of its short- and long-term debt. The company manages its
interest rate risk by issuing long-term fixed-rate debt with varying maturities,
refinancing certain debt and periodically hedging the interest rate on
anticipated borrowings. For further information about debt securities, interest
rates and fair values, see the Consolidated Statements of Capitalization on page
26, the Fair Value of Financial Instruments footnote on page 29 and the Short-
and Long-Term Debt footnote on page 31.
Discontinued operations. The company maintains a reserve for estimated costs
related to discontinued contract drilling, oil and gas exploration, inland
barging and extractive operations. The reserve will continue to be evaluated as
remaining medical benefit, tax and other contingencies are resolved.
New accounting pronouncement. In June 1998, the Financial Accounting Standards
Board issued Statement No. 133, Accounting for Derivative Instruments and
Hedging Activities. Nicor adopted this statement, as amended, on January 1,
2001. The initial application of the statement had no impact on the company's
results of operations and no material impact on its financial condition. For
further information, see Derivative Instruments beginning on page 28.
Mercury program. Future operating results may be impacted by adjustments to
estimated mercury program costs or recoveries, and any such adjustments could be
material. Additional information about this program is presented under the
heading Mercury Program beginning on page 37, which is incorporated herein by
reference. One of the lawsuits referred to therein involves five previous class
actions that have been consolidated before a single judge. On March 7, 2001, the
Circuit Court of Cook County entered an order dismissing the pending
consolidated class action complaint without prejudice and allowing plaintiffs to
file an amended consolidated class action complaint.
Nicor Inc. Page 20
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations (concluded)
Other contingencies. The company is involved in legal or administrative
proceedings before various courts and agencies with respect to rates, taxes and
other matters. In addition, the company is conducting environmental
investigations and remedial activities at former manufactured gas plant sites.
Although unable to determine the outcome of these contingencies, management
believes that appropriate accruals have been recorded. Final disposition of
these matters is not expected to have a material impact on the company's
financial condition or results of operations. For further information, see Other
beginning on page 38, which is incorporated herein by reference.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
For disclosures about market risk, see Market Risk beginning on page 19, which
is incorporated herein by reference.
<PAGE>
Nicor Inc. Page 21
Item 8. Financial Statements and Supplementary Data
Page
Report of Independent Public Accountants................................... 22
Financial Statements:
Consolidated Statements of Operations................................... 23
Consolidated Statements of Cash Flows................................... 24
Consolidated Balance Sheets............................................. 25
Consolidated Statements of Capitalization............................... 26
Consolidated Statements of Common Equity................................ 27
Notes to the Consolidated Financial Statements.......................... 28
<PAGE>
Nicor Inc. Page 22
Report of Independent Public Accountants
To the Shareholders and Board of Directors of Nicor Inc.:
We have audited the accompanying consolidated balance sheets and statements of
capitalization of Nicor Inc. (an Illinois corporation) and subsidiary companies
as of December 31, 2000 and 1999, and the related consolidated statements of
operations, common equity and cash flows for each of the three years in the
period ended December 31, 2000. These financial statements and the schedule
referred to below are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements and the
schedule based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Nicor Inc. and subsidiary
companies as of December 31, 2000 and 1999, and the results of its operations
and its cash flows for each of the three years in the period ended December 31,
2000, in conformity with accounting principles generally accepted in the United
States.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The financial statement schedule on page
41 is presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in the audits of
the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Chicago, Illinois
January 22, 2001
Nicor Inc. Page 23
Consolidated Statements of Operations
(millions, except per share data)
Year ended December 31
--------------------------------
2000 1999 1998
--------- --------- ---------
Operating revenues $ 2,298.1 $ 1,615.2 $ 1,465.1
--------- --------- ---------
Operating expenses
Cost of gas 1,403.8 802.3 682.7
Operating and maintenance 386.9 356.0 338.0
Depreciation 144.3 140.3 136.5
Taxes, other than income taxes 121.0 104.6 99.3
Other 148.0 - -
--------- --------- ---------
2,204.0 1,403.2 1,256.5
--------- --------- ---------
Operating income 94.1 212.0 208.6
Other income (expense), net 15.6 23.2 15.5
--------- --------- ---------
Income before interest on debt and income taxes 109.7 235.2 224.1
Interest expense, net of amounts capitalized 48.6 45.1 46.6
--------- --------- ---------
Income before income taxes 61.1 190.1 177.5
Income taxes 14.4 65.7 61.1
--------- --------- ---------
Net income 46.7 124.4 116.4
Dividends on preferred stock .3 .3 .3
--------- --------- ---------
Earnings applicable to common stock $ 46.4 $ 124.1 $ 116.1
========= ========= =========
Average shares of common stock outstanding
Basic 46.2 47.3 47.9
Diluted 46.3 47.4 48.1
Earnings per average share of common stock
Basic $ 1.01 $ 2.63 $ 2.43
Diluted 1.00 2.62 2.42
The accompanying notes are an integral part of these statements.
Nicor Inc. Page 24
Consolidated Statements of Cash Flows
(millions)
Year ended December 31
--------------------------------
2000 1999 1998
--------- --------- ---------
Operating activities
Net income $ 46.7 $ 124.4 $ 116.4
Adjustments to reconcile
net income to net cash flow provided
from operating activities:
Depreciation 144.3 140.3 136.5
Deferred income tax expense (benefit) (15.6) 14.4 18.6
Changes in assets and liabilities:
Receivables, less allowances (300.2) (95.8) 90.6
Gas in storage (.8) 74.5 22.3
Deferred/accrued gas costs (33.3) (45.8) 4.8
Accounts payable 324.2 12.1 28.4
Postretirement benefits (26.6) (16.5) (19.2)
Accrued mercury-related costs 78.0 - -
Other 13.5 (1.9) (30.0)
--------- --------- ---------
Net cash flow provided from
operating activities 230.2 205.7 368.4
--------- --------- ---------
Investing activities
Capital expenditures (158.4) (154.0) (136.2)
Short-term investments (13.3) 26.1 (35.6)
Other 5.4 (7.4) (19.9)
--------- --------- ---------
Net cash flow used for
investing activities (166.3) (135.3) (191.7)
--------- --------- ---------
Financing activities
Net proceeds from issuing long-term debt 49.9 101.5 107.3
Disbursements to retire long-term debt (72.5) (156.9) (129.9)
Short-term borrowings (repayments), net 97.8 109.7 (44.4)
Dividends paid (75.9) (73.2) (70.3)
Disbursements to reacquire stock (51.9) (23.1) (33.4)
Other 2.0 1.1 1.8
--------- --------- ---------
Net cash flow used for financing activities (50.6) (40.9) (168.9)
--------- --------- ---------
Net increase in cash and cash equivalents 13.3 29.5 7.8
Cash and cash equivalents, beginning of year 42.5 13.0 5.2
--------- --------- ---------
Cash and cash equivalents, end of year $ 55.8 $ 42.5 $ 13.0
========= ========= =========
Supplemental information
Income taxes paid, net of refunds $ 30.6 $ 46.2 $ 42.9
Interest paid, net of amounts capitalized 50.6 45.5 49.1
The accompanying notes are an integral part of these statements.
Nicor Inc. Page 25
Consolidated Balance Sheets
(millions)
December 31
------------------------
2000 1999
----------- ----------
Assets
Current assets
Cash and cash equivalents $ 55.8 $ 42.5
Short-term investments, at
cost which approximates market 43.0 29.7
Receivables, less allowances of
$14.5 and $7.1, respectively 660.0 359.8
Gas in storage 31.8 31.0
Deferred gas costs 49.2 15.9
Deferred income taxes 57.6 10.1
Other 17.2 19.0
----------- ----------
914.6 508.0
----------- ----------
Property, plant and equipment, at cost
Gas distribution 3,292.8 3,200.3
Shipping 281.8 280.8
Other 2.0 2.0
----------- ----------
3,576.6 3,483.1
Less accumulated depreciation 1,847.0 1,747.9
----------- ----------
1,729.6 1,735.2
----------- ----------
Other assets 241.2 208.6
----------- ----------
$ 2,885.4 $ 2,451.8
=========== ==========
Liabilities and Capitalization
Current liabilities
Long-term obligations due within one year $ 125.0 $ 74.2
Short-term borrowings 442.0 344.2
Accounts payable 606.6 282.4
Accrued mercury-related costs 78.0 -
Other 59.9 44.9
----------- ----------
1,311.5 745.7
----------- ----------
Deferred credits and other liabilities
Deferred income taxes 296.6 266.6
Regulatory income tax liability 70.4 74.8
Unamortized investment tax credits 41.1 42.7
Other 104.6 91.9
----------- ----------
512.7 476.0
----------- ----------
Capitalization
Long-term debt 347.1 436.1
Preferred stock 6.3 6.3
Common equity 707.8 787.7
----------- ----------
1,061.2 1,230.1
----------- ----------
$ 2,885.4 $ 2,451.8
=========== ==========
The accompanying notes are an integral part of these statements.
Nicor Inc. Page 26
Consolidated Statements of Capitalization
(millions, except share data)
December 31
-------------------------------------
2000 1999
------------------ -----------------
First Mortgage Bonds
Maturity Interest rate
-------- ---------
2001 6.45 % $ 75.0 $ 75.0
2002 6.75 50.0 50.0
2003 5.75 50.0 50.0
2009 5.37 50.0 50.0
2021 8.875 50.0 50.0
2025 7.26 50.0 50.0
2027 7.375 50.0 50.0
2028 6.58 50.0 50.0
--------- --------
425.0 425.0
Less: Amount due within one year 75.0 -
Unamortized debt discount,
net of premium 2.9 3.3
--------- --------
347.1 32.7 % 421.7 34.3 %
--------- --------
Other long-term debt
Notes payable due 2001,
at variable interest rate 50.0 -
Notes payable due 2000, 5.065% - 50.0
Notes payable due 2000, 6.83% - 22.5
Other - 16.1
--------- --------
50.0 88.6
Less: Amount due within one year 50.0 74.2
--------- --------
- - 14.4 1.2
--------- --------
Preferred and preference stock
Cumulative, $50 par value, 1,600,000
preferred shares authorized; and
cumulative, without par value,
20,000,000 preference shares
authorized
Redeemable preferred stock, 4.48%
and 5.00% series, 125,223 shares
outstanding 6.3 .6 6.3 .5
--------- --------
Common equity
Common stock, $2.50 par value,
160,000,000 shares authorized
(4,767,796 and 4,822,428 shares
reserved for conversion and other
purposes, and 45,491,458 and
46,890,301 outstanding, respectively) 113.7 117.2
Retained earnings 594.1 670.5
--------- --------
707.8 66.7 787.7 64.0
--------- ---- -------- ----
$1,061.2 100.0 % $1,230.1 100.0%
========= ====== ========= ======
The accompanying notes are an integral part of these statements.
Nicor Inc. Page 27
Consolidated Statements of Common Equity
(millions, except per share data)
Year ended December 31
--------------------------------
2000 1999 1998
--------- --------- ---------
Common stock
Balance at beginning of year $ 117.2 $ 118.8 $ 120.5
Issued and converted stock .2 .1 .3
Reacquired and cancelled stock (3.7) (1.7) (2.0)
--------- --------- ---------
Balance at end of year 113.7 117.2 118.8
--------- --------- ---------
Paid-in capital
Balance at beginning of year - - -
Issued and converted stock 1.8 1.2 3.0
Reacquired and cancelled stock (1.8) (1.2) (3.0)
--------- --------- ---------
Balance at end of year - - -
--------- --------- ---------
Retained earnings
Balance at beginning of year 670.5 640.2 623.5
Net income 46.7 124.4 116.4
Dividends on common stock ($1.66, $1.56
and $1.48 per share, respectively) (76.4) (73.6) (70.6)
Dividends on preferred stock (.3) (.3) (.3)
Reacquired and cancelled stock (46.4) (20.2) (28.8)
--------- --------- ---------
Balance at end of year 594.1 670.5 640.2
--------- --------- ---------
$ 707.8 $ 787.7 $ 759.0
========= ========= =========
The accompanying notes are an integral part of these statements.
<PAGE>
Nicor Inc. Page 28
Notes to the Consolidated Financial Statements
ACCOUNTING POLICIES
Consolidation. The consolidated financial statements include the accounts of
Nicor and its subsidiaries. All significant intercompany balances and
transactions have been eliminated.
Use of estimates. The preparation of the financial statements requires
management to make estimates that affect reported amounts. Actual results could
differ from those estimates.
Reclassifications. Certain reclassifications have been made to conform the prior
years' financial statements to the current year's presentation.
Regulation. Nicor Gas is regulated by the Illinois Commerce Commission (ICC)
which establishes the rules and regulations governing utility rates and services
in Illinois. The company applies accounting standards that recognize the
economic effects of rate regulation and, accordingly, has recorded regulatory
assets and liabilities. The company had net regulatory assets of about $4
million at December 31, 2000 and net regulatory liabilities of about $40 million
at December 31, 1999.
Operating revenues and gas costs. Gas distribution revenues are recorded when
gas is delivered to customers. Nicor Gas classifies revenue taxes billed to
customers as operating revenues and related taxes due as operating expenses. In
the gas distribution segment, the cost of gas purchased, adjusted for inventory
activity, is reflected in volumetric charges to customers through operation of
the Purchased Gas Adjustment (PGA). Any difference between PGA revenues and
recoverable gas costs is deferred or accrued with a corresponding decrease or
increase to cost of gas. This difference is amortized as it is collected from or
refunded to customers through the PGA.
In the shipping segment, revenues and related delivery costs are recorded at the
time vessels depart from port.
Depreciation. Property, plant and equipment are depreciated over estimated
useful lives on a straight-line basis. The gas distribution composite
depreciation rate is 4.1 percent.
Income taxes. Deferred income taxes are provided for temporary differences
between the tax basis of an asset or liability and its reported amount in the
financial statements. Nicor Gas amortizes prior deferred tax credits and excess
deferred taxes to income over the lives of the applicable properties.
Cash and cash equivalents. The company considers investments purchased with a
maturity of three months or less to be cash equivalents.
Receivable credit risk. Nicor's major subsidiaries have diversified customer
bases and prudent credit policies which mitigate risk.
DERIVATIVE INSTRUMENTS
In June 1998, the Financial Accounting Standards Board issued Statement No. 133,
Accounting for Derivative Instruments and Hedging Activities. Nicor adopted the
statement, as amended, on January 1, 2001. The initial application of the
statement had no impact on the company's results of operations and no material
impact on its financial condition.
Nicor Inc. Page 29
Notes to the Consolidated Financial Statements (continued)
At Nicor Gas, derivative instruments are primarily utilized in the natural gas
procurement function. Realized gains or losses are passed directly through to
customers through operation of the company's PGA. As such, beginning in 2001,
changes in the fair value of these derivative instruments are being deferred or
accrued as a regulatory asset or liability until realized.
Nicor Gas also holds weather derivative instruments to limit the earnings impact
of weather fluctuations. For 2001, these instruments hedge the earnings impact
related to weather warmer than 5,700 degree days or colder than 6,100 degree
days. These weather derivative instruments are recorded using the intrinsic
value method.
Derivative instruments and other energy-related contracts are used by Nicor's
wholesale natural gas marketing business to hedge price risk associated with
inventories of natural gas and fixed-price purchase and sale agreements. The
company records energy-related contracts and physical inventory at fair market
value.
Nicor periodically utilizes derivative instruments to reduce interest rate risk
associated with the issuance of debt. At December 31, 2000, Nicor held treasury
lock agreements that hedge the risk-free interest rate of an anticipated debt
issuance of $75 million in August 2001. Beginning in 2001, the change in the
fair market value of the treasury lock agreements will be reported as a
component of other comprehensive income. Upon settlement of the treasury lock
agreements and issuance of the debt, accumulated other comprehensive income will
be amortized to interest expense over the life of the debt instrument.
GAS IN STORAGE
The gas distribution segment's inventory is carried at cost on a last-in,
first-out (LIFO) basis. Based on the average cost of gas purchased in December
2000 and 1999, the estimated replacement cost of inventory at December 31, 2000
and 1999 exceeded the LIFO cost by $491.7 million and $172.4 million,
respectively.
Nicor's wholesale gas marketing business carries its inventory at market value.
At December 31, 2000 and 1999, the market value of the inventory was $12.5
million and $8.9 million, respectively.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The recorded amount of short-term investments and short-term borrowings
approximates fair value because of the short maturity of the instruments. Based
on quoted market interest rates, the recorded amount of long-term debt
outstanding, including current maturities, also approximates fair value.
Nicor Inc. Page 30
Notes to the Consolidated Financial Statements (continued)
INCOME TAXES
The components of income tax expense (benefit) are presented below:
(millions) 2000 1999 1998
-------- -------- --------
Current
Federal $ 29.3 $ 44.3 $ 36.4
State 1.9 8.2 7.9
-------- -------- --------
31.2 52.5 44.3
-------- -------- --------
Deferred
Federal (12.2) 13.9 16.6
State (3.4) .5 2.0
-------- -------- --------
(15.6) 14.4 18.6
-------- -------- --------
Amortization of investment tax credits, net (1.5) (1.5) (2.1)
Foreign taxes .3 .3 .3
-------- -------- --------
Income tax expense, net $ 14.4 $ 65.7 $ 61.1
======== ======== ========
The temporary differences which gave rise to the net deferred tax liability at
December 31, 2000 and 1999, are as follows:
(millions) 2000 1999
-------- --------
Deferred tax liabilities
Property, plant and equipment $ 217.5 $ 222.9
Investment in foreign subsidiaries 48.5 43.8
Investment in partnerships 39.3 24.5
Employee benefits 18.7 10.2
Other 23.6 19.6
-------- --------
347.6 321.0
-------- --------
Deferred tax assets
Unamortized investment tax credits 26.6 27.8
Regulatory income tax liability 17.4 18.6
Accrued mercury-related costs 30.9 -
Other 33.7 18.1
-------- --------
108.6 64.5
-------- --------
Net deferred tax liability $ 239.0 $ 256.5
======== ========
The effective combined federal and state income tax rate was 23.6 percent, 34.6
percent and 34.4 percent in 2000, 1999 and 1998, respectively. Differences
between federal income taxes computed using the statutory rate and reported
income tax expense are shown below:
(millions) 2000 1999 1998
-------- -------- --------
Federal income taxes using statutory rate $ 21.4 $ 66.5 $ 62.1
State income taxes, net (.3) 6.3 6.7
Tax credits (4.3) (3.8) (2.9)
Excess deferred tax adjustment (2.4) (2.1) (1.8)
Other, net - (1.2) (3.0)
-------- -------- --------
Income tax expense, net $ 14.4 $ 65.7 $ 61.1
========= ======== ========
Nicor Inc. Page 31
Notes to the Consolidated Financial Statements (continued)
SHORT- AND LONG-TERM DEBT
The company maintains short-term lines of credit with major domestic and foreign
banks. These lines, which serve as backup for the issuance of commercial paper,
totaled $532.5 million at December 31, 2000. Commitment fees of up to .08
percent per annum were paid on these lines. All lines of credit have variable
interest rate options tied to short-term markets.
The company had $442 million and $342.5 million of commercial paper outstanding
with a weighted average interest rate of 6.5 percent and 5.9 percent at December
31, 2000 and 1999, respectively.
Bank cash balances averaged about $4 million during 2000, which partially
compensated for the cost of maintaining accounts and other banking services.
Such demand balances may be withdrawn at any time.
First Mortgage Bonds are secured by liens on substantially all gas distribution
property.
Interest on debt was net of amounts capitalized of $1.1 million, $.4 million and
$.5 million in 2000, 1999 and 1998, respectively.
STOCK-BASED COMPENSATION
Nicor has a long-term incentive compensation plan that permits the granting of
stock options, restricted stock and alternate stock rights to key executives and
managerial employees, as well as an employee stock purchase plan. The company
does not recognize compensation expense for these plans. If compensation expense
for these plans had been recognized based on the fair value of awards at the
grant dates, the impact on the company's net income and earnings per share would
not have been material.
Long-term incentive compensation plan. The company may grant options for up to
3.5 million shares and has granted options on 1.9 million shares through
December 31, 2000. The stock option exercise price equals the stock's market
price on the date of grant. Options vest after one year, generally become
exercisable after three years and expire after ten years.
Nicor Inc. Page 32
Notes to the Consolidated Financial Statements (continued)
A summary of stock option activity is presented below:
Weighted
Number average
of exercise
shares price
---------- -----------
Options outstanding at:
December 31, 1997 672,900 $ 27.70
Granted 113,500 40.56
Exercised (158,100) 26.05
Cancelled (4,500) 40.63
----------
December 31, 1998 623,800 30.37
Granted 149,000 38.06
Exercised (3,500) 28.25
Cancelled (7,500) 38.06
----------
December 31, 1999 761,800 31.81
Granted 251,500 32.37
Exercised (33,200) 27.44
Cancelled (78,000) 32.13
----------
December 31, 2000 902,100 32.10
----------
Options exercisable at:
December 31, 1998 264,500 $ 26.25
December 31, 1999 383,900 26.87
December 31, 2000 434,100 28.38
Stock options outstanding at December 31, 2000, had exercise prices ranging from
$19.63 to $40.69 and a weighted average remaining contractual life of seven
years.
The weighted average fair value of options granted in 2000 and 1999 is $3.25 and
$3.52, respectively. The fair value of each option was estimated on the date of
grant using the Black-Scholes option-pricing model with the following
assumptions used for grants in 2000 and 1999, respectively: dividend yield of
5.7 percent and 4.6 percent; volatility of 16.8 percent and 14.7 percent;
risk-free interest rate of 6.4 percent and 5.2 percent; and expected periods
outstanding of three years for both years.
There were no shares of restricted stock or alternate stock rights outstanding
at December 31, 2000.
Employee stock purchase plan. Under the employee stock purchase plan, the
company may sell up to 1.5 million shares of common stock to its employees and
has sold about 887,000 shares through December 31, 2000. Under the terms of this
plan, eligible employees may purchase shares at 90 percent of the stock's market
price. The company sold about 28,900 shares and 28,400 shares to employees in
2000 and 1999, respectively. The weighted average market value of shares sold in
2000 and 1999 was $33.01 and $36.71, respectively.
POSTRETIREMENT BENEFITS
Nicor Gas maintains noncontributory defined benefit pension plans covering
substantially all employees hired prior to January 1, 1998 and provides health
care and life insurance benefits to eligible retired employees. Certain
employees' postretirement health care benefits have been capped to a defined
annual per capita medical cost. The following table sets forth the components of
the changes in the plans'
Nicor Inc. Page 33
Notes to the Consolidated Financial Statements (continued)
benefit obligations and assets, and reconciles the funded status to the prepaid
(accrued) benefit cost recorded in the financial statements at December 31:
Pension benefits Other benefits
--------------------- ---------------------
(millions) 2000 1999 2000 1999
---------- ---------- ---------- ----------
Change in benefit obligation
Benefit obligation at
beginning of period $ 214.8 $ 242.3 $ 116.1 $ 118.3
Service cost 5.4 6.4 1.2 1.3
Interest cost 15.3 15.7 8.4 7.7
Actuarial loss (gain) 7.3 (25.8) (5.3) (1.0)
Participant contributions - - .7 .6
Plan amendments 4.2 - - -
Benefits paid (29.7) (23.8) (8.5) (10.8)
---------- ---------- ---------- ----------
Benefit obligation at end of
period 217.3 214.8 112.6 116.1
---------- ---------- ---------- ----------
Change in plan assets
Fair value of plan assets at
beginning of period 445.3 401.7 19.4 16.6
Actual return on plan assets 72.1 67.1 3.2 2.8
Employer contributions 1.5 .3 7.8 10.2
Participant contributions - - .7 .6
Benefits paid (29.7) (23.8) (8.5) (10.8)
---------- ---------- ---------- ----------
Fair value of plan assets at
end of period 489.2 445.3 22.6 19.4
---------- ---------- ---------- ----------
Funded status 271.9 230.5 (90.0) (96.7)
Unrecognized net actuarial
(gain) loss (134.1) (114.4) (4.7) 1.3
Unrecognized transition
(asset) obligation (4.8) (8.6) 37.1 40.2
Unrecognized prior service cost 6.8 3.0 - -
Other .1 .1 1.2 1.5
---------- ---------- ---------- ----------
Prepaid (accrued) benefit cost $ 139.9 $ 110.6 $ (56.4) $ (53.7)
========== ========== ========== ==========
Net periodic benefit cost (credit) included the following components:
Pension benefits Other benefits
------------------------ ------------------------
(millions) 2000 1999 1998 2000 1999 1998
------- ------- ------- ------- ------- --------
Service cost $ 5.4 $ 6.4 $ 6.7 $ 1.2 $ 1.3 $ 1.3
Interest cost 15.3 15.7 16.0 8.4 7.7 8.3
Expected return on plan
assets (39.2) (35.3) (35.1) (1.8) (1.6) (1.4)
Recognized net actuarial
gain (5.8) (1.8) (4.7) - - -
Amortization of
unrecognized transition
(asset) obligation (3.8) (3.8) (3.8) 3.1 3.1 3.1
Amortization of prior
service cost .4 .3 .4 - - -
------- ------- ------- ------- ------- ------
Net periodic benefit cost
(credit) $(27.7) $(18.5) $ (20.5) $ 10.9 $ 10.5 $11.3
======= ======= ======= ======= ======= ======
Assumptions used in the computations included the following:
Pension benefits Other benefits
----------------------- ----------------------
2000 1999 2000 1999
----------- ----------- ----------- ----------
Discount rate 7.75% 7.50% 7.75% 7.50%
Expected return on plan assets 9.25 9.00 9.25 9.00
Rate of compensation increase 4.00 4.00 4.00 4.00
Nicor Inc. Page 34
Notes to the Consolidated Financial Statements (continued)
For measurement purposes, the health care cost trend rate for pre-Medicare
benefits was assumed to be 6.5 percent for 2001, declining to 5 percent by 2004
and remaining at that level thereafter. The health care cost trend rate for
post-Medicare benefits was assumed to be 5 percent.
Assumed health care cost trend rates can have a significant effect on the
amounts reported for the health care plans. A one-percentage-point change in the
assumed health care cost trend rates would have the following effects:
One-percent
-------------------
(millions) Increase Decrease
-------- --------
Effect on total of service and interest cost
components $ 1.1 $ (.9)
Effect on benefit obligation 11.3 (9.5)
The company also sponsors defined contribution plans covering substantially all
domestic employees. These plans provide for employer matching contributions. The
total cost of these plans was $4.0 million, $3.8 million and $3.4 million in
2000, 1999 and 1998, respectively.
DISCONTINUED OPERATIONS
The company maintains a reserve for the remaining costs related to discontinued
contract drilling, oil and gas exploration, inland barging and extractive
operations. The reserve will continue to be evaluated as the remaining medical
benefit, legal, tax and other contingencies are resolved.
BUSINESS SEGMENT AND GEOGRAPHIC INFORMATION
Nicor is a holding company that through its wholly owned subsidiaries, Nicor Gas
and Tropical Shipping, operates in two separately managed reportable segments:
gas distribution and shipping. The gas distribution segment, Nicor's principal
business, serves nearly 2 million customers in a service territory that
encompasses most of the northern third of Illinois, excluding the city of
Chicago. The shipping segment transports containerized freight between Florida
and the Caribbean. Other energy ventures include businesses that participate in
the following activities: retail energy marketing; wholesale natural gas
marketing; pipeline design and construction; corrosion protection services;
energy system design and construction; residential energy-related products and
services and natural gas vehicle market development.
Tropical Shipping's vessels are under foreign registry, and its containers are
considered instruments of international trade. Although the majority of its
long-lived assets are foreign owned, and its revenues are derived from foreign
operations, the functional currency is generally the U.S. dollar.
Nicor evaluates segment performance based on operating income. Intercompany
billing among segments is generally based on direct and indirect costs incurred
unless a market price is available. Financial data by business segment is
presented on the following page:
Nicor Inc. Page 35
Notes to the Consolidated Financial Statements (continued)
Other Corporate
Gas energy and Consol-
distribution Shipping ventures eliminations idated
(millions)
Operating revenues
2000 $ 1,896.0 $ 248.3 $ 169.9 $ (16.1) $ 2,298.1
1999 1,326.2 229.9 61.0 (1.9) 1,615.2
1998 1,229.0 224.5 11.6 - 1,465.1
Operating income (loss)
2000 $ 64.9 $ 25.7 $ 6.5 $ (3.0) $ 94.1
1999 191.7 22.5 1.3 (3.5) 212.0
1998 185.5 27.6 (1.9) (2.6) 208.6
Equity investment income
(loss)
2000 $ (.3) $ - $ 1.5 $ 2.0 $ 3.2
1999 - - (.3) .8 .5
1998 (.2) - (2.6) .1 (2.7)
Interest expense, net of
amounts capitalized
2000 $ 43.9 $ .8 $ .6 $ 3.3 $ 48.6
1999 40.4 1.3 .2 3.2 45.1
1998 43.4 1.3 .2 1.7 46.6
Income taxes
2000 $ 6.8 $ 10.2 $ 3.1 $ (5.7) $ 14.4
1999 55.9 8.3 2.6 (1.1) 65.7
1998 55.3 10.2 (.9) (3.5) 61.1
Property, plant and
equipment, net
2000 $ 1,600.8 $ 127.8 $ 1.0 $ - $ 1,729.6
1999 1,610.7 123.2 1.3 - 1,735.2
1998 1,617.8 113.3 .7 - 1,731.8
Capital expenditures
2000 $ 124.6 $ 33.8 $ - $ - $ 158.4
1999 127.4 26.0 .6 - 154.0
1998 112.6 23.3 .3 - 136.2
Depreciation
2000 $ 128.1 $ 15.9 $ .3 $ - $ 144.3
1999 123.9 16.1 .3 - 140.3
1998 120.8 15.4 .3 - 136.5
See Gas Distribution Statistics on page 16 for disclosure of sales and
transportation revenues in the gas distribution segment. The operating revenues
of other energy ventures include $14.9 million of revenues from the sale of
natural gas to Nicor Gas.
Nicor Inc. Page 36
Notes to the Consolidated Financial Statements
(continued)
COMMON STOCK
Shareholder rights plan. Under a shareholder rights plan, shareholders are
assigned one right for each share of Nicor common stock held. The rights will be
exercisable only if a person acquires, or announces a tender offer that would
result in, ownership of 10 percent or more of Nicor's common stock. If a person
acquires beneficial ownership of 10 percent or more of Nicor's common stock, all
holders of rights other than the acquiring person will be entitled to purchase
Nicor common stock at a 50 percent discount from the market price. Nicor may
redeem the rights at $.01 per right at any time before someone becomes a 10
percent beneficial owner. The rights expire on September 30, 2007.
Changes in common shares. Changes in common shares outstanding are summarized
below:
(millions) 2000 1999 1998
---------- --------- ----------
Beginning of year 46.9 47.5 48.2
Issued and converted .1 - .1
Reacquired and cancelled (1.5) (.6) (.8)
---------- --------- ----------
End of year 45.5 46.9 47.5
========== ========= ==========
Through common stock repurchase programs, Nicor has purchased and retired 1.4
million, .6 million and .7 million shares in 2000, 1999 and 1998, respectively.
REGULATORY MATTERS
Performance-based rate plan. On January 1, 2000, Nicor Gas' performance-based
rate (PBR) plan for natural gas costs went into effect. Under the PBR plan,
Nicor Gas' total gas supply costs are compared to a market-sensitive benchmark.
Savings and losses relative to the benchmark are shared equally with customers.
Nicor recorded $12.2 million of PBR plan results as operating revenue in 2000.
After 2001, the plan will be subject to ICC review.
Customer choice of commodity supplier. All industrial and commercial customers
and about 14 percent of residential customers are able to acquire their natural
gas supplies from third-party marketers. The choice of another natural gas
commodity supplier has no impact on Nicor Gas' operating income because natural
gas costs are passed directly through to customers without a markup under the
PGA. Nicor Gas continues to deliver the natural gas, maintain its distribution
system and respond to emergencies. The company's August 2000 filing with the ICC
to permanently expand the Customer Select(R) program to include all of its
residential customers is currently in the public hearing process, which may take
up to 11 months.
GUARANTEES
Nicor has a 50 percent interest in Nicor Energy, a joint venture that offers
natural gas, electricity and related retail services to customers primarily in
Illinois. Nicor guarantees up to $15 million of the joint venture's borrowings
under a line of credit. At December 31, 2000, Nicor had guaranteed $11.3 million
of Nicor Energy's debt. Management believes that the likelihood of a payment
pursuant to such guarantee is remote.
Nicor Inc. Page 37
Notes to the Consolidated Financial Statements (continued)
COMMITMENTS
In 1999, Tropical Shipping committed about $40 million for the construction of
two vessels. Through December 31, 2000 the company made construction payments of
$9.3 million. Remaining payments are scheduled as construction progresses
through early 2002.
CONTINGENCIES
Mercury program. Nicor Gas has incurred, and expects to continue to incur,
significant costs related to its historical use of mercury in various kinds of
company equipment.
Prior to 1961, gas regulators containing small quantities of mercury were
installed in homes. These gas regulators reduce the pressure of natural gas flow
from the service line to the inside of the home. During the third quarter of
2000, the company learned that in certain instances some mercury was spilled or
left in residences.
As a result, in September 2000, Nicor Gas was named as a defendant in a civil
lawsuit brought by the Illinois Attorney General and the State's Attorneys of
Cook, DuPage and Will Counties seeking, among other things, to compel the
company to inspect and clean up all homes and other sites that may have been
affected by mercury from company equipment. The Circuit Court of Cook County
hearing this action has entered two agreed preliminary injunctions requiring
Nicor Gas, among other things, to conduct inspections and, where necessary, to
clean up mercury, to pay for relocating residents until cleanup is completed,
and to pay for medical screening of potentially affected persons. It is not
possible to determine the likelihood that the plaintiffs will seek and obtain
fines or penalties.
Nicor Gas is also the subject of an Administrative Order, and an amendment
thereto, issued during the third quarter of 2000 by the U.S. Environmental
Protection Agency (EPA) pursuant to Section 106 of the Comprehensive
Environmental Response, Compensation and Liabilities Act. The order requires the
company, among other things, to develop and implement work plans to address
mercury spills at recycling centers where mercury regulators may have been
taken, at company facilities where regulators and mercury may have been
temporarily stored and at commercial/industrial sites where mercury-containing
equipment may have been used in metering facilities.
Pursuant to the injunctions and the EPA Administrative Order, Nicor Gas has
completed the work described above for all affected recycling centers and
commercial/industrial sites, and cleaning is underway at company facilities.
Potentially affected homes are being inspected using mercury vapor analyzers. By
December 31, 2000, Nicor Gas had called on every such home, although it has been
unable to gain access to some homes. Approximately 1,100 homes have been found
to have traces of mercury requiring cleanup.
As of December 31, 2000, Nicor Gas accrued $78 million as a current liability
for estimated obligations related to the previously described work and for legal
defense costs. Including amounts already incurred, $148 million was charged to
the company's income statement as other operating expense in the third quarter
of 2000. The accrual represents management's best estimate of future costs based
on an evaluation of currently available information, and actual costs may vary
from this estimate. The company will continue to reassess its estimated
obligation and will record any necessary adjustment, which could be material to
operating results in the period recorded.
Nicor Inc. Page 38
Notes to the Consolidated Financial Statements
(continued)
In addition to the matters described above, Nicor Gas has been named a defendant
in several private lawsuits, all in the Circuit Court of Cook County, claiming a
variety of unquantified damages (including bodily injury, property and punitive
damages) allegedly caused by mercury-containing regulators. One of the lawsuits
involves five previous class actions that have been consolidated before a single
judge. At this early stage in the litigation, it is not possible to estimate
what liability, if any, may result to the company from these lawsuits. While no
amount has been recorded for this potential liability, a loss contingency for an
unfavorable outcome of these lawsuits will be accrued if it becomes probable and
can be reasonably estimated. Any such accrual could be material to operating
results in the period in which it is recorded.
The company has certain insurance policies, has notified its insurers, and will
vigorously pursue recovery of mercury-related costs pursuant to its insurance
coverage. In January 2001, the company filed suit in the Circuit Court of Cook
County against certain of its insurance carriers for a declaration that the
company's mercury-related losses are covered, and for the recovery of those
losses. In addition, some of the removals of mercury-containing regulators were
conducted by independent contractors working for the company. In November 2000,
the company filed suit in the Circuit Court of Cook County seeking
indemnification and contribution from these contractors. At this early stage, it
is not possible to estimate the likelihood that costs will be recovered from
insurance carriers or other third parties related to the mercury spills, and
therefore Nicor Gas has not recorded any such amounts as assets in its financial
statements.
Nicor Gas will not seek recovery of the costs associated with these mercury
spills from its customers, and any proceeds from insurance carriers or third
parties will be retained by the company to offset costs incurred.
It is management's opinion, taking into account the above information and
uncertainties, including currently available information concerning the
company's existing and potential obligations, insurance coverage, possible
recoveries from other third parties and available financial resources, that
costs associated with the mercury spills will not have a material adverse effect
on the liquidity or financial position of the company.
Other. The company is involved in legal or administrative proceedings before
various courts and agencies with respect to rates, taxes and other matters.
Current environmental laws may require the cleanup of certain former
manufactured gas plant sites. To date, Nicor Gas has identified more than 40
properties for which it may, in whole or in part, be responsible. The majority
of these properties are not presently owned by the company. Information
regarding preliminary site reviews has been presented to the Illinois EPA, which
oversees the company's investigations and remedial actions. More detailed
investigations and remedial activities have either been completed, are in
progress or are being planned at many of these sites. The results of continued
testing and analysis should determine to what extent additional remediation is
necessary and may provide a basis for estimating any additional future costs
which could be significant. In accordance with ICC authorization, the company
has been recovering these costs from its customers.
In December 1995, Nicor Gas filed suit in the Circuit Court of Cook County
against certain insurance carriers seeking recovery of environmental cleanup
costs of certain former manufactured gas plant sites. Nicor Gas has reached a
settlement with one of the insurance carriers. In February 2000, the court
dismissed the company's case on summary judgment motions by certain defendants.
The company filed
Nicor Inc. Page 39
Notes to the Consolidated Financial Statements (concluded)
an appeal in March 2000. Management cannot predict the outcome of the lawsuit
against the remaining insurance carriers. Any recoveries will be refunded to the
company's customers.
Although unable to determine the outcome of these other contingencies,
management believes that appropriate accruals have been recorded. Final
disposition of these other matters is not expected to have a material impact on
the company's financial condition or results of operations.
QUARTERLY RESULTS (UNAUDITED)
Quarterly results fluctuate due mainly to the seasonal nature of the gas
distribution business.
Quarter ended
-------------------------------------------
(millions, except per share
data) Mar. 31 June 30 Sept. 30 Dec. 31
---------- ---------- ---------- ----------
2000
Operating revenues $ 659.3 $ 348.4 $ 301.0 $ 989.4
Operating income (loss) 70.2 55.4 (101.0) 69.5
Net income (loss) 38.8 30.6 (62.7) 39.9
Earnings (loss) per common
share
Basic .83 .66 (1.37) .87
Diluted .83 .66 (1.37) .87
1999
Operating revenues $ 576.4 $ 271.8 $ 227.3 $ 539.7
Operating income 65.4 44.5 38.1 64.0
Net income 39.0 26.5 19.8 39.1
Earnings per common share
Basic .82 .56 .42 .83
Diluted .82 .56 .42 .83
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
Nicor Inc. Page 40
PART III
Items 10. and 11. Directors and Executive Officers of the Registrant and
Executive Compensation
Information on directors, Section 16(a) Beneficial Ownership Reporting
Compliance and executive compensation is contained on pages 2 through 7, 9 and
14 through 18 of the Definitive Proxy Statement, dated March 8, 2001, and is
incorporated herein by reference. Information relating to the executive officers
of the registrant is provided on page 6 in Part I of this document.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Information about shares beneficially owned by directors and executive officers
is contained on pages 7 through 9 of the Definitive Proxy Statement, dated March
8, 2001, and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
Information about certain relationships and related transactions is contained on
page 19 of the Definitive Proxy Statement, dated March 8, 2001, and is
incorporated herein by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) 1) Financial Statements:
See Item 8, Financial Statements and Supplementary Data, on page 21
filed herewith, for a list of financial statements.
2) Financial Statement Schedules:
Schedule
Number Page
Report of Independent Public Accountants 22
II Valuation and Qualifying Accounts 41
Schedules other than those listed are omitted because they are not
applicable.
3) Exhibits Filed:
See Exhibit Index beginning on page 43 filed herewith.
(b) The company did not file a report on Form 8-K during the fourth
quarter of 2000.
Nicor Inc. Page 41
<TABLE>
Schedule II
VALUATION AND QUALIFYING ACCOUNTS
(millions)
<CAPTION>
Additions
----------------------
Balance at Charged to Charged to Balance
beginning costs and other at end
Description of period expenses accounts Deductions of period
- ---------------------- ---------- ---------- --------- ---------- ----------
2000
- -----
Allowance
for uncollectible
<S> <C> <C> <C> <C> <C>
accounts receivable $ 7.1 $ 17.5 $ - $ 10.1 (a) $ 14.5
Reserve for estimated
future costs related
to discontinued
businesses (b) 6.4 - - .6 (c) 5.8
1999
- -----
Allowance
for uncollectible
accounts receivable $ 6.3 $ 12.5 $ - $ 11.7 (a) $ 7.1
Reserve for estimated
future costs related
to discontinued
businesses (b) 6.3 - .1 (c) - 6.4
1998
- -----
Allowance
for uncollectible
accounts receivable $ 8.6 $ 13.6 $ - $ 15.9 (a) $ 6.3
Reserve for estimated
future costs related
to discontinued
businesses (b) 11.7 - - 5.4 (c) 6.3
<FN>
(a) Accounts receivable written off, net of recoveries.
(b) Excludes the related reserve for federal and state income taxes.
(c) Net receipts, expenditures, operating results, gains and losses related
to discontinued businesses credited or charged to reserve.
</FN>
</TABLE>
<PAGE>
Nicor Inc. Page 42
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Nicor Inc.
Date March 12, 2001 By KATHLEEN L. HALLORAN
Kathleen L. Halloran
Executive Vice President Finance
and Administration
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities indicated on March 12, 2001.
Signature Title
- ------------------------------------- ------------------------------------
THOMAS L. FISHER
- -------------------------------------
Thomas L. Fisher Chairman, President and
(Principal Executive Officer) Chief Executive Officer
KATHLEEN L. HALLORAN
- -------------------------------------
Kathleen L. Halloran Executive Vice President Finance
(Principal Financial and Accounting and Administration
Officer)
ROBERT M. BEAVERS, JR.* Director
BRUCE P. BICKNER* Director
JOHN H. BIRDSALL, III* Director
THOMAS A. DONAHOE* Director
JOHN E. JONES* Director
DENNIS J. KELLER* Director
WILLIAM A. OSBORN* Director
SIDNEY R. PETERSEN* Director
JOHN RAU* Director
PATRICIA A. WIER* Director
* By JEFFREY L. METZ .
Jeffrey L. Metz
(Attorney-in-fact)
Nicor Inc. Page 43
Exhibit Index
Exhibit
Number Description of Document
3.01 * Articles of Incorporation of the company. (File No. 2-55451, Form S-14,
Nicor Inc., Exhibit 1-03 and Exhibit B of Amendment No. 1 thereto.)
3.02 * Amendment to Articles of Incorporation of the company. (Proxy Statement
dated April 20, 1979, Nicor Inc., Item 3 thereto.)
3.03 * Amendment to Articles of Incorporation of the company. (File No. 2-68777,
Form S-16, Nicor Inc., Exhibit 2-01.)
3.04 * Amendment to Articles of Incorporation of the company. (File No. 1-7297,
Form 10-K for 1985, Nicor Inc., Exhibit 3-03.)
3.05 * Amendment to Articles of Incorporation of the company. (Proxy Statement
dated March 12, 1987, Nicor Inc., Exhibit A and Exhibit B thereto.)
3.06 * Amendment to Articles of Incorporation of the company. (File No. 1-7297,
Form 10-K for 1992, Nicor Inc., Exhibit 3-06.)
3.07 * Amendments to Articles of Incorporation of the company. (Proxy Statement
dated March 9, 1994, Nicor Inc., Exhibit A-1 and Exhibit B thereto.)
3.08 * Amendment to Articles of Incorporation of the company. (Proxy Statement
dated March 6, 1998, Nicor Inc., Item 2 thereto.)
3.09 * By-Laws of the company as amended by the company's board of Directors on
May 3, 1995. (File No. 1-7297, Form 10-Q for March 1995, Nicor Inc.,
Exhibit 3(ii).01.)
4.01 * Indenture of Commonwealth Edison Company to Continental Illinois National
Bank and Trust Company of Chicago, Trustee, dated as of January 1, 1954.
(File No. 1-7296, Form 10-K for 1995, Nicor Gas, Exhibit 4.01.)
4.02 * Indenture of Adoption of Nicor Gas to Continental Illinois National Bank
and Trust Company of Chicago, Trustee, dated February 9, 1954. (File No.
1-7296, Form 10-K for 1995, Nicor Gas, Exhibit 4.02.)
4.03 * Supplemental Indenture, dated June 1, 1963, of Nicor Gas to Continental
Illinois National Bank and Trust Company of Chicago, Trustee, under
Indenture dated as of January 1, 1954. (File No. 2-21490, Form S-9,
Nicor Gas, Exhibit 2-8.)
4.04 * Supplemental Indenture, dated May 1, 1966, of Nicor Gas to Continental
Illinois National Bank and Trust Company of Chicago, Trustee, under
Indenture dated as of January 1, 1954. (File No. 2-25292, Form S-9,
Nicor Gas, Exhibit 2-4.)
<PAGE>
Nicor Inc. Page 44
Exhibit Index (continued)
Exhibit
Number Description of Document
4.05 * Supplemental Indenture, dated June 1, 1971, of Nicor Gas to Continental
Illinois National Bank and Trust Company of Chicago, Trustee, under
Indenture dated as of January 1, 1954. (File No. 2-44647, Form S-7,
Nicor Gas, Exhibit 2-03.)
4.06 * Supplemental Indenture, dated April 30, 1976, between the company and
Continental Illinois National Bank and Trust Company of Chicago, Trustee,
under Indenture dated as of January 1, 1954. (File No.
2-56578, Form S-9, Nicor Gas, Exhibit 2-25.)
4.07 * Supplemental Indenture, dated April 30, 1976, of Nicor Gas to Continental
Illinois National Bank and Trust Company of Chicago, Trustee, under
Indenture dated as of January 1, 1954. (File No. 2-56578, Form S-9,
Nicor Gas, Exhibit 2-21.)
4.08 * Supplemental Indenture, dated August 15, 1991, of Nicor Gas to
Continental Bank, National Association, Trustee, under Indenture dated as
of January 1, 1954. (File No. 1-7296, Form 8-K for August 1991, Nicor
Gas, Exhibit 4-01.)
4.09 * Supplemental Indenture, dated October 15, 1995, of Nicor Gas to Bank of
America Illinois, Trustee, under Indenture dated as of January 1, 1954.
(File No. 1-7296, Form 10-Q for September 1995, Nicor Gas, Exhibit 4.01.)
4.10 * Supplemental Indenture, dated May 10, 1996, of Nicor Gas to Harris
Trust and Savings Bank, Trustee, under Indenture dated as of January 1,
1954. (File No. 1-7296, Form 10-Q for June 1996, Nicor Gas, Exhibit
4.01.)
4.11 * Supplemental Indenture, dated August 1, 1996, of Nicor Gas to Harris
Trust and Savings Bank, Trustee, under Indenture dated as of January 1,
1954. (File No. 1-7296, Form 10-Q for June 1996, Nicor Gas, Exhibit
4.02.)
4.12 * Supplemental Indenture, dated June 1, 1997, of Nicor Gas to Harris
Trust and Savings Bank, Trustee, under Indenture dated as of January 1,
1954. (File No. 1-7296, Form 10-Q for June 1997, Nicor Gas, Exhibit
4.01.)
4.13 * Shareholder Rights Agreement, dated September 9, 1997, between the
company and Harris Trust and Savings Bank, as Rights Agent. (File No.
1-7297, Form 8-K for September 1997, Nicor Inc., Exhibit 1.)
4.14 * Supplemental Indenture, dated October 15, 1997, of Nicor Gas to Harris
Trust and Savings Bank, Trustee, under Indenture dated as of January 1,
1954. (File No. 1-7296, Form 10-Q for September 1997, Nicor Gas, Exhibit
4.01.)
4.15 * Supplemental Indenture, dated February 15, 1998, of Nicor Gas to Harris
Trust and Savings Bank, Trustee, under Indenture dated as of January 1,
1954. (File No. 1-7296, Form 10-K for 1997, Nicor Gas, Exhibit 4.19.)
<PAGE>
Nicor Inc. Page 45
Exhibit Index (continued)
Exhibit
Number Description of Document
4.16 * Supplemental Indenture, dated June 1, 1998, of Nicor Gas to Harris
Trust and Savings Bank, Trustee, under Indenture dated as of January 1,
1954. (File No. 1-7296, Form 10-Q for June 1998, Nicor Gas, Exhibit
4.01.)
4.17 * Supplemental Indenture, dated February 1, 1999, of Nicor Gas to Harris
Trust and Savings Bank, Trustee, under Indenture dated as of January 1,
1954. (File No. 1-7296, Form 10-K for 1998, Nicor Gas, Exhibit 4.19.)
4.18 * Supplemental Indenture, dated February 1, 2001, of Nicor Gas to BNY
Midwest Trust Company, Trustee, under Indenture dated as of January 1,
1954. (File No. 1-7296, Form 10-K for 2000, Nicor Gas, Exhibit 4.17.)
Other debt instruments are omitted in accordance with Item 601(b)(4)(iii)(A) of
Regulation S-K. Copies of such agreements will be furnished to the Commission
upon request.
10.01 * 1984 Nicor Officers' Capital Accumulation Plan Participation
Agreement. (File No. 1-7297, Form 10-K for 1988, Nicor Inc., Exhibit
10-10.)
10.01(a)* 1985 Nicor Officers' Capital Accumulation Plan Participation
Agreement. (File No. 1-7297, Form 10-K for 1988, Nicor Inc., Exhibit
10-10(a).)
10.02 * 1984 Nicor Directors' Capital Accumulation Plan Participation
Agreement. (File No. 1-7297, Form 10-K for 1983, Nicor Inc., Exhibit
10-13.)
10.02(a)* 1985 Nicor Directors' Capital Accumulation Plan Participation
Agreement. (File No. 1-7297, Form 10-K for 1984, Nicor Inc., Exhibit
10-13(a).)
10.03 * Directors' Deferred Compensation Plan. (File No. 1-7297, Form 10-K
for 1983, Nicor Inc., Exhibit 10-16.)
10.04 * Directors' Pension Plan. (File No. 1-7297, Form 10-K for 1985,
Nicor Inc., Exhibit 10-18.)
10.05 * Flexible Spending Account for Executives. (File No. 1-7297, Form
10-K for 1986, Nicor Inc., Exhibit 10-20.)
10.06 * Amendment and Restatement of the Nicor Gas Incentive Compensation
Plan.(File No. 1-7297, Form 10-K for 1986, Nicor Inc., Exhibit 10-21.)
10.07 * Nicor Inc. 1989 Long-Term Incentive Plan. (Filed with Nicor Inc.
Proxy Statement, dated April 20, 1989, Exhibit A.)
10.08 * Nicor Salary Deferral Plan. (File No. 1-7297, Form 10-K for 1989,
Nicor Inc., Exhibit 10-29.)
Nicor Inc. Page 46
Exhibit Index (continued)
Exhibit
Number Description of Document
10.09 * Nicor Inc. Stock Deferral Plan. (File No. 1-7297, Form 10-Q
for September 1996, Nicor Inc., Exhibit 10.01.)
10.10 * Amendment to Nicor Inc. Stock Deferral Plan. (File No. 1-7297, Form
10-K for 1997, Nicor Inc., Exhibit 10.22.)
10.11 * Nicor Inc. 1995 Directors' Stock Plan. (File No. 1-7297, Form 10-Q
for September 1996, Nicor Inc., Exhibit 10.02.)
10.12 * 1997 Long-Term Incentive Program. (File No. 1-7297, Form 10-Q for
March 1997, Nicor Inc., Exhibit 10.01.)
10.13 * Nicor Inc. 1997 Long-Term Incentive Plan. (Filed as appendix to
the Nicor Inc. Proxy Statement, dated March 6, 1997.)
10.14 * 1998 Long-Term Incentive Program. (File No. 1-7297, Form 10-K for
1997, Nicor Inc., Exhibit 10.25.)
10.15 * 1999 Long-Term Incentive Program. (File No. 1-7297, Form 10-K for
1998, Nicor Inc., Exhibit 10.26.)
10.16 * 2000 Nicor Incentive Compensation Plan. (File No. 1-7297, Form 10-K
for 1999, Nicor Inc., Exhibit 10.21.)
10.17 * 2000 Nicor Gas Incentive Compensation Plan. (File No. 1-7297, Form
10-K for 1999, Nicor Inc., Exhibit 10.22.)
10.18 * 2000 Long-Term Incentive Program. (File No. 1-7297, Form 10-K for
1999, Nicor Inc., Exhibit 10.23.)
10.19 * Security Payment Plan. (File No. 1-7297, Form 10-K for 1999, Nicor
Inc., Exhibit 10.24.)
10.20 * Amendment and Restatement of Nicor Gas Supplementary Retirement
Plan. (File No. 1-7297, Form 10-Q for March 2000, Nicor Inc., Exhibit
10.01.)
10.21 * Amendment and Restatement of Nicor Gas Supplementary Savings Plan.
(File No. 1-7297, Form 10-Q for March 2000, Nicor Inc., Exhibit 10.02.)
10.22 * First Amendment to Nicor Salary Deferral Plan. (File No. 1-7297,
Form 10-Q for March 2000, Nicor Inc., Exhibit 10.03.)
10.23 * First Amendment to Agreements Restating 1984 and 1985 Nicor
Capital Accumulation Plan Participation Agreements for Officers and
Directors. (File No. 1-7297, Form 10-Q for March 2000, Nicor Inc.,
Exhibit 10.04.)
Nicor Inc. Page 47
Exhibit Index (concluded)
Exhibit
Number Description of Document
10.24 * First Amendment to Nicor 1989 Long -Term Incentive Plan. (File
No. 1-7297, Form 10-Q for March 2000, Nicor Inc., Exhibit 10.05.)
10.25 * First Amendment to Nicor 1997 Long -Term Incentive Plan. (File
No. 1-7297, Form 10-Q for March 2000, Nicor Inc., Exhibit 10.06.)
10.26 * Second Amendment to Nicor Stock Deferral Plan. (File No. 1-7297,
Form 10-Q for March 2000, Nicor Inc., Exhibit 10.07.)
10.27 * Form of Change-in-Control Agreement, dated June 2, 2000, between
Nicor Inc. and Mr. Cali and Ms. Halloran. (File No. 1-7297, Form
10-Q for June 2000, Nicor Inc., Exhibit 10.01.)
10.28 Change-in-Control Agreement, dated June 2, 2000, between Nicor Inc.
and Mr. Fisher.
10.29 Change-in-Control Agreement, dated June 2, 2000, between Nicor Inc.
and Mr. Behrens.
Exhibits 10.01 through 10.29 constitute management contracts and compensatory
plans and arrangements required to be filed as exhibits to this Form pursuant to
Item 14(c) of Form 10-K.
21.01 * Subsidiaries. (File No. 69-228, Form U-3A-2 for 2000, Nicor Inc.,
Item 1.)
23.01 Consent of Independent Public Accountants.
24.01 Powers of Attorney.
99.01 * Form of Letter to Shareholders relating to Shareholder Rights
Agreement. (File No. 1-7297, Form 8-K for September 1997, Nicor Inc.,
Exhibit 2.)
* These exhibits have been previously filed with the Securities and Exchange
Commission as exhibits to registration statements or to other filings with the
Commission and are incorporated herein as exhibits by reference. The file number
and exhibit number of each such exhibit, where applicable, are stated, in
parentheses, in the description of such exhibit.
Upon written request, the company will furnish free of charge a copy of any
exhibit. Requests should be sent to Investor Relations at the corporate
headquarters.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.28
<SEQUENCE>2
<FILENAME>0002.txt
<DESCRIPTION>CHANGE-IN-CONTROL AGREEMENT
<TEXT>
Nicor Inc.
Form 10-K
Exhibit 10.28
CHANGE-IN-CONTROL AGREEMENT
THIS AGREEMENT dated as of June 2, 2000 (the "Agreement Date") is made
by and among Nicor Inc. (the "Company"), an Illinois corporation, and Thomas
L. Fisher (the "Executive").
ARTICLE I
PURPOSES
The Board of Directors of the Company (the "Board") has determined that it
is in the best interests of the Company and its shareholders to assure that the
Company and Nicor Gas will have the continued services of the Executive, despite
the possibility or occurrence of a Change in Control of the Company. The Board
believes it is imperative to reduce the distraction of the Executive that would
result from the personal uncertainties caused by a pending or threatened Change
in Control, to encourage the Executive's full attention and dedication to the
Company and Nicor Gas, and to provide the Executive with compensation and
benefits arrangements upon a Change in Control which are competitive with those
of similarly-situated corporations. This Agreement is intended to accomplish
these objectives.
ARTICLE II
CERTAIN DEFINITIONS
When used in this Agreement, the terms specified below shall have the
following meanings:
2.1 The "Agreement Term" shall begin on the Agreement Date and shall
continue through December 31, 2001. As of December 31, 2001, and on each
December 31 thereafter, the Agreement Term shall automatically be extended for
one additional year unless, not later than the preceding June 30, either party
shall have given notice that such party does not wish to extend the Agreement
Term. If a Change in Control shall have occurred during the Agreement Term (as
it may be extended from time to time), the Agreement Term shall continue for a
period ending on the two-year anniversary of the date of the Change in Control,
but if the Termination Date (as defined below) occurs during that two-year
period, then the Agreement Term shall continue until the end of the Severance
Period (as defined below). Unless the Termination Date occurs during the
two-year period after a Change in Control so that the Agreement Term is extended
to include the Severance Period, as provided in the immediately preceding
sentence, the Agreement Term shall not extend beyond the two-year anniversary of
the Change in Control.
2.2 "Effective Date" means the first date during the Agreement Term on
which a Change in Control occurs.
2.3 "Change in Control" means:
2.3.1 The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) (a "Person") of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange
Act) of any shares of Common Stock of the Company or any voting securities
of the Company entitled to vote generally in the election of directors if,
as a result of such acquisition, such person owns 20% or more of either
(i) the outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock"), or (ii) the combined voting power of
the outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "Outstanding Company Voting
Securities"); provided, however, that for purposes of this subsection
2.3.1, the following acquisitions shall not constitute a Change in
Control: (A) any acquisition by the Company, (B) any acquisition by an
employee benefit plan (or related trust) sponsored or maintained by the
Company or any corporation controlled by the Company (a "Company Plan"),
or (C) any acquisition by any corporation pursuant to a transaction which
complies with subsections 2.3.3.1, 2.3.3.2 and 2.3.3.3 of this definition;
provided further, that for purposes of clause (A), if any Person (other
than the Company or any Company Plan) shall become the beneficial owner of
20% or more of the Outstanding Company Common Stock or 20% or more of the
Outstanding Company Voting Securities by reason of an acquisition by the
Company, and such Person shall, after such acquisition by the Company,
become the beneficial owner of any additional shares of the Outstanding
Company Common Stock or any additional Outstanding Company Voting
Securities (other than pursuant to any dividend reinvestment plan or
arrangement maintained by the Company) and such beneficial ownership is
publicly announced, such additional beneficial ownership shall constitute
a Change in Control; or
2.3.2 Individuals who, as of the date hereof, constitute the Board
of Directors of the Company (for purposes of this Section 2.3, the
"Incumbent Board") cease for any reason to constitute at least a majority
of the Incumbent Board; provided, however, that any individual becoming a
director subsequent to the date hereof whose election, or nomination for
election by the Company shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board,
but excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or publicly
threatened election contest (as such terms are used in Rule 14a-11
promulgated under the Exchange Act) or other actual or publicly threatened
solicitation of proxies or consents by or on behalf of a Person other than
the Board of Directors of the Company; or
2.3.3 Consummation, including receipt of any necessary regulatory
approval, of (i) a reorganization, merger, consolidation or other business
combination involving the Company or (ii) the sale or other disposition of
more than 50% of the operating assets of the Company (determined on a
consolidated basis), other than in connection with a sale-leaseback or
other arrangement resulting in the continued utilization of such assets
(or the operating products of such assets) by the Company (any transaction
described in part (i) or (ii) being referred to as a "Corporate
Transaction"); excluding, however, a Corporate Transaction pursuant to
which:
2.3.3.1 all or substantially all of the individuals and
entities who are the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting
Securities immediately prior to such Corporate Transaction
beneficially own, directly or indirectly, more than 60% of,
respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as the case
may be, of the ultimate parent entity resulting from such Corporate
Transaction (including, without limitation, an entity which, as a
result of such transaction, owns the Company or all or substantially
all of the assets of the Company either directly or through one or
more subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Corporate Transaction of the
Outstanding Company Common Stock and Outstanding Company Voting
Securities, as the case may be;
2.3.3.2 no Person (other than the Company, any Company Plan or
related trust, the corporation resulting from such Corporate
Transaction, and any Person which beneficially owned, immediately
prior to such Corporate Transaction, directly or indirectly, 20% or
more of the Outstanding Company Common Stock or the Outstanding
Company Voting Securities, as the case may be) will beneficially
own, directly or indirectly, 20% or more of, respectively, the then
outstanding common stock of the ultimate parent entity resulting
from such Corporate Transaction or the combined voting power of the
then outstanding voting securities of such entity; and
2.3.3.3 individuals who were members of the Incumbent Board
will constitute at least a majority of the members of the board of
directors of the ultimate parent entity resulting from such
Corporate Transaction; or
2.3.4 A tender offer (for which a filing has been made with the
Securities and Exchange Commission (the "SEC") which purports to comply
with the requirements of Section 14(d) of the Exchange Act and the
corresponding SEC rules) is made for the stock of the Company, which has
not been negotiated and approved by the Board, provided that in case of a
tender offer described in this subsection 2.3.4, the Change in Control
will be deemed to have occurred at the first time during the offer period
when the Person (as defined in subsection 2.3.1, above) making the offer
beneficially owns or has accepted for payment stock of the Company with
20% or more of the combined voting power of the then Outstanding Company
Voting Securities; or
2.3.5 Approval by the shareholders of the Company of a plan of
complete liquidation or dissolution of the Company.
2.3.6 For purposes of this Section 2.3, (i) the term "Company" shall
mean Nicor Inc. and shall include any Successor to Nicor Inc.; and (ii)
the term "Successor to Nicor Inc." shall mean any corporation,
partnership, joint venture or other entity that succeeds to the interests
of Nicor Inc. by means of a merger, consolidation, or other restructuring
that does not constitute a Change in Control under paragraphs 2.3.1, 2.3.3
or 2.3.4 above.
2.3.7 By entering into this Agreement, the Executive irrevocably
consents to the modification of the definition of "Change in Control"
(including "change in control") in all Employee Benefit Arrangements (as
defined below), by substituting for such definition in each such Employee
Benefit Arrangement the definition of "Change in Control" set forth above,
with such substitution to be effective on the first date this Agreement
has been signed by both the Company and the Executive. For purposes of the
preceding sentence, the term "Employee Benefit Arrangement" shall mean
each agreement with the Executive to which the Company or any Subsidiary
is a party, and each plan or arrangement maintained by the Company or any
Subsidiary, and including any awards outstanding under any such agreement,
plan, or arrangement, to the extent that such award, agreement, plan, or
arrangement contains a definition of "Change in Control." However, to the
extent that the Employee Benefit Arrangement provides for an award based
on common stock of the Company (including, without limitation, an award of
stock options or shares of restricted stock), and such Employee Benefit
Arrangement provides that vesting or exercisability of such award will
occur at the time of the Change in Control (rather than the occurrence of
a subsequent event, such as termination of employment), the definition of
"Change in Control" that is substituted for the definition in such
Employee Benefit Arrangement shall be the definition of "Change in
Control" set forth above, except that Section 2.3.4 shall be modified by
adding, at the end of such Section, immediately prior to the word "or,"
the following: "provided, however, that the Change in Control shall occur
three (3) business days before such tender offer is to terminate, unless
the offer is withdrawn first, if the Person making the offer could own, by
the terms of the offer plus any shares beneficially owned by that Person,
stock with 50% or more of the combined voting power of the then
Outstanding Company Voting Securities when the offer (and any subsequent
offering period) terminates;"
2.3.8 By entering into this Agreement, the Executive irrevocably
consents to the amendment of the Nicor Inc. Stock Deferral Plan to provide
for distribution, as soon as practicable following a Change in Control, of
any amounts which may then be deferred for the Executive under such plan.
2.4 "Code" means the Internal Revenue Code of 1986, as amended.
2.5 "Employment Period" means the period commencing on the Effective Date
and ending on the two-year anniversary of that date.
2.6 "Incentive Plan" shall have the meaning set forth in
Section 3.2.2.
2.7 "Notice of Termination" means a written notice given in accordance
with Section 11.8 which sets forth (a) the specific termination provision
in this Agreement relied upon by the party giving such notice, (b) in
reasonable detail the facts and circumstances claimed to provide a basis
for termination of the Executive's employment under such termination
provision, and (c) if the Termination Date is other than the date of
receipt of such Notice of Termination, the Termination Date.
2.8 "Plans" shall have the meaning set forth in Section 3.2.3.
2.9 A "Potential Change in Control" shall exist during any period in which
the circumstances described in Sections 2.9.1, 2.9.2, or 2.9.3 exist
(provided, however, that a Potential Change in Control shall cease to
exist not later than the occurrence of a Change in Control):
2.9.1 The Company enters into an agreement, the consummation of
which would result in the occurrence of a Change in Control, provided that
a Potential Change in Control described in this Section 2.9.1 shall cease
to exist upon the expiration or other termination of all such agreements.
2.9.2 Any person (including the Company) publicly announces an
intention to take or to consider taking actions the consummation of which
would constitute a Change in Control; provided that a Potential Change in
Control described in this Section 2.9.2 shall cease to exist upon the
withdrawal of such intention, or upon a reasonable determination by the
Board that there is no reasonable chance that such actions would be
consummated.
2.9.3 The Board adopts a resolution to the effect that, for purposes
of this Agreement, a Potential Change in Control exists; provided that a
Potential Change in Control described in this Section 2.9.3 shall cease to
exist upon a reasonable determination by the Board that the reasons that
gave rise to the resolution providing for the existence of a Potential
Change in Control have expired or no longer exist.
2.10 "Severance Incentive" means the greater of (i) the target annual
incentive under an Incentive Plan applicable to the Executive for the
Performance Period in which the Termination Date occurs, or (ii) the
average of the actual annual incentives paid (or payable, to the extent
not previously paid) to the Executive under the applicable Incentive Plan
for each of the two calendar years preceding the calendar year in which
the Termination Date occurs.
2.11 "Severance Period" means the period beginning on the Executive's
Termination Date and ending on the third anniversary thereof; provided,
however, that no Severance Period will occur unless the Executive's
Termination Date occurs under circumstances described in Section 5.1
(relating to termination by the Executive for Good Reason or by the
Company and Nicor Gas other than for Cause or Permanent Disability).
2.12 "Subsidiary" shall mean any corporation, partnership, joint venture
or other entity during any period in which at least a fifty percent
interest in such entity is owned, directly or indirectly, by the Company
(or a successor to the Company).
2.13 "Termination Date" means the first day on or after which the
Executive is not employed by the Company or Nicor Gas; provided, however,
that (a) if the Company and Nicor Gas terminate the Executive's employment
other than for Cause or Disability (as defined in Section 4.1.2), then the
Termination Date shall be the date of receipt of the Notice of Termination
and (b) if the Executive's employment is terminated by reason of death or
Disability, then the Termination Date shall be the date of death of the
Executive or the Disability Effective Date (as defined in Section 4.1.1),
as the case may be.
2.14 "Welfare Plans" shall have the meaning set forth in Section 3.2.4.
ARTICLE III
TERMS OF EMPLOYMENT
3.1 Position and Duties.
3.1.1 The Company hereby agrees to cause the Company and/or Nicor
Gas to continue the Executive's employment during the Employment Period
and, subject to Article IV of this Agreement, the Executive agrees to
remain in the employ of the Company and Nicor Gas, as applicable, subject
to the terms and conditions hereof. During the Employment Period, (i) the
Executive's position (including status, offices, titles and reporting
requirements), authority, duties and responsibilities shall be at least
commensurate in all material respects with the most significant of those
held, exercised and assigned to the Executive at any time during the
90-day period immediately preceding the Effective Date, and (ii) the
Executive's services shall be performed at the location where the
Executive was employed immediately preceding the Effective Date or any
office or location less than 25 miles from such location.
3.1.2 During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the Executive
agrees to devote reasonable attention and time during normal business
hours to the business and affairs of the Company and Nicor Gas, as
applicable, and, to the extent necessary to discharge the responsibilities
assigned to the Executive hereunder, to use the Executive's reasonable
best efforts to perform faithfully and efficiently such responsibilities.
During the Employment Period it shall not be a violation of this Agreement
for the Executive (i) to serve on corporate, civic or charitable boards or
committees, (ii) to deliver lectures, fulfill speaking engagements or
teach at educational institutions and (iii) to manage personal
investments, to the extent that such other activities do not, in the
reasonable judgment of the Board, inhibit or prohibit the performance of
the Executive's duties under this Agreement, or conflict in any material
way with the business of the Company or any Subsidiary; provided, however,
that the Executive shall not serve on the board of any business, or hold
any other position with any business, without the consent of the Board.
3.2 Compensation.
3.2.1 Base Salary. During the Employment Period, the Executive shall
receive an annual base salary ("Annual Base Salary"), which shall be paid
at an annual rate at least equal to twelve times the highest monthly base
salary paid or payable, including any base salary which has been earned
but deferred, to the Executive by the Company in respect of the
twelve-month period immediately preceding the month in which the Effective
Date occurs. During the Employment Period, the Annual Base Salary shall be
reviewed no more than twelve months after the last salary increase awarded
to the Executive prior to the Effective Date and, thereafter, at least
annually, and shall be increased at any time and from time to time as
shall be substantially consistent with increases in base salary awarded to
other senior executives of the Company. Annual Base Salary shall not be
reduced after any such increase unless such reduction is part of a policy,
program or arrangement applicable to senior executives of the Company and
of any successor entity, and the term Annual Base Salary as used in this
Agreement shall refer to Annual Base Salary as so increased. Any increase
in Annual Base Salary shall not limit or reduce any other obligation of
the Company to the Executive under this Agreement.
3.2.2 Annual Incentive. In addition to Annual Base Salary, the
Company shall pay or cause to be paid to the Executive an incentive award
(the "Annual Incentive") for each Performance Period or portion thereof
which falls within the Employment Period. "Performance Period" means each
period of time designated in accordance with any annual incentive award
arrangement ("Incentive Plan") which is based upon performance and
approved by the Board or any committee of the Board, or in the absence of
any Incentive Plan or any such designated period of time, Performance
Period shall mean each calendar year. The Executive's target and maximum
Annual Incentive with respect to any Performance Period shall not be less
than the target and maximum annual incentive award payable with respect to
the Executive under the Company's annual incentive program as in effect
immediately preceding the Effective Date.
3.2.3 Incentive, Savings and Retirement Plans. During the Employment
Period, the Executive shall be entitled to participate in all incentive,
savings and retirement plans, practices, policies and programs ("Plans")
applicable generally to other senior executives of the Company, but in no
event shall such Plans provide the Executive with incentive opportunities
(measured with respect to long- term and special incentives, to the
extent, if any, that such distinctions are applicable) or savings and
retirement benefits which are less favorable, in the aggregate, than the
greater of (i) those provided by the Company for the Executive under such
Plans as in effect at any time during the 90-day period immediately
preceding the Effective Date, or (ii) those provided generally at any time
after the Effective Date to other senior executives of the Company.
3.2.4 Welfare Benefit Plans. During the Employment Period, the
Executive and/or the Executive's family, as the case may be, shall be
eligible for participation in and shall receive all benefits under welfare
benefit plans, practices, policies and programs ("Welfare Plans") provided
by the Company (including, without limitation, medical, prescription,
dental, disability, salary continuance, employee life, group life,
accidental death and travel accident insurance benefits), but in no event
shall such Welfare Plans provide the Executive with benefits which are
less favorable, in the aggregate, than the greater of (i) those provided
by the Company for the Executive under such Welfare Plans as were in
effect at any time during the 90-day period immediately preceding the
Effective Date, or (ii) those provided generally at any time after the
Effective Date to other senior executives of the Company.
3.2.5 Other Employee Benefits. During the Employment Period, the
Executive shall be entitled to other employee benefits and perquisites in
accordance with the most favorable plans, practices, programs and policies
of the Company, as in effect with respect to the Executive at any time
during the 90-day period immediately preceding the Effective Date, or if
more favorable, as in effect generally with respect to other senior
executives of the Company.
3.2.6 Expenses. During the Employment Period, the Executive shall be
entitled to receive prompt reimbursement for all reasonable expenses
incurred by the Executive in accordance with the policies, practices and
procedures of the Company as in effect with respect to the Executive at
any time during the 90-day period immediately preceding the Effective
Date, or if more favorable, as in effect generally with respect to other
senior executives of the Company.
3.2.7 Office and Support Staff. During the Employment Period, the
Executive shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to exclusive personal secretarial
and other assistance, as in effect with respect to the Executive at any
time during the 90-day period immediately preceding the Effective Date, or
if more favorable, as provided generally with respect to other senior
executives of the Company.
3.2.8 Paid Time Off. During the Employment Period, the Executive
shall be entitled to paid time off in accordance with the plans, policies,
programs and practices of the Company as in effect with respect to the
Executive at any time during the 90-day period immediately preceding the
Effective Date, or if more favorable, as provided generally with respect
to other senior executives of the Company.
3.2.9 Subsidiaries. To the extent that immediately prior to the
Effective Date, the Executive has been on the payroll of, and participated
in the incentive or employee benefit plans of, a Subsidiary of the
Company, the references to the Company contained in Sections 3.2.1 through
3.2.8 and the other sections of this Agreement referring to benefits to
which the Executive may be entitled shall be read to refer to such
Subsidiary.
ARTICLE IV
TERMINATION OF EMPLOYMENT
4.1 Disability.
4.1.1 During the Agreement Term, the Company and Nicor Gas may
terminate the Executive's employment upon the Executive's Permanent
Disability (as defined in Section 4.1.2) by giving the Executive or his
legal representative, as applicable, (1) written notice in accordance with
Section 11.8 of the Company's or Nicor Gas', as applicable, intention to
terminate the Executive's employment pursuant to this section, and (2) a
certification of the Executive's Permanent Disability by a physician
selected by the Company or Nicor Gas or its insurers and reasonably
acceptable to the Executive or the Executive's legal representative. The
Executive's employment shall terminate effective on the 30th day (the
"Permanent Disability Effective Date") after the Executive's receipt of
such notice unless, before the Permanent Disability Effective Date, the
Executive shall have resumed the full-time performance of the Executive's
duties. During the period in which the Executive has a Disability, the
Company or Nicor Gas, as applicable, may appoint a temporary replacement
to assume the Executive's responsibilities.
4.1.2 The Executive shall be considered to have a "Permanent
Disability" during any period in which he has a Disability (as defined
below); provided, however, that the Executive shall not be considered to
have "Permanent Disability" until (i) for a period of 180 consecutive
days, the Executive, as a result of a Disability, is incapable, after
reasonable accommodation, of performing his duties under this Agreement on
a full-time basis; (ii) such Disability is reasonably expected to continue
for at least another 90 days; and (iii) at the Executive's Termination
Date, he is eligible for income replacement benefits under the Company's
or Nicor Gas' long-term disability plan. The Executive shall be considered
to have a "Disability" during any period in which he has a physical or
mental disability which renders him incapable, after reasonable
accommodation, of performing his duties under this Agreement.
4.2 Death. The Executive's employment shall terminate automatically upon
the Executive's death during the Agreement Term.
4.3 Cause. The Company or Nicor Gas, as applicable, may terminate the
Executive's employment during the Employment Period for Cause. For
purposes of this Agreement, "Cause" means:
4.3.1 the Executive's willful commission of acts or omissions which
have, have had, or are likely to have a material adverse effect on the
business, operations, financial condition or reputation of the Company or
Nicor Gas;
4.3.2 the Executive's conviction (including a plea of guilty or nolo
contendere) of a felony or any crime of fraud, theft, dishonesty or moral
turpitude; or
4.3.3 the Executive's material violation of any statutory or common
law duty of loyalty to the Company or Nicor Gas.
For purposes of this Agreement, no act, or failure to act, on the part of
the Executive shall be considered "willful" unless it is done, or omitted
to be done, by the Executive in bad faith or without reasonable belief
that the Executive's action or omission was in the best interests of the
Company or Nicor Gas. Any act, or failure to act, pursuant to direction
provided by the person to whom the Executive reports, or provided by a
resolution duly adopted by the Board, or pursuant to advice of counsel for
the Company or Nicor Gas, shall be conclusively presumed to be done, or
omitted to be done, by the Executive in good faith and in the best
interests of the Company or Nicor Gas. The cessation of employment of the
Executive shall not be deemed to be for Cause unless and until there shall
have been delivered to the Executive a copy of a resolution duly adopted
by the affirmative vote of not less than 60% of the entire membership of
the Board at a meeting of such Board called and held for such purpose
(after reasonable notice is provided to the Executive and the Executive is
given an opportunity, together with counsel, to be heard before the
Board), finding that, in the good faith opinion of the Board, the
Executive has engaged in conduct described in this Section 4.3 and
specifying the particulars thereof in detail.
4.4 Good Reason. During the Employment Period, the Executive's employment
may be terminated by the Executive for Good Reason. For purposes of this
Agreement, "Good Reason" means any material breach of this Agreement by
the Company or Nicor Gas, including:
4.4.1 the failure to maintain the Executive in the office or
position, or in a substantially equivalent office or position, held by the
Executive immediately prior to the Change in Control, including causing or
requiring the Executive to report to any individual or group other than
the board of directors of a corporation whose stock is publicly traded;
4.4.2 a material adverse alteration in the nature or scope of the
Executive's position, duties, functions, responsibilities or authority;
4.4.3 a material reduction of the Executive's salary, incentive
compensation or benefits;
4.4.4 the failure of any successor to the Company to assume this
Agreement, or a material breach of the Agreement by the Company or its
successor;
4.4.5 a relocation of more than 25 miles of (i) the Executive's
principal workplace, or (ii) the principal offices of the Company or Nicor
Gas, as applicable, (if such offices are the Executive's principal
workplace), in each case without the consent of the Executive;
4.4.6 the Company or Nicor Gas, as applicable, requiring the
Executive to engage in travel that is materially greater than the
Executive's travel obligations during the 1-year period immediately prior
to the Change in Control; or
4.4.7 any failure by the Company or Nicor Gas, as applicable, to
comply with any of the provisions of Section 3.2 of this Agreement, other
than an isolated, insubstantial and inadvertent failure not occurring in
bad faith and which is remedied by the Company or Nicor Gas, as
applicable, promptly after receipt of notice thereof given by the
Executive;
provided, however, that an act or omission of the Company or Nicor Gas, as
applicable, shall not constitute Good Reason: (i) unless the Executive gives the
Company or Nicor Gas, as applicable, written notice of such act or omission and
the Company or Nicor Gas, as applicable, fails to cure such act or omission
within the 30-day period after such notice, or (ii) if the Executive first
acquired knowledge of such act or omission more than 6 months before the
Executive gives the Company or Nicor Gas, as applicable, such notice, or (C) if
the Executive has consented in writing to such act or omission in a document
that makes specific reference to this Section 4.4. In addition, any other
provision of this Agreement notwithstanding, termination by the Executive for
any reason during the 12-month period which begins 90 days after a Change in
Control shall be deemed to be a termination for Good Reason.
4.5 Without Cause During a Potential Change in Control. If the Executive's
employment is terminated by the Company and Nicor Gas, as applicable, without
Cause during a Potential Change in Control, and such date of termination occurs
not more than 180 days prior to the occurrence of a Change in Control and the
Executive establishes by reasonable evidence that such termination of employment
was materially connected with and in anticipation of the Change in Control, then
the Executive shall be entitled to receive the benefits that would have been
provided under Section 5.1, determined as though:
4.5.1 the Executive were rehired by the Company and Nicor Gas, as
applicable, immediately prior to the Change in Control at the salary rate
equal to the Executive's highest salary rate during the one-year period
prior to the date of the Change in Control, and with other Company and
Nicor Gas compensation and benefit arrangements comparable to those
provided to comparable executives of the Company and Nicor Gas;
4.5.2 the Executive's employment were terminated by the Company and
Nicor Gas without Cause immediately after the Change in Control; and
4.5.3 this Agreement were in full force and effect at the time of
the Change in Control, and at the time of the Executive's deemed
termination of employment.
4.6 Right of Resignation and Termination. This Agreement does not
constitute a guarantee of continued employment at any time, but instead provides
for certain rights and benefits for the Executive during his employment
following the occurrence of a Change in Control, and in the event his employment
with the Company and Nicor Gas, as applicable, terminates under the
circumstances described herein. The Company and Nicor Gas, as applicable, may
terminate the employment of the Executive at any time for any reason, without
breach of this Agreement, subject to its obligations set forth in Article V and
elsewhere in this Agreement. The Executive may resign from the Company and Nicor
Gas, as applicable, for Good Reason, or for any other reason, without breach of
this Agreement, subject to the Executive's obligations set forth in this
Agreement; provided that, in the event of a resignation without Good Reason, the
Executive shall provide at least four weeks advance notice of such resignation
to the Company and Nicor Gas, as applicable.. Notwithstanding the foregoing
provisions in this Section 4.6, the Company and Nicor Gas, as applicable, may
suspend the Executive from performing his duties under this Agreement following
the delivery of a Notice of Termination by the Executive without Good Reason;
provided, however, that during the period of suspension (which shall end on the
Termination Date), the Executive shall continue to be treated as employed by the
Company and Nicor Gas, as applicable, for other purposes, and his rights to
compensation or benefits shall not be reduced by reason of the suspension.
ARTICLE V
OBLIGATIONS OF THE COMPANY UPON TERMINATION
5.1 If by the Executive for Good Reason or by the Company and Nicor Gas,
as Applicable, Other Than for Cause or Permanent Disability. If, during the
Employment Period, the Company and Nicor Gas, as applicable, shall terminate the
Executive's employment other than for Cause or Permanent Disability, or if the
Executive shall terminate employment for Good Reason, the Company's and Nicor
Gas' obligations to the Executive shall be as set forth in this Section 5.1. As
a precondition to fulfilling such obligations, the Company shall require the
Executive to execute and deliver a release prepared by the Company and providing
for the Executive's release of any and all claims against the Company and its
Subsidiaries (and those acting on behalf of them) that may have arisen on or
before the date of the release, which release shall contain such other
reasonable and customary terms as are specified by the Company. Notwithstanding
any other provision of this section to the contrary, to the extent any portion
of such release is subject to the seven-day revocation period prescribed by the
Age Discrimination in Employment Act, as amended, or to any similar revocation
period in effect on the Termination Date, no payment shall be due under this
Section 5.1 until such revocation period has expired without such revocation
occurring.
5.1.1 The Company shall, within five business days of such
termination of employment, pay the Executive a cash payment equal to the
sum of the following amounts:
5.1.1.1 to the extent not previously paid, the Annual Base
Salary and any accrued paid time off through the Termination Date;
5.1.1.2 an amount equal to the product of (i) the Annual
Incentive (as defined in Section 3.2.2) at target for any
Performance Period in which the Termination Date occurs multiplied
by (ii) a fraction, the numerator of which is the number of days the
Executive was actually employed by the Company during such
Performance Period, and the denominator of which is the number of
days in the Performance Period; or, if greater, the amount of any
Annual Incentive otherwise payable to the Executive with respect to
a Performance Period in which the Termination Date occurs, which
payment shall be in full settlement of Annual Incentive amounts due
with respect to any such Performance Period; and
5.1.1.3 all amounts previously deferred by or accrued to the
benefit of the Executive under any nonqualified deferred
compensation plan sponsored by the Company (including, without
limitation, any vested amounts deferred under incentive plans),
together with any accrued earnings thereon, and not yet paid by the
Company; and
5.1.1.4 an amount equal to the product of (A) three (3)
multiplied by (B) the sum of (i) the Executive's Annual Base Salary,
and (ii) the Severance Incentive.
5.1.2 For purposes of each of the Executive's stock options granted
under the Company's Long Term Incentive Plan (the "LTIP"), any successor
plan, or otherwise, that is or becomes exercisable on the Termination
Date, the Executive's termination of employment shall be disregarded, and
each such option shall continue to be exercisable as though the
Executive's employment had continued through the last day on which such
option would be exercisable in the absence of such employment termination
(such earlier date being referred to herein as the "Applicable Expiration
Date"). This Section 5.1.2 shall be applicable notwithstanding any term of
any plan, arrangement, or agreement providing for early expiration of the
option because of the Executive's termination of employment, except for an
amendment adopted in accordance with Section 11.7 of this Agreement and
that by its specific terms amends this Agreement.
5.1.3 On the Termination Date (i) the Executive shall become fully
vested in, and may thereupon and until the Applicable Expiration Date of
such stock incentive awards exercise in whole or in part, any and all
stock incentive awards granted to the Executive under the LTIP, any
successor plan or otherwise which have not become exercisable as of the
Termination Date; (ii) all dividend performance units previously awarded
to the Executive shall become fully vested, and a prorated calculation of
the target value of all such units shall be done as of the Termination
Date and full payment of such prorated target value shall be made by the
Company within 30 days after the Termination Date; and (iii) the Executive
shall become fully vested at the prorated target level in any other cash
incentive awards granted for the performance period in which the
Termination Date occurs under the LTIP, a successor plan or otherwise
which have not, as of the Termination Date, become fully vested.
5.1.4 All forfeiture conditions that as of the Termination Date are
applicable to any deferred stock unit, restricted stock or restricted
share units awarded to the Executive by the Company pursuant to the LTIP,
a successor plan or otherwise shall lapse immediately (to the extent such
awards are outstanding immediately prior to the Termination Date).
5.1.5 During the Severance Period (or until such later date as any
Welfare Plan of the Company may specify), the Company shall continue to
provide to the Executive and the Executive's family welfare benefits
(including, without limitation, medical, prescription, dental, disability,
individual life and group life insurance benefits) which are at least as
favorable as those provided under the most favorable Welfare Plans of the
Company applicable (i) with respect to the Executive and his family during
the 90-day period immediately preceding the Termination Date, or (ii) with
respect to other senior executives and their families during the Severance
Period. In determining benefits under such Welfare Plans, the Executive's
annual compensation attributable to base salary and incentives for any
plan year or calendar year, as applicable, shall be deemed to be not less
than the Executive's Annual Base Salary and Target Annual Incentive. The
cost of the welfare benefits provided under this Section 5.1.5 shall not
exceed the cost of such benefits to the Executive immediately before the
Termination Date or, if less, the Effective Date. Notwithstanding the
foregoing, if the Executive obtains comparable coverage under any Welfare
Plans sponsored by another employer, then the amount of coverage required
to be provided by the Company hereunder shall be reduced by the amount of
coverage provided by such other employer's Welfare Plans. The Executive's
rights under this Section shall be in addition to and not in lieu of any
post-termination continuation coverage or conversion rights the Executive
may have pursuant to applicable law, including, without limitation,
continuation coverage required by Section 4980B of the Code. For purposes
of determining eligibility for (but not the time of commencement of)
retiree benefits under any Welfare Plans of the Company, the Executive
shall be considered (i) to have remained employed until the last day of
the Severance Period and to have retired on the last day of such period,
and (ii) to have attained the age the Executive would have attained on the
last day of the Severance Period.
5.1.6 If the Executive participates in the Company's nonqualified
supplemental executive retirement plan ("SERP"), the amount payable under
subsection 5.1.1.4 of this Agreement shall be taken into account for
purposes of determining the amount of benefits to which the Executive is
entitled under the SERP; provided that such amount shall be taken into
account as though it was earned equally over the Severance Period, and
further provided that the Executive shall be deemed to have attained the
age he or she would have attained as of the last day of the Severance
Period, and completed the number of years of service he or she would have
completed as of the last day of the Severance Period. The Severance Period
shall be taken into account for purposes of determining the amount of and
eligibility to begin to receive benefits under the SERP.
5.1.7 On the Termination Date (i) the Executive shall become fully
vested in all contributions made by the Company on behalf of the Executive
under the Company's Savings Investment Plan (the "SIP") or any
supplemental or successor plan, if applicable, and (ii) the Company shall
immediately make an additional contribution to the SIP (or, if such
contribution is not permitted under the terms of the SIP, to a
non-qualified plan providing benefits comparable to the benefits provided
under the SIP) or any supplemental or successor plan, if applicable, equal
to the aggregate maximum matching contributions which the Company would
have made on behalf of the Executive to the SIP or any supplemental or
successor plan, if applicable, for the Severance Period, calculated as if
the amount payable under subsection 5.1.1.4 of this Agreement had been
earned equally over the Severance Period and the Executive had made the
maximum allowable voluntary contributions to the SIP or any supplemental
or successor plan, if applicable. In addition, if the Executive is not
eligible to participate in the Company's defined benefit retirement plan,
the Company shall also contribute to the SIP or any supplemental or
successor plan, if applicable, on the Termination Date an amount equal to
the aggregate additional "retirement growth" contributions which the
Company would have made on behalf of the Executive for the Severance
Period if the amount payable under subsection 5.1.1.4 of this Agreement
had been earned equally over the Severance Period.
5.1.8 The Company shall, at its sole expense, as incurred, pay on
behalf of Executive all fees and costs charged by a nationally recognized
outplacement firm selected by the Company (subject to approval by the
Executive, which shall not be withheld unreasonably) to provide
outplacement service.
5.2 If by the Company and Nicor Gas for Cause. If the Company and Nicor
Gas, as applicable, terminates the Executive's employment for Cause during the
Employment Period, this Agreement shall terminate without further obligation by
the Company and Nicor Gas, as applicable, to the Executive, other than the
obligation immediately to pay the Executive in cash the Executive's Annual Base
Salary through the Termination Date, plus any accrued paid time off, in each
case to the extent not previously paid.
5.3 If by the Executive Other Than for Good Reason. If the Executive
terminates employment during the Employment Period other than for Good Reason
(including, but not by way of limitation, voluntary retirement other than for
Good Reason), and other than for Disability or death, this Agreement shall
terminate without further obligation by the Executive or by the Company, other
than the obligation of the Company immediately to pay the Executive in cash the
Executive's Annual Base Salary through the Termination Date, plus any accrued
paid time off, in each case to the extent not previously paid.
5.4 If by the Company and Nicor Gas, as applicable, for Permanent
Disability. If the Company and Nicor Gas, as applicable, and Nicor Gas, as
applicable, terminates the Executive's employment by reason of the Executive's
Permanent Disability during the Employment Period, this Agreement shall
terminate without further obligation to the Executive, other than:
5.4.1 the Company's obligation immediately to pay the Executive in
cash all amounts specified in Sections 5.1.1.1, 5.1.1.2 and 5.1.1.3, in
each case, to the extent unpaid as of the Termination Date (such amounts
collectively, the "Accrued Obligations"), and
5.4.2 the Executive's right after the Permanent Disability Effective
Date to receive disability and other benefits at least equal to the
greater of (i) those provided under the most favorable disability Plans
applicable to disabled senior executives of the Company in effect
immediately before the Termination Date, or (ii) those provided under the
most favorable disability Plans of the Company in effect at any time
during the 90-day period immediately before the Effective Date.
5.5 If upon Death. If the Executive's employment is terminated by reason
of the Executive's death during the Employment Period, this Agreement shall
terminate without further obligation to the Executive's legal representatives
under this Agreement, other than the obligation immediately to pay the
Executive's estate or beneficiary in cash all Accrued Obligations.
Notwithstanding anything in this Agreement to the contrary, the Executive's
family shall be entitled to receive benefits at least equal to the most
favorable benefits provided under Plans of the Company to the surviving families
of senior executives of the Company, but in no event shall such Plans provide
benefits which in each case are less favorable, in the aggregate, than the most
favorable of those provided by the Company to the Executive under such Plans in
effect at any time during the 90-day period immediately before the Effective
Date.
ARTICLE VI
CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY
6.1 Gross-up for Certain Taxes.
6.1.1 If it is determined by the Company's independent auditors that
any benefit received or deemed received by the Executive from the Company
pursuant to this Agreement or otherwise, whether or not in connection with
a Change in Control (such monetary or other benefits collectively, the
"Potential Parachute Payments") is or will become subject to any excise
tax under Section 4999 of the Code or any similar tax payable under any
United States federal, state, local or other law (such excise tax and all
such similar taxes collectively, "Excise Taxes"), then the Company shall,
subject to Sections 6.6 and 6.7, within five business days after such
determination, pay the Executive an amount (the "Gross-up Payment") equal
to the product of:
(a) the amount of such Excise Taxes multiplied by
(b) the Gross-up Multiple (as defined in Section 6.4). The
Gross-up Payment is intended to compensate the Executive
for all Excise Taxes payable by the Executive with
respect to the Potential Parachute Payments and any
federal, state, local or other income or other taxes or
Excise Taxes payable by the Executive with respect to
the Gross-up Payment.
6.1.2 The determination of the Company's independent auditors
described in Section 6.1.1, including the detailed calculations of the
amounts of the Potential Parachute Payments, Excise Taxes and Gross-Up
Payment and the assumptions relating thereto, shall be set forth in a
written certificate of such auditors (the "Company Certificate") delivered
to the Executive. The Executive or the Company may at any time request the
preparation and delivery to the Executive of a Company Certificate. The
Company shall cause the Company Certificate to be delivered to the
Executive as soon as reasonably possible after such request.
6.2 Determination by the Executive.
6.2.1 If (i) the Company shall fail to deliver a Company Certificate
to the Executive within 30 days after its receipt of his written request
therefor, or (ii) at any time after the Executive's receipt of a Company
Certificate, the Executive disputes either (x) the amount of the Gross-Up
Payment set forth therein, or (y) the determination set forth therein to
the effect that no Gross-Up Payment is due (whether by reason of Section
6.7 or otherwise), then the Executive may elect to require the Company to
pay a Gross-Up Payment in the amount determined by the Executive as set
forth in an Executive Counsel Opinion (as defined in Section 6.5). Any
such demand by the Executive shall be made by delivery to the Company of a
written notice which specifies the Gross-Up Payment determined by the
Executive (together with the detailed calculations of the amounts of
Potential Parachute Payments, Excise Taxes and Gross-Up Payment and the
assumptions relating thereto) and an Executive Counsel Opinion regarding
such Gross-Up Payment (such written notice and opinion collectively, the
"Executive's Determination"). Within 30 days after delivery of an
Executive's Determination to the Company, the Company shall either (i) pay
the Executive the Gross-Up Payment set forth in Executive's Determination
(less the portion thereof, if any, previously paid to Executive by the
Company) or (ii) deliver to the Executive a Company Certificate and a
Company Counsel Opinion (as defined in Section 6.5), and pay the Executive
the Gross-Up Payment specified in such Company Certificate. If for any
reason the Company fails to comply with the preceding sentence, the
Gross-Up Payment specified in the Executive's Determination shall be
controlling for all purposes.
6.2.2 If the Executive does not request a Company Certificate, and
the Company does not deliver a Company Certificate to the Executive, then
(i) the Company shall, for purposes of Section 6.7, be deemed to have
determined that no Gross-up Payment is due, and (ii) the Executive shall
not pay any Excise Taxes in respect of Potential Parachute Payments,
except in accordance with Sections 6.6.1 or 6.6.4.
6.3 Additional Gross-up Amounts. If for any reason it is later determined
(whether pursuant to the subsequently-enacted provisions of the Code, final
regulations or published rulings of the IRS, a final judgment of a court of
competent jurisdiction, a determination of the Company's independent auditors
set forth in a Company Certificate or, subject to the last two sentences of
Section 6.2.1, an Executive's Determination) that the amount of Excise Taxes
payable by the Executive is greater than the amount determined by the Company or
the Executive pursuant to Section 6.1 or 6.2, as applicable, then the Company
shall, subject to Sections 6.6 and 6.7, pay the Executive an amount (which shall
also be deemed a Gross-up Payment) equal to the product of:
(a) the sum of (1) such additional Excise Taxes and (2) any
interest, fines, penalties, expenses or other costs incurred
by the Executive as a result of having taken a position in
accordance with determination made pursuant to Section 6.1 or
6.2, as applicable,
multiplied by
(b) the Gross-up Multiple.
6.4 Gross-up Multiple. The Gross-up Multiple shall equal a fraction, the
numerator of which is one (1.0), and the denominator of which is one (1.0) minus
the lesser of (i) the sum, expressed as a decimal fraction, of the effective
marginal tax rates of all federal, state, local and other income and other taxes
and any Excise Taxes applicable to the Gross-up Payment; or (ii) 0.80, it being
intended that the Gross-up Multiple shall in no event exceed five (5.0). (If
different rates of tax are applicable to various portions of a Gross-up Payment,
the weighted average of such rates shall be used.)
6.5 Opinion of Counsel. "Executive Counsel Opinion" means an opinion of
nationally-recognized executive compensation counsel to the effect (i) that the
amount of the Gross-Up Payment determined by the Executive pursuant to Section
6.2 is the amount that a court of competent jurisdiction, based on a final
judgment not subject to further appeal, is most likely to decide to have been
calculated in accordance with this Article and applicable law and (ii) if the
Company has previously delivered a Company Certificate to the Executive, that
there is no reasonable basis or no substantial authority for the calculation of
the Gross-Up Payment set forth in the Company Certificate. "Company Counsel
Opinion" means an opinion of nationally-recognized executive compensation
counsel to the effect that (i) the amount of the Gross-Up Payment set forth in
the Company Certificate is the amount that a court of competent jurisdiction,
based on a final judgment not subject to further appeal, is most likely to
decide to have been calculated in accordance with this Article and applicable
law and (ii) for purposes of Section 6662 of the Code, the Executive has
substantial authority to report on his federal income tax return the amount of
Excise Taxes set forth in the Company Certificate.
6.6 Amount Increased or Contested.
6.6.1 The Executive shall notify the Company in writing (an
"Executive's Notice") of any claim by the IRS or other taxing authority
(an "IRS Claim") that, if successful, would require the payment by the
Executive of Excise Taxes in respect of Potential Parachute Payments in an
amount in excess of the amount of such Excise Taxes determined in
accordance with Section 6.1 or 6.2, as applicable. Such Executive's Notice
shall include the nature and amount of such IRS Claim, the date on which
such IRS Claim is due to be paid (the "IRS Claim Deadline"), and a copy of
all notices and other documents or correspondence received by the
Executive in respect of such IRS Claim. The Executive shall give the
Executive's Notice as soon as practicable, but no later than the earlier
of (i) 10 business days after the Executive first obtains actual knowledge
of such IRS Claim or (ii) five business days after the IRS Claim Deadline;
provided, however, that the Executive's failure to give such notice shall
affect the Company's obligations under this Article only to the extent
that the Company is actually prejudiced by such failure. If at least one
business day before the IRS Claim Deadline the Company shall:
6.6.1.1 deliver to the Executive a Company Certificate to the
effect that the IRS Claim has been reviewed by the Company's
independent auditors and, notwithstanding the IRS Claim, the amount
of Excise Taxes, interest and penalties payable by the Executive is
either zero or an amount less than the amount specified in the IRS
Claim,
6.6.1.2 pay to the Executive an amount (which shall also be
deemed a Gross-Up Payment) equal to the positive difference between
(x) the product of the amount of Excise Taxes, interest and
penalties specified in the Company Certificate, if any, multiplied
by the Gross-Up Multiple, and (y) the portion of such product, if
any, previously paid to Executive by the Company, and
6.6.1.3 direct the Executive pursuant to Section 6.6.4 to
contest the balance of the IRS Claim, then the Executive shall pay
only the amount, if any, of Excise Taxes, interest and penalties
specified in the Company Certificate. In no event shall the
Executive pay an IRS Claim earlier than 30 days after having given
an Executive's Notice to the Company (or, if sooner, the IRS Claim
Deadline).
6.6.2 At any time after the payment by the Executive of any amount
of Excise Taxes or related interest or penalties in respect of Potential
Parachute Payments (whether or not such amount was based upon a Company
Certificate or an Executive's Determination), the Company may in its
discretion require the Executive to pursue a claim for a refund (a "Refund
Claim") of all or any portion of such Excise Taxes, interest or penalties
as the Company may specify by written notice to the Executive.
6.6.3 If the Company notifies the Executive in writing that the
Company desires the Executive to contest an IRS Claim or to pursue a
Refund Claim, the Executive shall:
6.6.3.1 give the Company all information that it reasonably
requests in writing from time to time relating to such IRS Claim or
Refund Claim, as applicable,
6.6.3.2 take such action in connection with such IRS Claim or
Refund Claim (as applicable) as the Company reasonably requests in
writing from time to time, including accepting legal representation
with respect thereto by an attorney selected by the Company, subject
to the approval of the Executive (which approval shall not be
unreasonably withheld or delayed),
6.6.3.3 cooperate with the Company in good faith to contest
such IRS Claim or pursue such Refund Claim, as applicable,
6.6.3.4 permit the Company to participate in any
proceedings relating to such IRS Claim or Refund Claim, as
applicable, and
6.6.3.5 contest such IRS Claim or prosecute such Refund Claim
(as applicable) to a determination before any administrative
tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company may from time to time determine in
its discretion.
The Company shall control all proceedings in connection with such
IRS Claim or Refund Claim (as applicable) and in its discretion may
cause the Executive to pursue or forego any and all administrative
appeals, proceedings, hearings and conferences with the IRS or other
taxing authority in respect of such IRS Claim or Refund Claim (as
applicable); provided that (i) any extension of the statute of
limitations relating to payment of taxes for the taxable year of the
Executive relating to the IRS Claim is limited solely to such IRS
Claim, (ii) the Company's control of the IRS Claim or Refund Claim
(as applicable) shall be limited to issues with respect to which a
Gross-Up Payment would be payable, and (iii) the Executive shall be
entitled to settle or contest, as the case may be, any other issue
raised by the IRS or other taxing authority.
6.6.4 The Company may at any time in its discretion direct the
Executive to (i) contest the IRS Claim in any lawful manner or (ii) pay
the amount specified in an IRS Claim and pursue a Refund Claim; provided,
however, that if the Company directs the Executive to pay an IRS Claim and
pursue a Refund Claim, the Company shall advance the amount of such
payment to the Executive on an interest-free basis and shall indemnify the
Executive, on an after-tax basis, for any income or other applicable taxes
or Excise Tax, and any related interest or penalties imposed with respect
to such advance.
6.6.5 The Company shall pay directly all legal, accounting and other
costs and expenses (including additional interest and penalties) incurred
by the Company or the Executive in connection with any IRS Claim or Refund
Claim, as applicable, and shall indemnify the Executive, on an after-tax
basis, for any income or other applicable taxes, Excise Tax and related
interest and penalties imposed on the Executive as a result of such
payment of costs and expenses.
6.7 Refunds. If, after the receipt by the Executive of any payment or
advance of Excise Taxes advanced by the Company pursuant to Section 6.6, the
Executive receives any refund with respect to such claim, the Executive shall
(subject to the Company's complying with the requirements of Section 6.6)
promptly pay the Company the amount of such refund (together with any interest
paid or credited thereon after taxes applicable thereto). If, after the receipt
by Executive of an amount advanced by the Company pursuant to Section 6.6, a
determination is made that the Executive shall not be entitled to any refund
with respect to such claim and the Company does not notify the Executive in
writing of its intent to contest such determination within 30 days after the
Company receives written notice of such determination, then such advance shall
be forgiven and shall not be required to be repaid and the amount of such
advance shall offset, to the extent thereof, the amount of Gross-up Payment
required to be paid. Any contest of a denial of refund shall be controlled by
Section 6.6.
ARTICLE VII
EXPENSES AND INTEREST
7.1 Legal Fees and Other Expenses.
7.1.1 If the Executive incurs legal fees or other expenses in an
effort to secure, preserve, establish entitlement to, or obtain benefits
under this Agreement (including, without limitation, the fees and other
expenses of the Executive's legal counsel in connection with the delivery
of the Executive Counsel opinion referred to in Section 6.5), the Company
shall, regardless of the outcome of such effort, promptly reimburse the
Executive on a current basis for such fees and expenses following the
Executive's written submission of a request for reimbursement together
with evidence that such fees and expenses were incurred.
7.1.2 If the Executive does not prevail (after exhaustion of all
available judicial remedies) in respect of a claim by the Executive or by
the Company hereunder, and the Company establishes before a court of
competent jurisdiction, by clear and convincing evidence, that the
Executive had no reasonable basis for his claim hereunder, or for his
response to the Company's claim hereunder, and acted in bad faith, no
further reimbursement for legal fees and expenses shall be due to the
Executive in respect of such claim and the Executive shall refund any
amounts previously reimbursed hereunder with respect to such claim.
7.2 Interest. If the Company and Nicor Gas, as applicable, does not pay
any amount due to the Executive under this Agreement within three days after
such amount became due and owing, interest shall accrue on such amount from the
date it became due and owing until the date of payment at an annual rate equal
to 200 basis points above the base commercial lending rate published in The Wall
Street Journal in effect from time to time during the period of such nonpayment.
ARTICLE VIII
NO SET-OFF OR MITIGATION
8.1 No Set-off by Company. The Executive's right to receive when due the
payments and other benefits provided for under this Agreement is absolute,
unconditional and subject to no set-off, counterclaim or legal or equitable
defense. Any claim which the Company may have against the Executive, whether for
a breach of this Agreement or otherwise, shall be brought in a separate action
or proceeding and not as part of any action or proceeding brought by the
Executive to enforce any rights against the Company under this Agreement.
8.2 No Mitigation. The Executive shall not have any duty to mitigate the
amounts payable by the Company and Nicor Gas, as applicable, under this
Agreement by seeking new employment following termination. Except as
specifically otherwise provided in this Agreement, all amounts payable pursuant
to this Agreement shall be paid without reduction regardless of any amounts of
salary, compensation or other amounts which may be paid or payable to the
Executive as the result of the Executive's employment by another employer.
ARTICLE IX
NON-EXCLUSIVITY OF RIGHTS
9.1 Waiver of Other Severance Rights. Except as may be otherwise
specifically provided in an amendment of this Section 9.1 adopted in accordance
with Section 11.7 of this Agreement, the Executive's rights under Section 5.1 of
this Agreement shall be in lieu of any benefits that may be otherwise payable to
or on behalf of the Executive pursuant to the terms of any severance pay
arrangement of the Company or any Subsidiary or any other, similar arrangement
of the Company or any Subsidiary providing benefits upon involuntary termination
of employment and shall also be in lieu of any benefits under the Nicor Inc.
Executive/Key Employee Severance Benefits Program (notwithstanding any provision
of that program to the contrary); provided, however, that this Section 9.1 shall
not affect the Executive's rights to receive any benefits with respect to a
termination of employment that occurs outside of the Employment Period.
9.2 Other Rights. Except as provided in Section 9.1, this Agreement shall
not prevent or limit the Executive's continuing or future participation in any
benefit, bonus, incentive or other plans provided by the Company or any of its
Subsidiaries and for which the Executive may qualify, nor shall this Agreement
limit or otherwise affect such rights as the Executive may have under any other
agreements with the Company or any of its Subsidiaries. Amounts which are vested
benefits or which the Executive is otherwise entitled to receive under any plan
of the Company or any of its Subsidiaries and any other payment or benefit
required by law at or after the Termination Date shall be payable in accordance
with such Plan or applicable law except as expressly modified by this Agreement.
ARTICLE X
CONFIDENTIALITY
10.1 Confidentiality. The Executive acknowledges that it is the policy of
the Company and its Subsidiaries to maintain as secret and confidential all
valuable and unique information and techniques acquired, developed or used by
the Company and its Subsidiaries relating to their business, operations,
employees and customers, which gives the Company and its Subsidiaries a
competitive advantage in the transmission, distribution, marketing, or sale of
natural gas or in the energy services industry and other businesses in which the
Company and its Subsidiaries are engaged ("Confidential Information"). The
Executive recognizes that all such Confidential Information is the sole and
exclusive property of the Company and its Subsidiaries, and that disclosure of
Confidential Information would cause damage to the Company and its Subsidiaries.
The Executive agrees that, except as required by the duties of his employment
with the Company or its Subsidiaries and except in connection with enforcing the
Executive's rights under this Agreement or if compelled by a court or
governmental agency, he will not, without the consent of the Company,
disseminate or otherwise disclose any Confidential Information obtained during
his employment with the Company or its Subsidiaries until such time as such
information has been disclosed publicly by the Company or one of its
Subsidiaries, or with its consent, or is otherwise a matter of public knowledge
(unless the Executive has reason to know that such information became a matter
of public knowledge through an unauthorized disclosure).
10.2 Remedy. The Executive and the Company specifically agree that, in the
event that Executive shall breach his obligations under this Article X, the
Company and its Subsidiaries will suffer irreparable injury and shall be
entitled to injunctive relief therefor, and shall not be precluded from pursuing
any and all remedies it may have at law or in equity for breach of such
obligations; provided, however, that such breach shall not in any manner or
degree whatsoever limit, reduce or otherwise affect the obligations of the
Company or Nicor Gas, as applicable, under this Agreement, and in no event shall
an asserted breach of the Executive's obligations under this Article X
constitute a basis for deferring or withholding any amounts otherwise payable to
the Executive under this Agreement.
ARTICLE XI
MISCELLANEOUS
11.1 No Assignability. This Agreement is personal to the Executive and
without the prior written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.
11.2 Successors. Before or upon the consummation of any Change in Control,
the Company shall obtain from each individual, group or entity, if any, that
becomes a successor of the Company by reason of the Change in Control, the
unconditional written agreement of such individual, group or entity to assume
this Agreement and to perform all of the obligations of the Company hereunder.
11.3 Payments to Beneficiary. If the Executive dies before receiving
amounts to which the Executive is entitled under this Agreement, such amounts
shall be paid in a lump sum to the beneficiary designated in writing by the
Executive, or if none is so designated, to the Executive's estate.
11.4 Nonalienation of Benefits. Benefits payable under this Agreement
shall not be subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, charge, garnishment, execution or levy of any
kind, either voluntary or involuntary, before actually being received by the
Executive, and any such attempt to dispose of any right to benefits payable
under this Agreement shall be void.
11.5 Severability. If any one or more articles, sections or other portions
of this Agreement are declared by any court or governmental authority to be
unlawful or invalid, such unlawfulness or invalidity shall not serve to
invalidate any article, section or other portion not so declared to be unlawful
or invalid. Any article, section or other portion so declared to be unlawful or
invalid shall be construed so as to effectuate the terms of such article,
section or other portion to the fullest extent possible while remaining lawful
and valid.
11.6 Arbitration. Any and all disputes between the parties hereto arising
out of this Agreement (other than disputes related to Article VI or to an
alleged breach of the covenant contained in Article X) shall be settled by
arbitration before an impartial arbitrator pursuant to the rules and regulations
of the American Arbitration Association (AAA) pertaining to the arbitration of
commercial disputes. Either party may invoke the right to arbitration. The
arbitrator shall be selected by means of the parties striking alternatively from
a panel of seven arbitrators supplied by the Chicago office of AAA. The
Arbitrator shall have the authority to interpret and apply the provisions of
this Agreement, consistent with Section 11.10 below. The decision of the
arbitrator shall be final and binding upon the parties. Judgment may be entered
on the award in any court of competent jurisdiction. The arbitrator's fees and
expenses shall be borne by the Company.
11.7 Amendments. This Agreement shall not be altered, amended or modified
except by written instrument executed by the Company and the Executive.
11.8 Notices. All notices and other communications under this Agreement
shall be in writing and delivered by hand, by a nationally-recognized commercial
delivery service, or by first-class registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:
If to the Executive:
Thomas L. Fisher
37 Winthrop New Road
Aurora, Illinois 60506
If to the Company:
Nicor Inc.
1844 Ferry Road
Naperville, Illinois 60563-9600
Attn: Claudia J. Colalillo
or to such other address as either party shall have furnished to the other in
writing. Notice and communications shall be effective when actually received by
the addressee.
11.9 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
11.10 Governing Law. This Agreement is intended to be interpreted and
construed in accordance with the laws of the State of Illinois, without
regard to its choice of law principles.
11.11 Captions. The captions of this Agreement are not a part of the
provisions hereof and shall have no force or effect.
11.12 Number and Gender. Wherever from the context it appears appropriate,
each term stated in either the singular or plural shall include the singular and
the plural, and pronouns stated in either the masculine, the feminine or the
neuter gender shall include the masculine, feminine and neuter genders.
11.13 Tax Withholding. The Company or Nicor Gas, as applicable, may
withhold from any amounts payable under this Agreement any federal, state or
local taxes that are required to be withheld pursuant to any applicable law or
regulation.
11.14 No Waiver. A waiver of any provision of this Agreement shall not be
deemed a waiver of any other provision, and any waiver of any default as to any
such provision shall not be deemed a waiver of any later default as to that or
any other provision.
11.15 Entire Agreement. This Agreement contains the entire
understanding of the Company, Nicor Gas and the Executive with respect to its
subject matter.
IN WITNESS WHEREOF, the Executive and the Company have executed this
Agreement as of the date first above written.
THOMAS L. FISHER
Thomas L. Fisher
Nicor Inc.
By: KATHLEEN L. HALLORAN
Executive Vice President Finance
and Administration and Secretary
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.29
<SEQUENCE>3
<FILENAME>0003.txt
<DESCRIPTION>CHANGE-IN-CONTROL AGREEMENT
<TEXT>
Nicor Inc.
From 10-K
Exhibit 10.29
CHANGE-IN-CONTROL AGREEMENT
THIS AGREEMENT dated as of June 2, 2000 (the "Agreement Date") is made
by and among Nicor Inc. (the "Company"), an Illinois corporation, and George
M. Behrens (the "Executive").
ARTICLE I
PURPOSES
The Board of Directors of the Company (the "Board") has determined that it
is in the best interests of the Company and its shareholders to assure that the
Company and Nicor Gas will have the continued services of the Executive, despite
the possibility or occurrence of a Change in Control of the Company. The Board
believes it is imperative to reduce the distraction of the Executive that would
result from the personal uncertainties caused by a pending or threatened Change
in Control, to encourage the Executive's full attention and dedication to the
Company and Nicor Gas, and to provide the Executive with compensation and
benefits arrangements upon a Change in Control which are competitive with those
of similarly-situated corporations. This Agreement is intended to accomplish
these objectives.
ARTICLE II
CERTAIN DEFINITIONS
When used in this Agreement, the terms specified below shall have the
following meanings:
2.1 The "Agreement Term" shall begin on the Agreement Date and shall
continue through December 31, 2001. As of December 31, 2001, and on each
December 31 thereafter, the Agreement Term shall automatically be extended for
one additional year unless, not later than the preceding June 30, either party
shall have given notice that such party does not wish to extend the Agreement
Term. If a Change in Control shall have occurred during the Agreement Term (as
it may be extended from time to time), the Agreement Term shall continue for a
period ending on the two-year anniversary of the date of the Change in Control,
but if the Termination Date (as defined below) occurs during that two-year
period, then the Agreement Term shall continue until the end of the Severance
Period (as defined below). Unless the Termination Date occurs during the
two-year period after a Change in Control so that the Agreement Term is extended
to include the Severance Period, as provided in the immediately preceding
sentence, the Agreement Term shall not extend beyond the two-year anniversary of
the Change in Control.
2.2 "Effective Date" means the first date during the Agreement Term on
which a Change in Control occurs.
2.3 "Change in Control" means:
2.3.1 The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) (a "Person") of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange
Act) of any shares of Common Stock of the Company or any voting securities
of the Company entitled to vote generally in the election of directors if,
as a result of such acquisition, such person owns 20% or more of either
(i) the outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock"), or (ii) the combined voting power of
the outstanding voting securities of the Company entitled to vote
generally in the
election of directors (the "Outstanding Company Voting Securities");
provided, however, that for purposes of this subsection 2.3.1, the
following acquisitions shall not constitute a Change in Control: (A) any
acquisition by the Company, (B) any acquisition by an employee benefit
plan (or related trust) sponsored or maintained by the Company or any
corporation controlled by the Company (a "Company Plan"), or (C) any
acquisition by any corporation pursuant to a transaction which complies
with subsections 2.3.3.1, 2.3.3.2 and 2.3.3.3 of this definition; provided
further, that for purposes of clause (A), if any Person (other than the
Company or any Company Plan) shall become the beneficial owner of 20% or
more of the Outstanding Company Common Stock or 20% or more of the
Outstanding Company Voting Securities by reason of an acquisition by the
Company, and such Person shall, after such acquisition by the Company,
become the beneficial owner of any additional shares of the Outstanding
Company Common Stock or any additional Outstanding Company Voting
Securities (other than pursuant to any dividend reinvestment plan or
arrangement maintained by the Company) and such beneficial ownership is
publicly announced, such additional beneficial ownership shall constitute
a Change in Control; or
2.3.2 Individuals who, as of the date hereof, constitute the Board
of Directors of the Company (for purposes of this Section 2.3, the
"Incumbent Board") cease for any reason to constitute at least a majority
of the Incumbent Board; provided, however, that any individual becoming a
director subsequent to the date hereof whose election, or nomination for
election by the Company shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board,
but excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or publicly
threatened election contest (as such terms are used in Rule 14a-11
promulgated under the Exchange Act) or other actual or publicly threatened
solicitation of proxies or consents by or on behalf of a Person other than
the Board of Directors of the Company; or
2.3.3 Consummation, including receipt of any necessary regulatory
approval, of (i) a reorganization, merger, consolidation or other business
combination involving the Company or (ii) the sale or other disposition of
more than 50% of the operating assets of the Company (determined on a
consolidated basis), other than in connection with a sale-leaseback or
other arrangement resulting in the continued utilization of such assets
(or the operating products of such assets) by the Company (any transaction
described in part (i) or (ii) being referred to as a "Corporate
Transaction"); excluding, however, a Corporate Transaction pursuant to
which:
2.3.3.1 all or substantially all of the individuals and
entities who are the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting
Securities immediately prior to such Corporate Transaction
beneficially own, directly or indirectly, more than 60% of,
respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as the case
may be, of the ultimate parent entity resulting from such Corporate
Transaction (including, without limitation, an entity which, as a
result of such transaction, owns the Company or all or substantially
all of the assets of the Company either directly or through one or
more subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Corporate Transaction of the
Outstanding Company Common Stock and Outstanding Company Voting
Securities, as the case may be;
2.3.3.2 no Person (other than the Company, any Company Plan or
related trust, the corporation resulting from such Corporate
Transaction, and any Person which beneficially owned, immediately
prior to such Corporate Transaction, directly or indirectly, 20% or
more of the Outstanding Company Common Stock or the Outstanding
Company Voting Securities, as the case may be) will beneficially
own, directly or indirectly, 20% or more of, respectively, the then
outstanding common stock of the ultimate parent entity resulting
from such Corporate Transaction or the combined voting power of the
then outstanding voting securities of such entity; and
2.3.3.3 individuals who were members of the Incumbent Board
will constitute at least a majority of the members of the board of
directors of the ultimate parent entity resulting from such
Corporate Transaction; or
2.3.4 A tender offer (for which a filing has been made with the
Securities and Exchange Commission (the "SEC") which purports to comply
with the requirements of Section 14(d) of the Exchange Act and the
corresponding SEC rules) is made for the stock of the Company, which has
not been negotiated and approved by the Board, provided that in case of a
tender offer described in this subsection 2.3.4, the Change in Control
will be deemed to have occurred at the first time during the offer period
when the Person (as defined in subsection 2.3.1, above) making the offer
beneficially owns or has accepted for payment stock of the Company with
20% or more of the combined voting power of the then Outstanding Company
Voting Securities; or
2.3.5 Approval by the shareholders of the Company of a plan of
complete liquidation or dissolution of the Company.
2.3.6 For purposes of this Section 2.3, (i) the term "Company" shall
mean Nicor Inc. and shall include any Successor to Nicor Inc.; and (ii)
the term "Successor to Nicor Inc." shall mean any corporation,
partnership, joint venture or other entity that succeeds to the interests
of Nicor Inc. by means of a merger, consolidation, or other restructuring
that does not constitute a Change in Control under paragraphs 2.3.1, 2.3.3
or 2.3.4 above.
2.3.7 By entering into this Agreement, the Executive irrevocably
consents to the modification of the definition of "Change in Control"
(including "change in control") in all Employee Benefit Arrangements (as
defined below), by substituting for such definition in each such Employee
Benefit Arrangement the definition of "Change in Control" set forth above,
with such substitution to be effective on the first date this Agreement
has been signed by both the Company and the Executive. For purposes of the
preceding sentence, the term "Employee Benefit Arrangement" shall mean
each agreement with the Executive to which the Company or any Subsidiary
is a party, and each plan or arrangement maintained by the Company or any
Subsidiary, and including any awards outstanding under any such agreement,
plan, or arrangement, to the extent that such award, agreement, plan, or
arrangement contains a definition of "Change in Control." However, to the
extent that the Employee Benefit Arrangement provides for an award based
on common stock of the Company (including, without limitation, an award of
stock options or shares of restricted stock), and such Employee Benefit
Arrangement provides that vesting or exercisability of such award will
occur at the time of the Change in Control (rather than the occurrence of
a subsequent event, such as termination of employment), the definition of
"Change in Control" that is substituted for the definition in such
Employee Benefit Arrangement shall be the definition of "Change in
Control" set forth above, except that Section 2.3.4 shall be modified by
adding, at the end of such Section, immediately prior to the word "or,"
the following: "provided, however, that the Change in Control shall occur
three (3) business days before such tender offer is to terminate, unless
the offer is withdrawn first, if the Person making the offer could own, by
the terms of the offer plus any shares beneficially owned by that Person,
stock with 50% or more of the combined voting power of the then
Outstanding Company Voting Securities when the offer (and any subsequent
offering period) terminates;"
2.3.8 By entering into this Agreement, the Executive irrevocably
consents to the amendment of the Nicor Inc. Stock Deferral Plan to provide
for distribution, as soon as practicable following a Change in Control, of
any amounts which may then be deferred for the Executive under such plan.
2.4 "Code" means the Internal Revenue Code of 1986, as amended.
2.5 "Employment Period" means the period commencing on the Effective Date
and ending on the two-year anniversary of that date.
2.6 "Incentive Plan" shall have the meaning set forth in
Section 3.2.2.
2.7 "Notice of Termination" means a written notice given in accordance
with Section 11.8 which sets forth (a) the specific termination provision in
this Agreement relied upon by the party giving such notice, (b) in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
the Executive's employment under such termination provision, and (c) if the
Termination Date is other than the date of receipt of such Notice of
Termination, the Termination Date.
2.8 "Plans" shall have the meaning set forth in Section 3.2.3.
2.9 A "Potential Change in Control" shall exist during any period in which
the circumstances described in Sections 2.9.1, 2.9.2, or 2.9.3 exist (provided,
however, that a Potential Change in Control shall cease to exist not later than
the occurrence of a Change in Control):
2.9.1 The Company enters into an agreement, the consummation of
which would result in the occurrence of a Change in Control, provided that
a Potential Change in Control described in this Section 2.9.1 shall cease
to exist upon the expiration or other termination of all such agreements.
2.9.2 Any person (including the Company) publicly announces an
intention to take or to consider taking actions the consummation of which
would constitute a Change in Control; provided that a Potential Change in
Control described in this Section 2.9.2 shall cease to exist upon the
withdrawal of such intention, or upon a reasonable determination by the
Board that there is no reasonable chance that such actions would be
consummated.
2.9.3 The Board adopts a resolution to the effect that, for purposes
of this Agreement, a Potential Change in Control exists; provided that a
Potential Change in Control described in this Section 2.9.3 shall cease to
exist upon a reasonable determination by the Board that the reasons that
gave rise to the resolution providing for the existence of a Potential
Change in Control have expired or no longer exist.
2.10 "Severance Incentive" means the greater of (i) the target annual
incentive under an Incentive Plan applicable to the Executive for the
Performance Period in which the Termination Date occurs, or (ii) the average of
the actual annual incentives paid (or payable, to the extent not previously
paid) to the Executive under the applicable Incentive Plan for each of the two
calendar years preceding the calendar year in which the Termination Date occurs.
2.11 "Severance Period" means the period beginning on the Executive's
Termination Date and ending on the second anniversary thereof; provided,
however, that no Severance Period will occur unless the Executive's Termination
Date occurs under circumstances described in Section 5.1 (relating to
termination by the Executive for Good Reason or by the Company and Nicor Gas
other than for Cause or Permanent Disability).
2.12 "Subsidiary" shall mean any corporation, partnership, joint venture
or other entity during any period in which at least a fifty percent interest in
such entity is owned, directly or indirectly, by the Company (or a successor to
the Company).
2.13 "Termination Date" means the first day on or after which the
Executive is not employed by the Company or Nicor Gas; provided, however, that
(a) if the Company and Nicor Gas terminate the Executive's employment other than
for Cause or Disability (as defined in Section 4.1.2), then the Termination Date
shall be the date of receipt of the Notice of Termination and (b) if the
Executive's employment is terminated by reason of death or Disability, then the
Termination Date shall be the date of death of the Executive or the Disability
Effective Date (as defined in Section 4.1.1), as the case may be.
2.14 "Welfare Plans" shall have the meaning set forth in Section 3.2.4.
ARTICLE III
TERMS OF EMPLOYMENT
3.1 Position and Duties.
3.1.1 The Company hereby agrees to cause the Company and/or Nicor
Gas to continue the Executive's employment during the Employment Period
and, subject to Article IV of this Agreement, the Executive agrees to
remain in the employ of the Company and Nicor Gas, as applicable, subject
to the terms and conditions hereof. During the Employment Period, (i) the
Executive's position (including status, offices, titles and reporting
requirements), authority, duties and responsibilities shall be at least
commensurate in all material respects with the most significant of those
held, exercised and assigned to the Executive at any time during the
90-day period immediately preceding the Effective Date, and (ii) the
Executive's services shall be performed at the location where the
Executive was employed immediately preceding the Effective Date or any
office or location less than 25 miles from such location.
3.1.2 During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the Executive
agrees to devote reasonable attention and time during normal business
hours to the business and affairs of the Company and Nicor Gas, as
applicable, and, to the extent necessary to discharge the responsibilities
assigned to the Executive hereunder, to use the Executive's reasonable
best efforts to perform faithfully and efficiently such responsibilities.
During the Employment Period it shall not be a violation of this Agreement
for the Executive (i) to serve on corporate, civic or charitable boards or
committees, (ii) to deliver lectures, fulfill speaking engagements or
teach at educational institutions and (iii) to manage personal
investments, to the extent that such other activities do not, in the
reasonable judgment of the Chief Executive Officer of the Company (the
"CEO"), inhibit or prohibit the performance of the Executive's duties
under this Agreement, or conflict in any material way with the business of
the Company or any Subsidiary; provided, however, that the Executive shall
not serve on the board of any business, or hold any other position with
any business, without the consent of the CEO.
3.2 Compensation.
3.2.1 Base Salary. During the Employment Period, the Executive shall
receive an annual base salary ("Annual Base Salary"), which shall be paid
at an annual rate at least equal to twelve times the highest monthly base
salary paid or payable, including any base salary which has been earned
but deferred, to the Executive by the Company in respect of the
twelve-month period immediately preceding the month in which the Effective
Date occurs. During the Employment Period, the Annual Base Salary shall be
reviewed no more than twelve months after the last salary increase awarded
to the Executive prior to the Effective Date and, thereafter, at least
annually, and shall be increased at any time and from time to time as
shall be substantially consistent with increases in base salary awarded to
other senior executives of the Company. Annual Base Salary shall not be
reduced after any such increase unless such reduction is part of a policy,
program or arrangement applicable to senior executives of the Company and
of any successor entity, and the term Annual Base Salary as used in this
Agreement shall refer to Annual Base Salary as so increased. Any increase
in Annual Base Salary shall not limit or reduce any other obligation of
the Company to the Executive under this Agreement.
3.2.2 Annual Incentive. In addition to Annual Base Salary, the
Company shall pay or cause to be paid to the Executive an incentive award
(the "Annual Incentive") for each Performance Period or portion thereof
which falls within the Employment Period. "Performance Period" means each
period of time designated in accordance with any annual incentive award
arrangement ("Incentive Plan") which is based upon performance and
approved by the Board or any committee of the Board, or in the absence of
any Incentive Plan or any such designated period of time, Performance
Period shall mean each calendar year. The Executive's target and maximum
Annual Incentive with respect to any Performance Period shall not be less
than the target and maximum annual incentive award payable with respect to
the Executive under the Company's annual incentive program as in effect
immediately preceding the Effective Date.
3.2.3 Incentive, Savings and Retirement Plans. During the Employment
Period, the Executive shall be entitled to participate in all incentive,
savings and retirement plans, practices, policies and programs ("Plans")
applicable generally to other senior executives of the Company, but in no
event shall such Plans provide the Executive with incentive opportunities
(measured with respect to long- term and special incentives, to the
extent, if any, that such distinctions are applicable) or savings and
retirement benefits which are less favorable, in the aggregate, than the
greater of (i) those provided by the Company for the Executive under such
Plans as in effect at any time during the 90-day period immediately
preceding the Effective Date, or (ii) those provided generally at any time
after the Effective Date to other senior executives of the Company.
3.2.4 Welfare Benefit Plans. During the Employment Period, the
Executive and/or the Executive's family, as the case may be, shall be
eligible for participation in and shall receive all benefits under welfare
benefit plans, practices, policies and programs ("Welfare Plans") provided
by the Company (including, without limitation, medical, prescription,
dental, disability, salary continuance, employee life, group life,
accidental death and travel accident insurance benefits), but in no event
shall such Welfare Plans provide the Executive with benefits which are
less favorable, in the aggregate, than the greater of (i) those provided
by the Company for the Executive under such Welfare Plans as were in
effect at any time during the 90-day period immediately preceding the
Effective Date, or (ii) those provided generally at any time after the
Effective Date to other senior executives of the Company.
3.2.5 Other Employee Benefits. During the Employment Period, the
Executive shall be entitled to other employee benefits and perquisites in
accordance with the most favorable plans, practices, programs and policies
of the Company, as in effect with respect to the Executive at any time
during the 90-day period immediately preceding the Effective Date, or if
more favorable, as in effect generally with respect to other senior
executives of the Company.
3.2.6 Expenses. During the Employment Period, the Executive shall be
entitled to receive prompt reimbursement for all reasonable expenses
incurred by the Executive in accordance with the policies, practices and
procedures of the Company as in effect with respect to the Executive at
any time during the 90-day period immediately preceding the Effective
Date, or if more favorable, as in effect generally with respect to other
senior executives of the Company.
3.2.7 Office and Support Staff. During the Employment Period, the
Executive shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to exclusive personal secretarial
and other assistance, as in effect with respect to the Executive at any
time during the 90-day period immediately preceding the Effective Date, or
if more favorable, as provided generally with respect to other senior
executives of the Company.
3.2.8 Paid Time Off. During the Employment Period, the Executive
shall be entitled to paid time off in accordance with the plans, policies,
programs and practices of the Company as in effect with respect to the
Executive at any time during the 90-day period immediately preceding the
Effective Date, or if more favorable, as provided generally with respect
to other senior executives of the Company.
3.2.9 Subsidiaries. To the extent that immediately prior to the
Effective Date, the Executive has been on the payroll of, and participated
in the incentive or employee benefit plans of, a Subsidiary of the
Company, the references to the Company contained in Sections 3.2.1 through
3.2.8 and the other sections of this Agreement referring to benefits to
which the Executive may be entitled shall be read to refer to such
Subsidiary.
ARTICLE IV
TERMINATION OF EMPLOYMENT
4.1 Disability.
4.1.1 During the Agreement Term, the Company and Nicor Gas may
terminate the Executive's employment upon the Executive's Permanent
Disability (as defined in Section 4.1.2) by giving the Executive or his
legal representative, as applicable, (1) written notice in accordance with
Section 11.8 of the Company's or Nicor Gas', as applicable, intention to
terminate the Executive's employment pursuant to this section, and (2) a
certification of the Executive's Permanent Disability by a physician
selected by the Company or Nicor Gas or its insurers and reasonably
acceptable to the Executive or the Executive's legal representative. The
Executive's employment shall terminate effective on the 30th day (the
"Permanent Disability Effective Date") after the Executive's receipt of
such notice unless, before the Permanent Disability Effective Date, the
Executive shall have resumed the full-time performance of the Executive's
duties. During the period in which the Executive has a Disability, the
Company or Nicor Gas, as applicable, may appoint a temporary replacement
to assume the Executive's responsibilities.
4.1.2 The Executive shall be considered to have a "Permanent
Disability" during any period in which he has a Disability (as defined
below); provided, however, that the Executive shall not be considered to
have "Permanent Disability" until (i) for a period of 180 consecutive
days, the Executive, as a result of a Disability, is incapable, after
reasonable accommodation, of performing his duties under this Agreement on
a full-time basis; (ii) such Disability is reasonably expected to continue
for at least another 90 days; and (iii) at the Executive's Termination
Date, he is eligible for income replacement benefits under the Company's
or Nicor Gas' long-term disability plan. The Executive shall be considered
to have a "Disability" during any period in which he has a physical or
mental disability which renders him incapable, after reasonable
accommodation, of performing his duties under this Agreement.
4.2 Death. The Executive's employment shall terminate automatically upon
the Executive's death during the Agreement Term.
4.3 Cause. The Company or Nicor Gas, as applicable, may terminate the
Executive's employment during the Employment Period for Cause. For
purposes of this Agreement, "Cause" means:
4.3.1 the Executive's willful commission of acts or omissions which
have, have had, or are likely to have a material adverse effect on the
business, operations, financial condition or reputation of the Company or
Nicor Gas;
4.3.2 the Executive's conviction (including a plea of guilty or nolo
contendere) of a felony or any crime of fraud, theft, dishonesty or moral
turpitude; or
4.3.3 the Executive's material violation of any statutory or common
law duty of loyalty to the Company or Nicor Gas.
For purposes of this Agreement, no act, or failure to act, on the part of
the Executive shall be considered "willful" unless it is done, or omitted
to be done, by the Executive in bad faith or without reasonable belief
that the Executive's action or omission was in the best interests of the
Company or Nicor Gas. Any act, or failure to act, pursuant to direction
provided by the person to whom the Executive reports, or provided by a
resolution duly adopted by the Board, or pursuant to advice of counsel for
the Company or Nicor Gas, shall be conclusively presumed to be done, or
omitted to be done, by the Executive in good faith and in the best
interests of the Company or Nicor Gas.
4.4 Good Reason. During the Employment Period, the Executive's employment
may be terminated by the Executive for Good Reason. For purposes of this
Agreement, "Good Reason" means any material breach of this Agreement by
the Company or Nicor Gas, including:
4.4.1 the failure to maintain the Executive in the office or
position, or in a substantially equivalent office or position, held by the
Executive immediately prior to the Change in Control;
4.4.2 a material adverse alteration in the nature or scope of the
Executive's position, duties, functions, responsibilities or authority;
4.4.3 a material reduction of the Executive's salary, incentive
compensation or benefits;
4.4.4 the failure of any successor to the Company to assume this
Agreement, or a material breach of the Agreement by the Company or its
successor;
4.4.5 a relocation of more than 25 miles of (i) the Executive's
principal workplace, or (ii) the principal offices of the Company or Nicor
Gas, as applicable, (if such offices are the Executive's principal
workplace), in each case without the consent of the Executive;
4.4.6 the Company or Nicor Gas, as applicable, requiring the
Executive to engage in travel that is materially greater than the
Executive's travel obligations during the 1-year period immediately prior
to the Change in Control; or
4.4.7 any failure by the Company or Nicor Gas, as applicable, to
comply with any of the provisions of Section 3.2 of this Agreement, other
than an isolated, insubstantial and inadvertent failure not occurring in
bad faith and which is remedied by the Company or Nicor Gas, as
applicable, promptly after receipt of notice thereof given by the
Executive;
provided, however, that an act or omission of the Company or Nicor Gas, as
applicable, shall not constitute Good Reason: (i) unless the Executive gives the
Company or Nicor Gas, as applicable, written notice of such act or omission and
the Company or Nicor Gas, as applicable, fails to cure such act or omission
within the 30-day period after such notice, or (ii) if the Executive first
acquired knowledge of such act or omission more than 6 months before the
Executive gives the Company or Nicor Gas, as applicable, such notice, or (C) if
the Executive has consented in writing to such act or omission in a document
that makes specific reference to this Section 4.4.
4.5 Without Cause During a Potential Change in Control. If the Executive's
employment is terminated by the Company and Nicor Gas, as applicable, without
Cause during a Potential Change in Control, and such date of termination occurs
not more than 180 days prior to the occurrence of a Change in Control and the
Executive establishes by reasonable evidence that such termination of employment
was materially connected with and in anticipation of the Change in Control, then
the Executive shall be entitled to receive the benefits that would have been
provided under Section 5.1, determined as though:
4.5.1 the Executive were rehired by the Company and Nicor Gas, as
applicable, immediately prior to the Change in Control at the salary rate
equal to the Executive's highest salary rate during the one-year period
prior to the date of the Change in Control, and with other Company and
Nicor Gas compensation and benefit arrangements comparable to those
provided to comparable executives of the Company and Nicor Gas;
4.5.2 the Executive's employment were terminated by the Company and
Nicor Gas without Cause immediately after the Change in Control; and
4.5.3 this Agreement were in full force and effect at the time of
the Change in Control, and at the time of the Executive's deemed
termination of employment.
4.6 Right of Resignation and Termination. This Agreement does not
constitute a guarantee of continued employment at any time, but instead provides
for certain rights and benefits for the Executive during his employment
following the occurrence of a Change in Control, and in the event his employment
with the Company and Nicor Gas, as applicable, terminates under the
circumstances described herein. The Company and Nicor Gas, as applicable, may
terminate the employment of the Executive at any time for any reason, without
breach of this Agreement, subject to its obligations set forth in Article V and
elsewhere in this Agreement. The Executive may resign from the Company and Nicor
Gas, as applicable, for Good Reason, or for any other reason, without breach of
this Agreement, subject to the Executive's obligations set forth in this
Agreement; provided that, in the event of a resignation without Good Reason, the
Executive shall provide at least four weeks advance notice of such resignation
to the Company and Nicor Gas, as applicable.. Notwithstanding the foregoing
provisions in this Section 4.6, the Company and Nicor Gas, as applicable, may
suspend the Executive from performing his duties under this Agreement following
the delivery of a Notice of Termination by the Executive without Good Reason;
provided, however, that during the period of suspension (which shall end on the
Termination Date), the Executive shall continue to be treated as employed by the
Company and Nicor Gas, as applicable, for other purposes, and his rights to
compensation or benefits shall not be reduced by reason of the suspension.
ARTICLE V
OBLIGATIONS OF THE COMPANY UPON TERMINATION
5.1 If by the Executive for Good Reason or by the Company and Nicor Gas,
as Applicable, Other Than for Cause or Permanent Disability. If, during the
Employment Period, the Company and Nicor Gas, as applicable, shall terminate the
Executive's employment other than for Cause or Permanent Disability, or if the
Executive shall terminate employment for Good Reason, the Company's and Nicor
Gas' obligations to the Executive shall be as set forth in this Section 5.1. As
a precondition to fulfilling such obligations, the Company shall require the
Executive to execute and deliver a release prepared by the Company and providing
for the Executive's release of any and all claims against the Company and its
Subsidiaries (and those acting on behalf of them) that may have arisen on or
before the date of the release, which release shall contain such other
reasonable and customary terms as are specified by the Company. Notwithstanding
any other provision of this section to the contrary, to the extent any portion
of such release is subject to the seven-day revocation period prescribed by the
Age Discrimination in Employment Act, as amended, or to any similar revocation
period in effect on the Termination Date, no payment shall be due under this
Section 5.1 until such revocation period has expired without such revocation
occurring.
5.1.1 The Company shall, within five business days of such
termination of employment, pay the Executive a cash payment equal to the
sum of the following amounts:
5.1.1.1 to the extent not previously paid, the Annual Base
Salary and any accrued paid time off through the Termination Date;
5.1.1.2 an amount equal to the product of (i) the Annual
Incentive (as defined in Section 3.2.2) at target for any
Performance Period in which the Termination Date occurs multiplied
by (ii) a fraction, the numerator of which is the number of days the
Executive was actually employed by the Company during such
Performance Period, and the denominator of which is the number of
days in the Performance Period; or, if greater, the amount of any
Annual Incentive otherwise payable to the Executive with respect to
a Performance Period in which the Termination Date occurs, which
payment shall be in full settlement of Annual Incentive amounts due
with respect to any such Performance Period; and
5.1.1.3 all amounts previously deferred by or accrued to the
benefit of the Executive under any nonqualified deferred
compensation plan sponsored by the Company (including, without
limitation, any vested amounts deferred under incentive plans),
together with any accrued earnings thereon, and not yet paid by the
Company; and
5.1.1.4 an amount equal to the product of (A) two (2)
multiplied by (B) the sum of (i) the Executive's Annual Base Salary,
and (ii) the Severance Incentive.
5.1.2 For purposes of each of the Executive's stock options granted
under the Company's Long Term Incentive Plan (the ?LTIP?), any successor
plan, or otherwise, that is or becomes exercisable on the Termination
Date, the Executive's termination of employment shall be disregarded, and
each such option shall continue to be exercisable as though the
Executive's employment had continued through the last day on which such
option would be exercisable in the absence of such employment termination
(such earlier date being referred to herein as the "Applicable Expiration
Date"). This Section 5.1.2 shall be applicable notwithstanding any term of
any plan, arrangement, or agreement providing for early expiration of the
option because of the Executive's termination of employment, except for an
amendment adopted in accordance with Section 11.7 of this Agreement and
that by its specific terms amends this Agreement.
5.1.3 On the Termination Date (i) the Executive shall become fully
vested in, and may thereupon and until the Applicable Expiration Date of
such stock incentive awards exercise in whole or in part, any and all
stock incentive awards granted to the Executive under the LTIP, any
successor plan or otherwise which have not become exercisable as of the
Termination Date; (ii) all dividend performance units previously awarded
to the Executive shall become fully vested, and a prorated calculation of
the target value of all such units shall be done as of the Termination
Date and full payment of such prorated target value shall be made by the
Company within 30 days after the Termination Date; and (iii) the Executive
shall become fully vested at the prorated target level in any other cash
incentive awards granted for the performance period in which the
Termination Date occurs under the LTIP, a successor plan or otherwise
which have not, as of the Termination Date, become fully vested.
5.1.4 All forfeiture conditions that as of the Termination Date are
applicable to any deferred stock unit, restricted stock or restricted
share units awarded to the Executive by the Company pursuant to the LTIP,
a successor plan or otherwise shall lapse immediately (to the extent such
awards are outstanding immediately prior to the Termination Date).
5.1.5 During the Severance Period (or until such later date as any
Welfare Plan of the Company may specify), the Company shall continue to
provide to the Executive and the Executive's family welfare benefits
(including, without limitation, medical, prescription, dental, disability,
individual life and group life insurance benefits) which are at least as
favorable as those provided under the most favorable Welfare Plans of the
Company applicable (i) with respect to the Executive and his family during
the 90-day period immediately preceding the Termination Date, or (ii) with
respect to other senior executives and their families during the Severance
Period. In determining benefits under such Welfare Plans, the Executive's
annual compensation attributable to base salary and incentives for any
plan year or calendar year, as applicable, shall be deemed to be not less
than the Executive's Annual Base Salary and Target Annual Incentive. The
cost of the welfare benefits provided under this Section 5.1.5 shall not
exceed the cost of such benefits to the Executive immediately before the
Termination Date or, if less, the Effective Date. Notwithstanding the
foregoing, if the Executive obtains comparable coverage under any Welfare
Plans sponsored by another employer, then the amount of coverage required
to be provided by the Company hereunder shall be reduced by the amount of
coverage provided by such other employer's Welfare Plans. The Executive's
rights under this Section shall be in addition to and not in lieu of any
post-termination continuation coverage or conversion rights the Executive
may have pursuant to applicable law, including, without limitation,
continuation coverage required by Section 4980B of the Code. For purposes
of determining eligibility for (but not the time of commencement of)
retiree benefits under any Welfare Plans of the Company, the Executive
shall be considered (i) to have remained employed until the last day of
the Severance Period and to have retired on the last day of such period,
and (ii) to have attained the age the Executive would have attained on the
last day of the Severance Period.
5.1.6 If the Executive participates in the Company's nonqualified
supplemental executive retirement plan ("SERP"), the amount payable under
subsection 5.1.1.4 of this Agreement shall be taken into account for
purposes of determining the amount of benefits to which the Executive is
entitled under the SERP; provided that such amount shall be taken into
account as though it was earned equally over the Severance Period, and
further provided that the Executive shall be deemed to have attained the
age he or she would have attained as of the last day of the Severance
Period, and completed the number of years of service he or she would have
completed as of the last day of the Severance Period. The Severance Period
shall be taken into account for purposes of determining the amount of and
eligibility to begin to receive benefits under the SERP.
5.1.7 On the Termination Date (i) the Executive shall become fully
vested in all contributions made by the Company on behalf of the Executive
under the Company's Savings Investment Plan (the "SIP") or any
supplemental or successor plan, if applicable, and (ii) the Company shall
immediately make an additional contribution to the SIP (or, if such
contribution is not permitted under the terms of the SIP, to a
non-qualified plan providing benefits comparable to the benefits provided
under the SIP) or any supplemental or successor plan, if applicable, equal
to the aggregate maximum matching contributions which the Company would
have made on behalf of the Executive to the SIP or any supplemental or
successor plan, if applicable, for the Severance Period, calculated as if
the amount payable under subsection 5.1.1.4 of this Agreement had been
earned equally over the Severance Period and the Executive had made the
maximum allowable voluntary contributions to the SIP or any supplemental
or successor plan, if applicable. In addition, if the Executive is not
eligible to participate in the Company's defined benefit retirement plan,
the Company shall also contribute to the SIP or any supplemental or
successor plan, if applicable, on the Termination Date an amount equal to
the aggregate additional "retirement growth" contributions which the
Company would have made on behalf of the Executive for the Severance
Period if the amount payable under subsection 5.1.1.4 of this Agreement
had been earned equally over the Severance Period.
5.1.8 The Company shall, at its sole expense, as incurred, pay on
behalf of Executive all fees and costs charged by a nationally recognized
outplacement firm selected by the Company (subject to approval by the
Executive, which shall not be withheld unreasonably) to provide
outplacement service.
5.2 If by the Company and Nicor Gas for Cause. If the Company and Nicor
Gas, as applicable, terminates the Executive's employment for Cause during the
Employment Period, this Agreement shall terminate without further obligation by
the Company and Nicor Gas, as applicable, to the Executive, other than the
obligation immediately to pay the Executive in cash the Executive's Annual Base
Salary through the Termination Date, plus any accrued paid time off, in each
case to the extent not previously paid.
5.3 If by the Executive Other Than for Good Reason. If the Executive
terminates employment during the Employment Period other than for Good Reason
(including, but not by way of limitation, voluntary retirement other than for
Good Reason), and other than for Disability or death, this Agreement shall
terminate without further obligation by the Executive or by the Company, other
than the obligation of the Company immediately to pay the Executive in cash the
Executive's Annual Base Salary through the Termination Date, plus any accrued
paid time off, in each case to the extent not previously paid.
5.4 If by the Company and Nicor Gas, as applicable, for Permanent
Disability. If the Company and Nicor Gas, as applicable, and Nicor Gas, as
applicable, terminates the Executive's employment by reason of the Executive's
Permanent Disability during the Employment Period, this Agreement shall
terminate without further obligation to the Executive, other than:
5.4.1 the Company's obligation immediately to pay the Executive in
cash all amounts specified in Sections 5.1.1.1, 5.1.1.2 and 5.1.1.3, in
each case, to the extent unpaid as of the Termination Date (such amounts
collectively, the "Accrued Obligations"), and
5.4.2 the Executive's right after the Permanent Disability Effective
Date to receive disability and other benefits at least equal to the
greater of (i) those provided under the most favorable disability Plans
applicable to disabled senior executives of the Company in effect
immediately before the Termination Date, or (ii) those provided under the
most favorable disability Plans of the Company in effect at any time
during the 90-day period immediately before the Effective Date.
5.5 If upon Death. If the Executive's employment is terminated by reason
of the Executive's death during the Employment Period, this Agreement shall
terminate without further obligation to the Executive's legal representatives
under this Agreement, other than the obligation immediately to pay the
Executive's estate or beneficiary in cash all Accrued Obligations.
Notwithstanding anything in this Agreement to the contrary, the Executive's
family shall be entitled to receive benefits at least equal to the most
favorable benefits provided under Plans of the Company to the surviving families
of senior executives of the Company, but in no event shall such Plans provide
benefits which in each case are less favorable, in the aggregate, than the most
favorable of those provided by the Company to the Executive under such Plans in
effect at any time during the 90-day period immediately before the Effective
Date.
ARTICLE VI
CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY
6.1 Gross-up for Certain Taxes.
6.1.1 If it is determined by the Company's independent auditors that
any benefit received or deemed received by the Executive from the Company
pursuant to this Agreement or otherwise, whether or not in connection with
a Change in Control (such monetary or other benefits collectively, the
"Potential Parachute Payments") is or will become subject to any excise
tax under Section 4999 of the Code or any similar tax payable under any
United States federal, state, local or other law (such excise tax and all
such similar taxes collectively, "Excise Taxes"), then the Company shall,
subject to Sections 6.6 and 6.7, within five business days after such
determination, pay the Executive an amount (the "Gross-up Payment") equal
to the product of:
(a) the amount of such Excise Taxes multiplied by
(b) the Gross-up Multiple (as defined in Section 6.4). The
Gross-up Payment is intended to compensate the Executive
for all Excise Taxes payable by the Executive with
respect to the Potential Parachute Payments and any
federal, state, local or other income or other taxes or
Excise Taxes payable by the Executive with respect to
the Gross-up Payment.
6.1.2 The determination of the Company's independent auditors
described in Section 6.1.1, including the detailed calculations of the
amounts of the Potential Parachute Payments, Excise Taxes and Gross-Up
Payment and the assumptions relating thereto, shall be set forth in a
written certificate of such auditors (the "Company Certificate") delivered
to the Executive. The Executive or the Company may at any time request the
preparation and delivery to the Executive of a Company Certificate. The
Company shall cause the Company Certificate to be delivered to the
Executive as soon as reasonably possible after such request.
6.2 Determination by the Executive.
6.2.1 If (i) the Company shall fail to deliver a Company Certificate
to the Executive within 30 days after its receipt of his written request
therefor, or (ii) at any time after the Executive's receipt of a Company
Certificate, the Executive disputes either (x) the amount of the Gross-Up
Payment set forth therein, or (y) the determination set forth therein to
the effect that no Gross-Up Payment is due (whether by reason of Section
6.7 or otherwise), then the Executive may elect to require the Company to
pay a Gross-Up Payment in the amount determined by the Executive as set
forth in an Executive Counsel Opinion (as defined in Section 6.5). Any
such demand by the Executive shall be made by delivery to the Company of a
written notice which specifies the Gross-Up Payment determined by the
Executive (together with the detailed calculations of the amounts of
Potential Parachute Payments, Excise Taxes and Gross-Up Payment and the
assumptions relating thereto) and an Executive Counsel Opinion regarding
such Gross-Up Payment (such written notice and opinion collectively, the
"Executive's Determination"). Within 30 days after delivery of an
Executive's Determination to the Company, the Company shall either (i) pay
the Executive the Gross-Up Payment set forth in Executive's Determination
(less the portion thereof, if any, previously paid to Executive by the
Company) or (ii) deliver to the Executive a Company Certificate and a
Company Counsel Opinion (as defined in Section 6.5), and pay the Executive
the Gross-Up Payment specified in such Company Certificate. If for any
reason the Company fails to comply with the preceding sentence, the
Gross-Up Payment specified in the Executive's Determination shall be
controlling for all purposes.
6.2.2 If the Executive does not request a Company Certificate, and
the Company does not deliver a Company Certificate to the Executive, then
(i) the Company shall, for purposes of Section 6.7, be deemed to have
determined that no Gross-up Payment is due, and (ii) the Executive shall
not pay any Excise Taxes in respect of Potential Parachute Payments,
except in accordance with Sections 6.6.1 or 6.6.4.
6.3 Additional Gross-up Amounts. If for any reason it is later determined
(whether pursuant to the subsequently-enacted provisions of the Code, final
regulations or published rulings of the IRS, a final judgment of a court of
competent jurisdiction, a determination of the Company's independent auditors
set forth in a Company Certificate or, subject to the last two sentences of
Section 6.2.1, an Executive's Determination) that the amount of Excise Taxes
payable by the Executive is greater than the amount determined by the Company or
the Executive pursuant to Section 6.1 or 6.2, as applicable, then the Company
shall, subject to Sections 6.6 and 6.7, pay the Executive an amount (which shall
also be deemed a Gross-up Payment) equal to the product of:
(a) the sum of (1) such additional Excise Taxes and (2) any
interest, fines, penalties, expenses or other costs incurred
by the Executive as a result of having taken a position in
accordance with determination made pursuant to Section 6.1 or
6.2, as applicable,
multiplied by
(b) the Gross-up Multiple.
6.4 Gross-up Multiple. The Gross-up Multiple shall equal a fraction, the
numerator of which is one (1.0), and the denominator of which is one (1.0) minus
the lesser of (i) the sum, expressed as a decimal fraction, of the effective
marginal tax rates of all federal, state, local and other income and other taxes
and any Excise Taxes applicable to the Gross-up Payment; or (ii) 0.80, it being
intended that the Gross-up Multiple shall in no event exceed five (5.0). (If
different rates of tax are applicable to various portions of a Gross-up Payment,
the weighted average of such rates shall be used.)
6.5 Opinion of Counsel. "Executive Counsel Opinion" means an opinion of
nationally-recognized executive compensation counsel to the effect (i) that the
amount of the Gross-Up Payment determined by the Executive pursuant to Section
6.2 is the amount that a court of competent jurisdiction, based on a final
judgment not subject to further appeal, is most likely to decide to have been
calculated in accordance with this Article and applicable law and (ii) if the
Company has previously delivered a Company Certificate to the Executive, that
there is no reasonable basis or no substantial authority for the calculation of
the Gross-Up Payment set forth in the Company Certificate. "Company Counsel
Opinion" means an opinion of nationally-recognized executive compensation
counsel to the effect that (i) the amount of the Gross-Up Payment set forth in
the Company Certificate is the amount that a court of competent jurisdiction,
based on a final judgment not subject to further appeal, is most likely to
decide to have been calculated in accordance with this Article and applicable
law and (ii) for purposes of Section 6662 of the Code, the Executive has
substantial authority to report on his federal income tax return the amount of
Excise Taxes set forth in the Company Certificate.
6.6 Amount Increased or Contested.
6.6.1 The Executive shall notify the Company in writing (an
"Executive's Notice") of any claim by the IRS or other taxing authority
(an "IRS Claim") that, if successful, would require the payment by the
Executive of Excise Taxes in respect of Potential Parachute Payments in an
amount in excess of the amount of such Excise Taxes determined in
accordance with Section 6.1 or 6.2, as applicable. Such Executive's Notice
shall include the nature and amount of such IRS Claim, the date on which
such IRS Claim is due to be paid (the "IRS Claim Deadline"), and a copy of
all notices and other documents or correspondence received by the
Executive in respect of such IRS Claim. The Executive shall give the
Executive's Notice as soon as practicable, but no later than the earlier
of (i) 10 business days after the Executive first obtains actual knowledge
of such IRS Claim or (ii) five business days after the IRS Claim Deadline;
provided, however, that the Executive's failure to give such notice shall
affect the Company's obligations under this Article only to the extent
that the Company is actually prejudiced by such failure. If at least one
business day before the IRS Claim Deadline the Company shall:
6.6.1.1 deliver to the Executive a Company Certificate to the
effect that the IRS Claim has been reviewed by the Company's
independent auditors and, notwithstanding the IRS Claim, the amount
of Excise Taxes, interest and penalties payable by the Executive is
either zero or an amount less than the amount specified in the IRS
Claim,
6.6.1.2 pay to the Executive an amount (which shall also be
deemed a Gross-Up Payment) equal to the positive difference between
(x) the product of the amount of Excise Taxes, interest and
penalties specified in the Company Certificate, if any, multiplied
by the Gross-Up Multiple, and (y) the portion of such product, if
any, previously paid to Executive by the Company, and
6.6.1.3 direct the Executive pursuant to Section 6.6.4 to
contest the balance of the IRS Claim, then the Executive shall pay
only the amount, if any, of Excise Taxes, interest and penalties
specified in the Company Certificate. In no event shall the
Executive pay an IRS Claim earlier than 30 days after having given
an Executive's Notice to the Company (or, if sooner, the IRS Claim
Deadline).
6.6.2 At any time after the payment by the Executive of any amount
of Excise Taxes or related interest or penalties in respect of Potential
Parachute Payments (whether or not such amount was based upon a Company
Certificate or an Executive's Determination), the Company may in its
discretion require the Executive to pursue a claim for a refund (a "Refund
Claim") of all or any portion of such Excise Taxes, interest or penalties
as the Company may specify by written notice to the Executive.
6.6.3 If the Company notifies the Executive in writing that the
Company desires the Executive to contest an IRS Claim or to pursue a
Refund Claim, the Executive shall:
6.6.3.1 give the Company all information that it reasonably
requests in writing from time to time relating to such IRS Claim or
Refund Claim, as applicable,
6.6.3.2 take such action in connection with such IRS Claim or
Refund Claim (as applicable) as the Company reasonably requests in
writing from time to time, including accepting legal representation
with respect thereto by an attorney selected by the Company, subject
to the approval of the Executive (which approval shall not be
unreasonably withheld or delayed),
6.6.3.3 cooperate with the Company in good faith to contest
such IRS Claim or pursue such Refund Claim, as applicable,
6.6.3.4 permit the Company to participate in any
proceedings relating to such IRS Claim or Refund Claim, as
applicable, and
6.6.3.5 contest such IRS Claim or prosecute such Refund Claim
(as applicable) to a determination before any administrative
tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company may from time to time determine in
its discretion.
The Company shall control all proceedings in connection with such
IRS Claim or Refund Claim (as applicable) and in its discretion may
cause the Executive to pursue or forego any and all administrative
appeals, proceedings, hearings and conferences with the IRS or other
taxing authority in respect of such IRS Claim or Refund Claim (as
applicable); provided that (i) any extension of the statute of
limitations relating to payment of taxes for the taxable year of the
Executive relating to the IRS Claim is limited solely to such IRS
Claim, (ii) the Company's control of the IRS Claim or Refund Claim
(as applicable) shall be limited to issues with respect to which a
Gross-Up Payment would be payable, and (iii) the Executive shall be
entitled to settle or contest, as the case may be, any other issue
raised by the IRS or other taxing authority.
6.6.4 The Company may at any time in its discretion direct the
Executive to (i) contest the IRS Claim in any lawful manner or (ii) pay
the amount specified in an IRS Claim and pursue a Refund Claim; provided,
however, that if the Company directs the Executive to pay an IRS Claim and
pursue a Refund Claim, the Company shall advance the amount of such
payment to the Executive on an interest-free basis and shall indemnify the
Executive, on an after-tax basis, for any income or other applicable taxes
or Excise Tax, and any related interest or penalties imposed with respect
to such advance.
6.6.5 The Company shall pay directly all legal, accounting and other
costs and expenses (including additional interest and penalties) incurred
by the Company or the Executive in connection with any IRS Claim or Refund
Claim, as applicable, and shall indemnify the Executive, on an after-tax
basis, for any income or other applicable taxes, Excise Tax and related
interest and penalties imposed on the Executive as a result of such
payment of costs and expenses.
6.7 Refunds. If, after the receipt by the Executive of any payment or
advance of Excise Taxes advanced by the Company pursuant to Section 6.6, the
Executive receives any refund with respect to such claim, the Executive shall
(subject to the Company's complying with the requirements of Section 6.6)
promptly pay the Company the amount of such refund (together with any interest
paid or credited thereon after taxes applicable thereto). If, after the receipt
by Executive of an amount advanced by the Company pursuant to Section 6.6, a
determination is made that the Executive shall not be entitled to any refund
with respect to such claim and the Company does not notify the Executive in
writing of its intent to contest such determination within 30 days after the
Company receives written notice of such determination, then such advance shall
be forgiven and shall not be required to be repaid and the amount of such
advance shall offset, to the extent thereof, the amount of Gross-up Payment
required to be paid. Any contest of a denial of refund shall be controlled by
Section 6.6.
ARTICLE VII
EXPENSES AND INTEREST
7.1 Legal Fees and Other Expenses.
7.1.1 If the Executive incurs legal fees or other expenses in an
effort to secure, preserve, establish entitlement to, or obtain benefits
under this Agreement (including, without limitation, the fees and other
expenses of the Executive's legal counsel in connection with the delivery
of the Executive Counsel opinion referred to in Section 6.5), the Company
shall, regardless of the outcome of such effort, promptly reimburse the
Executive on a current basis for such fees and expenses following the
Executive's written submission of a request for reimbursement together
with evidence that such fees and expenses were incurred.
7.1.2 If the Executive does not prevail (after exhaustion of all
available judicial remedies) in respect of a claim by the Executive or by
the Company hereunder, and the Company establishes before a court of
competent jurisdiction, by clear and convincing evidence, that the
Executive had no reasonable basis for his claim hereunder, or for his
response to the Company's claim hereunder, and acted in bad faith, no
further reimbursement for legal fees and expenses shall be due to the
Executive in respect of such claim and the Executive shall refund any
amounts previously reimbursed hereunder with respect to such claim.
7.2 Interest. If the Company and Nicor Gas, as applicable, does not pay
any amount due to the Executive under this Agreement within three days after
such amount became due and owing, interest shall accrue on such amount from the
date it became due and owing until the date of payment at an annual rate equal
to 200 basis points above the base commercial lending rate published in The Wall
Street Journal in effect from time to time during the period of such nonpayment.
ARTICLE VIII
NO SET-OFF OR MITIGATION
8.1 No Set-off by Company. The Executive's right to receive when due the
payments and other benefits provided for under this Agreement is absolute,
unconditional and subject to no set-off, counterclaim or legal or equitable
defense. Any claim which the Company may have against the Executive, whether for
a breach of this Agreement or otherwise, shall be brought in a separate action
or proceeding and not as part of any action or proceeding brought by the
Executive to enforce any rights against the Company under this Agreement.
8.2 No Mitigation. The Executive shall not have any duty to mitigate the
amounts payable by the Company and Nicor Gas, as applicable, under this
Agreement by seeking new employment following termination. Except as
specifically otherwise provided in this Agreement, all amounts payable pursuant
to this Agreement shall be paid without reduction regardless of any amounts of
salary, compensation or other amounts which may be paid or payable to the
Executive as the result of the Executive's employment by another employer.
ARTICLE IX
NON-EXCLUSIVITY OF RIGHTS
9.1 Waiver of Other Severance Rights. Except as may be otherwise
specifically provided in an amendment of this Section 9.1 adopted in accordance
with Section 11.7 of this Agreement, the Executive's rights under Section 5.1 of
this Agreement shall be in lieu of any benefits that may be otherwise payable to
or on behalf of the Executive pursuant to the terms of any severance pay
arrangement of the Company or any Subsidiary or any other, similar arrangement
of the Company or any Subsidiary providing benefits upon involuntary termination
of employment and shall also be in lieu of any benefits under the Nicor Inc.
Executive/Key Employee Severance Benefits Program (notwithstanding any provision
of that program to the contrary); provided, however, that this Section 9.1 shall
not affect the Executive's rights to receive any benefits with respect to a
termination of employment that occurs outside of the Employment Period.
9.2 Other Rights. Except as provided in Section 9.1, this Agreement shall
not prevent or limit the Executive's continuing or future participation in any
benefit, bonus, incentive or other plans provided by the Company or any of its
Subsidiaries and for which the Executive may qualify, nor shall this Agreement
limit or otherwise affect such rights as the Executive may have under any other
agreements with the Company or any of its Subsidiaries. Amounts which are vested
benefits or which the Executive is otherwise entitled to receive under any plan
of the Company or any of its Subsidiaries and any other payment or benefit
required by law at or after the Termination Date shall be payable in accordance
with such Plan or applicable law except as expressly modified by this Agreement.
ARTICLE X
CONFIDENTIALITY
10.1 Confidentiality. The Executive acknowledges that it is the policy of
the Company and its Subsidiaries to maintain as secret and confidential all
valuable and unique information and techniques acquired, developed or used by
the Company and its Subsidiaries relating to their business, operations,
employees and customers, which gives the Company and its Subsidiaries a
competitive advantage in the transmission, distribution, marketing, or sale of
natural gas or in the energy services industry and other businesses in which the
Company and its Subsidiaries are engaged ("Confidential Information"). The
Executive recognizes that all such Confidential Information is the sole and
exclusive property of the Company and its Subsidiaries, and that disclosure of
Confidential Information would cause damage to the Company and its Subsidiaries.
The Executive agrees that, except as required by the duties of his employment
with the Company or its Subsidiaries and except in connection with enforcing the
Executive's rights under this Agreement or if compelled by a court or
governmental agency, he will not, without the consent of the Company,
disseminate or otherwise disclose any Confidential Information obtained during
his employment with the Company or its Subsidiaries until such time as such
information has been disclosed publicly by the Company or one of its
Subsidiaries, or with its consent, or is otherwise a matter of public knowledge
(unless the Executive has reason to know that such information became a matter
of public knowledge through an unauthorized disclosure).
10.2 Remedy. The Executive and the Company specifically agree that, in the
event that Executive shall breach his obligations under this Article X, the
Company and its Subsidiaries will suffer irreparable injury and shall be
entitled to injunctive relief therefor, and shall not be precluded from pursuing
any and all remedies it may have at law or in equity for breach of such
obligations; provided, however, that such breach shall not in any manner or
degree whatsoever limit, reduce or otherwise affect the obligations of the
Company or Nicor Gas, as applicable, under this Agreement, and in no event shall
an asserted breach of the Executive's obligations under this Article X
constitute a basis for deferring or withholding any amounts otherwise payable to
the Executive under this Agreement.
ARTICLE XI
MISCELLANEOUS
11.1 No Assignability. This Agreement is personal to the Executive and
without the prior written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.
11.2 Successors. Before or upon the consummation of any Change in Control,
the Company shall obtain from each individual, group or entity, if any, that
becomes a successor of the Company by reason of the Change in Control, the
unconditional written agreement of such individual, group or entity to assume
this Agreement and to perform all of the obligations of the Company hereunder.
11.3 Payments to Beneficiary. If the Executive dies before receiving
amounts to which the Executive is entitled under this Agreement, such amounts
shall be paid in a lump sum to the beneficiary designated in writing by the
Executive, or if none is so designated, to the Executive's estate.
11.4 Nonalienation of Benefits. Benefits payable under this Agreement
shall not be subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, charge, garnishment, execution or levy of any
kind, either voluntary or involuntary, before actually being received by the
Executive, and any such attempt to dispose of any right to benefits payable
under this Agreement shall be void.
11.5 Severability. If any one or more articles, sections or other portions
of this Agreement are declared by any court or governmental authority to be
unlawful or invalid, such unlawfulness or invalidity shall not serve to
invalidate any article, section or other portion not so declared to be unlawful
or invalid. Any article, section or other portion so declared to be unlawful or
invalid shall be construed so as to effectuate the terms of such article,
section or other portion to the fullest extent possible while remaining lawful
and valid.
11.6 Arbitration. Any and all disputes between the parties hereto arising
out of this Agreement (other than disputes related to Article VI or to an
alleged breach of the covenant contained in Article X) shall be settled by
arbitration before an impartial arbitrator pursuant to the rules and regulations
of the American Arbitration Association (AAA) pertaining to the arbitration of
commercial disputes. Either party may invoke the right to arbitration. The
arbitrator shall be selected by means of the parties striking alternatively from
a panel of seven arbitrators supplied by the Chicago office of AAA. The
Arbitrator shall have the authority to interpret and apply the provisions of
this Agreement, consistent with Section 11.10 below. The decision of the
arbitrator shall be final and binding upon the parties. Judgment may be entered
on the award in any court of competent jurisdiction. The arbitrator's fees and
expenses shall be borne by the Company.
11.7 Amendments. This Agreement shall not be altered, amended or modified
except by written instrument executed by the Company and the Executive.
11.8 Notices. All notices and other communications under this Agreement
shall be in writing and delivered by hand, by a nationally-recognized commercial
delivery service, or by first-class registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:
If to the Executive:
George M. Behrens
2520 Hanford Lane
Aurora, Illinois 60504
If to the Company:
Nicor Inc.
1844 Ferry Road
Naperville, Illinois 60563-9600
Attn: Claudia J. Colalillo
or to such other address as either party shall have furnished to the other in
writing. Notice and communications shall be effective when actually received by
the addressee.
11.9 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
11.10 Governing Law. This Agreement is intended to be interpreted and
construed in accordance with the laws of the State of Illinois, without
regard to its choice of law principles.
11.11 Captions. The captions of this Agreement are not a part of the
provisions hereof and shall have no force or effect.
11.12 Number and Gender. Wherever from the context it appears appropriate,
each term stated in either the singular or plural shall include the singular and
the plural, and pronouns stated in either the masculine, the feminine or the
neuter gender shall include the masculine, feminine and neuter genders.
11.13 Tax Withholding. The Company or Nicor Gas, as applicable, may
withhold from any amounts payable under this Agreement any federal, state or
local taxes that are required to be withheld pursuant to any applicable law or
regulation.
11.14 No Waiver. A waiver of any provision of this Agreement shall not be
deemed a waiver of any other provision, and any waiver of any default as to any
such provision shall not be deemed a waiver of any later default as to that or
any other provision.
11.15 Entire Agreement. This Agreement contains the entire
understanding of the Company, Nicor Gas and the Executive with respect to its
subject matter.
IN WITNESS WHEREOF, the Executive and the Company have executed this
Agreement as of the date first above written.
GEORGE M. BEHRENS
George M. Behrens
Nicor Inc.
By: THOMAS L. FISHER
Chairman, President and CEO
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.01
<SEQUENCE>4
<FILENAME>0004.txt
<DESCRIPTION>CONSENT OF ACCOUNTANTS
<TEXT>
Nicor Inc.
Form 10-K
Exhibit 23.01
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference of our report, dated January 22, 2001, included in this Form 10-K,
into the company's previously filed Form S-3 Registration Statement in
connection with the Nicor Automatic Dividend Reinvestment and Stock Purchase
Plan (No. 33-56871), and Form S-8 Registration Statements in connection with
the Nicor Employee Stock Purchase Plan (No. 33-1732), the Nicor Gas Savings
Investment Plan (No. 33-56867), the Nicor Gas Thrift Plan (No. 33-60689), the
Birdsall Retirement Savings Plan (No. 333-28579), the Nicor 1989 Long-Term
Incentive Plan (No. 33-31029) and the Nicor 1997 Long-Term Incentive Plan
(No. 333-28699).
ARTHUR ANDERSEN LLP
Chicago, Illinois
March 7, 2001
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-24.01
<SEQUENCE>5
<FILENAME>0005.txt
<DESCRIPTION>POWER OF ATTORNEY
<TEXT>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned, a Director, Officer, or Director and Officer of
Nicor Inc., an Illinois corporation, does hereby constitute and appoint J. L.
METZ and M. T. LORENZ, and each of them, the undersigned's true and lawful
attorneys and agents, each with full power and authority (acting alone and
without the other) to execute in the name and on behalf of the undersigned as
such Director, Officer, or Director and Officer, the 2000 Annual Report on
Form 10-K (and such amendment or amendments thereto as may be necessary) to
be filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934, hereby granting to such attorneys and agents, and each of them, full
power of substitution and revocation in the premises; and hereby ratifying
and confirming all that such attorneys and agents, or any of them, may do or
cause to be done by virtue of these presents.
IN WITNESS WHEREOF, I have hereunto signed this Power of Attorney this
18th day of January, 2001.
ROBERT M. BEAVERS, JR.
Robert M. Beavers, Jr.
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned, a Director, Officer, or Director and Officer of
Nicor Inc., an Illinois corporation, does hereby constitute and appoint J. L.
METZ and M. T. LORENZ, and each of them, the undersigned's true and lawful
attorneys and agents, each with full power and authority (acting alone and
without the other) to execute in the name and on behalf of the undersigned as
such Director, Officer, or Director and Officer, the 2000 Annual Report on
Form 10-K (and such amendment or amendments thereto as may be necessary) to
be filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934, hereby granting to such attorneys and agents, and each of them, full
power of substitution and revocation in the premises; and hereby ratifying
and confirming all that such attorneys and agents, or any of them, may do or
cause to be done by virtue of these presents.
IN WITNESS WHEREOF, I have hereunto signed this Power of Attorney this
18th day of January, 2001.
BRUCE P. BICKNER
Bruce P. Bickner
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned, a Director, Officer, or Director and Officer of
Nicor Inc., an Illinois corporation, does hereby constitute and appoint J. L.
METZ and M. T. LORENZ, and each of them, the undersigned's true and lawful
attorneys and agents, each with full power and authority (acting alone and
without the other) to execute in the name and on behalf of the undersigned as
such Director, Officer, or Director and Officer, the 2000 Annual Report on
Form 10-K (and such amendment or amendments thereto as may be necessary) to
be filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934, hereby granting to such attorneys and agents, and each of them, full
power of substitution and revocation in the premises; and hereby ratifying
and confirming all that such attorneys and agents, or any of them, may do or
cause to be done by virtue of these presents.
IN WITNESS WHEREOF, I have hereunto signed this Power of Attorney this
18th day of January, 2001.
JOHN H. BIRDSALL, III
John H. Birdsall, III
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned, a Director, Officer, or Director and Officer of
Nicor Inc., an Illinois corporation, does hereby constitute and appoint J. L.
METZ and M. T. LORENZ, and each of them, the undersigned's true and lawful
attorneys and agents, each with full power and authority (acting alone and
without the other) to execute in the name and on behalf of the undersigned as
such Director, Officer, or Director and Officer, the 2000 Annual Report on
Form 10-K (and such amendment or amendments thereto as may be necessary) to
be filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934, hereby granting to such attorneys and agents, and each of them, full
power of substitution and revocation in the premises; and hereby ratifying
and confirming all that such attorneys and agents, or any of them, may do or
cause to be done by virtue of these presents.
IN WITNESS WHEREOF, I have hereunto signed this Power of Attorney this
18th day of January, 2001.
THOMAS A. DONAHOE
Thomas A. Donahoe
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned, a Director, Officer, or Director and Officer of
Nicor Inc., an Illinois corporation, does hereby constitute and appoint J. L.
METZ and M. T. LORENZ, and each of them, the undersigned's true and lawful
attorneys and agents, each with full power and authority (acting alone and
without the other) to execute in the name and on behalf of the undersigned as
such Director, Officer, or Director and Officer, the 2000 Annual Report on
Form 10-K (and such amendment or amendments thereto as may be necessary) to
be filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934, hereby granting to such attorneys and agents, and each of them, full
power of substitution and revocation in the premises; and hereby ratifying
and confirming all that such attorneys and agents, or any of them, may do or
cause to be done by virtue of these presents.
IN WITNESS WHEREOF, I have hereunto signed this Power of Attorney this
18th day of January, 2001.
JOHN E. JONES
John E. Jones
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned, a Director, Officer, or Director and Officer of
Nicor Inc., an Illinois corporation, does hereby constitute and appoint J. L.
METZ and M. T. LORENZ, and each of them, the undersigned's true and lawful
attorneys and agents, each with full power and authority (acting alone and
without the other) to execute in the name and on behalf of the undersigned as
such Director, Officer, or Director and Officer, the 2000 Annual Report on
Form 10-K (and such amendment or amendments thereto as may be necessary) to
be filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934, hereby granting to such attorneys and agents, and each of them, full
power of substitution and revocation in the premises; and hereby ratifying
and confirming all that such attorneys and agents, or any of them, may do or
cause to be done by virtue of these presents.
IN WITNESS WHEREOF, I have hereunto signed this Power of Attorney this
18th day of January, 2001.
DENNIS J. KELLER
Dennis J. Keller
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned, a Director, Officer, or Director and Officer of
Nicor Inc., an Illinois corporation, does hereby constitute and appoint J. L.
METZ and M. T. LORENZ, and each of them, the undersigned's true and lawful
attorneys and agents, each with full power and authority (acting alone and
without the other) to execute in the name and on behalf of the undersigned as
such Director, Officer, or Director and Officer, the 2000 Annual Report on
Form 10-K (and such amendment or amendments thereto as may be necessary) to
be filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934, hereby granting to such attorneys and agents, and each of them, full
power of substitution and revocation in the premises; and hereby ratifying
and confirming all that such attorneys and agents, or any of them, may do or
cause to be done by virtue of these presents.
IN WITNESS WHEREOF, I have hereunto signed this Power of Attorney this
18th day of January, 2001.
WILLIAM A. OSBORN
William A. Osborn
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned, a Director, Officer, or Director and Officer of
Nicor Inc., an Illinois corporation, does hereby constitute and appoint J. L.
METZ and M. T. LORENZ, and each of them, the undersigned's true and lawful
attorneys and agents, each with full power and authority (acting alone and
without the other) to execute in the name and on behalf of the undersigned as
such Director, Officer, or Director and Officer, the 2000 Annual Report on
Form 10-K (and such amendment or amendments thereto as may be necessary) to
be filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934, hereby granting to such attorneys and agents, and each of them, full
power of substitution and revocation in the premises; and hereby ratifying
and confirming all that such attorneys and agents, or any of them, may do or
cause to be done by virtue of these presents.
IN WITNESS WHEREOF, I have hereunto signed this Power of Attorney this
18th day of January, 2001.
SIDNEY R. PETERSEN
Sidney R. Petersen
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned, a Director, Officer, or Director and Officer of
Nicor Inc., an Illinois corporation, does hereby constitute and appoint J. L.
METZ and M. T. LORENZ, and each of them, the undersigned's true and lawful
attorneys and agents, each with full power and authority (acting alone and
without the other) to execute in the name and on behalf of the undersigned as
such Director, Officer, or Director and Officer, the 2000 Annual Report on
Form 10-K (and such amendment or amendments thereto as may be necessary) to
be filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934, hereby granting to such attorneys and agents, and each of them, full
power of substitution and revocation in the premises; and hereby ratifying
and confirming all that such attorneys and agents, or any of them, may do or
cause to be done by virtue of these presents.
IN WITNESS WHEREOF, I have hereunto signed this Power of Attorney this
18th day of January, 2001.
JOHN RAU
John Rau
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned, a Director, Officer, or Director and Officer of
Nicor Inc., an Illinois corporation, does hereby constitute and appoint J. L.
METZ and M. T. LORENZ, and each of them, the undersigned's true and lawful
attorneys and agents, each with full power and authority (acting alone and
without the other) to execute in the name and on behalf of the undersigned as
such Director, Officer, or Director and Officer, the 2000 Annual Report on
Form 10-K (and such amendment or amendments thereto as may be necessary) to
be filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934, hereby granting to such attorneys and agents, and each of them, full
power of substitution and revocation in the premises; and hereby ratifying
and confirming all that such attorneys and agents, or any of them, may do or
cause to be done by virtue of these presents.
IN WITNESS WHEREOF, I have hereunto signed this Power of Attorney this
18th day of January, 2001.
PATRICIA A. WIER
Patricia A. Wier
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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