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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
AGL RESOURCES INC.
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(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
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[LOGO OF AGL RESOURCES INC. APPEARS HERE]
WALTER M. HIGGINS
President and Chief Executive Officer
December 30, 1998
To Our Shareholders:
On behalf of the Board of Directors, I am pleased to invite you to attend the
1999 Annual Meeting of Shareholders of AGL Resources Inc., which will be held
at 10:00 a.m., local time, on Friday, February 5, 1999, at Cobb Galleria Centre
(Ballroom), Two Galleria Parkway, Atlanta, Georgia. The formal notice of the
Annual Meeting appears on the next page, and a map with directions is enclosed.
The matters to be acted upon at the Annual Meeting are described in the
attached Proxy Statement. During the meeting, you and our other shareholders
will have the opportunity to ask questions and comment on the Company's
operations. Directors, officers, and other employees of the Company will be
available to answer any questions you may have. In addition to the matters
described in the attached Proxy Statement, we also will discuss 1998 financial
results, deregulation of the natural gas business and our new retail natural
gas marketing joint venture.
We are pleased to announce that you now can make a TOLL-FREE call to 1-877-
ATG-NYSE (1-877-284-6973) to obtain quarterly earnings, news releases and faxed
financial reports or to request AGL Resources information by mail. You also can
access current AGL Resources information at our web site at www.aglr.com.
Your views and opinions are very important to our Company. Whether or not you
are able to attend the Annual Meeting, please review the enclosed Annual Report
and Proxy Statement.
YOUR VOTE ALSO IS VERY IMPORTANT TO US. REGARDLESS OF THE NUMBER OF SHARES
YOU OWN, PLEASE COMPLETE YOUR PROXY CARD AND PROMPTLY RETURN IT TO US IN THE
POSTPAID ENVELOPE.
We greatly appreciate the interest expressed by our shareholders, and we are
pleased that in the past so many of you have voted your shares either in person
or by proxy. We hope that you will continue to do so and urge you to return
your proxy card as soon as possible.
Sincerely,
[SIGNATURE OF WALTER M. HIGGINS APPEARS HERE]
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[LOGO OF AGL RESOURCES INC. APPEARS HERE]
303 PEACHTREE STREET, N.E.
ATLANTA, GEORGIA 30308
----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD FEBRUARY 5, 1999
----------------
To Our Shareholders:
The Annual Meeting of Shareholders of AGL Resources Inc. ("AGL Resources")
will be held at Cobb Galleria Centre (Ballroom), Two Galleria Parkway, Atlanta,
Georgia, on Friday, February 5, 1999 at 10:00 a.m., local time. The following
items of business will be discussed and voted upon during the meeting:
1. A proposal to elect two directors, each for a term of three years.
2. A proposal to adopt the AGL Resources Inc. Long-Term Incentive Plan
(1999).
3. Such other business as properly may come before the Annual Meeting or
any adjournments thereof.
The Board of Directors does not know of any other business to be voted upon by
the shareholders at the Annual Meeting.
The attached Proxy Statement discusses the above matters. The Board of
Directors has fixed the close of business on November 27, 1998, as the record
date for the determination of the shareholders entitled to receive notice of
and to vote at this meeting or any adjournment.
PLEASE NOTE THAT THIS YEAR'S ANNUAL MEETING WILL BE HELD AT COBB GALLERIA
CENTRE. IF YOU PLAN TO ATTEND, PLEASE REFER TO THE ENCLOSED MAP FOR DIRECTIONS.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE FILL IN, SIGN,
DATE AND PROMPTLY MAIL THE ACCOMPANYING PROXY CARD IN THE ENCLOSED, POSTPAID
ENVELOPE.
We look forward to seeing you at the meeting.
By Order of the Board of Directors
[LOGO OF MELANIE MCGEE PLATT APPEARS HERE]
Melanie McGee Platt
Corporate Secretary
Atlanta, Georgia
December 30, 1998
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TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
Voting Information....................................................... 1
Election of Directors.................................................... 3
Governance of the Company................................................ 7
Director Compensation.................................................... 9
Adoption of the AGL Resources Inc. Long-Term Incentive Plan (1999)....... 10
Security Ownership of Management......................................... 15
Executive Compensation................................................... 17
Other Matters Involving Directors and Executive Officers................. 24
Nominating and Compensation Committee Report............................. 26
Stock Performance Graph.................................................. 29
General Information...................................................... 30
</TABLE>
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[LOGO OF AGL RESOURCES INC. APPEARS HERE]
303 PEACHTREE STREET, N.E.
ATLANTA, GEORGIA 30308
--------
PROXY STATEMENT
FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD FEBRUARY 5, 1999
VOTING INFORMATION
PURPOSE
This Proxy Statement and the accompanying proxy card are being mailed to
shareholders of
AGL Resources Inc. ("AGL Resources" or the "Company") beginning on December 30,
1998. The
AGL Resources Board of Directors is soliciting proxies to be used at the 1999
Annual Meeting of Shareholders (the "Annual Meeting"), which will be held on
Friday, February 5, 1999. We are soliciting proxies to give all shareholders of
record an opportunity to vote on matters to be presented at the Annual Meeting.
In the following pages of this Proxy Statement, you will find information on
matters to be voted upon at the Annual Meeting or any adjournment of that
meeting.
WHO CAN VOTE
All shareholders of record of AGL Resources Common Stock, $5 par value per
share (the "Common Stock"), as of the close of business on November 27, 1998
are entitled to vote at the Annual Meeting. Each outstanding share of Common
Stock is entitled to one vote on each matter on which the shareholders vote.
QUORUM AND SHARES OUTSTANDING
A majority of the outstanding shares of AGL Resources Common Stock must be
present, either in person or represented by proxy, in order to obtain a quorum
and conduct the Annual Meeting. In order to determine whether a quorum is
present at the Annual Meeting, the number of votes "for" and abstentions
(including instructions to withhold authority to vote) will be counted. On
November 27, 1998, 57,386,389 shares of
AGL Resources Common Stock were outstanding and eligible to be voted at the
Annual Meeting.
BENEFICIAL OWNERS OF MORE THAN 5% OF VOTING STOCK
A total of 4,738,384 shares (8.25%) of AGL Resources Common Stock was held of
record on November 27, 1998 by the AGL Resources Inc. Retirement Savings Plus
Plan, P.O. Box 4569, Atlanta, Georgia 30302. AGL Resources does not know of any
other beneficial owner of more than 5% of the outstanding Common Stock of the
Company.
REQUIRED VOTES - ELECTION OF DIRECTORS
In voting for the proposal to elect the directors (Item 1 on the proxy card),
shareholders may vote in favor of all nominees, withhold their votes as to all
nominees, or withhold their votes as to specific nominees. Georgia law governs
the voting on this proposal, and requires that directors be elected by a
plurality of votes. That means that the nominees for the two director positions
who receive the largest number of properly executed proxy votes will be elected
as directors. Under Georgia law, votes that are withheld will not be counted
and will have no effect.
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REQUIRED VOTES - ADOPTION OF THE AGL RESOURCES INC. LONG-TERM INCENTIVE PLAN
(1999)
In voting for the proposal to adopt the AGL Resources Inc. Long-Term
Incentive Plan (1999) (Item 2 on the proxy card), shareholders may vote in
favor of the proposal or against the proposal or may abstain from voting.
Georgia law governs the voting on this proposal. This proposal will be approved
if the votes cast favoring the proposal exceed the votes cast opposing the
proposal, provided that a quorum is present. Abstentions will not be counted
and will have no effect.
VOTING OF SHARES BY HOLDERS OF COMMON STOCK
AGL Resources is mailing a WHITE proxy card with this Proxy Statement to all
AGL Resources shareholders of record. If you participate in the AGL Resources
Inc. Direct Stock Purchase and Dividend Reinvestment Plan ("ResourcesDirect"),
your WHITE proxy card represents shares held in ResourcesDirect, as well as
shares that are registered in your name and held outside the plan.
(Participants in certain employee benefit plans should read the following
paragraph for instructions about how to vote those shares.) If you properly
complete and return your WHITE proxy card and do not revoke it, your shares
will be voted according to your instructions. IF YOU PROPERLY SIGN AND RETURN
THE WHITE PROXY CARD BUT DO NOT SPECIFY HOW YOU WANT YOUR SHARES TO BE VOTED,
YOUR SHARES WILL BE VOTED "FOR" THE PROPOSALS LISTED ON THE WHITE PROXY CARD
AND DESCRIBED IN THIS PROXY STATEMENT.
If your shares are registered in your name and you vote by proxy, you may
revoke your WHITE proxy card at any time by:
. executing and delivering a WHITE proxy card bearing a later date to the
Corporate Secretary of the Company at P.O. Box 4569, Atlanta, Georgia
30302; or
. attending the Annual Meeting and voting in person.
VOTING OF SHARES BY PARTICIPANTS IN AGL RESOURCES EMPLOYEE BENEFIT PLANS
AGL Resources is mailing a separate GREEN proxy card with this Proxy
Statement to all participants in the following employee benefit plans:
AGL Resources Inc. Retirement Savings Plus Plan (the "RSP Plan")
AGL Resources Inc. Leveraged Employee Stock Ownership Plan ( the "LESOP")
Your GREEN proxy card appoints The Northern Trust Company, which acts as
Trustee for the RSP Plan and the LESOP, as your proxy, to vote your shares
according to your instructions.
You may revoke your GREEN proxy card at any time by:
. executing and delivering a GREEN proxy card bearing a later date to the
Trustee at the following address: The Northern Trust Company, Attention:
Master Trust Administrator, Fifty South La Salle Street, Chicago,
Illinois 60675.
Under the RSP Plan and the LESOP, only the Trustee can vote your plan shares
even if you or your beneficiary attend the Annual Meeting in person.
If you do not return your GREEN proxy card or if you properly sign and return
your GREEN proxy card but do not specify how you want your shares to be voted,
the Trustee will vote the unvoted allocated shares in the LESOP in the same
proportion as the LESOP shares that are voted by participants and
beneficiaries. The Trustee will vote the unallocated LESOP shares and any
unvoted RSP Plan shares, according to the instructions of the respective
Administrative Committees of the plans, "FOR" the proposals listed on your
GREEN proxy card and described in this Proxy Statement.
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TABULATION OF VOTES
If you properly complete and return your proxy card and do not revoke it,
your shares will be voted according to your instructions. If your AGL Resources
shares are held in street name or by a broker and you do not give voting
instructions, brokers are prohibited, under certain circumstances, from voting
on proposals. This results in "broker non-votes." Such "broker non-votes" are
not considered in determining whether a quorum exists at the Annual Meeting and
are not considered as votes cast for or against a proposal.
COSTS OF SOLICITATION
AGL Resources will pay the expenses of soliciting proxies. Proxies may be
solicited on our behalf by directors, officers and employees, in person or by
telephone, facsimile or electronic transmission. Directors, officers and
employees will not be paid for those services. AGL Resources has hired
Corporate Investor Communications, Inc. ("CIC"), a proxy solicitation firm, to
assist in the distribution and solicitation of proxies. We will pay CIC
approximately $5,000, plus reasonable out-of-pocket disbursements, for those
services.
SHAREHOLDER ACCOUNT MAINTENANCE
Our transfer and shareholder services agent is Wachovia Bank, N.A. All
communications concerning accounts for shareholders of record, including
address changes, name changes, inquiries to transfer shares and similar issues
can be handled by making a toll-free call to the AGL Resources Shareholder
Services number at 1-800-633-4236.
ELECTION OF DIRECTORS (ITEM 1 ON THE PROXY CARD)
The Board of Directors presently consists of eleven members. The Board is
divided into three classes, with the directors in each class serving a three-
year term. Each year the shareholders elect a class of directors for a new
term.
The Board of Directors has nominated Frank Barron, Jr. and Walter M. Higgins
for election as directors at the Annual Meeting. Messrs. Barron and Higgins
presently are members of the Board of Directors and their terms are scheduled
to end at the Annual Meeting. Each of the nominees has agreed to serve as a
director if elected. If elected by the shareholders, Messrs. Barron and Higgins
each will serve a three-year term which will end at the Annual Meeting of
Shareholders in the year 2002.
If either nominee becomes unable to stand for election, the proxies will vote
all valid proxy cards for the election of the remaining nominee and for any
substitute nominee named by the Board, or will allow the vacancy to remain open
until filled by the Board, or will reduce the authorized number of directors,
as the Board recommends.
Following is information as of December 1, 1998 about the two director
nominees and all current directors whose terms of office will continue after
the Annual Meeting. Unless otherwise stated, all directors have been engaged in
their principal occupations for more than the past five years.
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NOMINEES FOR ELECTION AT THIS MEETING TO TERMS EXPIRING IN THE YEAR 2002:
[Frank Barron,
Jr. Photo]
FRANK BARRON, JR., Vice President of Public Affairs of
Rome Coca-Cola Bottling Company and previously officer
and director of seven Coca-Cola Bottling Companies in
Georgia. Mr. Barron, 66, has been a director since 1983.
[Walter M.
Higgins Photo]
WALTER M. HIGGINS, President and Chief Executive Officer
of the Company since January 1998; Chief Executive
Officer of Atlanta Gas Light Company ("AGLC"), a wholly
owned subsidiary of the Company, since January 1998;
President of AGLC from January 1998 until September
1998; Chairman of the Board, President and Chief
Executive Officer of Sierra Pacific Resources ("Sierra
Pacific") from January 1994 until January 1998;
President and Chief Executive Officer of Sierra Pacific
Power Company, a wholly owned subsidiary of Sierra
Pacific, from February 1994 until January 1998;
President and Chief Operating Officer of Sierra Pacific
from November 1993 until January 1994; President and
Chief Operating Officer of Louisville Gas and Electric
Company from 1991 until November 1993; director of UTILX
Corporation and AEGIS Insurance Services. Mr. Higgins,
54, has been a director since February 1998.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ABOVE NOMINEES.
----------------
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DIRECTORS WHOSE TERMS CONTINUE UNTIL THE ANNUAL MEETING IN THE YEAR 2000:
[Otis A. Brumby,
Jr. Photo]
OTIS A. BRUMBY, JR., Chairman of the Board and Chief
Executive Officer of The Marietta Daily Journal and
Neighbor Newspapers, Inc. since October 1993 and
previously President and Publisher of The Marietta Daily
Journal and Neighbor Newspapers from March 1965 until
October 1993; director of First Union - Georgia. Mr.
Brumby, 58, has been a director since 1990.
[David R.
Jones Photo]
DAVID R. JONES, Chairman of the Board of Directors of
the Company since February 1998; President and Chief
Executive Officer of the Company since its organization
in January 1996 until February 1998; Chairman and Chief
Executive Officer of AGLC, a wholly owned subsidiary of
the Company, from August 1997 until February 1998;
President and Chief Executive Officer of AGLC from 1988
until August 1997; chairman of the Board of Directors of
the Federal Reserve Bank of Atlanta. Mr. Jones, 61, has
been a director since 1985.
[Wyck A. Knox,
Jr. Photo]
WYCK A. KNOX, JR., Partner in the law firm of Kilpatrick
Stockton LLP; Chairman and Chief Executive Officer of
Knox-Rivers Construction Company from 1976 until 1995;
director of First Union - Georgia. Mr. Knox, 58, has
been a director since November 1998.
[Albert G. Norman,
Jr. Photo]
ALBERT G. NORMAN, JR., Partner in the law firm of Long
Aldridge & Norman LLP, counsel to the Company. Mr.
Norman, 69, has been a director since 1976.
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DIRECTORS WHOSE TERMS CONTINUE UNTIL THE ANNUAL MEETING IN THE YEAR 2001:
[D. Raymond
Riddle Photo]
D. RAYMOND RIDDLE, Retired Chairman of the Board and
Chief Executive Officer of National Service Industries,
Inc. ("NSI") effective February 1996; Chairman of the
Board and Chief Executive Officer of NSI from September
1994 until February 1996; President and Chief Executive
Officer of NSI from January 1993 until September 1994;
Executive Vice President of Wachovia Corporation and
President and Chief Executive Officer of Wachovia Bank
of Georgia, N.A. and Wachovia Corporation of Georgia
from May 1987 until January 1993; director of Atlantic
American Corporation, Equifax, Inc. and Gables
Residential Trust. Mr. Riddle, 65, has been a director
since 1978.
[Dr. Betty L.
Siegel Photo]
DR. BETTY L. SIEGEL, President of Kennesaw State
University; director of Equifax, Inc. and National
Service Industries, Inc. Dr. Siegel, 67, has been a
director since 1986.
[Ben J. Tarbutton,
Jr. Photo]
BEN J. TARBUTTON, JR., Vice President of Sandersville
Railroad Co. Mr. Tarbutton, 68, has been a director
since 1983.
[Felker W. Ward,
Jr. Photo]
FELKER W. WARD, JR., Chairman of Pinnacle Investment
Advisors, Inc., an investment banking firm and wholly
owned subsidiary of Ward and Associates, Inc., since
January 1994; President of Ward and Associates, Inc., an
investment banking firm, from January 1988 until January
1998; Vice Chairman of Concessions International, Inc.
("Concessions") since 1997; President of Concessions
from 1979 until 1997; director of Fidelity National
Bank, Shoney's, Inc. and Abrams Industries, Inc. Mr.
Ward, 65, has been a director since 1988.
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GOVERNANCE OF THE COMPANY
BOARD OF DIRECTORS
The business affairs of AGL Resources are managed under the direction of the
Board of Directors in accordance with the Georgia Business Corporation Code,
AGL Resources' Articles and its Bylaws. Members of the Board are kept informed
through reports routinely presented at Board and committee meetings by the
Chief Executive Officer and other officers, and through other means. The Board
of Directors held ten meetings in fiscal 1998. Each director attended at least
78% or more of the Board and all committee meetings.
COMMITTEES ESTABLISHED BY THE BOARD
The Board of Directors has established the committees described below to
assist it in discharging its duties. Actions taken by any committee of the
Board are reported to the Board, usually at its meetings or by written report.
Committee members are listed below. Biographical information about each of the
directors is described above, at "Election of Directors."
COMMITTEE MEMBERS OF THE BOARD AS OF DECEMBER 1, 1998
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CORPORATE NOMINATING &
AUDIT RESPONSIBILITY EXECUTIVE COMPENSATION STRATEGY & FINANCE
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<S> <C> <C> <C> <C>
O.A. Brumby, Jr., Chair F. Barron, Jr., Chair W.M. Higgins, Chair D.R. Riddle, Chair F.W. Ward, Jr., Chair
W.W. Bradley O.A. Brumby, Jr. F. Barron, Jr. W.W. Bradley F. Barron, Jr.
B.L. Siegel W.M. Higgins O.A. Brumby, Jr. W.A. Knox, Jr. W.M. Higgins
A.G. Norman, Jr. D.R. Jones D.R. Jones B.L. Siegel D.R. Jones
D.R. Riddle W.A. Knox, Jr. D.R. Riddle B.J. Tarbutton, Jr. A.G. Norman, Jr.
F.W. Ward, Jr. B.J. Tarbutton, Jr. B.J. Tarbutton, Jr.
F.W. Ward, Jr.
</TABLE>
AUDIT COMMITTEE
The Audit Committee met two times in fiscal 1998. Its duties and
responsibilities are to, among other things:
. Consider the choice of the Company's independent public accountants.
. Review the planned scope of the audit and the results of the audit.
. Review the results of the Company's internal audit program.
. Convey information between the Board of Directors and the Company's
independent public accountants and auditors.
CORPORATE RESPONSIBILITY COMMITTEE
The Corporate Responsibility Committee met one time in fiscal 1998. Its
duties and responsibilities are to, among other things:
. Make periodic reviews of pension and benefit plans (including the
investment of funds).
. Identify and monitor broad governmental, social and environmental trends
that could affect the Company's performance and the related interests of
its employees, shareholders, customers and the general public.
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.Review and monitor matters relating to employee and community health and
safety.
.Review and monitor corporate policy with respect to charitable giving.
EXECUTIVE COMMITTEE
The Executive Committee met three times in fiscal 1998. The Executive
Committee may meet during intervals between Board meetings and has all the
authority of the Board, subject to limitations imposed by law or the Company's
Bylaws.
NOMINATING AND COMPENSATION COMMITTEE
The Nominating and Compensation Committee met six times in fiscal 1998. Its
duties and responsibilities are to, among other things:
.Review and develop management succession and executive development plans.
. Recommend for election the officers of the Company and AGLC and the
presidents of each of the other principal subsidiaries of the Company.
. Review the performance of and recommend the appropriate compensation
level for those officers, including base salaries, long-term incentive
compensation, other incentive compensation, and benefits.
. Review and recommend any changes in the Company's various benefit
programs.
. Review the compensation paid to the members of the Company's Board of
Directors and make recommendations for adjustments, as appropriate.
. Identify and recommend the nominees for election to the Board.
Although the Nominating and Compensation Committee has not established any
formal procedures for considering nominees recommended by shareholders, it will
consider any nominees.
STRATEGY AND FINANCE COMMITTEE
On May 1, 1998, the Board approved the formation of the Strategy and Finance
Committee. The Strategy and Finance Committee met for the first time on
November 4, 1998. This Committee has responsibility for considering and making
recommendations about short- and long-term business objectives and strategies;
strategic business combinations; the Company's entry into new businesses; the
Company's operating plans and budgets; the Company's capitalization; financing
plans; and dividend policy.
8
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DIRECTOR COMPENSATION
FEES AND OTHER COMPENSATION
Each non-employee director of the Company receives an annual retainer for
services as a director, which is paid in accordance with the terms of the AGL
Resources Inc. 1996 Non-Employee Directors Equity Compensation Plan, as set
forth in the following paragraph. In addition, each non-employee director
receives $1,000 for attendance at each meeting of the Board and any standing
committee of which he or she is a member. Directors are reimbursed for expenses
incurred in connection with attendance of meetings of the Board and committees.
Any director who is an officer or employee of the Company does not receive any
compensation for his or her services as a director or as a member of a standing
committee of the Board.
1996 NON-EMPLOYEE DIRECTORS EQUITY COMPENSATION PLAN. All non-employee
directors participate in the AGL Resources Inc. 1996 Non-Employee Directors
Equity Compensation Plan (the "Directors Plan"). The Directors Plan provides
for an automatic grant to each non-employee director on the first day of each
annual service term of (i) an award of AGL Resources Common Stock equal in fair
market value on such date to the $16,000 annual retainer payable to each
director and (ii) a nonqualified stock option to purchase the same number of
shares of Common Stock as are awarded on such date in payment of the retainer.
Additionally, the Directors Plan allows a non-employee director to make an
advance irrevocable election to defer receipt of meeting fees under the Common
Stock Equivalent Plan described below. The per share option exercise price is
equal to the fair market value of the Company's Common Stock on the date of
grant of the option. The stock award may not be sold or transferred until the
expiration of six months from the date of issuance. Directors realize value
from option grants only to the extent that the fair market value of the Common
Stock of the Company on the date of exercise of the option exceeds the fair
market value of the Common Stock on the date of grant.
For the 1998 annual term of service, Dr. Siegel and Messrs. Barron, Brumby,
Norman, Riddle, Tarbutton and Ward each were granted stock awards for 798
shares. The share amount was calculated by dividing the $16,000 annual retainer
fee by $20.0625, the then current per share fair market value of AGL Resources
Common Stock. Each of the directors also was granted an option to purchase 798
shares at $20.0625 per share. In addition, Waldo W. Bradley, a current director
who is not standing for re-election, L.L. Gellerstedt, III, a former director
who resigned in 1998, and Charles McKenzie Taylor, a former director who
retired in 1998, each received a stock award for 798 shares and an option to
purchase 798 shares at $20.0625 per share. (See "Security Ownership of
Management" below.)
1998 COMMON STOCK EQUIVALENT PLAN FOR NON-EMPLOYEE DIRECTORS. In order to
further encourage ownership of AGL Resources Common Stock by directors, the
Company also maintains the Common Stock Equivalent Plan for Non-Employee
Directors. The plan became effective in January 1998 and allows non-employee
directors to invest their meeting fees in common stock equivalents. Common
stock equivalents are bookkeeping entries that track the performance of AGL
Resources Common Stock and are not actual shares of stock. The bookkeeping
entries reflect fluctuations based on AGL Resources Common Stock price changes,
dividends, stock splits and other capital changes. At the end of their board
service, directors receive a cash distribution based on the value of their
common stock equivalents and dividends.
DEFERRED COMPENSATION PLAN FOR CORPORATE DIRECTORS. The Company also
maintains the AGL Resources Inc. Deferred Compensation Plan for Corporate
Directors. Under this plan, a non-employee director may defer receipt of
meeting fees. Deferred fees are credited during the calendar year and accrue
interest at a rate equal to the rate applicable to the first auction of 26-week
Treasury Bills during the calendar year.
Generally, a participant will receive payment of his or her benefit under the
plan in a lump sum or in a series of five annual cash installments, beginning
after such participant attains age 70 or after the director otherwise retires
from service on the Board. The total amount of the cash payment(s) is (are)
determined by the amount of fees deferred plus the interest accrued thereon. If
a director dies before receiving full payment of his or her benefit under the
plan, the remaining amount will be paid to the beneficiary designated by the
director.
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ADOPTION OF THE AGL RESOURCES INC. LONG-TERM INCENTIVE PLAN (1999)
(ITEM 2 ON THE PROXY CARD)
GENERAL
The Board of Directors has adopted the AGL Resources Inc. Long-Term Incentive
Plan (1999) (the "LTIP"), subject to shareholder approval. If our shareholders
approve the LTIP at the Annual Meeting, the LTIP will be effective as of
January 1, 1999 (the "effective date").
The purpose of the LTIP is to encourage ownership of AGL Resources Common
Stock by eligible employees. The Company believes that the LTIP will give
eligible employees an added incentive to continue in the employ of the Company
or its related companies. In addition, the LTIP will align the long-term
interests of eligible employees with those of the shareholders by stimulating
such employees' efforts to promote the growth, efficiency and profitability of
the Company and its related companies. The LTIP also may help to attract
outstanding employees to the service of the Company and its related companies.
The following is a brief summary of the principal features of the LTIP.
TYPES OF INCENTIVE COMPENSATION
The LTIP provides for the following types of long-term incentive
compensation:
. Stock Options;
. Restricted Stock; and
. Performance Units.
Stock Options consist of incentive stock options ("ISOs"), nonqualified stock
options ("NQSOs") and reload options. AGL Resources intends that ISOs granted
under the LTIP qualify as incentive stock options under Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"). NQSOs are stock options
that do not qualify as ISOs. Stock Options, Restricted Stock and Performance
Units collectively are referred to as "Awards."
ADMINISTRATION
The Nominating and Compensation Committee of the Board of Directors (the
"Committee") will administer the LTIP. The Committee, or a subcommittee thereof
if required for Code (S)162(m) compliance, will have full discretionary
authority concerning the issuance of Awards under the LTIP and the
interpretation and administration of the LTIP. The Committee will decide
whether and to what extent Awards will be structured to conform with Code
(S)162(m) requirements applicable to performance-based compensation. All
decisions of the Committee and its actions with respect to the LTIP are final,
binding and conclusive. Members of the Committee will be indemnified by the
Company against actual or threatened litigation so long as they act in good
faith and in the best interests of the Company.
SHARES AVAILABLE
The maximum number of shares that may be issued under the LTIP is the
aggregate of: (i) 2,800,000 shares of Common Stock; (ii) the remaining shares
available for issuance under the AGL Resources Inc. Long-Term Stock Incentive
Plan of 1990, a shareholder approved plan (the "LTSIP") which, as of December
1, 1998 was approximately 240,000 shares; and (iii) the number of shares, to
the extent authorized by the Company's Board of Directors for purposes of the
LTIP, repurchased by the Company in the open market or in a private transaction
after the effective date. Shares issuable under the LTIP are subject to
adjustment as provided in the LTIP for stock splits, stock dividends,
recapitalizations and other similar transactions or events. (See "Adjustments"
below.) Shares issued under the LTIP may be shares of original issuance,
treasury shares or shares acquired by the Company in the open market.
10
<PAGE>
ELIGIBILITY
Key employees of our Company and its related companies are eligible to
participate in the LTIP. As of December 1, 1998, approximately 220 persons were
eligible to participate in the LTIP.
STOCK OPTIONS
GRANT AND TRANSFERABILITY OF STOCK OPTIONS. Stock Options granted under the
LTIP represent rights to purchase shares of the Common Stock within a fixed
period of time and at a specified price per share (the "exercise price"). The
Committee will decide the term of each Stock Option, although, generally, the
term may not exceed ten years from the date of grant (or five years from the
date of grant for an ISO optionee who owns more than 10% of the voting power of
all classes of stock of either the Company or any "parent" or "subsidiary" of
the Company as defined in Code (S)424). A participant does not pay any
consideration for the grant of a Stock Option. Unless the Committee specifies
otherwise, an optionee may transfer a Stock Option only by will or by the laws
of descent and distribution. A participant may not be granted Stock Options
with respect to more than 500,000 shares of Common Stock in any one calendar
year.
EXERCISE PRICE. The exercise price of each Stock Option will be the fair
market value of the Common Stock as of the date of grant (110% of the fair
market value of the Common Stock as of the date of grant for an ISO optionee
who owns more than 10% of the voting power of all classes of stock of either
the Company or any "parent" or "subsidiary" of the Company as defined in Code
(S)424).
EXERCISE OF STOCK OPTIONS. An optionee must pay the full exercise price upon
exercise of a Stock Option. The exercise price may be paid in cash, by the
transfer to the Company of unrestricted shares of Common Stock, by broker-
assisted cashless exercise, by any combination of the foregoing methods, or by
any other form of payment permitted by the Committee. An optionee will have
rights as a shareholder of the Company only when the optionee has paid the
exercise price in full and the shares have been issued to the optionee.
TERMINATION OF EMPLOYMENT OR DEATH. As noted above, the term of a Stock
Option generally may not exceed ten years. In the event of an optionee's
termination of employment due to death, disability or retirement, any
outstanding Stock Option will become exercisable immediately. The Committee has
the authority to accelerate the exercisability of any Stock Option or extend
the original expiration date as long as the extended expiration date does not
exceed ten years from the date of grant.
RELOAD OPTIONS. In the discretion of the Committee, any Stock Option may be
accompanied by a reload option. A reload option may be granted only to
individuals who are actively employed by the Company or a related company at
the time the grant is made. A reload option is a Stock Option that is granted
to an optionee who pays for all or part of a Stock Option with shares of Common
Stock and represents an additional Stock Option to acquire the same number of
shares as is tendered by the optionee to pay for the original Stock Option. A
reload option is subject to all of the same terms and conditions as the
original Stock Option, except that the exercise price for the reload option
will be the fair market value of the Common Stock as of the date of grant of
such reload option.
CHANGE IN CONTROL. In the event of a change in control of the Company, all
Stock Options become immediately exercisable for the full number of shares. For
purposes of the LTIP, a change in control of the Company means the occurrence
of any of the following events: (i) the acquisition by a person or group of
persons of 10% or more of the voting securities of the Company; (ii) the
approval by the shareholders of a merger, business combination, or sale of 50%
or more of the Company's assets, the result of which is that less than 80% of
the voting securities of the resulting corporation is owned by the former
shareholders of the Company; or (iii) the failure, during any two-year period,
of incumbent directors to constitute at least a majority of the Board of
Directors of the Company.
11
<PAGE>
RESTRICTED STOCK
The Committee may issue Restricted Stock to key employees in its sole
discretion. A key employee may not receive more than 50,000 shares of
Restricted Stock in any one calendar year. The Committee will specify in a
Restriction Agreement the manner in which Restricted Stock will vest and become
nonforfeitable, as well as any conditions, restrictions and contingencies to
which the Restricted Stock may be subject. Such conditions, restrictions and
contingencies may consist of a requirement of continuous service and/or the
satisfaction of one or more performance goals as described below. The Committee
has the right to accelerate the vesting of any Restricted Stock issued under
the LTIP. A recipient of Restricted Stock will have immediate rights of
ownership in the shares of Restricted Stock, including the right to vote the
shares and the right to receive dividends with respect to the shares. A
participant does not pay any consideration for the issuance of Restricted
Stock. Unless otherwise specified by the Committee, however, a recipient may
not transfer shares of Restricted Stock while such shares are still subject to
restriction. In addition, unless otherwise specified by the Committee, all
shares of Restricted Stock which remain subject to restriction upon the
recipient's termination of employment for any reason will be forfeited as of
the date of such termination of employment. In the event of a change in control
of the Company (as defined in the preceding section), all shares of Restricted
Stock will become vested and nonforfeitable.
PERFORMANCE UNITS
The Committee may issue Performance Units to key employees in its sole
discretion. A key employee may not receive more than 50,000 Performance Units
in any one calendar year. A Performance Unit is the right, subject to such
conditions, restrictions and contingencies as the Committee determines, to
receive one share of Common Stock in the future. When the Committee issues a
Performance Unit, it will establish a bookkeeping account for the recipient to
reflect the number of Performance Units issued to the recipient. The
recipient's Performance Unit account will be credited with Performance Units
and dividend equivalents. A participant does not pay any consideration for the
issuance of Performance Units.
The Committee will specify in a Performance Unit Agreement the manner in
which Performance Units will vest and become nonforfeitable, as well as any
conditions, restrictions and contingencies to which the Performance Units may
be subject. Such conditions, restrictions and contingencies may consist of a
requirement of continuous service and/or the satisfaction of one or more
performance goals as described below. The Committee may accelerate the vesting
of Performance Units issued under the LTIP. Unless otherwise specified by the
Committee, a recipient may not transfer Performance Units, and all Performance
Units will be forfeited as of the date of the optionee's termination of
employment for any reason. A participant is not entitled to vote the
Performance Units or the shares subject to the Performance Units. In the event
that Performance Units vest, the participant will receive shares of the
Company's Common Stock representing the vested number of Performance Units
(including accrued dividends) standing in the participant's account. In the
event of a change in control of the Company (as defined in the preceding
section), all Performance Units will become vested and nonforfeitable.
PERFORMANCE GOALS
The vesting of Restricted Stock and Performance Units, which are intended to
conform with the requirements of Code (S)162(m), will be determined based on
the attainment of written performance goals approved by the Committee for a
performance period established by the Committee no more than 90 days after the
commencement of the performance period or, if less, the number of days which is
equal to 25% of the relevant performance period. The performance goals, which
must be objective, will be based upon one or more of the following criteria:
(i) consolidated earnings before or after taxes (including earnings before
interest, taxes, depreciation and amortization); (ii) net income; (iii)
operating income; (iv) earnings per share; (v) book value per share; (vi)
return on shareholders' equity; (vii) capital expenditures; (viii) expense
management; (ix) return on investment; (x) improvements in capital structure;
(xi) profitability of an identifiable business unit or product; (xii)
maintenance or improvement of profit margins; (xiii) stock price; (xiv) market
share; (xv) revenues or sales;
12
<PAGE>
(xvi) costs; (xvii) cash flow; (xviii) working capital; (xix) return on assets;
or (xx) gross or net profit. The foregoing criteria may relate to the Company,
one or more of its subsidiaries, one or more of its divisions or units or any
combination of the foregoing, and may be applied on an absolute basis or be
relative to one or more peer group companies or indices, or any combination
thereof, all as the Committee determines. To the degree consistent with Code
(S)162(m), the performance goals may be calculated without regard to
extraordinary items.
TERMINATION AND AMENDMENT
The LTIP is expected to remain in effect until December 31, 2008, or as long
as any awards are outstanding. The Board, however, may amend or terminate the
LTIP at any time. If the Board amends the LTIP, the amendment will not
adversely affect the rights of individuals who have outstanding Awards unless
such individuals agree to the amendment. The Committee may amend any agreement
under the LTIP if the amended agreement is signed by the Company and the
applicable participant.
ADJUSTMENTS
If AGL Resources is involved in a corporate transaction (including any
recapitalization, reclassification, reverse or forward stock split, stock
dividend, extraordinary cash dividend, merger, consolidation, split-up, spin-
off, combination or exchange of shares) which constitutes a change in control
of the Company under the LTIP, the Committee will make an appropriate and
equitable adjustment to the number and kind of shares that are issuable under
the LTIP, will take action to adjust the number and kind of shares of Common
Stock subject to outstanding Awards, will take action to adjust the exercise
price of outstanding Stock Options, and will make any other equitable
adjustments. Additionally, if AGL Resources is involved in certain corporate
transactions which do not constitute a change in control but which require
shareholder approval, the Committee may make certain equitable decisions
regarding the stock to which Awards will pertain, the number of resulting
Awards and the vesting and/or exercisability of the Awards.
FEDERAL INCOME TAX CONSEQUENCES
The following is a brief general description of the consequences under the
Code of the receipt or exercise of awards under the LTIP:
INCENTIVE STOCK OPTIONS. An optionee has no tax consequences upon grant or,
generally, upon exercise of an ISO. If an optionee disposes of the Common Stock
acquired upon exercise of an ISO after the expiration of the requisite holding
periods (i.e., two years after the date of grant of the ISO and one year after
the date of issuance of the ISO shares to the optionee), then upon the sale of
the shares any amount realized in excess of the exercise price generally will
be taxed to the optionee as long-term capital gain and any loss sustained will
be a long-term capital loss. If an optionee disposes of the Common Stock
acquired upon exercise of an ISO before the expiration of the requisite holding
periods described above, the optionee will recognize ordinary income in an
amount equal to any excess of the fair market value of the shares at the time
of exercise (or, if less, the amount realized on the disposition of the shares)
over the exercise price paid for the shares.
An optionee may have tax consequences upon exercise of an ISO if the
aggregate fair market value of shares of the Common Stock subject to ISOs which
first become exercisable by an optionee in any one calendar year exceeds
$100,000. If that occurs, the excess shares will be treated as though they are
subject to an NQSO instead of an ISO. Upon exercise of an option with respect
to those shares, the optionee will have the tax consequences described below
with respect to the exercise of NQSOs.
Additionally, except to the extent that an optionee has recognized income
with respect to the exercise of an ISO (as described in the preceding
paragraphs), the amount by which the fair market value of a share of the Common
Stock at the time of exercise of the ISO exceeds the option price will be
included in determining an optionee's alternative minimum taxable income, and
may cause the optionee to incur an alternative minimum tax liability in the
year of exercise.
13
<PAGE>
There will be no tax consequences to the Company upon issuance or, generally,
upon exercise of an ISO. However, to the extent that an optionee recognizes
ordinary income upon exercise, as described above, the Company generally will
have a deduction in the same amount.
NONQUALIFIED STOCK OPTIONS. Neither the Company nor the optionee has income
tax consequences from the grant of NQSOs. Generally, in the tax year when an
optionee exercises NQSOs, the optionee recognizes ordinary income in the amount
by which the fair market value of the shares at the time of exercise exceeds
the exercise price for such shares. The Company generally will have a deduction
in the same amount as the ordinary income recognized by the optionee in the
Company's tax year in which or with which the optionee's tax year (of exercise)
ends.
RESTRICTED STOCK. A holder of restricted stock will recognize income upon its
receipt, but generally only to the extent that it is not subject to a
substantial risk of forfeiture. If the restricted stock is subject to
restrictions that lapse in increments, income is recognized equal to the fair
market value of those shares, determined as of the time that the restrictions
on those shares lapse. That income generally will be taxable at ordinary income
tax rates. The Company generally will be entitled to a deduction in an amount
equal to the amount of ordinary income recognized by the holder of the
restricted stock.
However, a holder of restricted stock may elect instead to recognize ordinary
income for the taxable year in which he or she receives an award of restricted
stock in an amount equal to the fair market value of all shares of restricted
stock awarded to him or her (even if the shares are subject to forfeiture).
That income will be taxable at ordinary income tax rates. The Company generally
will be entitled to a deduction in an amount equal to the amount of ordinary
income recognized by the holder at the time of the election.
PERFORMANCE UNITS. A holder of performance units will not recognize income
upon grant of performance units so long as they are subject to a substantial
risk of forfeiture. A holder of a Performance Unit will recognize ordinary
income in any tax year only with respect to the units that become
nonforfeitable and for which shares of the Company's Common Stock are issued
during that year. The income recognized will be equal to the fair market value
of the shares issued determined as of the time of share issuance. The Company
generally will be entitled to a deduction in an amount equal to the amount of
ordinary income recognized by the holder of the units.
LIMITATION ON COMPANY DEDUCTIONS
Code (S)162(m) provides that no federal income tax deduction is allowed for
compensation paid to a "covered employee" in any taxable year of the Company to
the extent that such compensation exceeds $1,000,000. For this purpose,
"covered employees" generally are the chief executive officer of the Company
and the four most highly compensated officers of the Company. The term
"compensation" generally includes amounts includable in gross income as a
result of the exercise of stock options or stock appreciation rights, or the
receipt of restricted stock. This deduction limitation does not apply to
compensation that is: (i) commission-based compensation; (ii) performance-based
compensation; (iii) compensation which would not be includable in an employee's
gross income; and (iv) compensation payable under a written binding contract in
existence on February 17, 1993, and not materially modified thereafter.
The Company intends that the LTIP and awards made under the LTIP will meet
the Code (S)162(m) requirements for the exemption of performance-based
compensation. Any vesting of Restricted Stock or Performance Units which are
intended to be performance-based compensation will be subject to the written
certification of the Committee that the performance measures were satisfied.
Shareholder approval of the LTIP is necessary for the Awards to meet the Code
(S)162(m) exemption.
ERISA
The LTIP is not, and is not intended to be, an employee benefit plan or tax-
qualified retirement plan. The LTIP is not, therefore, subject to the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") or Code (S)401(a).
14
<PAGE>
STOCK AWARDS GRANTED UNDER THE LTIP
As of December 1, 1998, no Awards have been granted under the LTIP. The
number and kind of Awards to be granted prospectively to eligible participants
is not determinable. Because non-employee directors are not eligible to
participate in the LTIP, such directors will not be granted any Awards under
the LTIP.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
THE ADOPTION OF THE LONG-TERM INCENTIVE PLAN.
----------------
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth certain information as of September 30, 1998
about the ownership of AGL Resources Common Stock by each director and director
nominee, by each executive officer named in the Summary Compensation Table who
is not a director (collectively, the "named executive officers") and by all
executive officers and directors as a group, based on information furnished to
the Company.
<TABLE>
<CAPTION>
"SHARES" AND
BENEFICIAL "SHARE
OWNERSHIP EQUIVALENTS"
AS OF HELD UNDER
SEPTEMBER 30, DEFERRAL
NAME 1998(1)(2)(3) PLANS (4) TOTAL
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Frank Barron, Jr. 39,846 457 40,303
- -------------------------------------------------------------------------------
Otis A. Brumby, Jr. 22,166 559 22,725
- -------------------------------------------------------------------------------
Walter M. Higgins 224,897 561 225,458
- -------------------------------------------------------------------------------
David R. Jones 293,187 3,624 296,811
- -------------------------------------------------------------------------------
Albert G. Norman, Jr. 18,633 -- 18,633
- -------------------------------------------------------------------------------
D. Raymond Riddle 6,966 558 7,524
- -------------------------------------------------------------------------------
Dr. Betty L. Siegel 7,352 356 7,708
- -------------------------------------------------------------------------------
Ben J. Tarbutton, Jr. 9,803 757 10,560
- -------------------------------------------------------------------------------
Felker W. Ward, Jr. 8,434 403 8,837
- -------------------------------------------------------------------------------
Charles W. Bass 158,717 2,163 160,880
- -------------------------------------------------------------------------------
J. Michael Riley 63,619 404 64,023
- -------------------------------------------------------------------------------
Richard H. Woodward 86,790 920 87,710
- -------------------------------------------------------------------------------
Thomas H. Benson 132,761 3,100 135,861
- -------------------------------------------------------------------------------
Robert L. Goocher 142,793 6,219 149,012
- -------------------------------------------------------------------------------
All executive officers and directors as
a group (18 persons)(5) 1,302,275 20,811 1,323,086
</TABLE>
- --------
(1) As of September 30, 1998, no individual director, director nominee or
executive officer of the Company owned beneficially 1% or more of the
outstanding Common Stock of the Company. Additionally, as of September 30,
1998, all executive officers and directors as a group owned beneficially
2.2% of the outstanding Common Stock of the Company. Beneficial ownership
as reported in this Proxy Statement has been determined in accordance with
regulations of the Securities and Exchange Commission (the "Commission")
and includes shares of Common Stock which may be acquired within 60 days
upon the exercise of outstanding stock options and excludes "shares" and
"share equivalents" held under deferral plans. Except as otherwise
indicated in footnote (2) below, all executive officers, directors and
director nominees have sole voting and investment power with respect to the
shares shown.
15
<PAGE>
(2) With regard to Mr. Jones, the shares shown include 65,822 shares for which
he shares voting and investment power and 1,474 shares which are held of
record by the spouse of Mr. Jones as to which he disclaims beneficial
ownership; with regard to Mr. Norman, the shares shown include 5,008 shares
for which he shares voting and investment power; with regard to Mr. Bass,
the shares shown include 4,111 shares for which he shares voting and
investment power; with regard to Mr. Goocher, the shares shown include
11,975 shares for which he shares voting and investment power; with regard
to Mr. Riley, the shares shown include 2,123 shares for which he shares
voting and investment power; and with regard to the group, the shares shown
include 89,039 shares held with shared voting and investment power and
1,474 shares held of record by certain spouses of members of the above-
referenced group as to which the respective members of the group disclaim
beneficial ownership.
(3) For the directors, the shares shown include 2,483 shares which may be
acquired by each of Messrs. Barron, Brumby, Norman, Riddle, Tarbutton and
Ward and Dr. Siegel upon exercise of stock options granted under the
Directors Plan.
For the named executive officers, the shares shown include shares which may
be acquired upon exercise of stock options granted pursuant to the LTSIP as
follows: Mr. Higgins - 194,889 shares; Mr. Jones - 182,384; Mr. Bass -
123,863 shares; Mr. Riley - 49,872 shares; Mr. Woodward - 59,671 shares;
Mr. Benson - 114,157 shares; and Mr. Goocher - 114,311 shares.
For all executive officers and directors as a group, the shares shown
include an aggregate of 921,494 shares which may be acquired upon the
exercise of stock options granted under the Directors Plan and the LTSIP.
(4) Represents shares of AGL Resources Common Stock, AGL Resources Common Stock
Equivalents and accrued dividends held under deferral plans. The amounts
deferred track the performance of AGL Resources Common Stock and are
payable in cash. The shares and share equivalents may not be voted or
transferred.
(5) Includes holdings by Mr. Taylor, a director of the Company since 1984, who
retired as a director of the Company, effective November 1998. Includes
holdings by Mr. Bradley, a director of the Company since 1991. Mr. Bradley,
whose term is scheduled to end at the Annual Meeting, is not standing for
re-election. Excludes holdings by Mr. Gellerstedt, a director of the
Company since 1996, who tendered his resignation as a director of the
Company, effective May 1998. Each of Messrs. Taylor, Bradley and
Gellerstedt has retired or resigned or will resign as a director due to
business or personal demands. The Company greatly appreciates the
significant contributions to the Company of Messrs. Taylor, Bradley and
Gellerstedt during their years of service as directors of the Company.
Excludes holdings by Mr. Knox, a director elected November 6, 1998 to fill
the vacancy created by the resignation of Mr. Taylor. As of the date of his
election as a director, Mr. Knox beneficially owned 378 shares of AGL
Resources Common Stock.
16
<PAGE>
EXECUTIVE COMPENSATION
COMPENSATION SUMMARY
Table 1 shows, for the last three fiscal years, the total compensation paid
to or accrued by the Company for each of the named executive officers.
TABLE 1: SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------------------ ------------------------
FISCAL YEAR OTHER RESTRICTED SECURITIES ALL OTHER
ENDED ANNUAL STOCK UNDERLYING COMPEN-
NAME AND PRINCIPAL SEPTEMBER SALARY BONUS COMPENSATION AWARDS OPTIONS SATION
POSITION 30 ($)(1) ($)(2) ($)(3) ($)(4) (#)(5) ($)(6)
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
WALTER M. HIGGINS 1998 $350,003 $750,000 $75,144 $ 401,250 200,000 $29,442
President and 1997 -- -- -- -- -- --
Chief Executive Officer 1996 -- -- -- -- -- --
- -------------------------------------------------------------------------------------------------------
DAVID R. JONES 1998 500,000 -- -- -- -- 37,695
Chairman of the Board 1997 495,077 -- -- 150,012 49,689 41,512
(President and Chief 1996 474,923 160,800 -- -- 37,161 46,080
Executive Officer
through January
1998)(7)
- -------------------------------------------------------------------------------------------------------
CHARLES W. BASS 1998 305,769 147,930 -- 30,006 26,087 21,205
President of AGL 1997 277,538 26,000 -- 56,994 24,783 19,485
Investments, Inc.* 1996 248,885 83,600 -- -- 20,129 17,069
- -------------------------------------------------------------------------------------------------------
J. MICHAEL RILEY 1998 191,500 93,635 -- 9,358 9,292 12,805
Senior Vice President 1997 173,808 16,400 -- 17,911 9,499 11,354
and Chief Financial 1996 152,750 51,690 -- -- 8,465 10,117
Officer
- -------------------------------------------------------------------------------------------------------
RICHARD H. WOODWARD 1998 208,039 92,900 -- 10,143 14,655 14,550
Senior Vice President 1997 190,273 17,900 -- 19,481 12,537 12,605
1996 174,496 58,465 -- -- 9,239 12,082
- -------------------------------------------------------------------------------------------------------
THOMAS H. BENSON 1998 222,115 96,000 -- 30,006 30,087 79,797
(Executive Vice 1997 277,538 26,000 -- 56,994 27,015 20,045
President through 1996 248,885 83,600 -- -- 20,129 17,497
June 30, 1998)(7)
- -------------------------------------------------------------------------------------------------------
ROBERT L. GOOCHER 1998 225,577 95,430 -- 30,006 58,305 112,407
(Executive Vice 1997 277,538 26,000 -- 56,994 24,783 17,731
President through 1996 248,885 83,600 -- -- 20,129 15,522
July 3, 1998)(7)
</TABLE>
- --------
* A wholly owned subsidiary of the Company
(1) Includes before-tax contributions for the indicated fiscal years made to
the RSP Plan and the AGL Resources Inc. Nonqualified Savings Plan (the
"NSP").
(2) Reflects for each of the named executive officers other than Messrs.
Higgins and Jones annual incentive compensation earned in fiscal 1998 and
paid in fiscal 1999. For Mr. Higgins, reflects a one-time signing incentive
paid to defray the loss of incentive income and benefits associated with
his resignation from his former employer, $250,000 of which was paid in
fiscal 1999. Reflects for each of the named executive officers other than
Messrs. Higgins and Jones annual incentive compensation earned in 1997 and
paid in fiscal 1998. Reflects for each of the named executive officers
other than Mr. Higgins annual incentive compensation earned in 1996 and
paid in fiscal 1997. Reflects for each of the named executive officers
other than Messrs. Higgins and Jones annual incentive compensation earned
in 1995 and paid in fiscal 1996.
17
<PAGE>
(3) Reflects reimbursement of taxes related to the Company's payment of
relocation expenses for Mr. Higgins. The taxes were incurred in fiscal 1998
and reimbursed in fiscal 1999.
(4) Dollar amounts shown equal the number of shares of restricted stock
multiplied by the fair market value on the date of grant. The number and
value of aggregate restricted stock holdings on September 30, 1998, based
on the fair market value of the Company's Common Stock at September 30,
1998 of $19.375, were as follows: Mr. Higgins - 20,000 shares ($387,500);
Mr. Jones - 6,212 shares ($120,358); Mr. Bass -3,851 shares ($74,613); Mr.
Riley - 1,207 shares ($23,386); Mr. Woodward - 1,311 shares ($25,401);
Mr. Benson - 0 shares ($-0-); and Mr. Goocher - 0 shares ($-0-). (During
fiscal 1998, unvested shares of restricted stock were forfeited to the
Company by Messrs. Benson and Goocher.) The shares of restricted stock
issued to the named executive officers vest over a period of up to three
years. Dividends are paid on all shares of restricted stock at the same
rate as on unrestricted shares. (See "Nominating and Compensation Committee
Report" below.) For fiscal 1998, reflects for Mr. Higgins a one-time
issuance of restricted stock on the date of his employment which vests in
equal installments over a three-year period.
(5) Includes grants of reload options pursuant to the LTSIP. For fiscal 1998,
reflects for Mr. Higgins a one-time stock option granted on the date of his
employment.
(6) All Other Compensation paid during fiscal 1998 includes the following: (i)
Company contributions to the LESOP: Mr. Higgins - $0; Mr. Jones - $1,435;
Mr. Bass - $1,435; Mr. Riley - $1,435; Mr. Woodward -$1,435; Mr. Benson -
$1,435; and Mr. Goocher - $1,435; (ii) Company contributions to the RSP
Plan: Mr. Higgins - $3,000; Mr. Jones - $3,250; Mr. Bass - $5,726; Mr.
Riley - $6,191; Mr. Woodward -$5,696; Mr. Benson - $5,107; Mr. Goocher -
$5,063; (iii) Company contributions to the NSP: Mr. Higgins - $6,000; Mr.
Jones - $0; Mr. Bass - $5,738; Mr. Riley - $1,238; Mr. Woodward - $2,599;
Mr. Benson - $5,108; and Mr. Goocher - $7,313; (iv) premiums paid by the
Company for life insurance policies, any proceeds of which are payable to
the respective beneficiaries designated by the named officers: Mr.
Higgins - $20,422; Mr. Jones - $33,010; Mr. Bass - $8,306; Mr. Riley -
$3,941; Mr. Woodward - $4,820; Mr. Benson - $9,088; and Mr. Goocher -
$6,288; and (v) retirement and separation benefits paid by the Company:
Mr. Benson - $59,058 and Mr. Goocher - $92,308.
(7) During fiscal 1998, Mr. Jones, Chairman of the Board, retired from his
position as President and Chief Executive Officer and announced his
retirement as Chairman effective June 1, 1999. During fiscal 1998, Messrs.
Benson and Goocher served as Executive Vice Presidents of the Company
through June 30, 1998 and July 3, 1998, respectively.
18
<PAGE>
OPTION GRANTS
Table 2 sets forth information regarding the number and terms of stock
options granted to the named executive officers during the fiscal year ended
September 30, 1998. The Company utilized the Black-Scholes option pricing model
to develop the theoretical values set forth under the "Grant Date Present
Value" column. An officer realizes value from a stock option only to the extent
that the price of AGL Resources Common Stock on the exercise date exceeds the
price of the stock on the grant date. Consequently, there is no assurance that
the value realized by an officer will be at or near the value estimated below.
Those amounts should not be used to predict stock performance.
TABLE 2: OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING OPTIONS
OPTIONS GRANTED TO EXERCISE OR GRANT DATE
GRANTED EMPLOYEES IN BASE PRICE EXPIRATION PRESENT VALUE
NAME (#)(1) FISCAL YEAR ($/SH)(2) DATE ($)(3)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Walter M. Higgins 189,778 23.4% $19.5625 1/14/08 $535,174
10,222(4) 1.3 19.5625 1/14/08 28,826
- --------------------------------------------------------------------------------
David R. Jones -- -- -- -- --
- --------------------------------------------------------------------------------
Charles W. Bass 9,938(4) 1.2 20.1250 2/9/08 30,609
16,149 1.9 20.1250 2/9/08 49,739
- --------------------------------------------------------------------------------
J. Michael Riley 9,292(4) 1.1 20.1250 2/9/08 28,619
- --------------------------------------------------------------------------------
Richard H. Woodward 9,937(4) 1.2 20.1250 2/9/08 30,606
150 * 20.1250 2/9/08 462
4,568 * 22.0625 2/1/01 12,471
- --------------------------------------------------------------------------------
Thomas H. Benson 9,938(4) 1.2 20.1250 2/9/08 30,609
16,149 1.9 20.1250 2/9/08 49,739
4,000 * 20.0000 2/3/05 12,000
- --------------------------------------------------------------------------------
Robert L. Goocher 9,938(4) 1.2 20.1250 2/9/08 30,609
16,149 1.9 20.1250 2/9/08 49,739
7,456(5) 1.0 19.8125 2/7/02 18,193
10,000(5) 1.2 19.8125 2/3/05 27,800
13,414(5) 1.7 19.8125 2/4/04 36,352
1,348(5) * 19.8125 4/24/02 3,316
</TABLE>
- --------
* Less than one percent
(1) Options were granted to the named executive officers under the LTSIP at
prices equal to the fair market value on the date of grant. Incentive
options are subject to a statutory limitation of $100,000 value of options
first becoming exercisable in a calendar year. Nonqualified stock options
become exercisable six months after the date of grant. Options are subject
to early termination upon the occurrence of certain events related to
termination of employment. All options immediately become exercisable in
the event of a change in control.
(2) The exercise price of options may be paid in cash, by delivery of already-
owned shares of Common Stock of the Company or by any other method approved
by the Nominating and Compensation Committee, which administers the LTSIP.
To the extent that the exercise price of an option is paid with shares of
Common Stock of the Company, a "reload option" will be granted to the
optionee. A reload option is an option granted to an employee for the same
number of shares as is exchanged in payment of the exercise price and is
subject to all of the same terms and conditions as the original option
except for the exercise price which is determined on the basis of the fair
market value of the Common Stock of the Company on
19
<PAGE>
the date the reload option is granted. One or more successive reload
options may be granted to an employee who pays for the exercise of a reload
option with shares of Common Stock of the Company.
(3) This represents the estimated present value of stock options, measured at
the date of grant using the Black-Scholes Warrant Valuation Call Option
Model. Unless otherwise noted with respect to specific option grants in the
following paragraphs, this model assumes no dilutive effects and includes
the following underlying assumptions used in developing the grant
valuations: (i) an exercise price equal to the fair market value on the
date of grant; (ii) expected volatility - 20.2962%; (iii) annual risk free
rate of return (represents the yield on Treasury notes during the month of
the grant with a maturity date corresponding to the contractual term of the
option) - 5.57%; and (iv) annual dividend yield as of the date of
grant - 5.36%. The model also assumes a contractual exercise period for
options granted of ten years.
With respect to the options granted to Mr. Higgins, the model assumes the
following: (i) an exercise price equal to the fair market value on the date
of grant; (ii) expected volatility - 19.8544%; (iii) annual risk free rate
of return (represents the yield on Treasury notes during the month of the
grant with a maturity date corresponding to the contractual term of the
option) - 5.54%; and (iv) annual dividend yield as of the date of grant -
5.52%. The model also assumes a contractual exercise period for options
granted of ten years.
With respect to the reload option granted to Mr. Woodward for 4,568 shares,
the model assumes the following: (i) an exercise price equal to the fair
market value on the date of grant; (ii) expected volatility - 20.2196%;
(iii) annual risk free rate of return (represents the yield on Treasury
notes during the month of the grant with a maturity date corresponding to
the contractual term of the option) - 5.58%; and (iv) annual dividend yield
as of the date of grant - 4.89%. The model also assumes a contractual
exercise period for options granted of 2.75 years.
With respect to the reload option granted to Mr. Benson for 4,000 shares,
the model assumes the following: (i) an exercise price equal to the fair
market value on the date of grant; (ii) expected volatility - 20.2823%;
(iii) annual risk free rate of return (represents the yield on Treasury
notes during the month of the grant with a maturity date corresponding to
the contractual term of the option) - 5.60%; and (iv) annual dividend yield
as of the date of grant - 5.436%. The model also assumes a contractual
exercise period for options granted of seven years.
With respect to the options granted to Mr. Goocher for 7,456, 10,000,
13,414 and 1,348 shares, respectively, the model assumes the following: (i)
an exercise price equal to the fair market value on the date of grant; (ii)
expected volatility - 19.5696%; (iii) annual risk free rate of return
(represents the yield on Treasury notes during the month of the grant with
a maturity date corresponding to the contractual term of the option) -
5.47%; and (iv) annual dividend yield as of the date of grant - 5.45%. The
model also assumes a contractual exercise period for options granted of
3.6, 6.6, 5.6 and 3.75 years, respectively.
(4) The Board of Directors granted incentive stock options to certain officers
equal to 100%-175% of their base pay. See "Nominating and Compensation
Committee Report" below.
(5) The Board of Directors granted these options to Mr. Goocher under the terms
of a negotiated separation agreement. See "Other Matters Involving
Directors and Executive Officers - Change in Control and Termination of
Employment Agreements" below.
20
<PAGE>
OPTION EXERCISES
Table 3 sets forth information for options exercised by the named executive
officers during fiscal 1998, including the aggregate value of gains on the date
of exercise. The table also sets forth the following: (i) the number of shares
covered by options (both exercisable and unexercisable) as of September 30,
1998; and (ii) the respective values for "in-the-money" options, which
represent the positive spread between the exercise price of existing options
and the fair market value of the Company's Common Stock at September 30, 1998.
TABLE 3: AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
EXERCISES DURING YEAR FISCAL YEAR END
-----------------------------------------------------------------------------------
NUMBER OF SECURITIES
SHARES VALUE UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-
NAME ACQUIRED ON REALIZED ($) OPTIONS AT FISCAL YEAR THE-MONEY OPTIONS AT
EXERCISE (#) END (#) FISCAL YEAR END ($)(1)
------------------------------------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Walter M. Higgins -- -- 194,889 5,111 -- --
- --------------------------------------------------------------------------------------------------------
David R. Jones 4,000 $31,000 182,384 -- $263,920 --
- --------------------------------------------------------------------------------------------------------
Charles W. Bass -- -- 123,863 4,970 185,856 --
- --------------------------------------------------------------------------------------------------------
J. Michael Riley -- -- 49,872 4,324 44,194 --
- --------------------------------------------------------------------------------------------------------
Richard H. Woodward 6,529 43,254 59,671 9,537 63,986 --
- --------------------------------------------------------------------------------------------------------
Thomas H. Benson 5,000 20,000 114,157 -- 57,619 --
- --------------------------------------------------------------------------------------------------------
Robert L. Goocher 28,218 77,633 114,311 -- 37,442 --
</TABLE>
- --------
(1) Certain exercisable options held by the named executive officers were not
"in-the-money" at September 30, 1998.
21
<PAGE>
RETIREMENT PLAN
Table 4 shows the estimated annual lifetime benefits calculated on a
straight-life annuity basis and payable under the AGL Resources Inc. Retirement
Plan (the "Retirement Plan") and the AGL Resources Inc. Excess Benefit Plan
(the "Excess Benefit Plan") (as described below), as currently in effect, to
persons in specified compensation and years of service classifications upon
retirement at age 65. Benefit amounts shown in the table below are subject to
reductions for a portion of Social Security benefits.
TABLE 4: PENSION PLAN TABLE
<TABLE>
<CAPTION>
THREE YEAR AVERAGE
EARNINGS YEARS OF SERVICE
----------------------------------------------------------
20 25 30 35 40 45
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 100,000 $ 33,333 $ 41,667 $ 50,000 $ 57,500 $ 65,000 $ 72,500
150,000 50,000 62,500 75,000 86,250 97,500 108,750
200,000 66,667 83,333 100,000 115,000 130,000 145,000
250,000 83,333 104,167 125,000 143,750 162,500 181,250
300,000 100,000 125,000 150,000 172,500 195,000 217,500
350,000 116,667 145,833 175,000 201,250 227,500 253,750
400,000 133,333 166,667 200,000 230,000 260,000 290,000
450,000 150,000 187,500 225,000 258,750 292,500 326,250
500,000 166,667 208,333 250,000 287,500 325,000 362,500
550,000 183,333 229,167 275,000 316,250 357,500 398,750
600,000 200,000 250,000 300,000 345,000 390,000 435,000
650,000 216,667 278,333 325,000 373,750 422,500 471,250
700,000 233,333 291,667 350,000 402,500 455,000 507,500
750,000 250,000 312,500 375,000 431,250 487,500 543,750
1,000,000 333,333 416,667 500,000 575,000 650,000 725,000
1,250,000 416,667 520,833 625,000 718,750 812,500 906,250
1,500,000 500,000 625,000 750,000 862,500 975,000 1,087,500
</TABLE>
The Retirement Plan is a qualified defined benefit pension plan, which covers
all employees of the Company and its participating affiliate companies (except
leased employees) who have satisfied certain standards as to hours of service,
who have attained age 21 and who have been employed for one year. Benefits
under the Retirement Plan are based upon age, final average compensation and
length of service, with varying provisions for employees who are terminated or
take early, normal or deferred retirement. A participant's benefits vary
depending upon the participant's earnings for the three consecutive years of
highest compensation during his or her final 60 months of employment with the
Company.
The compensation covered by the Retirement Plan includes generally the base
rate of earnings actually paid to a participant by the Company (up to dollar
limits imposed by the Internal Revenue Service). That amount of compensation
does not include the annual incentive compensation that is included above in
the Summary Compensation Table. The Retirement Plan also provides, subject to
certain conditions, for the payment of vested benefits of a deceased employee
to his or her spouse during such spouse's lifetime.
The Company makes contributions to the Retirement Plan to fund the benefits
which accrue thereunder. Annual contribution amounts are determined
actuarially. Participant contributions are not permitted.
In addition, the Company maintains an Excess Benefit Plan for its employees.
The purpose of the Excess Benefit Plan is to restore pension benefits to
employees who are prevented from receiving their total accrued benefits under
the Retirement Plan because of the maximum benefit limitations imposed on
qualified retirement plans by Code (S)(S)415 and 401(a)(17). The Excess Benefit
Plan is not funded, and benefit payments are made
22
<PAGE>
directly by the Company. Benefits under the Excess Benefit Plan are payable in
the same form and according to the same general terms and conditions as
benefits under the Retirement Plan. All employees who participate in the
Retirement Plan whose benefits are limited by the provisions of the Code will
receive restoration of benefits under the Excess Benefit Plan.
The Company maintains a Supplemental Executive Retirement Plan (the "SERP")
for Mr. Higgins. The purpose of the SERP is to provide Mr. Higgins with
retirement benefits supplemental to those provided under the Retirement Plan.
The SERP is an unfunded obligation of the Company, with benefits payable from
the Company's general assets. Benefits under the SERP are payable in the same
form and according to the same general terms and conditions as benefits under
the Retirement Plan. The benefit paid under the SERP to Mr. Higgins will equal
the benefit Mr. Higgins would have received under the Retirement Plan if his
benefit were calculated by including any annual incentive compensation earned
by Mr. Higgins and by crediting him with an additional five years of service
with the Company, less the benefit actually payable to Mr. Higgins under the
Retirement Plan.
The amounts shown in the Summary Compensation Table above do not include the
Company's contributions for the named executive officers in connection with the
Retirement Plan, the Excess Benefit Plan or the SERP. Such amounts are not and
cannot be readily separated or individually calculated. The Company made a
contribution of approximately $2.1 million to the Retirement Plan for the plan
year ended June 30, 1998.
As of the plan year ended June 30, 1998, Mr. Higgins had 5 whole years of
service, which reflects years of service credited to him under the SERP, and
Messrs. Jones, Bass, Riley, Woodward, Benson and Goocher had 38, 28, 25, 28,
28, and 26 whole years of service, respectively.
The Retirement Plan, the Excess Benefit Plan and the SERP are administered by
or are under the direction of the Retirement Plan Administrative Committee
appointed by the Board of Directors. Wachovia Bank, N.A., serves as Trustee to
the Retirement Plan.
23
<PAGE>
OTHER MATTERS INVOLVING DIRECTORS AND EXECUTIVE OFFICERS
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Albert G. Norman, Jr., a director and a former member of the Nominating and
Compensation Committee, is a partner in the law firm of Long Aldridge & Norman
LLP, counsel to the Company. For the fiscal year ended September 30, 1998, the
Company paid to Long Aldridge & Norman LLP approximately $3 million for legal
services to the Company and its related companies.
CHANGE IN CONTROL AND TERMINATION OF EMPLOYMENT AGREEMENTS
Each of the executive officers participates in one of three tier levels in
the Company's Employment Continuity Program. The purpose of the program is to
retain key management personnel and assure continued productivity of such
personnel in the event of a change in control of the Company.
For purposes of the program, a "change in control" means the occurrence of
any of the following events:
. the acquisition by a person or group of persons of 10% or more of the
voting securities of the Company;
. the approval by the shareholders of a merger, business combination, or
sale of 50% or more of the Company's assets, the result of which is that
less than 80% of the voting securities of the resulting corporation is
owned by the former shareholders of the Company; or
. the failure, during any two-year period, of incumbent directors to
constitute at least a majority of the Board of Directors of the Company.
Generally, no benefits are provided under the program for any type of
termination before a change in control, or for terminations after a change in
control due to death, disability, voluntary termination (other than the Chief
Executive Officer) or any termination for "cause," which includes failure to
perform duties and responsibilities and fraud or dishonesty.
Upon a "change in control," and depending on the tier level of participation
and on the timing of employment termination, the program provides a severance
benefit of between one and three years of base salary and annual incentive
compensation to participants whose employment is involuntarily terminated (or
voluntarily terminated with respect to the Chief Executive Officer) within
twelve months after the occurrence of the change in control.
Other program benefits include a pro rata payout of annual incentive
compensation for the portion of the year in which the termination occurs, full
vesting of all long-term incentive compensation, a lump-sum payment of benefits
of between one and three years of age and service credits under the Company's
pension plan, full vesting and funding of nonqualified retirement and deferral
plan benefits, outplacement assistance, a one to two year continuation of
insurance benefits and, with respect to the Chief Executive Officer, a
continuation of insurance benefits until the later of three years or age 65.
Participants in two of the tier levels also will receive payments of legal fees
(up to a maximum dollar limit) in connection with the enforcement of payouts
under the program. For all participants, total severance benefits are limited
to the maximum benefit allowable without triggering excise taxes under the
Code.
In August 1998, in recognition of Mr. Jones' announced retirement date, the
Board determined to replace Mr. Jones' Continuity Agreement that was entered
into on May 15, 1996 with a new Continuity Agreement. The new Continuity
Agreement will provide that, in the event that a change in control of the
Company occurs and Mr. Jones is involuntarily terminated prior to his announced
retirement date (June 1, 1999), Mr. Jones will continue to receive his full
salary and employee benefits package through his announced retirement date.
Effective June 30, 1998, Mr. Benson retired from his employment with the
Company, and in connection therewith, entered into an early retirement
agreement (the "Early Retirement Agreement") with the Company. Under the Early
Retirement Agreement, Mr. Benson agreed to certain restrictions on his ability
to provide services to persons or entities that compete with the Company or any
of its affiliates and to not disclose
24
<PAGE>
confidential information relating to the Company. Under the Early Retirement
Agreement, the option exercise period for all outstanding options held by Mr.
Benson was extended through the earlier of the expiration of their original
term or his attainment of age 62. In addition, Mr. Benson agreed to release the
Company from any claims relating to Mr. Benson's employment with or retirement
from the Company.
Under the Early Retirement Agreement, Mr. Benson will receive a supplemental
retirement benefit equal to the difference between his actual accrued benefit
under the Retirement Plan and the accrued benefit that he would have had if his
age was increased by five years (not to exceed age 62) and his years of
eligibility service were increased by the same number of years as his age is
increased. In addition, the Early Retirement Agreement provides that Mr. Benson
will receive a monthly Social Security bridge payment of $1,300 per month until
his attainment of age 62. The Company will pay certain life insurance premiums
on Mr. Benson's behalf for life or until the applicable policy is paid in full.
Mr. Benson also will receive retiree medical and dental coverage, as well as
certain other incidental benefits.
Effective July 3, 1998, Mr. Goocher terminated his employment with the
Company, and in connection therewith, entered into a negotiated separation
agreement (the "Separation Agreement") with the Company. Under the Separation
Agreement, Mr. Goocher agreed to certain restrictions on his ability to provide
services to persons or entities that compete with the Company or any of its
affiliates and to not disclose confidential information relating to the
Company. In addition, the option exercise period for all outstanding options
held by Mr. Goocher was extended through the expiration of their original term,
and option agreements for an aggregate of 32,218 shares were granted to Mr.
Goocher to reflect the terms of the negotiated Separation Agreement. Under the
Separation Agreement, Mr. Goocher agreed to release the Company from any claims
relating to Mr. Goocher's employment with or termination of employment from the
Company.
Mr. Goocher's base salary will be continued under the Separation Agreement
for a period of 12 months following his termination of employment. He was paid
for any accrued and unused vacation days and he will receive Company-subsidized
coverage under the Company's group health and dental plans during the period of
salary continuation. In addition, the Company will provide Mr. Goocher and his
covered dependents with retiree medical insurance under the same terms and
conditions as is provided to employees of the Company who retire at the time
that Mr. Goocher commences receiving benefits under the Retirement Plan. Mr.
Goocher also will receive a monthly nonqualified retirement benefit, the amount
of which will depend upon the method of payment elected and the age at which
Mr. Goocher begins receiving the benefit; for instance, the monthly benefit
will be $3,836.20 if Mr. Goocher begins receiving benefits at age 55. The
Company will pay certain life insurance premiums on Mr. Goocher's behalf for
life or until the applicable policy is paid in full, as well as certain other
incidental benefits.
25
<PAGE>
NOMINATING AND COMPENSATION COMMITTEE REPORT
The Nominating and Compensation Committee (the "Committee") of the Board of
Directors is composed entirely of non-employee directors. The Committee is
responsible for executive compensation policies. The Committee also approves
all compensation plans and recommends to the Board of Directors specific salary
amounts and other compensation awards for individual executives. To assist the
Committee in performing its function, it is the Company's practice to have its
compensation programs periodically reviewed by an independent compensation
consulting firm to ensure that the Company's total executive compensation
program is competitive with similar companies.
The Committee designs compensation policies that will encourage executives to
manage AGL Resources and its subsidiaries in the best long-term interests of
shareholders and allow AGL Resources to attract and retain executives best
suited to lead AGL Resources in a changing industry. The Company's executive
compensation program for fiscal 1998 was based on the following principles:
. A substantial portion of each executive's total compensation is linked to
the achievement of pre-established annual goals that are dependent on or
related to corporate performance.
. Executives' long-term interests are aligned with those of the Company's
shareholders by encouraging ownership of the Company's Common Stock.
. Base salary and incentive compensation is competitive with other utilities
and with a group of service and industrial companies having
characteristics similar to the Company.
EXECUTIVE COMPENSATION
The executive compensation program consists of three elements: base salary;
annual incentive compensation; and long-term incentive compensation.
BASE SALARY. The Company establishes a market-competitive base salary for
each officer based upon an analysis of job responsibilities, various salary
survey data from other utilities and, if appropriate for a specific position,
salary survey data for similar positions in general industry. Officers' base
salaries generally do not exceed the competitive market rate. Officers' base
salaries are reviewed and approved annually by the Committee. Subsequent
increases in base salary are based on competitive marketplace data and on
personal performance.
ANNUAL INCENTIVE COMPENSATION. Annual incentive compensation is intended to
place a significant part of each officer's annual compensation at risk, and is
comprised of both a corporate and individual performance component. Corporate
objectives are established at the beginning of the fiscal year by the Board, as
recommended by the Committee. Individual performance goals are established on
an annual basis, typically are linked to improved corporate and/or business
unit performance, and are approved in advance by the President and Chief
Executive Officer. Payments of annual incentive compensation for a particular
year are based on that year's corporate performance and achievement of
individual performance goals.
For fiscal 1998, annual incentive compensation was determined as a percentage
of base salary, and established for each officer. If individual performance
goals were met or exceeded, officers earned up to 10% of the then effective
base salary. If corporate performance goals were met or exceeded, officers
earned 30% of the then effective base salary. For fiscal 1998, both individual
performance goals and corporate performance goals were met by all named
executive officers. As a result, annual incentive compensation was paid to the
named executive officers. (See footnote (2), "Table 1 - Summary Compensation
Table" above.)
LONG-TERM INCENTIVE COMPENSATION. The long-term incentive component of the
Company's executive compensation program seeks to accomplish three objectives:
align the long-term interests of officers with those of the shareholders; pay
for performance; and increase AGL Resources stock ownership among the Company's
key decision makers. Those objectives are accomplished when the value of the
Company's stock increases and long-term objectives are met.
26
<PAGE>
For fiscal 1998, long-term incentive compensation awards were granted under
the LTSIP, which was approved by the Company's shareholders in 1990. The LTSIP
provides for the grant of stock options and/or awards of restricted stock. The
LTSIP grants and awards to officers were based on common practices of peer
companies and on the discretion of the Committee which administers the LTSIP.
For fiscal 1998, the Committee granted options to acquire AGL Resources
Common Stock, which had a fair market value equal to 100%-175% of each
executive's then effective base salary. The first $200,000 of options granted
to an individual officer were granted as ISOs, and the balance were granted as
nonqualified stock options. Additionally, the Committee awarded shares of
restricted stock which had an aggregate fair market value equal to 5%-10% of an
officer's base salary. If the Total Shareholder Return ranking (stock price
appreciation plus dividends) meets or exceeds the 66th percentile when compared
to the Standard & Poors Utility Index, one-third of the restricted shares will
vest after twelve months and the remaining two-thirds will vest after 24
months. If the Total Shareholder Return ranking is not met as of the first
anniversary but is met as of the second anniversary, only one-third of the
restricted shares vest; provided, however, if the two-year average Total
Shareholder Return meets or exceeds the 66th percentile as of the second
anniversary, then two-thirds of the restricted shares vest. As of the third
anniversary, all remaining restricted shares, if any, will vest.
CHIEF EXECUTIVE OFFICER COMPENSATION
Consistent with the compensation philosophy and principles stated above, the
compensation of the President and Chief Executive Officer of the Company is
competitive and is based on contribution to the overall success of the Company.
Base salary and incentive compensation for the President and Chief Executive
Officer are determined by analyzing competitive pay practices of companies in
the energy industry. A nationally recognized independent compensation
consultant is used for this analysis.
Base salary, like that of other officers, generally will not exceed the
competitive market rate (position rate). Payments of annual incentive
compensation are dependent on the attainment of pre-established individual and
corporate performance goals. Long-term incentive compensation awards are
granted based on competitive pay practices of similar companies.
Mr. Jones was President and Chief Executive Officer of the Company for four
months of fiscal 1998. Mr. Jones presently serves as Chairman of the Board and
intends to retire as Chairman effective June 1, 1999. For fiscal 1998, Mr.
Jones did not receive a payment of annual individual or corporate performance
incentive compensation, stock option grant or stock award. (See footnotes (2),
(4) and (5) "Table 1 - Summary Compensation Table" above.)
Mr. Higgins was elected President and Chief Executive Officer of the Company
in January 1998. The Committee and the Board extended an employment offer to
Mr. Higgins after an extensive search was conducted by the Board with the
assistance of an executive search firm. In determining Mr. Higgins' base salary
and incentive compensation, the Board focused on the importance of hiring a
President and Chief Executive Officer with the strategic, financial and
leadership skills required to improve AGL Resources' competitiveness and
profitability. The Board also considered the need to offer a total compensation
package that would be competitive with packages offered by similar companies
competing for the services of a president and chief executive officer with Mr.
Higgins' skills. The Board also recognized the need to consider benefits
forfeited by Mr. Higgins upon his resignation from his former employer and he
received a one-time signing incentive to defray the loss of incentive income
and benefits associated with such resignation. Mr. Higgins also received stock
options and an award of restricted stock in connection with the assumption of
his duties. (See footnotes (2), (4) and (5), "Table 1 - Summary Compensation
Table" above.)
CODE SECTION 162(M) IMPLICATIONS FOR EXECUTIVE COMPENSATION
It is the responsibility of the Committee to address the issues raised by
Code (S)162(m) of the Code. This Section limits the Company's annual deduction
to $1,000,000 for compensation paid to its chief executive officer and to the
next four most highly compensated executives of the Company. Certain
compensation that
27
<PAGE>
qualifies as "performance-based" or that meets other requirements under the
Code may be exempt from the Code (S)162(m) limit. In that regard, the Committee
continues to carefully consider the impact of that tax code provision and must
determine whether any actions with respect to the limit should be taken by the
Company. Given the Company's level of executive compensation for fiscal 1998,
the Committee will continue to examine carefully the effects of this tax
provision and will monitor the level of compensation paid to the executive
officers in order to take any appropriate steps.
Ben J. Tarbutton, Jr., Chairman for fiscal 1998
W. Waldo Bradley
Otis A. Brumby, Jr.
Albert G. Norman, Jr.
Charles McKenzie Taylor (retired November 1998)
28
<PAGE>
STOCK PERFORMANCE GRAPH
The following line graph presentation compares the cumulative sixty-two month
shareholder return on Common Stock of the Company with the cumulative sixty-two
month total return of companies in the Standard & Poor's 500 Composite Stock
Price Index (the "S&P 500 Index") and the Standard & Poor's Utilities Index
(the "S&P Utilities Index").
COMPARISON OF SIXTY-TWO MONTH CUMULATIVE TOTAL RETURN*
AMONG AGL RESOURCES INC., THE S&P 500 INDEX AND THE S&P UTILITIES INDEX
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
9/30/93 9/30/94 9/30/95 9/30/96 9/30/97 9/30/98 11/30/98
- ------------------------------------------------------------------------------
AGL Resources Inc. $100 $ 86.32 $115.83 $121.24 $126.74 $137.18 $154.61
- ------------------------------------------------------------------------------
S&P 500 Index $100 $103.69 $134.53 $161.89 $227.37 $247.93 $284.35
- ------------------------------------------------------------------------------
S&P Utilities Index $100 $ 86.90 $110.87 $119.19 $136.32 $177.26 $176.61
</TABLE>
* The above stock performance graph assumes that $100 was invested on
September 30, 1993 in Common Stock of the Company, the S&P 500 Index and the
S&P Utilities Index and also assumes dividend reinvestment.
29
<PAGE>
GENERAL INFORMATION
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and any person who owns more than ten percent
of the Company's Common Stock, to file initial reports of ownership and changes
in ownership of such Common Stock with the Securities and Exchange Commission
and the New York Stock Exchange. Such persons are required by SEC regulations
to furnish the Company with copies of all Section 16(a) forms that they file.
To the Company's knowledge, based solely on its review of the copies of such
reports received by the Company and written representations that no other
reports were required for those persons, during the fiscal year ended September
30, 1998, all filing requirements were met.
INDEPENDENT AUDITORS
The firm of Deloitte & Touche LLP, 191 Peachtree Street, Atlanta, Georgia
30303, was the independent auditor for the Company and examined the financial
statements of the Company for the fiscal year ended September 30, 1998. The
Board of Directors intends to continue the services of that firm for the
current fiscal year ending September 30, 1999. A representative of the firm
will attend the Annual Meeting and will have the opportunity to make a
statement and answer appropriate questions.
OTHER MATTERS THAT MAY COME BEFORE THE ANNUAL MEETING
The Board of Directors of the Company does not know of any other matters that
may come before the Annual Meeting other than the matters described in this
Proxy Statement. If there is a matter that is not listed on the proxy card and
is properly brought before the Annual Meeting, the proxies would vote in
accordance with their judgment of what is in the best interest of the Company.
SHAREHOLDER PROPOSALS FOR PRESENTATION AT THE ANNUAL MEETING IN THE YEAR 2000
Shareholders who wish to present business at the Annual Meeting of
Shareholders in the year 2000 ("2000 Annual Meeting") are required to provide
notice to the Corporate Secretary of their intent to do so on or before
September 1, 1999, and such notice must provide the information set forth in
the AGL Resources Bylaws. A copy of these Bylaw requirements will be provided
upon written request to the Corporate Secretary, AGL Resources Inc., P.O. Box
4569, location 1080, Atlanta, Georgia 30302. This deadline applies to any
shareholder proposal sought to be considered at the 2000 Annual Meeting of
Shareholders (not just to those sought to be included in the Proxy Statement
and form of proxy for the 2000 Annual Meeting of Shareholders.) This deadline
does not apply to questions a shareholder may wish to ask at the meeting.
ANNUAL REPORT
This Proxy Statement is accompanied or preceded by the Company's Annual
Report to Shareholders for the fiscal year ended September 30, 1998. The Annual
Report, which contains financial and other information about the Company, is
not incorporated in the Proxy Statement and is not a part of the proxy
soliciting material.
30
<PAGE>
PLEASE MARK VOTES ---
[X] AS IN THIS EXAMPLE |
- -------------------------------------------------------------------------------
AGL RESOURCES INC.
- -------------------------------------------------------------------------------
RSP PLAN AND LESOP
Mark box at right if you plan to attend the Annual Meeting. [_]
Mark box at right if comments or an address change has been noted on the [_]
reverse side of this card.
_______________________________
Please be sure to sign and date this proxy card. | Date
________________________________________________________________________________
| |
| |
___Shareholder sign here____________________________Co-owner sign here__________
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE "FOR" THE BELOW-LISTED PROPOSALS
1. Elect as directors the two nominees listed
below to serve until the Annual Meeting of
Shareholders in the year 2002 and until FOR WITHHOLD FOR ALL
their successors are elected and qualified: ALL ALL EXCEPT*
[_] [_] [_]
FRANK BARRON, JR. AND WALTER M. HIGGINS
* INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR AN INDIVIDUAL NOMINEE, MARK
THE "FOR ALL EXCEPT" BOX AND STRIKE A LINE THROUGH THAT NOMINEE'S NAME
FROM THE LIST ABOVE.
2. Adopt the AGL Resources Inc. Long-Term FOR AGAINST ABSTAIN
Incentive Plan (1999). [_] [_] [_]
When properly executed, this proxy card will be voted as directed. IF NO
PROXY CARD IS RECEIVED OR A PROXY CARD IS RECEIVED WITHOUT INSTRUCTIONS FOR
VOTING, THE PROXY WILL VOTE THE UNVOTED ALLOCATED SHARES IN THE LESOP IN THE
SAME PROPORTION AS THE LESOP SHARES THAT ARE VOTED BY PARTICIPANTS AND
BENEFICIARIES. THE PROXY WILL VOTE THE UNALLOCATED LESOP SHARES AND ANY
UNVOTED RSP PLAN SHARES PURSUANT TO THE INSTRUCTIONS OF THE RESPECTIVE
ADMINISTRATIVE COMMITTEES OF THE PLANS AND "FOR" THE PROPOSALS LISTED ON THIS
PROXY CARD.
In its discretion, the proxy is authorized to vote upon such other business
as properly may come before the Annual Meeting and any and all adjournments
thereof.
If any other business is presented at the Annual Meeting, this proxy card
will be voted by the proxy in its best judgment. At the present time, the
Board of Directors knows of no other business to be presented at the Annual
Meeting. In the event you also own shares otherwise than pursuant to the RSP
Plan and the LESOP, you must return the proxy card relating to such other
shares in accordance with the instructions set forth thereon.
DETACH CARD DETACH CARD
AGL RESOURCES INC.
303 PEACHTREE STREET, N.E.
ATLANTA, GEORGIA 30308
Dear Shareholder:
YOUR VOTE IS IMPORTANT, AND YOU ARE STRONGLY ENCOURAGED TO EXERCISE YOUR RIGHT
TO VOTE YOUR SHARES. ON BEHALF OF THE BOARD OF DIRECTORS, WE URGE YOU TO SIGN,
DATE AND RETURN THE PROXY CARD IN THE ENCLOSED POSTAGE-PAID ENVELOPE AS SOON AS
POSSIBLE, EVEN IF YOU CURRENTLY PLAN TO ATTEND THE ANNUAL MEETING.
Thank you in advance for your prompt cooperation.
Sincerely,
AGL Resources Inc.
<PAGE>
Revocable Proxy RETIREMENT SAVINGS PLUS PLAN
AND
LEVERAGED EMPLOYEE STOCK OWNERSHIP PLAN
AGL RESOURCES INC.
303 PEACHTREE STREET, N.E., ATLANTA, GEORGIA 30308
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR THE 1999 ANNUAL MEETING
OF SHAREHOLDERS
The undersigned hereby appoints The Northern Trust Company, which acts as
Trustee for the AGL Resources Inc. Retirement Savings Plus Plan (the "RSP
Plan") and the AGL Resources Inc. Leveraged Employee Stock Ownership Plan (the
"LESOP"), as proxy, to act for and in the name of the undersigned, to vote all
shares of Common Stock of AGL Resources Inc. (the "Company") that have been
allocated to the account of the undersigned pursuant to the RSP Plan and/or
the LESOP, at the 1999 Annual Meeting of Shareholders of the Company, to be
held at Cobb Galleria Centre, Two Galleria Parkway, Atlanta, Georgia, on
Friday, February 5, 1999, at 10:00 a.m., local time, and at any and all
adjournments thereof, as set forth on the reverse side.
The undersigned may elect to withdraw this proxy card at any time prior to its
use by giving written notice to the proxy or by executing and delivering to
the proxy a duly executed proxy card bearing a later date. Under the terms of
the RSP Plan and the LESOP, only the Trustee of each plan can vote the shares
allocated to the accounts of the participants, even if such participants or
their beneficiaries attend the Annual Meeting in person. The undersigned
hereby revokes any previous proxies with respect to matters covered by this
proxy.
Receipt of the Notice of the Meeting, the accompanying Proxy Statement, and
the Annual Report to Shareholders hereby is acknowledged.
________________________________________________________________________________
| PLEASE VOTE, DATE AND SIGN ON REVERSE SIDE AND RETURN PROMPTLY IN THE |
| ENCLOSED POSTPAID ENVELOPE. |
________________________________________________________________________________
________________________________________________________________________________
| Please mark, date, and sign exactly as your name appears on this proxy card. |
| When shares are held jointly, both holders should sign. When signing as |
| attorney, executor, administrator, trustee, guardian or custodian, please |
| give your full title. If the holder is a corporation or a partnership, the |
| full corporate or partnership name should be signed by a duly authorized |
| officer or partner. |
________________________________________________________________________________
HAS YOUR ADDRESS CHANGED? IF SO, PRINT DO YOU HAVE ANY COMMENTS?
NEW ADDRESS BELOW:
_______________________________________ ______________________________________
_______________________________________ ______________________________________
_______________________________________ ______________________________________
<PAGE>
PLEASE MARK VOTES ---
[X] AS IN THIS EXAMPLE |
- --------------------------------------------------------------------------------
AGL RESOURCES INC.
- --------------------------------------------------------------------------------
COMMON STOCK
Mark box at right if you plan to attend the Annual Meeting. [_]
Mark box at right if comments or an address change has been noted on the [_]
reverse side of this card.
_____________________________
Please be sure to sign and date this proxy card. | Date |
________________________________________________________________________________
| |
___Shareholder sign here____________________________Co-owner sign here__________
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE "FOR" THE BELOW-LISTED PROPOSALS
1. Elect as directors the two nominees listed
below to serve until the Annual Meeting of
Shareholders in the year 2002 and until FOR WITHHOLD FOR ALL
their successors are elected and qualified: ALL ALL EXCEPT*
[_] [_] [_]
FRANK BARRON, JR. AND WALTER M. HIGGINS
* INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR AN INDIVIDUAL NOMINEE, MARK
THE "FOR ALL EXCEPT" BOX AND STRIKE A LINE THROUGH THAT NOMINEE'S NAME FROM
THE LIST ABOVE.
2. Adopt the AGL Resources Inc. Long-Term FOR AGAINST ABSTAIN
Incentive Plan (1999). [_] [_] [_]
When properly executed, this proxy card will be voted as directed. IF NO
INSTRUCTIONS ARE SPECIFIED, THIS PROXY CARD WILL BE VOTED "FOR" THE PROPOSALS
LISTED ON THIS PROXY CARD.
In their discretion, the proxies are authorized to vote upon such other
business as properly may come before the Annual Meeting and any and all
adjournments thereof.
If any other business is presented at the Annual Meeting, this proxy card
will be voted by the proxies in their best judgment. At the present time, the
Board of Directors knows of no other business to be presented at the Annual
Meeting.
DETACH CARD DETACH CARD
AGL RESOURCES INC.
303 PEACHTREE STREET, N.E.
ATLANTA, GEORGIA 30308
Dear Shareholder:
YOUR VOTE IS IMPORTANT, AND YOU ARE STRONGLY ENCOURAGED TO EXERCISE YOUR RIGHT
TO VOTE YOUR SHARES. ON BEHALF OF THE BOARD OF DIRECTORS, WE URGE YOU TO SIGN,
DATE AND RETURN THE PROXY CARD IN THE ENCLOSED POSTAGE-PAID ENVELOPE AS SOON AS
POSSIBLE, EVEN IF YOU CURRENTLY PLAN TO ATTEND THE ANNUAL MEETING.
Thank you in advance for your prompt cooperation.
Sincerely,
AGL Resources Inc.
<PAGE>
Revocable Proxy COMMON STOCK
AGL RESOURCES INC.
303 PEACHTREE STREET, N.E., ATLANTA, GEORGIA 30308
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR THE 1999 ANNUAL MEETING
OF SHAREHOLDERS
The undersigned hereby appoints Walter M. Higgins, Albert G. Norman, Jr., and
Melanie M. Platt, and each of them, proxies, with full power of substitution,
to act for and in the name of the undersigned to vote all shares of Common
Stock of AGL Resources Inc. (the "Company") that the undersigned is entitled
to vote at the 1999 Annual Meeting of Shareholders of the Company, to be held
at Cobb Galleria Centre, Two Galleria Parkway, Atlanta, Georgia, on Friday,
February 5, 1999, at 10:00 a.m., local time, and at any and all adjournments
thereof, as set forth on the reverse side.
The undersigned may elect to withdraw this proxy card at any time prior to its
use by giving written notice to the Corporate Secretary, by executing and
delivering to the Corporate Secretary a duly executed proxy card bearing a
later date, or by appearing at the Annual Meeting and voting in person. The
undersigned hereby revokes any previous proxies with respect to matters
covered by this proxy.
Receipt of the Notice of the Meeting, the accompanying Proxy Statement, and
the Annual Report to Shareholders hereby is acknowledged.
________________________________________________________________________________
| PLEASE VOTE, DATE AND SIGN ON REVERSE SIDE AND RETURN PROMPTLY IN THE |
| ENCLOSED POSTPAID ENVELOPE. |
________________________________________________________________________________
________________________________________________________________________________
| Please mark, date, and sign exactly as your name appears on this proxy card. |
| When shares are held jointly, both holders should sign. When signing as |
| attorney, executor, administrator, trustee, guardian, or custodian, please |
| give your full title. If the holder is a corporation or a partnership, the |
| full corporate or partnership name should be signed by a duly authorized |
| officer or partner. |
________________________________________________________________________________
HAS YOUR ADDRESS CHANGED? IF SO, PRINT DO YOU HAVE ANY COMMENTS?
NEW ADDRESS BELOW:
_______________________________________ ______________________________________
_______________________________________ ______________________________________
_______________________________________ ______________________________________
