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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 1999 Commission File Number 1-14174
AGL RESOURCES INC.
(Exact name of registrant as specified in its charter)
Georgia 58-2210952
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
817 West Peachtree Street, N.W., 404-584-9470
Atlanta, Georgia 30308 (Registrant's telephone number,
(Address and zip code of including area code)
principal executive offices)
Securities registered pursuant to Section 12(b) of the Act:
Title of Class Name of exchange on which registered
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Common Stock, $5 Par Value New York Stock Exchange
Preferred Share Purchase Rights New York Stock Exchange
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
Aggregate market value of shares of Common Stock held by non-affiliates of the
registrant, computed by reference to the closing price of such stock as of
November 30, 1999: $ 1,035,631,628
The number of shares of Common Stock outstanding as of November 30, 1999 was
56,991,789 shares.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the 1999 Annual Report to Shareholders for AGL Resources Inc. for
the fiscal year ended September 30, 1999 ("Annual Report") are incorporated
herein by reference in Parts I and II and portions of the Proxy Statement for
the 2000 Annual Meeting of Shareholders ("Proxy Statement") are incorporated
herein by reference in Part III.
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TABLE OF CONTENTS
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PART I
Item 1. Business.......................................................... 1
Item 2. Properties........................................................ 8
Item 3. Legal Proceedings................................................. 8
Item 4. Submission of Matters to a Vote of Security Holders............... 8
Item 4.(A). Executive Officers of the Registrant.............................. 9
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters........................................................... 10
Item 6. Selected Financial Data........................................... 10
Item 7. Management's Discussion and Analysis of Results of Operations and
Financial Condition............................................... 10
Item 7.(A). Qualitative and Quantitative Disclosure About Market Risk......... 10
Item 8. Financial Statements and Supplementary Data....................... 11
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.............................................. 11
PART III
Item 10. Directors and Executive Officers of the Registrant................ 12
Item 11. Executive Compensation............................................ 12
Item 12. Security Ownership of Certain Beneficial Owners and Management.... 12
Item 13. Certain Relationships and Related Transactions.................... 12
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.. 13
Signatures..................................................................... 23
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PART I
ITEM 1. BUSINESS
Forward-Looking Statements
The Private Securities Litigation Reform Act of 1995 allows public companies to
provide cautionary remarks about forward-looking statements that they make in
documents that are filed with the Securities and Exchange Commission. Forward-
looking statements in our Management's Discussion and Analysis include
statements about the following:
. Deregulation;
. Concentration of credit risk;
. Environmental investigations and cleanups;
. "Year 2000" readiness; and
. Qualitative and quantitative disclosures about market risk.
Important factors that could cause our actual results to differ substantially
from those in forward-looking statements include, but are not limited to, the
following:
. Changes in price and demand for natural gas and related products;
. Impact of changes in state and federal legislation and regulation on both the
gas and electric industries;
. Effects and uncertainties of deregulation and competition, particularly in
markets where prices and providers historically have been regulated, and
unknown issues such as the stability of certificated marketers;
. Concentration of credit risk in certificated marketers;
. Industry consolidation;
. Changes in accounting policies and practices;
. Interest rate fluctuations, financial market conditions, and economic
conditions, generally;
. Uncertainties about environmental issues and the related impact of such
issues; and
. Other factors discussed in the following section: Year 2000 Readiness
Disclosure -- Forward-Looking Statements.
Business Overview
Organizational Structure
AGL Resources Inc. is the holding company for:
. Atlanta Gas Light Company ("AGLC") and its wholly-owned subsidiary,
Chattanooga Gas Company ("Chattanooga"), which are natural gas local
distribution utilities;
. AGL Energy Services, Inc. ("AGLE"), a gas supply services company; and
. Several non-utility subsidiaries.
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AGL Resources Inc. and its subsidiaries are collectively referred to as "AGL
Resources."
AGLC conducts its primary business, the distribution of natural gas, in Georgia
including Atlanta, Athens, Augusta, Brunswick, Macon, Rome, Savannah, and
Valdosta. Chattanooga distributes natural gas in the Chattanooga and Cleveland
areas of Tennessee. The Georgia Public Service Commission ("GPSC") regulates
AGLC, and the Tennessee Regulatory Authority ("TRA") regulates Chattanooga. AGLE
is a nonregulated company that bought and sold the natural gas which was
supplied to AGLC's customers during the deregulation transition period to full
competition in Georgia. Currently, AGLE buys and sells natural gas for
Chattanooga's customers.
AGLC comprises substantially all of AGL Resources' assets, revenues, and
earnings. The operations and activities of AGLC, AGLE, and Chattanooga,
collectively, are referred to as the "utility." The utility's operations
expenses include costs allocated from AGL Resources Inc.
AGL Resources currently owns or has an interest in the following non-utility
businesses:
. SouthStar Energy Services LLC ("SouthStar"), a joint venture among a
subsidiary of AGL Resources Inc. and subsidiaries of Dynegy, Inc. and
Piedmont Natural Gas Company. SouthStar markets natural gas and related
services to residential and small commercial customers in Georgia and to
industrial customers in the Southeast. SouthStar began marketing natural gas
to customers in Georgia during the first quarter of fiscal 1999 under the
trade name "Georgia Natural Gas Services;"
. AGL Investments, Inc., which currently manages certain non-utility businesses
including:
. AGL Propane, Inc. ("Propane"), which engages in the sale of propane and
related products and services in Georgia, Alabama, Tennessee and North
Carolina;
. Trustees Investments, Inc., which owns Trustees Gardens, a residential
and retail development located in Savannah, Georgia; and
. Utilipro, Inc. ("Utilipro"), in which AGL Resources has an 85% ownership
interest and which engages in the sale of integrated customer care
solutions and billing services to energy marketers in the United States
and Canada;
. AGL Peaking Services, Inc., which owns a 50% interest in Etowah LNG Company
LLC ("Etowah"), a joint venture with Southern Natural Gas Company. Etowah was
formed for the purpose of constructing, owning, and operating a liquefied
natural gas peaking facility.
Overview of the Transition from a Regulated to a Competitive Business
Environment
Pursuant to Georgia's 1997 Natural Gas Competition and Deregulation Act
("Deregulation Act"), AGLC unbundled various components of its services to end-
use customers. Historically, only large, interruptible commercial and
industrial customers had the option of purchasing natural gas from suppliers
other than AGLC and transporting such natural gas through AGLC's distribution
system for delivery. The Deregulation Act enabled AGLC to unbundle its delivery
service and other related services from the sale of natural gas for all
customers, thus allowing firm residential and small commercial customers to
purchase natural gas and other services from suppliers other than AGLC.
Effective October 1, 1999, virtually all of AGLC's 1.4 million customers were
purchasing natural gas from marketers who were approved and certificated by the
GPSC ("certificated marketers").
As a result of the transition to competition, numerous changes have occurred
with respect to the services being offered by AGLC and with respect to the
manner in which AGLC prices and accounts for those services. Consequently,
AGLC's future revenues and expenses will not follow the same pattern as they
have historically.
AGLC continues to provide intrastate delivery service through its existing
pipeline system to end-use customers in Georgia, but has exited the natural gas
sales function. AGLC's delivery of natural gas remains subject to the GPSC's
continued regulation of delivery rates, safety, access to AGLC's system, and
quality of service for all aspects of delivery service.
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Since July 1, 1998, AGLC's charges for delivery service to end-use customers
have been based on a straight fixed variable ("SFV") rate design. Under SFV
rates, delivery service costs are recovered throughout the year consistent with
the way those costs are incurred. Prior to the implementation of SFV rates, AGLC
recovered the majority of its delivery service costs volumetrically based on the
amount of natural gas consumed by end-use customers. As a result, AGLC
historically recovered a disproportionately large share of its delivery costs in
the winter months and a disproportionately small share of its delivery costs in
the summer months. The effect of SFV rates is to spread evenly throughout the
year AGLC's recovery of its delivery service costs. Although, when compared to
corresponding quarters of prior years, the effect of SFV rates is to shift
utility delivery service revenues among quarters, AGLC's annual delivery service
revenues should remain relatively consistent with annual delivery service
revenues of prior years.
Certificated marketers, including AGL Resources' marketing affiliate, SouthStar,
compete to sell natural gas to end-use customers at market-based prices. AGLC
allocates delivery capacity to certificated marketers in proportion to the
number and size of residential and small commercial customers served by each
certificated marketer. Delivery capacity that is not used on any day to serve
residential and small commercial customers is made available to large,
interruptible commercial and industrial customers. Similarly, AGLC has allocated
to certificated marketers the majority of the pipeline storage services that it
has under contract, along with a corresponding amount of inventory.
On May 3, 1999, pursuant to the Deregulation Act, the GPSC issued an order
establishing a final 100 day period for customers who had not yet chosen a
certificated marketer to make a choice. Customers who did not choose a
certificated marketer were randomly assigned to a certificated marketer under
the rules issued by the GPSC.
Certificated marketers were randomly assigned customers in proportion to their
respective market share as of August 11, 1999, and began serving those customers
on October 1, 1999. As a result, AGLC has exited the natural gas sales business
and, except for isolated circumstances, is responsible only for delivery service
for residential and small commercial customers.
During the transition to competition, AGLC continued to provide gas sales
service to customers who had not yet switched to a certificated marketer. On
January 26, 1999, AGLC entered into a joint stipulation agreement with the GPSC
to resolve certain gas sales service issues. Among other requirements in the
joint stipulation agreement, AGLC implemented a rate structure for gas sales,
beginning with February 1999 bills, that more closely reflected customers'
actual gas usage and included a demand charge for fixed costs associated with
gas sales. This rate structure for gas sales service ensured AGLC's recovery of
its purchased gas costs incurred from October 6, 1998 through September 30,
1999, without creating any significant income or loss. The joint stipulation
agreement provided for a true-up for any profit or loss outside of a specified
range during fiscal 1999.
Also during the transition to competition, AGLC continued to bill end-use
customers who had not yet switched to certificated marketers for gas sales
service and for certain ancillary services. These ancillary services include
meter reading, billing, bill inquiry, payment processing, and collection
services. Once an end-use customer switched to a certificated marketer for gas
sales service, the Deregulation Act permitted AGLC to bill the marketer only for
the AGLC-provided ancillary services actually used by the marketer. AGLC was
unable, however, to eliminate all of the costs associated with the provision of
ancillary services as quickly as customers switched to certificated marketers
for natural gas sales, thereby creating an imbalance between revenues and
expenses.
The Deregulation Act provides marketing standards and rules of business practice
to ensure that the benefits of a competitive natural gas market are available to
all customers on AGLC's system. It imposes on certificated marketers an
obligation to serve end-use customers, and creates a universal service fund.
The universal service fund provides a method to fund the recovery of
certificated marketers' uncollectible accounts and enables AGLC to expand its
facilities to serve the public interest.
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State Regulatory Matters
During fiscal 1999, AGLC unbundled, or separated, all services to its natural
gas customers in Georgia; allocated delivery capacity to certificated marketers
who sell the gas commodity to residential and small commercial customers; and
created a secondary market for large commercial and industrial transportation
capacity. (See Overview of the Transition from a Regulated to a Competitive
Business Environment section under Business Overview.)
Daily Balancing Services; EBB. In September 1999, the GPSC approved the
application of daily balancing services and related charges to certificated
marketers serving retail customers on AGLC's system. This decision allows AGLC
to operate its delivery system in a reliable manner and provides for full
recovery of costs incurred for system imbalances. Along with the GPSC's order on
daily balancing, AGLC's Electronic Bulletin Board ("EBB") was declared fully
operational. This declaration was a requirement in order for daily balancing to
become effective.
Regulatory Accounting. AGL Resources has recorded regulatory assets and
liabilities in its Consolidated Balance Sheets in accordance with Statement of
Financial Accounting Standards No. 71, "Accounting for the Effects of Certain
Types of Regulation" ("SFAS 71").
In July 1997, the Emerging Issues Task Force ("EITF") concluded that once
legislation is passed to deregulate a segment of a utility and that legislation
includes sufficient detail for the enterprise to determine how the transition
plan will affect that segment, SFAS 71 should be discontinued for that segment
of the utility. The EITF consensus permits assets and liabilities of a
deregulated segment to be retained if they are recoverable through a segment
that remains regulated.
The Deregulation Act allows deregulation of natural gas sales and the separation
of some ancillary services of local natural gas distribution companies. However,
the rates that AGLC, as the local gas distribution company, charges to transport
natural gas through its intrastate pipeline system will continue to be regulated
by the GPSC. Therefore, the continued application of SFAS 71 is appropriate for
regulatory assets and liabilities related to AGLC's delivery services.
AGLC Pipeline Safety Program. On January 8, 1998, the GPSC issued procedures and
set a schedule for hearings about alleged pipeline safety violations. On July
21, 1998, the GPSC approved a settlement between AGLC and the Adversary Staff of
the GPSC that details a 10-year replacement program for approximately 2,300
miles of cast iron and bare steel pipe. Over that 10-year period, AGLC will
recover from customers, through billings to certificated marketers, the costs
related to the program net of any cost savings from the replacement program.
During fiscal 1999, approximately 247 miles of pipe was replaced pursuant to the
program. Also during fiscal 1999, AGLC's capital expenditures and operation and
maintenance expenses related to the pipeline replacement program were
approximately $43.2 million and $11.5 million, respectively. All such amounts
will be recovered through a combination of SFV rates and a regulatory mechanism.
Weather Normalization. The weather normalization adjustment rider ("WNAR")
authorized by the TRA to offset the impact of unusually cold or warm weather on
customer billings and operating margin remains in effect for Chattanooga. The
WNAR in effect for AGLC was discontinued for fiscal 1999 by the GPSC when the
SFV rate structure became effective.
Inventory Assignment. Pursuant to the Deregulation Act, certificated marketers,
including AGLC's marketing affiliate, began selling natural gas to firm end-use
customers at market-based prices in November 1998. Part of the unbundling
process is the allocation of certain pipeline services that AGLC has under
contract, including interstate pipeline transportation and gas storage. In
particular, AGLC has allocated the majority of its pipeline storage services
that it has under contract to the certificated marketers along with a
corresponding amount of inventory based on the respective market share of the
certificated marketers. Following the rules of AGLC's tariff, the sale price was
the weighted-average cost of the storage inventory at the time of sale. AGLC
changed its inventory costing method for its gas inventories from first-in,
first-out to weighted average effective October 1, 1998. The weighted-average
cost-flow assumption provides for a more equitable pricing method for the sale
of gas inventories to certificated marketers.
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As of September 30, 1999, AGLC had $43.0 million in gas storage. This amount
represents:
. Unassigned gas storage as of September 30, 1999, to serve unassigned
customers; and
. AGLC's retained storage, that represents the under ground storage capacity
retained by AGLC to balance temporary differences between marketer's expected
demand and actual demand.
Certain gas storage inventory was unassigned at September 30, 1999 because all
customers had not been assigned. Customers are switched to certificated
marketers on the first day of the month following the receipt of a switch
request. At September 30, 1999, approximately 18% of the customers had not been
switched to certificated marketers. Such customers were switched on October 1,
1999, with the exception of approximately 15,000 customers. The remaining
customers are expected to switch during the first quarter of fiscal 2000. The
resulting decrease in gas inventory on October 1, 1999 was approximately $19.0
million.
Federal Regulatory Matters
FERC Order 636: Transition Costs Settlement Agreements. The utility purchases
natural gas transportation and storage services from interstate pipeline
companies, and the Federal Energy Regulatory Commission ("FERC") regulates those
services and the rates the interstate pipeline companies charge the utility.
During the past decade, the FERC has dramatically transformed the natural gas
industry through a series of generic orders promoting competition in the
industry. As part of that transformation, the interstate pipelines that serve
the utility have been required to:
. Unbundle, or separate, their transportation and gas supply services; and
. Provide a separate transportation service on a nondiscriminatory basis for
the gas that is supplied by numerous gas producers or other third parties.
The FERC is considering further revisions to its rules, including the following:
. Its policies governing secondary market transactions for use of pipeline
capacity; and
. Revisions that would permit pipelines and their customers to establish
individually negotiated terms and conditions of service that depart from
generally applicable pipeline tariff rules.
The utility cannot predict whether revisions will be adopted or how they may
potentially affect operations.
The FERC has required the utility, as well as other interstate pipeline
customers, to pay transition costs associated with the separation of the
suppliers' transportation and gas supply services. Based on its pipeline
suppliers' filings with the FERC, the utility estimates the total portion of its
transition costs from all its pipeline suppliers will be approximately $107.9
million. As of September 30, 1999, approximately $105.8 million of those costs
had been incurred and were being recovered primarily from the utility's
customers under rates charged for gas sales. Going forward, AGLC's remaining
costs will be recovered from certificated marketers.
The largest portion of the transition costs the utility must pay consists of gas
supply realignment costs that Southern Natural Gas Company ("Southern") and
Tennessee Gas Pipeline Company ("Tennessee") bill the utility. The utility and
other parties have entered restructuring settlements with Southern and Tennessee
that resolve all transition cost issues for those pipelines.
Under the Southern settlement, the utility's share of Southern's transition
costs is approximately $89.7 million, of which the utility incurred $87.6
million as of September 30, 1999. Under the Tennessee settlement, the utility's
share of Tennessee's transition costs was approximately $14.7 million, all of
which had been incurred by September 30, 1999.
Southern filed a general rate case on September 1, 1999. Its proposed rates
would represent a 10% increase (about $15 million per year) under AGLC's
existing contracts in firm interstate pipeline charges. These rates would become
effective March 1, 2000, subject to refund unless the FERC should accept an
offer of settlement between Southern and its customers. Such a settlement is
currently under discussion.
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Environmental Matters
Before natural gas was widely available in the Southeast, AGLC manufactured gas
from coal and other fuels. Those manufacturing operations were known as
"manufactured gas plants," or "MGPs" which AGLC ceased operating in the 1950s.
Because of recent environmental concerns, AGLC is required to investigate
possible environmental contamination at those plants and, if necessary, clean up
any contamination.
AGLC has been associated with twelve MGP sites in Georgia and three in Florida.
Based on investigations to date, AGLC believes that some cleanup is likely at
most of the sites. In Georgia, the state Environmental Protection Division
supervises the investigation and cleanup of MGP sites. In Florida, the U.S.
Environmental Protection Agency has that responsibility.
For each of the MGP sites, AGLC has estimated its share of the likely costs of
investigation and cleanup. AGLC used the following process for the estimates:
First, AGLC eliminated the sites where it was believed that no cleanup or
further investigation was likely to be necessary. Second, AGLC estimated its
likely future cost of investigation and cleanup at each of the remaining sites.
Third, for some sites, AGLC estimated its likely "share" of the costs. AGLC
developed its estimate based on any agreements for cost sharing it has, the
legal principles for sharing costs, its evaluation of other entities' ability to
pay, and other similar factors.
Using the above process, AGLC currently estimates that its total future cost of
investigating and cleaning up MGP sites is between $102.4 million and $148.2
million. That range does not include other potential expenses, such as
unasserted property damage or personal injury claims or legal expenses for which
AGLC may be held liable but for which neither the existence nor the amount of
such liabilities can be reasonably forecast. Within that range, AGLC cannot
identify any single number as a "better" estimate of its likely future costs.
Consequently, AGLC has recorded the lower end of the range, or $102.4 million,
as a liability and a corresponding regulatory asset as of September 30, 1999.
AGLC does not believe that any single number within the range constitutes a
"better" estimate because its actual future investigation and cleanup costs will
be affected by a number of contingencies that cannot be quantified at this time.
During fiscal 1999, the asset increased $78.7 million and was reduced by
amortization of $6.1 million resulting in an asset of $150.2 million.
As of September 30, 1998, AGLC had recorded a liability of $47.0 million. During
fiscal 1999, the liability increased by $78.7 million and payments of $23.3
million were made. The net increase in the liability was $55.4 million resulting
in a liability of $102.4 million as of September 30, 1999. The net increase in
the liability was based on revised estimates of future costs, which resulted in
a corresponding increase in the unrecovered environmental response cost asset.
AGLC has two ways of recovering investigation and cleanup costs. First, the GPSC
has approved an "Environmental Response Cost Recovery Rider." It allows the
recovery of costs of investigation, testing, cleanup, and litigation. Because of
that rider, AGLC has recorded a regulatory asset in the same amount as the
recorded liability for investigation and cleanup. During fiscal 1999, AGLC
recovered $6.1 million through its environmental response recovery rider.
The second way AGLC can recover costs is by exercising the legal rights AGLC
believes it has to recover a share of its costs from other potentially
responsible parties, typically former owners or operators of the MGP sites. AGLC
has been actively pursuing those recoveries. There were no material recoveries
during fiscal 1999.
Competition
Utility
The utility competes with alternative energy suppliers to distribute natural gas
to large commercial and industrial customers. Those customers can switch to
alternative fuels, including propane, fuel and waste oils, electricity and, in
some cases, combustible wood by-products. AGLC also competes to distribute gas
to large commercial and industrial customers who seek to bypass AGLC's
distribution system.
Pursuant to the GPSC's rate case order of June 30, 1998, AGLC has been able to
price distribution services to large commercial and industrial customers in one
of three ways:
. GPSC approved rates in AGLC's tariff;
. Negotiated rates if an existing rate is not priced competitively with a
customer's competitive alternative fuel; or
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. Special contracts approved by the GPSC.
Additionally, interruptible customers have the option of purchasing delivery
service directly from certificated marketers, who are authorized to use capacity
on AGLC's distribution system that is allocated to the certificated marketers
for firm residential and small commercial customers, whenever such capacity is
not being used for firm customers.
Non-utility
AGL Resources engages in several competitive, energy-related businesses,
including gas supply services, wholesale and retail propane sales, customer care
services, and the sale of energy-related products and services for residential,
commercial, and industrial customers throughout the Southeast. (See
Organizational Structure section under Business Overview.)
Unlike the utility, the non-utility businesses are not regulated. The non-
utility businesses typically face competition from other companies in the same
or similar businesses.
SouthStar competes with other energy marketers, including certificated marketers
in Georgia, to provide natural gas and related services to customers in Georgia
and the Southeast. SouthStar began marketing natural gas to all customers in
Georgia during the first quarter of fiscal 1999. Marketing efforts during the
transition to competition in Georgia consisted of advertising and promotional
campaigns. As of October 1, 1999, SouthStar had the largest market share among
approximately 15 certificated and active marketers in Georgia.
Utilipro competes with other customer care service providers throughout the
United States and Canada. Utilipro anticipates that the number of competitors
will increase as energy markets in the United States and Canada become
deregulated.
Significant Customers
Information relating to significant customers and disclosures is contained under
the caption "Concentration of Credit Risk" included in "Management's Discussion
and Analysis of Results of Operations and Financial Condition" in the Annual
Report and is incorporated herein by reference. Additionally, no one of our
customers accounted for more than 10% of our total revenues or operating income
in any of our three most recent fiscal years.
Year 2000
Information relating to our year 2000 plan and disclosures is contained under
the caption "Year 2000 Readiness Disclosure" included in "Management's
Discussion and Analysis of Results of Operations and Financial Condition" in the
Annual Report and is incorporated herein by reference.
Environmental Matters
Information relating to environmental matters and disclosures is contained under
the caption "Environmental Matters" included in "Management's Discussion and
Analysis of Results of Operations and Financial Condition" in the Annual Report
and is incorporated herein by reference.
Employees
On September 30, 1999, AGL Resources and its subsidiaries had 2,892 employees.
Of that total, approximately 700 employees are covered under collective
bargaining agreements. Based on current pay levels, it is anticipated that the
majority of bargaining unit employees will not receive any base pay increases
until the year 2000. The collective bargaining agreements expire in September
2000 and 2001. Certain of those agreements will be renegotiated beginning in
January 2000.
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ITEM 2. PROPERTIES
AGL Resources considers its properties and the properties of its subsidiaries to
be well maintained, in good operating condition and suitable for their intended
purposes.
The utility's properties consist primarily of distribution systems and related
facilities and local offices serving 237 cities and surrounding areas in the
State of Georgia and 13 cities and surrounding areas in the State of Tennessee.
As of September 30, 1999, AGLC had 27,381 miles of mains and approximately
5,950,000 Mcf (thousand cubic feet) of liquefied natural gas ("LNG") storage
capacity in three LNG plants to supplement the gas supply in very cold weather
or emergencies. As of September 30, 1999, Chattanooga had 1,422 miles of mains
and approximately 1,080,000 Mcf of LNG storage capacity in its LNG plant. At
September 30, 1999, the utility's gross utility plant was approximately $2.3
billion.
At September 30, 1999, AGL Resources' gross nonutility property which consisted
primarily of buildings and computer equipment was approximately $117 million.
ITEM 3. LEGAL PROCEEDINGS
The nature of the business of AGL Resources and its subsidiaries ordinarily
results in periodic regulatory proceedings before various state and federal
authorities and/or litigation incidental to the business. For information
regarding regulatory proceedings, see the preceding sections in Part I, Item 1,
"Business - State Regulatory Matters", "Business - Federal Regulatory Matters"
and "Business - Environmental Matters."
With regard to other legal proceedings, AGL Resources is a party, as both
plaintiff and defendant, to a number of other suits, claims and counterclaims on
an ongoing basis. Management believes that the outcome of all litigation in
which it is involved will not have a material adverse effect on the consolidated
financial statements of AGL Resources.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report.
The remainder of this page was intentionally left blank.
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ITEM 4.(A) EXECUTIVE OFFICERS OF THE REGISTRANT
Set forth below, in accordance with General Instruction G(3) of Form 10-K and
Instruction 3 of Item 401(b) of Regulation S-K, is certain information regarding
the executive officers of AGL Resources. Unless otherwise indicated, the
information set forth is as of September 30, 1999.
Walter M. Higgins, age 55, Chairman of AGL Resources since June 1998; President
and Chief Executive Officer of AGL Resources since January 1998; Director of AGL
Resources since February 1998; Chairman and Chief Executive Officer of AGLC
since January 1998; Chairman of the Board, President and Chief Executive Officer
of Sierra Pacific Resources from January 1994 until January 1998; and President
and Chief Executive officer of Sierra Pacific Power Company, a wholly owned
subsidiary of Sierra Pacific Resources, from February 1994 until January 1998.
Michele H. Collins, age 42, Senior Vice President and Chief Administrative and
Technology Officer of AGL Resources since March 1999; Assistant Vice President,
Information Systems of McDonald's Corporation from May 1995 through February
1999; and Business Unit Executive of IBM from 1990 until 1994.
Clayton H. Preble, age 52, Senior Vice President Marketing, Communications, and
External Relations of AGL Resources since June 1999; Senior Vice President of
SouthStar Energy Services LLC from its organization in July 1998 until June
1999; Senior Vice President of Georgia Natural Gas Company (f/k/a The Energy
Spring, Inc.) from April 1998 until June 1999; President of The Energy Spring,
Inc. from its organization in July 1996 until April 1998; Vice President of AGL
Resources from 1996 until 1998; and Vice President, Marketing of AGLC from 1994
until 1996.
J. Michael Riley, age 48, Senior Vice President and Chief Financial Officer of
AGL Resources and AGLC from May 1998 through October 1999; Vice President and
Chief Financial Officer of AGL Resources from August 1996 until May 1998; Vice
President and Chief Financial Officer of AGLC from November 1996 until May 1998;
Vice President Finance and Accounting of AGLC from 1994 until 1996; and Vice
President and Controller of AGLC from 1991 until 1994.
Paula G. Rosput, age 42, President and Chief Operating Officer of AGLC since
September 1998; President and Chief Executive Officer of Duke Energy Power
Services, Inc., a subsidiary of Duke Energy from 1997 until 1998; President of
PanEnergy Power Services, Inc. from 1995 until 1997; and Senior Vice President
of Pacific Gas Transmission Company from 1988 until 1995.
Paul R. Shlanta, age 42, Senior Vice President and General Counsel of AGL
Resources and AGLC since September 1998; and a principal with Rowe, Foltz &
Martin, P.C., an Atlanta law firm, from January 1994 until August 1998.
There are no family relationships among the executive officers.
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9
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The information required by this item is set forth under the caption
"Shareholder Information" on page 66 in the Annual Report and is incorporated
herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this item is set forth under the caption "Selected
Financial Data" on page 65 in the Annual Report and is incorporated herein by
reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
The information required by this item is set forth under the caption
"Management's Discussion and Analysis of Results of Operations and Financial
Condition" on pages 18 through 37 in the Annual Report and is incorporated
herein by reference.
ITEM 7.(A) QUALITATIVE AND QUANTITATIVE DISCLOSURE ABOUT MARKET RISK
The information required by this item is set forth under the caption
"Qualitative and Quantitative Disclosures about Market Risk" on page 37 in the
Annual Report and is incorporated herein by reference.
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10
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item with respect to financial statements is
set forth on pages 38 through 64 in the Annual Report. Such information is
incorporated herein by reference and includes:
. Consolidated Balance Sheets as of September 30, 1999 and 1998.
. Statements of Consolidated Income for the years ended September 30, 1999,
1998 and 1997.
. Statements of Consolidated Common Stockholders' Equity for the years ended
September 30, 1999, 1998 and 1997.
. Statements of Consolidated Cash Flows for the years ended September 30,
1999, 1998 and 1997.
. Notes to Consolidated Financial Statements.
. Independent Auditors' Report.
The following supplemental data is submitted herewith:
. Financial Statement Schedule - Valuation and Qualifying Account - Allowance
for Uncollectible Accounts.
. Independent Auditors' Report.
Schedules other than those referred to above are omitted and are not
applicable or not required, or the required information is shown in the
financial statements or notes thereto.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None
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11
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item with respect to directors is set forth
under the caption "Election of Directors" in the Proxy Statement and is
incorporated herein by reference. The information required by this item with
respect to the executive officers is, pursuant to Instruction 3 of Item 401(b)
of Regulation S-K and General Instruction G(3) of Form 10-K, set forth at Part
I, Item 4(A) of this report under the caption "Executive Officers of the
Registrant."
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is set forth under the caption "Executive
Compensation" in the Proxy Statement and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is set forth under the caption "Security
Ownership of Management" in the Proxy Statement and is incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is set forth under the caption "Other
Matters Involving Directors and Executive Officers" in the Proxy Statement and
is incorporated herein by reference.
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12
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
FORM 8-K
(a) Documents Filed as Part of This Report:
1. Financial Statements
Included under Item 8 are the following financial statements:
Consolidated Balance Sheets as of September 30, 1999 and 1998.
Statements of Consolidated Income for the Years Ended September 30,
1999, 1998 and 1997.
Statements of Consolidated Common Stockholders' Equity for the Years
Ended September 30, 1999, 1998 and 1997.
Statements of Consolidated Cash Flows for the Years Ended September 30,
1999, 1998 and 1997.
Notes to Consolidated Financial Statements.
Independent Auditors' Report.
2. Supplemental Consolidated Financial Schedules for Each of the Three
Years in the Period Ended September 30, 1999
Independent Auditors' Report.
II. Valuation and Qualifying Account--Allowance for Uncollectible
Accounts.
Schedules other than those referred to above are omitted and are not
applicable or not required, or the required information is shown in the
financial statements or notes thereto.
3. Exhibits
Where an exhibit is filed by incorporation by reference to a previously
filed registration statement or report, such registration statement or
report is identified in parentheses.
2.1 Purchase Agreement, dated as of July 29, 1999, by and between AGL Power
Services, Inc. (the "Seller"), Sonat Energy Services Company (the
"Purchaser"), Sonat Power Marketing, Inc., Sonat Inc., and AGL
Resources Inc.
2.2 Purchase Agreement, dated as of July 29, 1999, by and between AGL Gas
Marketing, Inc. (the "Seller"), Sonat Energy Services Company (the
"Purchaser"), AGL Resources Inc., Sonat Marketing Company, and
Sonat Inc.
3.1 Amended and Restated Articles of Incorporation filed January 5, 1996,
with the Secretary of State of the State of Georgia (Exhibit B, Proxy
Statement and Prospectus filed as a part of Amendment No. 1 to
Registration Statement on Form S-4, No. 33-99826).
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3.2 Bylaws, as amended and restated on January 15, 1999 (Exhibit 3, AGL
Resources Form 10-Q for the quarter ended December 31, 1998).
4.1 Specimen form of Common Stock certificate.
4.2.a Specimen form of Right certificate (Exhibit 1, 8-K filed March 6,
1996).
4.2.b Specimen form of Right certificate, as amended.
4.3 Indenture, dated as of December 1, 1989, between Atlanta Gas Light
Company and Bankers Trust Company, as Trustee (Exhibit 4(a), Atlanta
Gas Light Company Registration Statement on Form S-3, No. 33-32274).
4.4 First Supplemental Indenture, dated as of March 16, 1992, between
Atlanta Gas Light Company and NationsBank of Georgia, National
Association, as Successor Trustee (Exhibit 4(a), Atlanta Gas Light
Company Registration Statement on Form S-3, No. 33-46419).
10.1 Executive Compensation Plans and Arrangements.
10.1.a Executive Severance Pay Plan of AGL Resources Inc. (Exhibit 10.1.a,
Form 10-K for the fiscal year ended September 30, 1996).
10.1.b AGL Resources Inc. 1998 Voluntary Early Retirement Plan for Officers,
together with form of Early Retirement Agreement (Exhibit 10.1.a, AGL
Resources Form 10-Q for the quarter ended June 30, 1998).
10.1.c Early Retirement Agreement in substantially the form entered into
between AGL Resources Inc. and three of its executive officers
(Exhibit 10.1.a, AGL Resources Form 10-Q for the quarter ended June
30, 1999).
10.1.d AGL Resources Inc. 1998 Severance Plan for Officers, together with
form of Separation Agreement (Exhibit 10.1.b, AGL Resources Form 10-Q
for the quarter ended June 30, 1998).
10.1.e Consulting Agreement in substantially the form entered into between
AGL Resources Inc. and one of its named executive officers.
10.1.f AGL Resources Inc. Long-Term Incentive Plan (1999).
10.1.g AGL Resources Inc. Long-Term Stock Incentive Plan of 1990 (Exhibit
10(ii), Atlanta Gas Light Company Form 10-K for the fiscal year ended
September 30, 1991).
10.1.h First Amendment to the AGL Resources Inc. Long-Term Stock Incentive
Plan of 1990 (Exhibit B to the Atlanta Gas Light Company Proxy
Statement for the Annual Meeting of Shareholders held February 5,
1993).
10.1.i Second Amendment to the AGL Resources Inc. Long-Term Stock Incentive
Plan of 1990 (Exhibit 10.1.d, AGL Resources Form 10-K for the fiscal
year ended September 30, 1997).
10.1.j Third Amendment to the AGL Resources Inc. Long-Term Stock Incentive
Plan of 1990 (Exhibit C to the Proxy Statement and Prospectus filed as
a part of Amendment No. 1 to Registration Statement on Form S-4, No.
33-99826).
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10.1.k Fourth Amendment to the AGL Resources Inc. Long-Term Stock Incentive
Plan of 1990 (Exhibit 10.1.f, AGL Resources Form 10-K for the fiscal
year ended September 30, 1997).
10.1.l Fifth Amendment to the AGL Resources Inc. Long-Term Stock Incentive
Plan of 1990 (Exhibit 10.1.g, AGL Resources Form 10-K for the fiscal
year ended September 30, 1997).
10.1.m Sixth Amendment to the AGL Resources Inc. Long-Term Stock Incentive
Plan of 1990 (Exhibit 10.1.a, AGL Resources Form 10-Q for the quarter
ended March 31, 1998).
10.1.n Seventh Amendment to the AGL Resources Inc. Long-Term Stock Incentive
Plan of 1990 (Exhibit 10.1, AGL Resources Form 10-Q for the quarter
ended December 31, 1998).
10.1.o AGL Resources Inc. Nonqualified Savings Plan as amended and restated
as of July 1, 1998.
10.1.p AGL Resources Inc. Non-Employee Directors Equity Compensation Plan
(Exhibit B, Proxy Statement and Prospectus filed as a part of
Amendment No. 1 to Registration Statement on Form S-4, No. 33-99826).
10.1.q AGL Resources Inc. 1998 Common Stock Equivalent Plan for Non-Employee
Directors (Exhibit 10.1.b, AGL Resources Form 10-Q for the quarter
ended December 31, 1997).
10.2 Service Agreement under Rate Schedule GSS dated April 13, 1972,
between Atlanta Gas Light Company and Transcontinental Gas Pipe Line
Corporation (Exhibit 5(c), Registration No. 2-48297).
10.3 Service Agreement under Rate Schedule LG-A, effective August 16, 1974,
between Atlanta Gas light Company and Transcontinental Gas Pipe Line
Corporation (Exhibit 5(d), Registration No. 2-58971).
10.4 Storage Transportation Agreement, dated June 1, 1979, between Atlanta
Gas Light Company and Southern Natural Gas Company, (Exhibit 5(n),
Registration No. 2-65487).
10.5 100 Day Storage Service Agreement, dated June 1, 1979, between Atlanta
Gas Light Company and South Georgia Natural Gas Company, (Exhibit
10(r), Atlanta Gas Light Company Form 10-K for the fiscal year ended
September 30, 1989).
10.6 Service Agreement under Rate Schedule LSS, dated October 31, 1984,
between Atlanta Gas Light Company and Transcontinental Gas Pipe Line
Corporation, (Exhibit 10(s), Atlanta Gas Light Company Form 10-K for
the fiscal year ended September 30, 1989).
10.7 Storage Transportation Agreement, dated June 1, 1979, between Atlanta
Gas Light Company and South Georgia Natural Gas Company, (Exhibit
10(v), Atlanta Gas Light Company Form 10-K for the fiscal year ended
September 30, 1990).
10.8 Firm Seasonal Transportation Agreement, dated June 29, 1990, between
Atlanta Gas Light Company and Transcontinental Gas Pipe Line
Corporation, (Exhibit 10(bb), Atlanta Gas Light Company Form 10-K for
the fiscal year ended September 30, 1990).
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10.9 Service Agreement under Rate Schedule WSS, dated June 1, 1990, between
Atlanta Gas Light Company and Transcontinental Gas Pipe Line
Corporation, (Exhibit 10(cc), Atlanta Gas Light Company Form 10-K for
the fiscal year ended September 30, 1990).
10.10 Limited-Term Transportation Agreement Contract # A970 dated April 1,
1988, between Atlanta Gas Light Company and CNG Transmission
Corporation, (Exhibit 10(bb), Atlanta Gas Light Company Form 10-K for
the fiscal year ended September 30, 1991).
10.11 Service Agreement System Contract #.2271 under Rate Schedule FT, dated
August 1, 1991, between Atlanta Gas Light Company and Transcontinental
Gas Pipe Line Corporation, (Exhibit 10(dd), Atlanta Gas Light Company
Form 10-K for the fiscal year ended September 30, 1991).
10.12 Service Agreement System Contract #.4984 dated August 1, 1991, between
Atlanta Gas Light Company and Transcontinental Gas Pipe Line
Corporation, (Exhibit 10(ee), Atlanta Gas Light Company Form 10-K for
the fiscal year ended September 30, 1991).
10.13 Service Agreement Contract #830810 under Rate Schedule FT, dated March
1, 1992, between Atlanta Gas Light Company and South Georgia Natural
Gas Company (Exhibit 10(aa), Atlanta Gas Light Company Form 10-K for
the fiscal year ended September 30, 1992).
10.14 Firm Gas Transportation Contract #3699 under Rate Schedule FT, dated
February 1, 1992, between Atlanta Gas Light Company and
Transcontinental Gas Pipe Line Corporation (Exhibit 10(dd), Atlanta
Gas Light Company Form 10-K for the fiscal year ended September 30,
1992).
10.15 Firm Gas Transportation Agreement under Rate Schedule FT-1, dated July
1, 1992, between Atlanta Gas Light Company and East Tennessee Natural
Gas Company (Exhibit 10(ff), Atlanta Gas Light Company Form 10-K for
the fiscal year ended September 30, 1992).
10.16 Service Agreement Applicable to the Storage of Natural Gas under Rate
Schedule GSS, dated October 25, 1993, between Atlanta Gas Light
Company and CNG Transmission Corporation (Exhibit 10(y), Atlanta Gas
Light Company Form 10-K for the fiscal year ended September 30, 1993).
10.17 Service Agreement Applicable to the Storage of Natural Gas under Rate
Schedule GSS, dated September, 1993, between Chattanooga Gas Company
and CNG Transmission Corporation (Exhibit 10(z), Atlanta Gas Light
Company Form 10-K for the fiscal year ended September 30, 1993).
10.18 Firm Seasonal Transportation Agreement, dated February 1, 1992,
between Atlanta Gas Light Company and Transcontinental Gas Pipe Line
Corporation amending Exhibit 10(bb), Atlanta Gas Light Company Form
10-K for the fiscal year ended September 30, 1990 (Exhibit 10(cc),
Atlanta Gas Light Company Form 10-K for the fiscal year ended
September 30, 1993).
10.19 Service Agreement under Rate Schedule SS-1, dated April 1, 1988,
between Atlanta Gas Light Company and Transcontinental Gas Pipe Line
Corporation (Exhibit 10(z), Atlanta Gas Light Company Form 10-K for
the fiscal year ended September 30, 1994).
10.20 Firm Gas Transportation Agreement #5049 under Rate Schedule FT-A,
dated November 1, 1993, between Atlanta Gas Light Company and
Tennessee Gas Pipeline Company
16
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(Exhibit 10(aa), Atlanta Gas Light Company Form 10-K for the fiscal
year ended September 30, 1994).
10.21 Firm Gas Transportation Agreement #5051 under Rate Schedule FT-A,
dated November 1, 1993, between Chattanooga Gas Company and Tennessee
Gas Pipeline Company (Exhibit 10(bb), Atlanta Gas Light Company Form
10-K for the fiscal year ended September 30, 1994).
10.22 Gas Storage Contract #3998 under Rate Schedule FS, dated November 1,
1993, between Atlanta Gas Light Company and Tennessee Gas Pipeline
Company (Exhibit 10(cc), Atlanta Gas Light Company Form 10-K for the
fiscal year ended September 30, 1994).
10.23 Gas Storage Contract #3999 under Rate Schedule FS, dated November 1,
1993, between Chattanooga Gas Company and Tennessee Gas Pipeline
Company (Exhibit 10(dd), Atlanta Gas Light Company Form 10-K for the
fiscal year ended September 30, 1994).
10.24 Gas Storage Contract #3923 under Rate Schedule FS, dated November 1,
1993, between Atlanta Gas Light Company and Tennessee Gas Pipeline
Company (Exhibit 10(ee), Atlanta Gas Light Company Form 10-K for the
fiscal year ended September 30, 1994).
10.25 Gas Storage Contract #3947 under Rate Schedule FS, dated November 1,
1993, between Chattanooga Gas Company and Tennessee Gas Pipeline
Company (Exhibit 10(ff), Atlanta Gas Light Company Form 10-K for the
fiscal year ended September 30, 1994).
10.26 Service Agreement #902470 under Rate Schedule FT, dated September 1,
1994, between Atlanta Gas Light Company and Southern Natural Gas
Company (Exhibit 10(hh), Atlanta Gas Light Company Form 10-K for the
fiscal year ended September 30, 1994).
10.27 Service Agreement #904460 under Rate Schedule FT, dated November 1,
1994, between Atlanta Gas Light Company and Southern Natural Gas
Company (Exhibit 10(ii), Atlanta Gas Light Company Form 10-K for the
fiscal year ended September 30, 1994).
10.28 Service Agreement #904480 under Rate Schedule FT, dated November 1,
1994, between Atlanta Gas Light Company and Southern Natural Gas
Company (Exhibit 10(jj), Atlanta Gas Light Company Form 10-K for the
fiscal year ended September 30, 1994).
10.29 Service Agreement #904461 under Rate Schedule FT-NN, dated November 1,
1994, between Atlanta Gas Light Company and Southern Natural Gas
Company (Exhibit 10(kk), Atlanta Gas Light Company Form 10-K for the
fiscal year ended September 30, 1994).
10.30 Service Agreement #904481 under Rate Schedule FT-NN, dated November 1,
1994, between Atlanta Gas Light Company and Southern Natural Gas
Company (Exhibit 10(ll), Atlanta Gas Light Company Form 10-K for the
fiscal year ended September 30, 1994).
10.31 Service Agreement #S20140 under Rate Schedule CSS, dated November 1,
1994, between Atlanta Gas Light Company and Southern Natural Gas
Company (Exhibit 10(mm), Atlanta Gas Light Company Form 10-K for the
fiscal year ended September 30, 1994).
10.32 Service Agreement #S20150 under Rate Schedule CSS, dated November 1,
1994, between Atlanta Gas Light Company and Southern Natural Gas
Company (Exhibit 10(nn), Atlanta Gas Light Company Form 10-K for the
fiscal year ended September 30, 1994).
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10.33 Service Agreement #904470 under Rate Schedule FT, dated November 1,
1994, between Chattanooga Gas Company and Southern Natural Gas Company
(Exhibit 10(oo), Atlanta Gas Light Company Form 10-K for the fiscal
year ended September 30, 1994).
10.34 Service Agreement #904471 under Rate Schedule FT-NN, dated November 1,
1994, between Chattanooga Gas Company and Southern Natural Gas Company
(Exhibit 10(pp), Atlanta Gas Light Company Form 10-K for the fiscal
year ended September 30, 1994).
10.35 Service Agreement #S20130 under Rate Schedule CSS, dated November 1,
1994, between Chattanooga Gas Company and Southern Natural Gas Company
(Exhibit 10(qq), Atlanta Gas Light Company Form 10-K for the fiscal
year ended September 30, 1994).
10.36 Firm Storage (FS) Agreement, dated November 1, 1994, between Atlanta
Gas Light Company and ANR Storage Company (Exhibit 10(a), Atlanta Gas
Light Company Form 10-Q for the quarter ended March 31, 1996).
10.37 Firm Storage (FS) Agreement, dated November 1, 1994, between Atlanta
Gas Light Company and ANR Storage Company (Exhibit 10(b), Atlanta Gas
Light Company Form 10-Q for the quarter ended March 31, 1996).
10.38 Firm Transportation Agreement, dated March 1, 1996, between Atlanta
Gas Light Company and Southern Natural Gas Company amending Exhibits
10(jj), 10(ll) and 10(mm), Atlanta Gas Light Company Form 10-K for the
fiscal year ended September 30, 1994 (Exhibit 10(c), Atlanta Gas Light
Company Form 10-Q for the quarter ended March 31, 1996).
10.39 Firm Transportation Agreement, dated March 1, 1996, between Atlanta
Gas Light Company and Southern Natural Gas Company amending Exhibits
10(hh), 10(ii), 10(kk) and 10(nn), Atlanta Gas Light Company Form 10-K
for the fiscal year ended September 30, 1994 (Exhibit 10(d), Atlanta
Gas Light Company Form 10-Q for the quarter ended March 31, 1996).
10.40 Firm Transportation Agreement, dated March 1, 1996, between
Chattanooga Gas Company and Southern Natural Gas Company amending
Exhibits 10(oo), 10(pp) and 10(qq), Atlanta Gas Light Company Form
10-K for the fiscal year ended September 30, 1994 (Exhibit 10(a),
Atlanta Gas Light Company Form 10-Q for the quarter ended June 30,
1996).
10.41 Firm Transportation Agreement, dated June 1, 1996, between Atlanta Gas
Light Company and Southern Natural Gas Company amending Exhibit
10(ii), Atlanta Gas Light Company Form 10-K for the fiscal year ended
September 30, 1994 (Exhibit 10(tt), Atlanta Gas Light Company Form
10-K for the fiscal year ended September 30, 1995).
10.42 Firm Storage Agreement, effective December 1, 1994, between
Chattanooga Gas Company and Tennessee Gas Pipeline Company amending
Exhibit 10(ff), Atlanta Gas Light Company Form 10-K for the fiscal
year ended September 30, 1994 (Exhibit 10(uu), Atlanta Gas Light
Company Form 10-K for the fiscal year ended September 30, 1995).
10.43 Firm Storage Agreement, effective July 1, 1996, between Chattanooga
Gas Company and Tennessee Gas Pipeline Company amending Exhibit
10(ff), Atlanta Gas Light Company Form 10-K for the fiscal year ended
September 30, 1994 (Exhibit 10(vv), Atlanta Gas Light Company Form
10-K for the fiscal year ended September 30, 1995).
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<PAGE>
10.44 Firm Storage Agreement, effective July 1, 1996, between Chattanooga
Gas Company and Tennessee Gas Pipeline Company amending Exhibit
10(dd), Atlanta Gas Light Company Form 10-K for the fiscal year ended
September 30, 1994 (Exhibit 10(ww), Atlanta Gas Light Company Form
10-K for the fiscal year ended September 30, 1995).
10.45 Firm Transportation Agreement, dated September 26, 1994, between
Atlanta Gas Light Company and South Georgia Natural Gas Company
amending Exhibit 10(s), Atlanta Gas Light Company Form 10-K for the
fiscal year ended September 30, 1994 (Exhibit 10(xx), Atlanta Gas
Light Company Form 10-K for the fiscal year ended September 30, 1995).
10.46 Firm Storage Agreement, effective July 1, 1996, between Atlanta Gas
Light Company and Tennessee Gas Pipeline Company amending Exhibit
10(ee), Atlanta Gas Light Company Form 10-K for the fiscal year ended
September 30, 1994 (Exhibit 10(yy), Atlanta Gas Light Company Form
10-K for the fiscal year ended September 30, 1995).
10.47 Firm Storage Agreement, effective July 1, 1996, between Atlanta Gas
Light Company and Tennessee Gas Pipeline Company amending Exhibit
10(cc), Atlanta Gas Light Company Form 10-K for the fiscal year ended
September 30, 1994 (Exhibit 10(zz), Atlanta Gas Light Company Form
10-K for the fiscal year ended September 30, 1995).
10.48 Firm Storage Agreement, effective January 1, 1996, between Atlanta Gas
Light Company and Tennessee Gas Pipeline Company amending Exhibit
10(z) and replacing Exhibit 10(u), Atlanta Gas Light Company Form 10-K
for the fiscal year ended September 30, 1995 (Exhibit 10(a), Atlanta
Gas Light Company Form 10-Q for the quarter ended December 31, 1995).
10.49 Firm Storage Agreement, effective January 1, 1996, between Chattanooga
Gas Company and Tennessee Gas Pipeline Company amending Exhibit 10(aa)
and replacing Exhibit 10(dd), Atlanta Gas Light Company Form 10-K for
the fiscal year ended September 30, 1995 (Exhibit 10(b), Atlanta Gas
Light Company Form 10-Q for the quarter ended December 31, 1995).
10.50 Firm Storage Agreement between Atlanta Gas Light Company and ANR
Storage Company (Exhibit 10(a), Atlanta Gas Light Company Form 10-Q
for the quarter ended March 31, 1995).
10.51 FPS-1 Service Agreement, dated July 9, 1996, between Atlanta Gas Light
Company and Cove Point LNG Limited Partnership (Exhibit 10(a), Atlanta
Gas Light Company Form 10-Q for the quarter ended June 30, 1996).
10.52 Amendment to FS Agreement, dated September 13, 1994, between Atlanta
Gas Light Company and Transcontinental Gas Pipe Line Corporation
(Exhibit 10.54, Atlanta Gas Light Company Form 10-K for the fiscal
year ended September 30, 1996).
10.53 Amendment to Letter Agreement, dated July 13, 1994, among and between
Southern Natural Gas Company, Atlanta Gas Light Company and
Chattanooga Gas Company (Exhibit 10.55, Atlanta Gas Light Company Form
10-K for the fiscal year ended September 30, 1996).
10.54 Three-party agreement between ANR Storage Company, Atlanta Gas Light
Company and Southern Natural Gas Company, effective November 1, 1994
(Exhibit 10.56, Atlanta Gas Light Company Form 10-K for the fiscal
year ended September 30, 1996).
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10.55 Displacement Service Agreement, effective December 15, 1996, between
Washington Gas Light Company and Atlanta Gas Light Company (Exhibit
10.57, Atlanta Gas Light Company Form 10-K for the fiscal year ended
September 30, 1996).
10.56 Amendment to Firm Storage Agreement, effective July 26, 1996, between
Chattanooga Gas Company and Southern Natural Gas Company amending
Exhibit 10(jj), Atlanta Gas Light Company Form 10-K for the fiscal
year ended September 30, 1995 (Exhibit 10.58, Atlanta Gas Light
Company Form 10-K for the fiscal year ended September 30, 1996).
10.57 Amendatory Agreement, effective August 23, 1996, between Southern
Natural Gas Company and Atlanta Gas Light Company amending Exhibits
10(ee), 10(ff), 10(hh) and 10(kk), Atlanta Gas Light Company Form 10-K
for the fiscal year ended September 30, 1995 (Exhibit 10.59, Atlanta
Gas Light Company Form 10-K for the fiscal year ended September 30,
1996).
10.58 Service Agreement and Amendments under Rate Schedule FS between
Atlanta Gas Light Company and Transcontinental Gas Pipe Line
Corporation (Exhibit 10.60, AGL Resources Form 10-K for the fiscal
year ended September 30, 1997).
10.59 Gas Transportation Agreement under Rate Schedules FT-A and FT-GS,
dated October 16, 1997, between Atlanta Gas Light Company and East
Tennessee Natural Gas Company (Exhibit 10.61, AGL Resources Form 10-K
for the fiscal year ended September 30, 1997).
10.60 Gas Transportation Agreement under Rate Schedules FT-A and FT-GS,
dated October 16, 1997, between Chattanooga Gas Company and East
Tennessee Natural Gas Company (Exhibit 10.62, AGL Resources Form 10-K
for the fiscal year ended September 30, 1997).
10.61 Extension of Service Agreements #904480 under Rate Schedule FT;
#904481 under Rate Schedule FT-NN; and #S20140 under Rate Schedule
CSS, all dated November 1, 1994, between Atlanta Gas Light Company and
Southern Natural Gas Company (Exhibit 10.2, AGL Resources Form 10-Q
for the quarter ended December 31, 1998).
10.62 Amendment to Service Agreement between Transcontinental Gas Pipe Line
Corporation and Atlanta Gas Light Company dated December 15, 1997
(Exhibit 10.2, AGL Resources Form 10-Q for the quarter ended March 31,
1998).
10.63 Service Agreement between Transcontinental Gas Pipe Line Corporation
and Atlanta Gas Light Company dated January 14, 1998 (Exhibit 10.3,
AGL Resources Form 10-Q for the quarter ended March 31, 1998).
10.64 Precedent Agreement dated April 16, 1998 between Etowah LNG Company,
LLC and Atlanta Gas Light Company (Exhibit 10.2, AGL Resources Form
10-Q for the quarter ended June 30, 1998).
10.65 Amendment, dated October 14, 1999, to Precedent Agreement dated April
16, 1998 between Etowah LNG Company, LLC and Atlanta Gas Light
Company.
10.66 Service Agreement dated November 1, 1998 between Transcontinental Gas
Pipe Line Corporation and Atlanta Gas Light Company under Part 284(G)
which supersedes Rate Schedule X-289 (Exhibit 10.67, AGL Resources
Form 10-K for the fiscal year ended September 30, 1998).
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<PAGE>
10.67 Service Agreement dated November 1, 1998 between Transcontinental Gas
Pipe Line Corporation and Atlanta Gas Light Company under Rate
Schedule WSS-Open Access (Exhibit 10.68, AGL Resources Form 10-K for
the fiscal year ended September 30, 1998).
10.68 Guaranty Agreement effective November 1, 1998 between Atlanta Gas
Light Company and AGL Resources Inc.
10.69 Indemnification Agreement entered into on January 15, 1999 between
Piedmont Propane Company and AGL Resources Inc.
10.70 Indemnification Agreement entered into on January 15, 1999 between
Dynegy Inc. and AGL Resources Inc.
10.71 Loan Agreement effective June 30, 1999 between SouthStar Energy
Services, LLC, Georgia Natural Gas Company, Piedmont Energy Company,
and Dynegy Hub Services Inc.
13 Portions of the AGL Resources Inc. 1999 Annual Report to Shareholders.
21 Subsidiaries of AGL Resources Inc.
23 Independent Auditors' Consent.
24 Powers of Attorney (included with Signature Page hereto).
27 Financial Data Schedule.
21
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(b) Reports on Form 8-K
On July 30, 1999, AGL Resources filed a Current Report on Form 8-K dated July
29, 1999, containing: "Item 7 - Exhibits"; Exhibit 99 - Form of Press Release,
dated July 29, 1999.
On September 23, 1999, AGL Resources filed a Current Report on Form 8-K dated
September 22, 1999, containing: "Item 7 - Exhibits"; Exhibit 99 - Form of
Press Release, dated September 22, 1999.
On October 1, 1999, AGL Resources filed a Current Report on Form 8-K dated
September 29, 1999, containing: "Item 7 - Exhibits"; Exhibit 99 - Form of
Press Release, dated September 29, 1999.
The remainder of this page was intentionally left blank.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, on December 15, 1999.
AGL RESOURCES INC.
By: /s/ Walter M. Higgins
-------------------------------------
Walter M. Higgins
Chairman, President and Chief
Executive Officer
POWERS OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints Walter M. Higgins, Albert G. Norman, Jr. and Paul R.
Shlanta, and each of them, his or her true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution, for him or her and
in his or her name, place and stead, in any and all capacities, to sign the
Annual Report on Form 10-K for the fiscal year ended September 30, 1999 and any
and all amendments to such Annual Report, and to file the same, with all
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite or necessary to be done, as fully to all intents
and purposes as he or she might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or their
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities indicated as of November 9, 1999.
<TABLE>
<CAPTION>
Signatures Title
---------- -----
<S> <C>
/s/ Walter M. Higgins Chairman, President and Chief Executive Officer
- -------------------------------- (Principal Executive Officer) and Director
Walter M. Higgins
/s/ Donald P. Weinstein Senior Vice President and Chief Financial Officer
- -------------------------------- (Principal Accounting and Financial Officer)
Donald P. Weinstein
/s/ Frank Barron, Jr. Director
- --------------------------------
Frank Barron, Jr.
</TABLE>
23
<PAGE>
<TABLE>
<S> <C>
/s/ Otis A. Brumby, Jr. Director
- --------------------------------
Otis A. Brumby, Jr.
/s/ Robert S. Jepson, Jr. Director
- --------------------------------
Robert S. Jepson, Jr.
/s/ David R. Jones Director
- --------------------------------
David R. Jones
/s/ Wyck A. Knox, Jr. Director
- --------------------------------
Wyck A. Knox, Jr.
/s/ Dennis M. Love Director
- --------------------------------
Dennis M. Love
/s/ Albert G. Norman, Jr. Director
- --------------------------------
Albert G. Norman, Jr.
/s/ D. Raymond Riddle Director
- --------------------------------
D. Raymond Riddle
/s/ Betty L. Siegel Director
- --------------------------------
Betty L. Siegel
/s/ Ben J. Tarbutton, Jr. Director
- --------------------------------
Ben J. Tarbutton, Jr.
/s/ Felker W. Ward, Jr. Director
- --------------------------------
Felker W. Ward, Jr.
</TABLE>
24
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors of AGL Resources Inc.:
We have audited the consolidated balance sheets of AGL Resources Inc. and
subsidiaries of September 30, 1999 and 1998 and the related statements of
consolidated income, common stockholders' equity, and cash flows for each of the
three years in the period ended September 30, 1999, and have issued our report
thereon dated October 29, 1999 (November 17, 1999 as to Note 17); such financial
statements and report are included in your 1999 Annual Report to Shareholders
and are incorporated herein by reference. Our audits also included the
financial statement schedule of AGL Resources Inc. and subsidiaries, listed in
Item 14. This financial statement schedule is the responsibility of AGL
Resources Inc.'s management. Our responsibility is to express an opinion based
on our audits. In our opinion, such financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Atlanta, Georgia
October 29, 1999
(November 17, 1999 as to Note 17)
25
<PAGE>
Schedule II
<TABLE>
<CAPTION>
AGL RESOURCES INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNT
ALLOWANCE FOR UNCOLLECTIBLE ACCOUNTS
FOR THE YEARS ENDED SEPTEMBER 30, 1999, 1998 AND 1997
(IN MILLIONS)
- -----------------------------------------------------------------------------------------------
1999 1998 1997
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, beginning of year $ 4.1 $ 2.6 $ 2.8
Addition:
Provisions charged to income 12.4 8.1 9.8
- -----------------------------------------------------------------------------------------------
Total 16.5 10.7 12.6
Deduction:
Accounts written off as uncollectible, net 12.2 6.6 10.0
- -----------------------------------------------------------------------------------------------
Balance, end of year $ 4.3 $ 4.1 $ 2.6
- -----------------------------------------------------------------------------------------------
</TABLE>
26
<PAGE>
INDEX TO EXHIBITS
2.1 Purchase Agreement, dated as of July 29, 1999, by and between AGL Power
Services, Inc. (the "Seller"), Sonat Energy Services Company (the
"Purchaser"), Sonat Power Marketing, Inc., Sonat Inc., and AGL
Resources Inc.
2.2 Purchase Agreement, dated as of July 29, 1999, by and between AGL Gas
Marketing, Inc. (the "Seller"), Sonat Energy Services Company (the
"Purchaser"), AGL Resources Inc., Sonat Marketing Company, and
Sonat Inc.
3.1 Amended and Restated Articles of Incorporation filed January 5, 1996,
with the Secretary of State of the State of Georgia (Exhibit B, Proxy
Statement and Prospectus filed as a part of Amendment No. 1 to
Registration Statement on Form S-4, No. 33-99826).
3.2 Bylaws, as amended and restated on January 15, 1999 (Exhibit 3, AGL
Resources Form 10-Q for the quarter ended December 31, 1998).
4.1 Specimen form of Common Stock certificate.
4.2.a Specimen form of Right certificate (Exhibit 1, 8-K filed March 6,
1996).
4.2.b Specimen form of Right certificate, as amended.
4.3 Indenture, dated as of December 1, 1989, between Atlanta Gas Light
Company and Bankers Trust Company, as Trustee (Exhibit 4(a), Atlanta
Gas Light Company Registration Statement on Form S-3, No. 33-32274).
4.4 First Supplemental Indenture, dated as of March 16, 1992, between
Atlanta Gas Light Company and NationsBank of Georgia, National
Association, as Successor Trustee (Exhibit 4(a), Atlanta Gas Light
Company Registration Statement on Form S-3, No. 33-46419).
10.1 Executive Compensation Plans and Arrangements.
10.1.a Executive Severance Pay Plan of AGL Resources Inc. (Exhibit 10.1.a,
Form 10-K for the fiscal year ended September 30, 1996).
10.1.b AGL Resources Inc. 1998 Voluntary Early Retirement Plan for Officers,
together with form of Early Retirement Agreement (Exhibit 10.1.a, AGL
Resources Form 10-Q for the quarter ended June 30, 1998).
10.1.c Early Retirement Agreement in substantially the form entered into
between AGL Resources Inc. and three of its executive officers
(Exhibit 10.1.a, AGL Resources Form 10-Q for the quarter ended June
30, 1999).
10.1.d AGL Resources Inc. 1998 Severance Plan for Officers, together with
form of Separation Agreement (Exhibit 10.1.b, AGL Resources Form 10-Q
for the quarter ended June 30, 1998).
10.1.e Consulting Agreement in substantially the form entered into between
AGL Resources Inc. and one of its named executive officers.
10.1.f AGL Resources Inc. Long-Term Incentive Plan (1999).
10.1.g AGL Resources Inc. Long-Term Stock Incentive Plan of 1990 (Exhibit
10(ii), Atlanta Gas Light Company Form 10-K for the fiscal year ended
September 30, 1991).
<PAGE>
10.1.h First Amendment to the AGL Resources Inc. Long-Term Stock Incentive
Plan of 1990 (Exhibit B to the Atlanta Gas Light Company Proxy
Statement for the Annual Meeting of Shareholders held February 5,
1993).
10.1.i Second Amendment to the AGL Resources Inc. Long-Term Stock Incentive
Plan of 1990 (Exhibit 10.1.d, AGL Resources Form 10-K for the fiscal
year ended September 30, 1997).
10.1.j Third Amendment to the AGL Resources Inc. Long-Term Stock Incentive
Plan of 1990 (Exhibit C to the Proxy Statement and Prospectus filed as
a part of Amendment No. 1 to Registration Statement on Form S-4, No.
33-99826).
10.1.k Fourth Amendment to the AGL Resources Inc. Long-Term Stock Incentive
Plan of 1990 (Exhibit 10.1.f, AGL Resources Form 10-K for the fiscal
year ended September 30, 1997).
10.1.l Fifth Amendment to the AGL Resources Inc. Long-Term Stock Incentive
Plan of 1990 (Exhibit 10.1.g, AGL Resources Form 10-K for the fiscal
year ended September 30, 1997).
10.1.m Sixth Amendment to the AGL Resources Inc. Long-Term Stock Incentive
Plan of 1990 (Exhibit 10.1.a, AGL Resources Form 10-Q for the quarter
ended March 31, 1998).
10.1.n Seventh Amendment to the AGL Resources Inc. Long-Term Stock Incentive
Plan of 1990 (Exhibit 10.1, AGL Resources Form 10-Q for the quarter
ended December 31, 1998).
10.1.o AGL Resources Inc. Nonqualified Savings Plan as amended and restated
as of July 1, 1998.
10.1.p AGL Resources Inc. Non-Employee Directors Equity Compensation Plan
(Exhibit B, Proxy Statement and Prospectus filed as a part of
Amendment No. 1 to Registration Statement on Form S-4, No. 33-99826).
10.1.q AGL Resources Inc. 1998 Common Stock Equivalent Plan for Non-Employee
Directors (Exhibit 10.1.b, AGL Resources Form 10-Q for the quarter
ended December 31, 1997).
10.2 Service Agreement under Rate Schedule GSS dated April 13, 1972,
between Atlanta Gas Light Company and Transcontinental Gas Pipe Line
Corporation (Exhibit 5(c), Registration No. 2-48297).
10.3 Service Agreement under Rate Schedule LG-A, effective August 16, 1974,
between Atlanta Gas light Company and Transcontinental Gas Pipe Line
Corporation (Exhibit 5(d), Registration No. 2-58971).
10.4 Storage Transportation Agreement, dated June 1, 1979, between Atlanta
Gas Light Company and Southern Natural Gas Company, (Exhibit 5(n),
Registration No. 2-65487).
10.5 100 Day Storage Service Agreement, dated June 1, 1979, between Atlanta
Gas Light Company and South Georgia Natural Gas Company, (Exhibit
10(r), Atlanta Gas Light Company Form 10-K for the fiscal year ended
September 30, 1989).
10.6 Service Agreement under Rate Schedule LSS, dated October 31, 1984,
between Atlanta Gas Light Company and Transcontinental Gas Pipe Line
Corporation, (Exhibit 10(s), Atlanta Gas Light Company Form 10-K for
the fiscal year ended September 30, 1989).
10.7 Storage Transportation Agreement, dated June 1, 1979, between Atlanta
Gas Light Company and South Georgia Natural Gas Company, (Exhibit
10(v), Atlanta Gas Light Company Form 10-K for the fiscal year ended
September 30, 1990).
<PAGE>
10.8 Firm Seasonal Transportation Agreement, dated June 29, 1990, between
Atlanta Gas Light Company and Transcontinental Gas Pipe Line
Corporation, (Exhibit 10(bb), Atlanta Gas Light Company Form 10-K for
the fiscal year ended September 30, 1990).
10.9 Service Agreement under Rate Schedule WSS, dated June 1, 1990, between
Atlanta Gas Light Company and Transcontinental Gas Pipe Line
Corporation, (Exhibit 10(cc), Atlanta Gas Light Company Form 10-K for
the fiscal year ended September 30, 1990).
10.10 Limited-Term Transportation Agreement Contract # A970 dated April 1,
1988, between Atlanta Gas Light Company and CNG Transmission
Corporation, (Exhibit 10(bb), Atlanta Gas Light Company Form 10-K for
the fiscal year ended September 30, 1991).
10.11 Service Agreement System Contract #.2271 under Rate Schedule FT, dated
August 1, 1991, between Atlanta Gas Light Company and Transcontinental
Gas Pipe Line Corporation, (Exhibit 10(dd), Atlanta Gas Light Company
Form 10-K for the fiscal year ended September 30, 1991).
10.12 Service Agreement System Contract #.4984 dated August 1, 1991, between
Atlanta Gas Light Company and Transcontinental Gas Pipe Line
Corporation, (Exhibit 10(ee), Atlanta Gas Light Company Form 10-K for
the fiscal year ended September 30, 1991).
10.13 Service Agreement Contract #830810 under Rate Schedule FT, dated March
1, 1992, between Atlanta Gas Light Company and South Georgia Natural
Gas Company (Exhibit 10(aa), Atlanta Gas Light Company Form 10-K for
the fiscal year ended September 30, 1992).
10.14 Firm Gas Transportation Contract #3699 under Rate Schedule FT, dated
February 1, 1992, between Atlanta Gas Light Company and
Transcontinental Gas Pipe Line Corporation (Exhibit 10(dd), Atlanta
Gas Light Company Form 10-K for the fiscal year ended September 30,
1992).
10.15 Firm Gas Transportation Agreement under Rate Schedule FT-1, dated July
1, 1992, between Atlanta Gas Light Company and East Tennessee Natural
Gas Company (Exhibit 10(ff), Atlanta Gas Light Company Form 10-K for
the fiscal year ended September 30, 1992).
10.16 Service Agreement Applicable to the Storage of Natural Gas under Rate
Schedule GSS, dated October 25, 1993, between Atlanta Gas Light
Company and CNG Transmission Corporation (Exhibit 10(y), Atlanta Gas
Light Company Form 10-K for the fiscal year ended September 30, 1993).
10.17 Service Agreement Applicable to the Storage of Natural Gas under Rate
Schedule GSS, dated September, 1993, between Chattanooga Gas Company
and CNG Transmission Corporation (Exhibit 10(z), Atlanta Gas Light
Company Form 10-K for the fiscal year ended September 30, 1993).
10.18 Firm Seasonal Transportation Agreement, dated February 1, 1992,
between Atlanta Gas Light Company and Transcontinental Gas Pipe Line
Corporation amending Exhibit 10(bb), Atlanta Gas Light Company Form
10-K for the fiscal year ended September 30, 1990 (Exhibit 10(cc),
Atlanta Gas Light Company Form 10-K for the fiscal year ended
September 30, 1993).
10.19 Service Agreement under Rate Schedule SS-1, dated April 1, 1988,
between Atlanta Gas Light Company and Transcontinental Gas Pipe Line
Corporation (Exhibit 10(z), Atlanta Gas Light Company Form 10-K for
the fiscal year ended September 30, 1994).
<PAGE>
10.20 Firm Gas Transportation Agreement #5049 under Rate Schedule FT-A,
dated November 1, 1993, between Atlanta Gas Light Company and
Tennessee Gas Pipeline Company (Exhibit 10(aa), Atlanta Gas Light
Company Form 10-K for the fiscal year ended September 30, 1994).
10.21 Firm Gas Transportation Agreement #5051 under Rate Schedule FT-A,
dated November 1, 1993, between Chattanooga Gas Company and Tennessee
Gas Pipeline Company (Exhibit 10(bb), Atlanta Gas Light Company Form
10-K for the fiscal year ended September 30, 1994).
10.22 Gas Storage Contract #3998 under Rate Schedule FS, dated November 1,
1993, between Atlanta Gas Light Company and Tennessee Gas Pipeline
Company (Exhibit 10(cc), Atlanta Gas Light Company Form 10-K for the
fiscal year ended September 30, 1994).
10.23 Gas Storage Contract #3999 under Rate Schedule FS, dated November 1,
1993, between Chattanooga Gas Company and Tennessee Gas Pipeline
Company (Exhibit 10(dd), Atlanta Gas Light Company Form 10-K for the
fiscal year ended September 30, 1994).
10.24 Gas Storage Contract #3923 under Rate Schedule FS, dated November 1,
1993, between Atlanta Gas Light Company and Tennessee Gas Pipeline
Company (Exhibit 10(ee), Atlanta Gas Light Company Form 10-K for the
fiscal year ended September 30, 1994).
10.25 Gas Storage Contract #3947 under Rate Schedule FS, dated November 1,
1993, between Chattanooga Gas Company and Tennessee Gas Pipeline
Company (Exhibit 10(ff), Atlanta Gas Light Company Form 10-K for the
fiscal year ended September 30, 1994).
10.26 Service Agreement #902470 under Rate Schedule FT, dated September 1,
1994, between Atlanta Gas Light Company and Southern Natural Gas
Company (Exhibit 10(hh), Atlanta Gas Light Company Form 10-K for the
fiscal year ended September 30, 1994).
10.27 Service Agreement #904460 under Rate Schedule FT, dated November 1,
1994, between Atlanta Gas Light Company and Southern Natural Gas
Company (Exhibit 10(ii), Atlanta Gas Light Company Form 10-K for the
fiscal year ended September 30, 1994).
10.28 Service Agreement #904480 under Rate Schedule FT, dated November 1,
1994, between Atlanta Gas Light Company and Southern Natural Gas
Company (Exhibit 10(jj), Atlanta Gas Light Company Form 10-K for the
fiscal year ended September 30, 1994).
10.29 Service Agreement #904461 under Rate Schedule FT-NN, dated November 1,
1994, between Atlanta Gas Light Company and Southern Natural Gas
Company (Exhibit 10(kk), Atlanta Gas Light Company Form 10-K for the
fiscal year ended September 30, 1994).
10.30 Service Agreement #904481 under Rate Schedule FT-NN, dated November 1,
1994, between Atlanta Gas Light Company and Southern Natural Gas
Company (Exhibit 10(ll), Atlanta Gas Light Company Form 10-K for the
fiscal year ended September 30, 1994).
10.31 Service Agreement #S20140 under Rate Schedule CSS, dated November 1,
1994, between Atlanta Gas Light Company and Southern Natural Gas
Company (Exhibit 10(mm), Atlanta Gas Light Company Form 10-K for the
fiscal year ended September 30, 1994).
10.32 Service Agreement #S20150 under Rate Schedule CSS, dated November 1,
1994, between Atlanta Gas Light Company and Southern Natural Gas
Company (Exhibit 10(nn), Atlanta Gas Light Company Form 10-K for the
fiscal year ended September 30, 1994).
10.33 Service Agreement #904470 under Rate Schedule FT, dated November 1,
1994, between Chattanooga Gas Company and Southern Natural Gas Company
(Exhibit 10(oo), Atlanta Gas Light Company Form 10-K for the fiscal
year ended September 30, 1994).
<PAGE>
10.34 Service Agreement #904471 under Rate Schedule FT-NN, dated November 1,
1994, between Chattanooga Gas Company and Southern Natural Gas Company
(Exhibit 10(pp), Atlanta Gas Light Company Form 10-K for the fiscal
year ended September 30, 1994).
10.35 Service Agreement #S20130 under Rate Schedule CSS, dated November 1,
1994, between Chattanooga Gas Company and Southern Natural Gas Company
(Exhibit 10(qq), Atlanta Gas Light Company Form 10-K for the fiscal
year ended September 30, 1994).
10.36 Firm Storage (FS) Agreement, dated November 1, 1994, between Atlanta
Gas Light Company and ANR Storage Company (Exhibit 10(a), Atlanta Gas
Light Company Form 10-Q for the quarter ended March 31, 1996).
10.37 Firm Storage (FS) Agreement, dated November 1, 1994, between Atlanta
Gas Light Company and ANR Storage Company (Exhibit 10(b), Atlanta Gas
Light Company Form 10-Q for the quarter ended March 31, 1996).
10.38 Firm Transportation Agreement, dated March 1, 1996, between Atlanta
Gas Light Company and Southern Natural Gas Company amending Exhibits
10(jj), 10(ll) and 10(mm), Atlanta Gas Light Company Form 10-K for the
fiscal year ended September 30, 1994 (Exhibit 10(c), Atlanta Gas Light
Company Form 10-Q for the quarter ended March 31, 1996).
10.39 Firm Transportation Agreement, dated March 1, 1996, between Atlanta
Gas Light Company and Southern Natural Gas Company amending Exhibits
10(hh), 10(ii), 10(kk) and 10(nn), Atlanta Gas Light Company Form 10-K
for the fiscal year ended September 30, 1994 (Exhibit 10(d), Atlanta
Gas Light Company Form 10-Q for the quarter ended March 31, 1996).
10.40 Firm Transportation Agreement, dated March 1, 1996, between
Chattanooga Gas Company and Southern Natural Gas Company amending
Exhibits 10(oo), 10(pp) and 10(qq), Atlanta Gas Light Company Form
10-K for the fiscal year ended September 30, 1994 (Exhibit 10(a),
Atlanta Gas Light Company Form 10-Q for the quarter ended June 30,
1996).
10.41 Firm Transportation Agreement, dated June 1, 1996, between Atlanta Gas
Light Company and Southern Natural Gas Company amending Exhibit
10(ii), Atlanta Gas Light Company Form 10-K for the fiscal year ended
September 30, 1994 (Exhibit 10(tt), Atlanta Gas Light Company Form
10-K for the fiscal year ended September 30, 1995).
10.42 Firm Storage Agreement, effective December 1, 1994, between
Chattanooga Gas Company and Tennessee Gas Pipeline Company amending
Exhibit 10(ff), Atlanta Gas Light Company Form 10-K for the fiscal
year ended September 30, 1994 (Exhibit 10(uu), Atlanta Gas Light
Company Form 10-K for the fiscal year ended September 30, 1995).
10.43 Firm Storage Agreement, effective July 1, 1996, between Chattanooga
Gas Company and Tennessee Gas Pipeline Company amending Exhibit
10(ff), Atlanta Gas Light Company Form 10-K for the fiscal year ended
September 30, 1994 (Exhibit 10(vv), Atlanta Gas Light Company Form
10-K for the fiscal year ended September 30, 1995).
10.44 Firm Storage Agreement, effective July 1, 1996, between Chattanooga
Gas Company and Tennessee Gas Pipeline Company amending Exhibit
10(dd), Atlanta Gas Light Company Form 10-K for the fiscal year ended
September 30, 1994 (Exhibit 10(ww), Atlanta Gas Light Company Form
10-K for the fiscal year ended September 30, 1995).
<PAGE>
10.45 Firm Transportation Agreement, dated September 26, 1994, between
Atlanta Gas Light Company and South Georgia Natural Gas Company
amending Exhibit 10(s), Atlanta Gas Light Company Form 10-K for the
fiscal year ended September 30, 1994 (Exhibit 10(xx), Atlanta Gas
Light Company Form 10-K for the fiscal year ended September 30, 1995).
10.46 Firm Storage Agreement, effective July 1, 1996, between Atlanta Gas
Light Company and Tennessee Gas Pipeline Company amending Exhibit
10(ee), Atlanta Gas Light Company Form 10-K for the fiscal year ended
September 30, 1994 (Exhibit 10(yy), Atlanta Gas Light Company Form
10-K for the fiscal year ended September 30, 1995).
10.47 Firm Storage Agreement, effective July 1, 1996, between Atlanta Gas
Light Company and Tennessee Gas Pipeline Company amending Exhibit
10(cc), Atlanta Gas Light Company Form 10-K for the fiscal year ended
September 30, 1994 (Exhibit 10(zz), Atlanta Gas Light Company Form
10-K for the fiscal year ended September 30, 1995).
10.48 Firm Storage Agreement, effective January 1, 1996, between Atlanta Gas
Light Company and Tennessee Gas Pipeline Company amending Exhibit
10(z) and replacing Exhibit 10(u), Atlanta Gas Light Company Form 10-K
for the fiscal year ended September 30, 1995 (Exhibit 10(a), Atlanta
Gas Light Company Form 10-Q for the quarter ended December 31, 1995).
10.49 Firm Storage Agreement, effective January 1, 1996, between Chattanooga
Gas Company and Tennessee Gas Pipeline Company amending Exhibit 10(aa)
and replacing Exhibit 10(dd), Atlanta Gas Light Company Form 10-K for
the fiscal year ended September 30, 1995 (Exhibit 10(b), Atlanta Gas
Light Company Form 10-Q for the quarter ended December 31, 1995).
10.50 Firm Storage Agreement between Atlanta Gas Light Company and ANR
Storage Company (Exhibit 10(a), Atlanta Gas Light Company Form 10-Q
for the quarter ended March 31, 1995).
10.51 FPS-1 Service Agreement, dated July 9, 1996, between Atlanta Gas Light
Company and Cove Point LNG Limited Partnership (Exhibit 10(a), Atlanta
Gas Light Company Form 10-Q for the quarter ended June 30, 1996).
10.52 Amendment to FS Agreement, dated September 13, 1994, between Atlanta
Gas Light Company and Transcontinental Gas Pipe Line Corporation
(Exhibit 10.54, Atlanta Gas Light Company Form 10-K for the fiscal
year ended September 30, 1996).
10.53 Amendment to Letter Agreement, dated July 13, 1994, among and between
Southern Natural Gas Company, Atlanta Gas Light Company and
Chattanooga Gas Company (Exhibit 10.55, Atlanta Gas Light Company Form
10-K for the fiscal year ended September 30, 1996).
10.54 Three-party agreement between ANR Storage Company, Atlanta Gas Light
Company and Southern Natural Gas Company, effective November 1, 1994
(Exhibit 10.56, Atlanta Gas Light Company Form 10-K for the fiscal
year ended September 30, 1996).
10.55 Displacement Service Agreement, effective December 15, 1996, between
Washington Gas Light Company and Atlanta Gas Light Company (Exhibit
10.57, Atlanta Gas Light Company Form 10-K for the fiscal year ended
September 30, 1996).
10.56 Amendment to Firm Storage Agreement, effective July 26, 1996, between
Chattanooga Gas Company and Southern Natural Gas Company amending
Exhibit 10(jj), Atlanta Gas Light Company Form 10-K for the fiscal
year ended September 30, 1995 (Exhibit 10.58, Atlanta Gas Light
Company Form 10-K for the fiscal year ended September 30, 1996).
<PAGE>
10.57 Amendatory Agreement, effective August 23, 1996, between Southern
Natural Gas Company and Atlanta Gas Light Company amending Exhibits
10(ee), 10(ff), 10(hh) and 10(kk), Atlanta Gas Light Company Form 10-K
for the fiscal year ended September 30, 1995 (Exhibit 10.59, Atlanta
Gas Light Company Form 10-K for the fiscal year ended September 30,
1996).
10.58 Service Agreement and Amendments under Rate Schedule FS between
Atlanta Gas Light Company and Transcontinental Gas Pipe Line
Corporation (Exhibit 10.60, AGL Resources Form 10-K for the fiscal
year ended September 30, 1997).
10.59 Gas Transportation Agreement under Rate Schedules FT-A and FT-GS,
dated October 16, 1997, between Atlanta Gas Light Company and East
Tennessee Natural Gas Company (Exhibit 10.61, AGL Resources Form 10-K
for the fiscal year ended September 30, 1997).
10.60 Gas Transportation Agreement under Rate Schedules FT-A and FT-GS,
dated October 16, 1997, between Chattanooga Gas Company and East
Tennessee Natural Gas Company (Exhibit 10.62, AGL Resources Form 10-K
for the fiscal year ended September 30, 1997).
10.61 Extension of Service Agreements #904480 under Rate Schedule FT;
#904481 under Rate Schedule FT-NN; and #S20140 under Rate Schedule
CSS, all dated November 1, 1994, between Atlanta Gas Light Company and
Southern Natural Gas Company (Exhibit 10.2, AGL Resources Form 10-Q
for the quarter ended December 31, 1998).
10.62 Amendment to Service Agreement between Transcontinental Gas Pipe Line
Corporation and Atlanta Gas Light Company dated December 15, 1997
(Exhibit 10.2, AGL Resources Form 10-Q for the quarter ended March 31,
1998).
10.63 Service Agreement between Transcontinental Gas Pipe Line Corporation
and Atlanta Gas Light Company dated January 14, 1998 (Exhibit 10.3,
AGL Resources Form 10-Q for the quarter ended March 31, 1998).
10.64 Precedent Agreement dated April 16, 1998 between Etowah LNG Company,
LLC and Atlanta Gas Light Company (Exhibit 10.2, AGL Resources Form
10-Q for the quarter ended June 30, 1998).
10.65 Amendment, dated October 14, 1999, to Precedent Agreement dated April
16, 1998 between Etowah LNG Company, LLC and Atlanta Gas Light
Company.
10.66 Service Agreement dated November 1, 1998 between Transcontinental Gas
Pipe Line Corporation and Atlanta Gas Light Company under Part 284(G)
which supersedes Rate Schedule X-289 (Exhibit 10.67, AGL Resources
Form 10-K for the fiscal year ended September 30, 1998).
10.67 Service Agreement dated November 1, 1998 between Transcontinental Gas
Pipe Line Corporation and Atlanta Gas Light Company under Rate
Schedule WSS-Open Access (Exhibit 10.68, AGL Resources Form 10-K for
the fiscal year ended September 30, 1998).
10.68 Guaranty Agreement effective November 1, 1998 between Atlanta Gas
Light Company and AGL Resources Inc.
10.69 Indemnification Agreement entered into on January 15, 1999 between
Piedmont Propane Company and AGL Resources Inc.
10.70 Indemnification Agreement entered into on January 15, 1999 between
Dynegy Inc. and AGL Resources Inc.
<PAGE>
10.71 Loan Agreement effective June 30, 1999 between SouthStar Energy
Services, LLC, Georgia Natural Gas Company, Piedmont Energy Company,
and Dynegy Hub Services Inc.
13 Portions of the AGL Resources Inc. 1999 Annual Report to Shareholders.
21 Subsidiaries of AGL Resources Inc.
23 Independent Auditors' Consent.
24 Powers of Attorney (included with Signature Page hereto).
27 Financial Data Schedule.
<PAGE>
EXHIBIT 2.1
[EXECUTION COPY]
PURCHASE AGREEMENT
PURCHASE AGREEMENT (this "Agreement"), dated as of July 29, 1999, by and
between AGL Power Services, Inc. (the "Seller"), Sonat Energy Services Company
(the "Purchaser"), Sonat Power Marketing, Inc. ("SPM"), Sonat Inc. ("Sonat"),
and AGL Resources Inc. ("AGL").
INTRODUCTION
The Seller holds a limited partner interest in Sonat Power Marketing L.P.,
a Delaware limited partnership (the "Partnership"), pursuant to the Limited
Partnership Agreement, dated as of June 1, 1996 (as supplemented and amended,
the "Partnership Agreement") between the Seller and SPM. Capitalized terms not
otherwise defined herein shall have the respective meanings set forth in the
Partnership Agreement.
The Seller proposes to (i) sell, assign and transfer its Partnership
Interest to the Purchaser in accordance with the terms and subject to the
conditions set forth in this Agreement and (ii) withdraw from the Partnership as
a Limited Partner.
The Purchaser proposes to (i) purchase, acquire and accept the Seller's
Partnership Interest in accordance with the terms and subject to the conditions
of this Agreement, and (ii) be admitted to the Partnership as a substituted
Limited Partner.
NOW, THEREFORE, in consideration of the premises and agreements contained
herein, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings:
"AGL" shall have the meaning set forth in the first paragraph of this
Agreement.
"Ancillary Agreements" shall mean the other agreements, documents and
instruments to be executed and delivered by the Purchaser and the Seller or
each of such parties, as the case may be, pursuant hereto, including the
Assignment of Limited Partner Interest of the Seller.
<PAGE>
2
"Assignment of Limited Partner Interest" shall mean an assignment
agreement, substantially in the form of Exhibit A hereto, providing for the
transfer of the Seller's Interest by the Seller to the Purchaser.
"Claim" shall mean any security interests, liens, pledges, claims,
charges, escrows, encumbrances, options, rights of first refusal,
mortgages, indentures, security agreements or other similar agreements,
arrangements, contracts, commitments, understandings or obligations,
whether written or oral, and whether or not relating in any way to credit
or the borrowing of money.
"Closing" shall have the meaning set forth in Section 2.3 hereof.
"Closing Date" shall have the meaning set forth in Section 2.3 hereof.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended.
"Partnership" shall have the meaning set forth in the first paragraph
of the Introduction to this Agreement.
"Partnership Agreement" shall have the meaning set forth in the first
paragraph of the Introduction to this Agreement.
"Person" includes any individual, partnership (whether general or
limited), corporation, joint venture, trust, estate, unincorporated
organization, incorporated association, proprietorship, association or
nominee, government or any agency or political subdivision thereof or any
other entity.
"Purchaser" shall have the meaning set forth in the first paragraph of
this Agreement.
"Purchase Price" shall have the meaning set forth in Section 2.2
hereof.
"Seller" shall have the meaning set forth in the first paragraph of
this Agreement.
"Seller's Interest" shall mean the Partnership Interest held by
Seller.
"Sonat" shall have the meaning set forth in the first paragraph of
this Agreement.
"SPM" shall have the meaning set forth in the first paragraph of this
Agreement.
"Supplementary Agreement" shall mean the Supplementary Agreement, in
substantially the form of Exhibit B to this Agreement, among the
Partnership, SPM, Sonat, AGL and the Seller.
<PAGE>
3
ARTICLE II
SALE AND PURCHASE
SECTION 2.1. Sale and Purchase. Upon the terms and subject to the
conditions set forth in this Agreement, on the Closing Date, the Seller shall
sell, assign, transfer and convey to the Purchaser, and the Purchaser shall
purchase, acquire and accept from the Seller, the Seller's Interest, free and
clear of any Claims (other than Claims created by or through the Purchaser and
Claims of SPM, Sonat and their Affiliates under the Partnership Agreement or the
Parent Agreement).
SECTION 2.2. Purchase Price. The purchase price for the Seller's
Interest shall be an amount equal to the sum of (i) $25,000,000 plus (ii) simple
interest, if any, on the $25,000,000 calculated at the average of the interest
rate reported as the Prime Rate in the Wall Street Journal for the period, if
any, beginning on, but excluding, the 90th day following the execution of this
Agreement, and ending on, and including, the Closing Date (the "Purchase
Price"). The parties hereto acknowledge and agree that the Purchase Price shall
constitute payment in full for the Seller's Interest and all rights related
thereto, including all amounts otherwise payable to the Seller with respect to
the Seller's Interest for any and all periods up to and through the Closing
Date; provided, however, that notwithstanding anything herein to the contrary
the Seller shall be entitled to distributions pursuant to Section 6.4(a) of the
Partnership Agreement with respect to taxes for all periods ending on or prior
to June 30, 1999, and provided further, that nothing herein or in the Ancillary
Agreements shall be deemed to abrogate the rights of the Seller, the Related
Persons of the Seller, any past, present or future Committee Members of the
Seller and any Released Persons of the Seller that are set forth in and
protected by Section 14.12 or Article 11 of the Partnership Agreement, and such
rights shall survive the transfer by the Seller of the Seller's Interest.
SECTION 2.3. The Closing.
(a) Upon the terms and subject to the conditions of this Agreement, the
sale and purchase of the Seller's Interest contemplated hereby shall take place
at a closing (the "Closing") at 11:00 a.m., United States Eastern time, on the
second Business Day following the satisfaction or waiver (if permissible) of the
conditions to Closing set forth in Article V hereof, or at such other place or
such other time or on such other date as the parties may mutually agree in
writing (the day on which the Closing takes place being the "Closing Date").
(b) At the Closing, each of the Seller and AGL, as the case may be, shall
deliver or cause to be delivered to the Purchaser:
(i) a duly executed counterpart of the Assignment of Limited
Partner Interest and such other instruments of transfer as may be
reasonably necessary or appropriate to evidence the transfer of the
Seller's Interest to the Purchaser;
(ii) the certificate and other documents required to be delivered by
each of the Seller and AGL pursuant to Section 5.2 hereof; and
<PAGE>
4
(iii) a receipt for the Purchase Price paid to the Seller.
(c) At the Closing, each of the Purchaser, SPM and Sonat, as the case
may be, shall deliver or cause to be delivered:
(i) the Purchase Price in immediately available funds to a bank
account specified by the Seller prior to the Closing Date;
(ii) a duly executed counterpart of the Assignment of Limited
Partner Interest and such other instruments of transfer as may be
reasonably necessary or appropriate to evidence the transfer of the
Seller's Interest to the Purchaser; and
(iii) the certificate and other documents required to be delivered by
each of the Purchaser, SPM and Sonat pursuant to Section 5.3 hereof.
SECTION 2.4. Withdrawal of Seller; Effect.
(a) On the Closing Date, the Seller shall withdraw as a Limited Partner in
the Partnership upon the sale, assignment, transfer and purchase of the Seller's
Interest under Section 2.1 hereof.
(b) Upon such withdrawal, the Seller shall no longer have any rights or
obligations as a Partner; provided, however, that notwithstanding anything
herein to the contrary the Seller shall be entitled to distributions pursuant to
Section 6.4(a) of the Partnership Agreement with respect to taxes for all
periods ending on or prior to June 30, 1999, and provided further, that nothing
herein or in the Ancillary Agreements shall be deemed to abrogate the rights of
the Seller, the Related Persons of the Seller, any past, present or future
Committee Members of the Seller and any Released Persons of the Seller that are
set forth in and protected by Section 14.12 or Article 11 of the Partnership
Agreement, and such rights shall survive the transfer by the Seller of the
Seller's Interest.
SECTION 2.5. Transfer as Purchase and Sale. Each of the parties to
this Agreement hereby agrees to treat the Transfer of the Seller's Interest to
the Purchaser as contemplated in this Agreement as a purchase and sale under
Sections 741 and 1001 of the Code and not as a retirement under Section 736 of
the Code.
<PAGE>
5
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE SELLER AND AGL
The Seller and AGL each represents and warrants to each of the Purchaser,
SPM and Sonat as follows:
SECTION 3.1. Existence and Power. Each of the Seller and AGL is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and has all requisite corporate power
and authority to execute, deliver and perform this Agreement and the Ancillary
Agreements to which it is a party, to carry out its obligations hereunder and
thereunder and to consummate the transactions contemplated hereby and thereby.
SECTION 3.2. Authority; Validity. Each of the Seller and AGL has
all requisite corporate power and authority to execute, deliver and perform this
Agreement and the Ancillary Agreements to which it is a party. The execution
and delivery of this Agreement by the Seller and AGL, and of the Ancillary
Agreements to which each is a party, the performance by each of its obligations
hereunder and thereunder and the consummation of the transactions contemplated
hereby and thereby have been duly authorized by all requisite corporate action
on the part of the Seller and AGL, as the case may be. This Agreement has been
duly executed and delivered by the Seller and AGL, and upon execution the
Ancillary Agreements to which each is a party will be duly executed and
delivered by the Seller and AGL, as the case may be, and (assuming due
authorization, execution and delivery by the Purchaser, SPM and Sonat) this
Agreement constitutes, and upon execution, each of the Ancillary Agreements to
which each is a party will constitute, a legal, valid and binding obligation of
the Seller and AGL, as the case may be, enforceable against the Seller and AGL,
as the case may be, in accordance with its terms.
SECTION 3.3. No Conflicts; Consents. The execution, delivery and
performance by each of the Seller and AGL of this Agreement and the Ancillary
Agreements to which it is a party and the consummation of the transactions
contemplated hereby and thereby do not and will not (i) violate, conflict with
or result in a breach of any provision of the articles or certificate of
incorporation or by-laws of the Seller or AGL, (ii) conflict with or result in a
default (or give rise to any right of termination, cancellation or acceleration)
under any of the terms, conditions or provisions of any note, bond, lease,
mortgage, indenture, permit, agreement or other instrument or obligation to
which the Seller or AGL is a party, or by which the Seller, AGL or any of their
properties or assets may be bound or affected, (iii) conflict with or violate
any statute, ordinance, law, rule, regulation or governmental order applicable
to the Seller, AGL or their properties or assets, or (iv) result in the creation
or imposition of any Claim upon any property or assets used or held by the
Seller or AGL. Except as required under the HSR Act or the Federal Power Act,
no waiver, consent or approval by, any notification or filing with, or any other
action by, any Person is required in connection with the execution, delivery and
performance by the Seller or AGL of this Agreement or any of the Ancillary
Documents to which it is a party or the consummation of the transactions
contemplated hereby or thereby.
<PAGE>
6
SECTION 3.4. Ownership Interest. The Seller owns the Seller's Interest
free and clear of all Claims (other than Claims created by or through the
Purchaser and Claims of SPM, Sonat and their Affiliates under the Partnership
Agreement or the Parent Agreement).
SECTION 3.5. Transfer of Interest. Upon consummation of the transactions
contemplated by this Agreement, the Seller will transfer good and marketable
title to the Seller's Interest to the Purchaser, free and clear of all Claims
(other than Claims created by or through the Purchaser and Claims of SPM, Sonat
and their Affiliates under the Partnership Agreement or the Parent Agreement).
SECTION 3.6. Committee Members. As of the date of this Agreement,
Richard H. Woodward and Stanley M. Price are the only Persons appointed by the
Seller to the Management Committee.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE PURCHASER, SPM AND SONAT
Each of the Purchaser, SPM and Sonat represents and warrants to each of the
Seller and AGL as follows:
SECTION 4.1. Existence and Power. Each of the Purchaser, SPM and Sonat
is a corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation and has all requisite corporate
power and authority to execute, deliver and perform this Agreement and the
Ancillary Agreements to which it is a party, to carry out its obligations
hereunder and thereunder and to consummate the transactions contemplated hereby
and thereby.
SECTION 4.2. Authority; Validity. Each of the Purchaser, SPM and Sonat
has all requisite corporate power and authority to execute, deliver and perform
this Agreement and the Ancillary Agreements to which it is a party. The
execution and delivery of this Agreement by the Purchaser, SPM and Sonat, and of
the Ancillary Agreements to which each is a party, the performance by each of
its obligations hereunder and thereunder and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by all
requisite corporate action on the part of the Purchaser, SPM and Sonat, as the
case may be. This Agreement has been duly executed and delivered by the
Purchaser, SPM and Sonat, and upon execution the Ancillary Agreements to which
each is a party will be duly executed and delivered by the Purchaser, SPM and
Sonat, as the case may be, and (assuming due authorization, execution and
delivery by the Seller and AGL) this Agreement constitutes, and upon execution
the Ancillary Agreements to which each is a party will constitute, a legal,
valid and binding obligation of the Purchaser, SPM and Sonat, as the case may
be, enforceable against the Purchaser, SPM and Sonat, as the case may be, in
accordance with its terms.
SECTION 4.3. No Conflicts; Consents. The execution, delivery and
performance by the Purchaser, SPM and Sonat of this Agreement and the Ancillary
Agreements to which each is a
<PAGE>
7
party and the consummation of the transactions contemplated hereby and thereby
do not and will not (i) violate, conflict with or result in a breach of any
provision of the articles or certificate of incorporation or by-laws of the
Purchaser, SPM or Sonat, (ii) conflict with or result in a default (or give rise
to any right of termination, cancellation or acceleration) under any of the
terms, conditions or provisions of any note, bond, lease, mortgage, indenture,
permit, agreement or other instrument or obligation to which the Purchaser, SPM
or Sonat is a party, or by which the Purchaser, SPM, Sonat or any of their
properties or assets may be bound or affected, (iii) conflict with or violate
any statute, ordinance, law, rule, regulation or governmental order applicable
to the Purchaser, SPM, Sonat or their properties or assets, or (iv) result in
the creation or imposition of any Claim upon any property or assets used or held
by the Purchaser, SPM or Sonat. Except as required under the HSR Act and the
Federal Power Act, no waiver, consent or approval by, any notification or filing
with, or any other action by, any Person is required in connection with the
execution, delivery and performance by the Purchaser, SPM or Sonat of this
Agreement or any of the Ancillary Documents to which it is a party or the
consummation of the transactions contemplated hereby or thereby.
SECTION 4.4. Results of Operations. To the best of each of their
knowledge, the information concerning the Partnership's financial condition and
the results of operations as of June 30, 1999 and for the period January 1, 1999
through June 30, 1999 attached hereto as Schedule 4.4 fairly presents in all
material respects the financial condition and results of operation of the
Partnership as of said date and for such period.
ARTICLE V
CONDITIONS TO CLOSING
SECTION 5.1. Conditions to the Obligations of the Purchaser and the
Seller. The obligations of the Seller and the Purchaser to consummate the
transactions contemplated by this Agreement are subject to the satisfaction or
occurrence at or prior to the Closing Date of the following conditions:
(a) Pending Legal Proceedings. There shall not be pending or
instituted, threatened or proposed, any action or proceeding before any court,
administrative agency or other tribunal challenging or complaining of, or
seeking to collect damages or other relief in connection with, the transactions
contemplated by this Agreement, which action or proceeding may materially
adversely affect (i) the business, operations, or condition (financial or
otherwise) of any party to this Agreement or (ii) the ability of the Seller or
the Purchaser to consummate the transactions contemplated by this Agreement.
(b) Prohibition of Transactions. No judicial or administrative decision
shall have been entered (whether on a preliminary or final basis) that would
prohibit, restrict or delay the consummation of the transactions contemplated by
this Agreement.
(c) HSR Act. All waiting periods, and any extension thereof, under
the HSR Act applicable to the purchase by the Purchaser of the Seller's Interest
shall have terminated or shall
<PAGE>
8
have expired.
(d) Federal Power Act Section 203. All approvals under Section 203 of
the Federal Power Act necessary for the consummation of the transactions
contemplated by this Agreement shall have been received by the parties hereto.
(e) Partnership Agreement. The Seller and SPM shall have executed an
amendment to the Partnership Agreement in the form attached hereto as Exhibit C.
SECTION 5.2. Additional Conditions to Purchaser's Obligations. The
obligations of the Purchaser to consummate the transactions contemplated by this
Agreement shall be subject to the satisfaction or waiver, at or prior to the
Closing, of each of the following conditions:
(a) Accuracy of Representations and Warranties of the Seller Parties.
The representations and warranties of each of the Seller and AGL contained in
this Agreement shall be true and correct in all material respects as of the
Closing, as though made on and as of the Closing, and the Purchaser shall have
received a certificate from each of the Seller and AGL to that effect, signed by
a duly authorized officer of the Seller and AGL, as the case may be.
(b) Assignment Agreement. An Assignment of Limited Partner Interest
from the Seller to the Purchaser shall have been executed and delivered by the
parties hereto.
(c) Supplementary Agreement. The Seller and AGL shall have executed
the Supplementary Agreement.
(d) Seller's Committee Members. Richard H. Woodward and Stanley M. Price
(or their replacements) shall have resigned from the Management Committee to the
Partnership.
SECTION 5.3. Additional Conditions to Seller's Obligations. The
obligations of the Seller to consummate the transactions contemplated by this
Agreement shall be subject to the satisfaction or waiver, at or prior to the
Closing, of each of the following conditions:
(a) Accuracy of Representations and Warranties of the Purchaser Parties.
The representations and warranties of each of the Purchaser, SPM and Sonat
contained in this Agreement shall be true and correct in all material respects
as of the Closing, as though made on and as of the Closing, and the Seller shall
have received a certificate from the Purchaser, SPM and Sonat to that effect,
signed by a duly authorized officer thereof.
(b) Assignment Agreement. An Assignment of Limited Partner Interest
from the Seller to the Purchaser shall have been executed and delivered by the
parties hereto.
(c) Supplementary Agreement. SPM, Sonat and the Partnership shall have
executed the Supplementary Agreement.
<PAGE>
9
ARTICLE VI
TERMINATION
SECTION 6.1. Termination. This Agreement may be terminated at any time
prior to the Closing:
(a) by the mutual written consent of the parties hereto; or
(b) by either the Purchaser or the Seller in writing, without liability,
if the Closing has not occurred on or before December 30, 1999 other than as a
result of the breach of this Agreement by the party (or an Affiliate of such
party) attempting to terminate this Agreement pursuant to this Section 6.1(b);
(c) by the Seller in writing, without liability, if the Purchaser, SPM
or Sonat shall (i) fail to perform in any material respect its agreements
contained herein required to be performed by it on or prior to the Closing Date
or (ii) materially breach any of its representations, warranties or covenants
herein, which failure or breach is not cured within ten (10) days after the
Seller has notified the Purchaser of its intent to terminate this Agreement
pursuant to this Section 6.1(c); and
(d) by the Purchaser in writing, without liability, if either the Seller
or AGL shall (i) fail to perform in any material respect its agreements
contained herein required to be performed by it on or prior to the Closing Date
or (ii) materially breach any of its representations, warranties or covenants
herein, which failure or breach is not cured within ten (10) days after the
Purchaser has notified the Seller of its intent to terminate this Agreement
pursuant to this Section 6.1(d).
SECTION 6.2. Effect of Termination. In the event of termination of
this Agreement pursuant to Section 6.1 hereof, the amendment to the Partnership
Agreement referred to in Section 2.2 shall be rescinded and all obligations of
the parties hereunder shall terminate, except for the obligations under Sections
6.2, 7.2 and 7.7 hereof; provided, however, that termination pursuant to Section
6.1 (c) or (d) hereof shall not relieve a defaulting or breaching party from any
liability to the other parties hereto. Following such termination, should SPM
elect to continue its previous exercise of its call option set forth in Article
9 of the Partnership Agreement, the call process pursuant to Article 9 of the
Partnership Agreement shall be deemed tolled for the period of time beginning
June 30, 1999 and ending on the date of termination of this Agreement and the
Investment Banks previously selected by the Seller and SPM pursuant to Section
9.3 of the Partnership Agreement to establish Fair Market Value shall have one
month from the date of termination of this Agreement to agree upon such Fair
Market Value.
SECTION 6.3. Causes of Action. The statute of limitations applicable to
any cause of action available to any party hereto, whether under the Partnership
Agreement or otherwise, shall be tolled for the period of time beginning on June
30, 1999 and ending on the earlier to occur of (i) the date upon which this
Agreement is terminated pursuant to Section 6.1 hereof or (ii) the Closing.
<PAGE>
10
ARTICLE VII
MISCELLANEOUS
SECTION 7.1. Further Assurances. Each of the parties hereto shall use
reasonable best efforts to consummate the transactions contemplated by this
Agreement, and shall execute such other documents, instruments of transfer or
assignment and do such other acts or things as may be reasonably required or
desirable to carry out the intent of the parties hereunder and the provisions of
this Agreement and the transactions contemplated hereby.
SECTION 7.2. Indemnification. Notwithstanding anything herein to the
contrary, each of the Seller and AGL, on the one hand, and the Purchaser, SPM
and Sonat, on the other hand, agrees to indemnify, defend and hold each other
and their Related Persons harmless from and against any damage, liability, loss,
cost or deficiency (including, but not limited to, reasonable attorneys' fees
and other costs and expenses incident to legal proceedings) arising out of,
resulting from or relating to (i) the failure to duly perform or observe any
term, provision or covenant to be performed or observed by such parties pursuant
to this Agreement, or (ii) any breach of or inaccuracy in any representation or
warranty made by such parties pursuant to this Agreement.
SECTION 7.3. Public Statements. No party shall issue any press release
or other written public statement regarding this Agreement or the transactions
contemplated hereby without the prior written consent of the other parties
hereto, such consent not to be unreasonably withheld, provided, however, that
this section shall not prohibit any party hereto from providing information
regarding this Agreement or the transactions contemplated hereby to any
Governmental Authority having authority to examine such party, or as required by
any legal or governmental process or otherwise by law.
SECTION 7.4. Notices, etc. All notices and other communications provided
for hereunder shall be in writing and shall be delivered in person or by courier
service, with written receipt of acceptance returned to sender, or via certified
or registered mail, return receipt requested (postage and charges prepaid), or
by telecopier to each of the parties at the address or telecopier number set
forth on the signature pages hereof or at such address or telecopier number as
shall be designated by a party in a written notice to the other parties. All
such notices and communications shall, when mailed or telecopied, be effective
when received at the relevant address. Telecopied communications must be
followed by a hard copy sent by registered or certified mail, postage and
charges prepaid.
SECTION 7.5. Assignment. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
assigns; provided that, except as provided below, this Agreement may not be
assigned by operation of law or otherwise without the express written consent of
the parties hereto; provided, however, that the Purchaser may assign its rights
and obligations under this Agreement to an Affiliate of the Purchaser without
the consent of the parties hereto, provided, such assignment shall not relieve
the Purchaser of its obligations hereunder.
<PAGE>
11
SECTION 7.6. Amendments; Waivers. This Agreement may be amended or
modified, and any of the terms or conditions hereof may be waived, only by a
written instrument executed by the parties hereto, or in the case of a waiver,
by the party waiving compliance. Any waiver by any party of any condition, or
of the breach of any provision or term contained in this Agreement, in any one
or more instances, shall not be deemed to be nor construed as a furthering or
continuing waiver of any such condition, or of the breach of any other provision
or term of this Agreement.
SECTION 7.7. Costs and Expenses. Except as set forth in the immediately
following sentence, all costs and expenses, including, without limitation, the
reasonable fees and disbursements of counsel, incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such costs and expenses. The Seller and the Purchaser each agree to
pay one-half of the filing fees paid in connection with any filing made pursuant
to the HSR Act and the Federal Power Act.
SECTION 7.8. No Third-Party Beneficiaries. This Agreement is for the
sole benefit of the parties hereto and their permitted assigns and nothing
herein, express or implied, shall give or be construed to give any Person other
than the parties hereto and such assigns any legal or equitable rights
hereunder.
SECTION 7.9. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware without regard
to conflicts of laws and principles thereof.
SECTION 7.10. Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be deemed an original and, when taken
together, shall constitute one agreement.
SECTION 7.11. Headings. Section headings in this Agreement are included
herein for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose.
[Signatures begin on following page]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
SELLER:
------
AGL POWER SERVICES, INC.
By /s/ Walter M. Higgins
---------------------
Name: Walter M. Higgins
Title: President
Address: c/o AGL Resources Inc.
P.O. Box 4569
Atlanta, GA 30302
Telecopier: (404) 584-3419
Attention: Paul R. Shlanta
Senior Vice President,
and General Counsel
PURCHASER:
---------
SONAT ENERGY SERVICES COMPANY
By /s/ Richard B. Bates
--------------------
Richard B. Bates,
President
Address: 1900 5th Avenue North
Birmingham, AL 35203
with a copy to:
Sonat Marketing Company
1900 5th Avenue North
Birmingham, AL 35203
Telecopier: (205) 325-3711
Attention: Richard B. Bates, President
and to:
King & Spalding
1185 Avenue of Americas
New York, NY 10036
Telecopier: (212) 556-2222
Attention: E. William Bates, II
1
<PAGE>
SONAT POWER MARKETING, INC.
By /s/ Richard B. Bates
--------------------
Richard B. Bates
President
SONAT INC.
By /s/ James E. Moylan, Jr.
------------------------
James E. Moylan, Jr.
Senior Vice President and
Chief Financial Officer
AGL RESOURCES INC.
By /s/ Walter M. Higgins
------------------------
Name: Walter M. Higgins
Title: Chairman and Chief Executive Officer
2
<PAGE>
List of Exhibits and Schedules Not Filed with Purchase Agreement *
------------------------------------------------------------------
Exhibit A Form of Assignment of Limited Partner Interest
Exhibit B Supplementary Agreement
Exhibit C Amendment to that Certain Limited Partnership Agreement of
Sonat Power Marketing L.P.
Schedule 4.4 Sonat Power Marketing L.P. Balance Sheets as of June 30,
1999, (unaudited) and December 31, 1998; Statements of
Operations for the six months ended June 30, 1999,
(unaudited); and Statements of Changes in Partners' Equity
for the six months ended June 30, 1999, (unaudited).
______________________________________
* A copy of any omitted Exhibit or Schedule will be furnished supplementally to
the Commission upon request.
3
<PAGE>
EXHIBIT 2.2
[EXECUTION COPY]
PURCHASE AGREEMENT
PURCHASE AGREEMENT (this "Agreement"), dated as of July 29, 1999, by and
between AGL Gas Marketing, Inc. (f/k/a AGL Energy Services, Inc.) (the
"Seller"), Sonat Energy Services Company (the "Purchaser"), AGL Resources Inc.
("AGL"), Sonat Marketing Company ("SMC"), and Sonat Inc. ("Sonat").
INTRODUCTION
The Seller holds a limited partner interest in Sonat Marketing Company
L.P., a Delaware limited partnership (the "Partnership"), pursuant to the
Limited Partnership Agreement, dated as of August 31, 1995 (as supplemented and
amended, the "Partnership Agreement ") between the Seller and SMC. Capitalized
terms not otherwise defined herein shall have the respective meanings set forth
in the Partnership Agreement.
The Seller proposes to (i) sell, assign and transfer its Partnership
Interest to the Purchaser in accordance with the terms and subject to the
conditions set forth in this Agreement and (ii) withdraw from the Partnership as
a Limited Partner.
The Purchaser proposes to (i) purchase, acquire and accept the Seller's
Partnership Interest in accordance with the terms and subject to the conditions
of this Agreement, and (ii) be admitted to the Partnership as a substituted
Limited Partner.
NOW, THEREFORE, in consideration of the premises and agreements contained
herein, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings:
"AGL" shall have the meaning set forth in the first paragraph of this
Agreement.
"Ancillary Agreements" shall mean the other agreements, documents and
instruments to be executed and delivered by the Purchaser and the Seller or
each of such
<PAGE>
2
parties, as the case may be, pursuant hereto, including the Assignment of
Limited Partner Interest of the Seller.
"Assignment of Limited Partner Interest" shall mean an assignment
agreement, substantially in the form of Exhibit A hereto, providing for the
transfer of the Seller's Interest by the Seller to the Purchaser.
"Claim" shall mean any security interests, liens, pledges, claims,
charges, escrows, encumbrances, options, rights of first refusal,
mortgages, indentures, security agreements or other similar agreements,
arrangements, contracts, commitments, understandings or obligations,
whether written or oral, and whether or not relating in any way to credit
or the borrowing of money.
"Closing" shall have the meaning set forth in Section 2.3 hereof.
"Closing Date" shall have the meaning set forth in Section 2.3 hereof.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended.
"Partnership" shall have the meaning set forth in the first paragraph
of the Introduction to this Agreement.
"Partnership Agreement" shall have the meaning set forth in the first
paragraph of the Introduction to this Agreement.
"Person" includes any individual, partnership (whether general or
limited), corporation, joint venture, trust, estate, unincorporated
organization, incorporated association, proprietorship, association or
nominee, government or any agency or political subdivision thereof or any
other entity.
"Purchaser" shall have the meaning set forth in the first paragraph of
this Agreement.
"Purchase Price" shall have the meaning set forth in Section 2.2
hereof.
"Seller" shall have the meaning set forth in the first paragraph of
this Agreement.
"Seller's Interest" shall mean the Partnership Interest held by
Seller.
"SMC" shall have the meaning set forth in the first paragraph of this
Agreement.
"Sonat" shall have the meaning set forth in the first paragraph of
this Agreement.
<PAGE>
3
"Supplementary Agreement" shall mean the Supplementary Agreement, in
substantially the form of Exhibit B to this Agreement, among the
Partnership, SMC, Sonat, AGL, and the Seller.
ARTICLE II
SALE AND PURCHASE
SECTION 2.1. Sale and Purchase. Upon the terms and subject to the
conditions set forth in this Agreement, on the Closing Date, the Seller shall
sell, assign, transfer and convey to the Purchaser, and the Purchaser shall
purchase, acquire and accept from the Seller, the Seller's Interest, free and
clear of any Claims (other than Claims created by or through the Purchaser and
Claims of SMC, Sonat and their Affiliates under the Partnership Agreement or the
Parent Agreement).
SECTION 2.2. Purchase Price. The purchase price for the Seller's Interest
shall be an amount equal to the sum of (i) $40,000,000 plus (ii) simple
interest, if any, on $40,000,000 calculated at the average of the interest rate
reported as the Prime Rate in the Wall Street Journal for the period, if any,
beginning on, but excluding, the 90th day following the execution of this
Agreement, and ending on, and including, the Closing Date (the "Purchase
Price"). The parties hereto acknowledge and agree that the Purchase Price shall
constitute payment in full for the Seller's Interest and all rights related
thereto, including all amounts otherwise payable to the Seller with respect to
the Seller's Interest for any and all periods up to and through the Closing
Date; provided, however, that notwithstanding anything herein to the contrary
the Seller shall be entitled to distributions pursuant to Section 6.4(a) of the
Partnership Agreement with respect to taxes for all periods ending on or prior
to June 30, 1999, and provided further, that nothing herein or in the Ancillary
Agreements shall be deemed to abrogate the rights of the Seller, the Related
Persons of the Seller, any past, present or future Committee Members of the
Seller and any Released Persons of the Seller that are set forth in and
protected by Section 14.12 or Article 11 of the Partnership Agreement, and such
rights shall survive the transfer by the Seller of the Seller's Interest.
SECTION 2.3. The Closing.
(a) Upon the terms and subject to the conditions of this Agreement,
the sale and purchase of the Seller's Interest contemplated hereby shall take
place at a closing (the "Closing") at 11:00 a.m., United States Eastern time, on
the second Business Day following the satisfaction or waiver (if permissible) of
the conditions to Closing set forth in Article V hereof, or at such other place
or such other time or on such other date as the parties may mutually agree in
writing (the day on which the Closing takes place being the "Closing Date").
<PAGE>
4
(b) At the Closing, each of the Seller and AGL, as the case may be,
shall deliver or cause to be delivered to the Purchaser:
(i) a duly executed counterpart of the Assignment of Limited Partner
Interest and such other instruments of transfer as may be reasonably
necessary or appropriate to evidence the transfer of the Seller's Interest
to the Purchaser;
(ii) the certificate and other documents required to be delivered by
each of the Seller and AGL, pursuant to Section 5.2 hereof; and
(iii) a receipt for the Purchase Price paid to the Seller.
(c) At the Closing, each of the Purchaser, SMC and Sonat, as the case
may be, shall deliver or cause to be delivered:
(i) the Purchase Price in immediately available funds to a bank
account specified by the Seller prior to the Closing Date;
(ii) a duly executed counterpart of the Assignment of Limited Partner
Interest and such other instruments of transfer as may be reasonably
necessary or appropriate to evidence the transfer of the Seller's Interest
to the Purchaser; and
(iii) the certificate and other documents required to be delivered by
each of the Purchaser, SMC and Sonat pursuant to Section 5.3 hereof.
SECTION 2.4. Withdrawal of Seller; Effect.
(a) On the Closing Date, the Seller shall withdraw as a Limited Partner in
the Partnership upon the sale, assignment, transfer and purchase of the Seller's
Interest under Section 2.1 hereof.
(b) Upon such withdrawal, the Seller shall no longer have any rights or
obligations as a Partner; provided, however, that notwithstanding anything
herein to the contrary the Seller shall be entitled to distributions pursuant to
Section 6.4(a) of the Partnership Agreement with respect to taxes for all
periods ending on or prior to June 30, 1999, and provided further, that nothing
herein or in the Ancillary Agreements shall be deemed to abrogate the rights of
the Seller, the Related Persons of the Seller, any past, present or future
Committee Members of the Seller and any Released Persons of the Seller that are
set forth in and protected by Section 14.12 or Article 11 of the Partnership
Agreement, and such rights shall survive the transfer by the Seller of the
Seller's Interest.
SECTION 2.5. Transfer as Purchase and Sale. Each of the parties to
this Agreement hereby agrees to treat the Transfer of the Seller's Interest to
the Purchaser as contemplated in this
<PAGE>
5
Agreement as a purchase and sale under Sections 741 and 1001 of the Code and not
as a retirement under Section 736 of the Code.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE SELLER AND AGL
The Seller and AGL each represents and warrants to each of the Purchaser,
SMC and Sonat as follows:
SECTION 3.1. Existence and Power. Each of the Seller and AGL is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and has all requisite corporate power
and authority to execute, deliver and perform this Agreement and the Ancillary
Agreements to which it is a party, to carry out its obligations hereunder and
thereunder and to consummate the transactions contemplated hereby and thereby.
SECTION 3.2. Authority; Validity. Each of the Seller and AGL has all
requisite corporate power and authority to execute, deliver and perform this
Agreement and the Ancillary Agreements to which it is a party. The execution and
delivery of this Agreement by the Seller and AGL, and of the Ancillary
Agreements to which each is a party, the performance by each of its obligations
hereunder and thereunder and the consummation of the transactions contemplated
hereby and thereby have been duly authorized by all requisite corporate action
on the part of the Seller and AGL, as the case may be. This Agreement has been
duly executed and delivered by the Seller and AGL, and upon execution the
Ancillary Agreements to which each is a party will be duly executed and
delivered by the Seller and AGL, as the case may be, and (assuming due
authorization, execution and delivery by the Purchaser, SMC and Sonat) this
Agreement constitutes, and upon execution, each of the Ancillary Agreements to
which each is a party will constitute, a legal, valid and binding obligation of
the Seller and AGL, as the case may be, enforceable against the Seller and AGL,
as the case may be, in accordance with its terms.
SECTION 3.3. No Conflicts; Consents. The execution, delivery and
performance by each of the Seller and AGL of this Agreement and the Ancillary
Agreements to which it is a party and the consummation of the transactions
contemplated hereby and thereby do not and will not (i) violate, conflict with
or result in a breach of any provision of the articles or certificate of
incorporation or by-laws of the Seller or AGL or their subsidiaries, (ii)
conflict with or result in a default (or give rise to any right of termination,
cancellation or acceleration) under any of the terms, conditions or provisions
of any note, bond, lease, mortgage, indenture, permit, agreement or other
instrument or obligation to which the Seller or AGL or their subsidiaries is a
party, or by which the Seller or AGL or their subsidiaries or any of their
properties or assets may be bound or affected, (iii) conflict with or violate
any statute, ordinance, law, rule, regulation or governmental order applicable
to the Seller or AGL or their subsidiaries or their properties or assets, or
(iv) result in the creation or imposition of any Claim upon any property or
assets used or held by
<PAGE>
6
the Seller or AGL or their subsidiaries. Except as required under the HSR Act,
no waiver, consent or approval by, any notification or filing with, or any other
action by, any Person is required in connection with the execution, delivery and
performance by the Seller or AGL or their subsidiaries of this Agreement or any
of the Ancillary Documents to which it is a party or the consummation of the
transactions contemplated hereby or thereby.
SECTION 3.4. Ownership Interest. The Seller owns the Seller's Interest free
and clear of all Claims (other than Claims created by or through the Purchaser
and Claims of SMC, Sonat and their Affiliates under the Partnership Agreement or
the Parent Agreement).
SECTION 3.5. Transfer of Interest. Upon consummation of the transactions
contemplated by this Agreement, the Seller will transfer good and marketable
title to the Seller's Interest to the Purchaser, free and clear of all Claims
(other than Claims created by or through the Purchaser and Claims of SMC, Sonat
and their Affiliates under the Partnership Agreement or the Parent Agreement).
SECTION 3.6. Committee Members. As of the date of this Agreement, Richard
H. Woodward and Stanley M. Price are the only Persons appointed by the Seller to
the Management Committee.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE PURCHASER, SPM AND SONAT
Each of the Purchaser, SMC and Sonat represents and warrants to each of the
Seller and AGL as follows:
SECTION 4.1. Existence and Power. Each of the Purchaser, SMC and Sonat is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and has all requisite corporate power
and authority to execute, deliver and perform this Agreement and the Ancillary
Agreements to which it is a party, to carry out its obligations hereunder and
thereunder and to consummate the transactions contemplated hereby and thereby.
SECTION 4.2. Authority; Validity. Each of the Purchaser, SMC and Sonat has
all requisite corporate power and authority to execute, deliver and perform this
Agreement and the Ancillary Agreements to which it is a party. The execution and
delivery of this Agreement by the Purchaser, SMC and Sonat, and of the Ancillary
Agreements to which each is a party, the performance by each of its obligations
hereunder and thereunder and the consummation of the transactions contemplated
hereby and thereby have been duly authorized by all requisite corporate action
on the part of the Purchaser, SMC and Sonat, as the case may be. This Agreement
has been duly executed and delivered by the Purchaser, SMC and Sonat, and upon
<PAGE>
7
execution the Ancillary Agreements to which each is a party will be duly
executed and delivered by the Purchaser, SMC and Sonat, as the case may be, and
(assuming due authorization, execution and delivery by the Seller and AGL) this
Agreement constitutes, and upon execution the Ancillary Agreements to which each
is a party will constitute, a legal, valid and binding obligation of the
Purchaser, SMC and Sonat, as the case may be, enforceable against the Purchaser,
SMC and Sonat, as the case may be, in accordance with its terms.
SECTION 4.3. No Conflicts; Consents. The execution, delivery and
performance by the Purchaser, SMC and Sonat of this Agreement and the Ancillary
Agreements to which each is a party and the consummation of the transactions
contemplated hereby and thereby do not and will not (i) violate, conflict with
or result in a breach of any provision of the articles or certificate of
incorporation or by-laws of the Purchaser, SMC or Sonat, (ii) conflict with or
result in a default (or give rise to any right of termination, cancellation or
acceleration) under any of the terms, conditions or provisions of any note,
bond, lease, mortgage, indenture, permit, agreement or other instrument or
obligation to which the Purchaser, SMC or Sonat is a party, or by which the
Purchaser, SMC, Sonat or any of their properties or assets may be bound or
affected, (iii) conflict with or violate any statute, ordinance, law, rule,
regulation or governmental order applicable to the Purchaser, SMC, Sonat or
their properties or assets, or (iv) result in the creation or imposition of any
Claim upon any property or assets used or held by the Purchaser, SMC or Sonat.
Except as required under the HSR Act, no waiver, consent or approval by, any
notification or filing with, or any other action by, any Person is required in
connection with the execution, delivery and performance by the Purchaser, SMC or
Sonat of this Agreement or any of the Ancillary Documents to which it is a party
or the consummation of the transactions contemplated hereby or thereby.
SECTION 4.4. Results of Operations. To the best of each of their knowledge,
the information concerning the Partnership's financial condition and the results
of operations as of June 30, 1999 and for the period January 1, 1999 through
June 30, 1999 attached hereto as Schedule 4.4 fairly presents in all material
respects the financial condition and results of operation of the Partnership as
of said date and for such period.
ARTICLE V
CONDITIONS TO CLOSING
SECTION 5.1. Conditions to the Obligations of the Purchaser and the Seller.
The obligations of the Seller and the Purchaser to consummate the transactions
contemplated by this Agreement are subject to the satisfaction or occurrence at
or prior to the Closing Date of the following conditions:
(a) Pending Legal Proceedings. There shall not be pending or instituted,
threatened or proposed, any action or proceeding before any court,
administrative agency or other tribunal challenging or complaining of, or
seeking to collect damages or other relief in connection with,
<PAGE>
8
the transactions contemplated by this Agreement, which action or proceeding may
materially adversely affect (i) the business, operations, or condition
(financial or otherwise) of any party to this Agreement or (ii) the ability of
the Seller or the Purchaser to consummate the transactions contemplated by this
Agreement.
(b) Prohibition of Transactions. No judicial or administrative decision
shall have been entered (whether on a preliminary or final basis) that would
prohibit, restrict or delay the consummation of the transactions contemplated by
this Agreement.
(c) HSR Act. All waiting periods, and any extension thereof, under the HSR
Act applicable to the purchase by the Purchaser of the Seller's Interest shall
have terminated or shall have expired.
(d) Partnership Agreement. The Seller and SMC shall have executed an
amendment to the Partnership Agreement in the form attached hereto as Exhibit C.
SECTION 5.2. Additional Conditions to Purchaser's Obligations. The
obligations of the Purchaser to consummate the transactions contemplated by this
Agreement shall be subject to the satisfaction or waiver, at or prior to the
Closing, of each of the following conditions:
(a) Accuracy of Representations and Warranties of the Seller Parties. The
representations and warranties of each of the Seller and AGL contained in this
Agreement shall be true and correct in all material respects as of the Closing,
as though made on and as of the Closing, and the Purchaser shall have received a
certificate from each of the Seller and AGL to that effect, signed by a duly
authorized officer of the Seller and AGL, as the case may be.
(b) Assignment Agreement. An Assignment of Limited Partner Interest from
the Seller to the Purchaser shall have been executed and delivered by the
parties hereto.
(c) Supplementary Agreement. The Seller and AGL shall have executed the
Supplementary Agreement and shall have delivered a duly executed copy of Exhibit
A thereto.
(d) Seller's Committee Members. Richard H. Woodward and Stanley M. Price
(or their replacements) shall have resigned from the Management Committee to the
Partnership.
SECTION 5.3. Additional Conditions to Seller's Obligations. The obligations
of the Seller to consummate the transactions contemplated by this Agreement
shall be subject to the satisfaction or waiver, at or prior to the Closing, of
each of the following conditions:
(a) Accuracy of Representations and Warranties of the Purchaser Parties.
The representations and warranties of each of the Purchaser, SMC and Sonat
contained in this Agreement shall be true and correct in all material respects
as of the Closing, as though made on
<PAGE>
9
and as of the Closing, and the Seller shall have received a certificate from the
Purchaser, SMC and Sonat to that effect, signed by a duly authorized officer
thereof.
(b) Assignment Agreement. An Assignment of Limited Partner Interest from
the Seller to the Purchaser shall have been executed and delivered by the
parties hereto.
(c) Supplementary Agreement. SMC, Sonat and the Partnership shall have
executed the Supplementary Agreement.
ARTICLE VI
TERMINATION
SECTION 6.1. Termination. This Agreement may be terminated at any time
prior to the Closing:
(a) by the mutual written consent of the parties hereto; or
(b) by either the Purchaser or the Seller in writing, without liability,
if the Closing has not occurred on or before December 30, 1999 other than as a
result of the breach of this Agreement by the party (or an Affiliate of such
party) attempting to terminate this Agreement pursuant to this Section 6.1(b);
(c) by the Seller in writing, without liability, if the Purchaser, SMC or
Sonat shall (i) fail to perform in any material respect its agreements contained
herein required to be performed by it on or prior to the Closing Date or (ii)
materially breach any of its representations, warranties or covenants herein,
which failure or breach is not cured within ten (10) days after the Seller has
notified the Purchaser of its intent to terminate this Agreement pursuant to
this Section 6.1(c); and
(d) by the Purchaser in writing, without liability, if either the Seller
or AGL shall (i) fail to perform in any material respect its agreements
contained herein required to be performed by it on or prior to the Closing Date
or (ii) materially breach any of its representations, warranties or covenants
herein, which failure or breach is not cured within ten (10) days after the
Purchaser has notified the Seller of its intent to terminate this Agreement
pursuant to this Section 6.1(d).
SECTION 6.2. Effect of Termination. In the event of termination of this
Agreement pursuant to Section 6.1 hereof, the amendment to the Partnership
Agreement referred to in Section 2.2 shall be rescinded and all obligations of
the parties hereunder shall terminate, except for the obligations under Sections
6.2, 7.2 and 7.7 hereof; provided, however, that termination pursuant to Section
6.1 (c) or (d) hereof shall not relieve a defaulting or breaching party from any
liability to the other parties hereto. Following such termination, should the
Seller elect to
<PAGE>
10
continue its previous exercise of its put option set forth in Article 9 of the
Partnership Agreement, the put process pursuant to Article 9 of the Partnership
Agreement shall be deemed tolled for the period of time beginning June 30, 1999
and ending on the date of termination of this Agreement and the Investment Banks
previously selected by the Seller and SMC pursuant to Section 9.3 of the
Partnership Agreement to establish Fair Market Value shall have one month from
the date of termination of this Agreement to agree upon such Fair Market Value.
SECTION 6.3. Causes of Action. The statute of limitations applicable to
any cause of action available to any party hereto, whether under the Partnership
Agreement or otherwise, shall be tolled for the period of time beginning on June
30, 1999 and ending on the earlier to occur of (i) the date upon which this
Agreement is terminated pursuant to Section 6.1 hereof or (ii) the Closing.
ARTICLE VII
MISCELLANEOUS
SECTION 7.1. Further Assurances. Each of the parties hereto shall use
reasonable best efforts to consummate the transactions contemplated by this
Agreement, and shall execute such other documents, instruments of transfer or
assignment and do such other acts or things as may be reasonably required or
desirable to carry out the intent of the parties hereunder and the provisions of
this Agreement and the transactions contemplated hereby.
SECTION 7.2. Indemnification. Notwithstanding anything herein to the
contrary, each of the Seller and AGL, on the one hand, and the Purchaser, SMC
and Sonat, on the other hand, agrees to indemnify, defend and hold each other
and their Related Persons harmless from and against any damage, liability, loss,
cost or deficiency (including, but not limited to, reasonable attorneys' fees
and other costs and expenses incident to legal proceedings) arising out of,
resulting from or relating to (i) the failure to duly perform or observe any
term, provision or covenant to be performed or observed by such parties pursuant
to this Agreement, or (ii) any breach of or inaccuracy in any representation or
warranty made by such parties pursuant to this Agreement.
SECTION 7.3. Public Statements. No party shall issue any press release
or other written public statement regarding this Agreement or the transactions
contemplated hereby without the prior written consent of the other parties
hereto, such consent not to be unreasonably withheld, provided, however, that
this section shall not prohibit any party hereto from providing information
regarding this Agreement or the transactions contemplated hereby to any
Governmental Authority having authority to examine such party, or as required by
any legal or governmental process or otherwise by law.
SECTION 7.4. Notices, etc. All notices and other communications
provided for hereunder shall be in writing and shall be delivered in person or
by courier service, with written
<PAGE>
11
receipt of acceptance returned to sender, or via certified or registered mail,
return receipt requested (postage and charges prepaid), or by telecopier to each
of the parties at the address or telecopier number set forth on the signature
pages hereof or at such address or telecopier number as shall be designated by a
party in a written notice to the other parties. All such notices and
communications shall, when mailed or telecopied, be effective when received at
the relevant address. Telecopied communications must be followed by a hard copy
sent by registered or certified mail, postage and charges prepaid.
SECTION 7.5. Assignment. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
assigns; provided that, except as provided below, this Agreement may not be
assigned by operation of law or otherwise without the express written consent of
the parties hereto; provided, however, that the Purchaser may assign its rights
and obligations under this Agreement to an Affiliate of the Purchaser without
the consent of the parties hereto, provided, such assignment shall not relieve
the Purchaser of its obligations hereunder.
SECTION 7.6. Amendments; Waivers. This Agreement may be amended or
modified, and any of the terms or conditions hereof may be waived, only by a
written instrument executed by the parties hereto, or in the case of a waiver,
by the party waiving compliance. Any waiver by any party of any condition, or of
the breach of any provision or term contained in this Agreement, in any one or
more instances, shall not be deemed to be nor construed as a furthering or
continuing waiver of any such condition, or of the breach of any other provision
or term of this Agreement.
SECTION 7.7. Costs and Expenses. Except as set forth in the immediately
following sentence, all costs and expenses, including, without limitation, the
reasonable fees and disbursements of counsel, incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such costs and expenses. The Seller and the Purchaser each agree to
pay one-half of the filing fees paid in connection with any filing made pursuant
to the HSR Act.
SECTION 7.8. No Third-Party Beneficiaries. This Agreement is for the sole
benefit of the parties hereto and their permitted assigns and nothing herein,
express or implied, shall give or be construed to give any Person other than the
parties hereto and such assigns any legal or equitable rights hereunder.
SECTION 7.9. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware without regard
to conflicts of laws and principles thereof.
SECTION 7.10. Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be deemed an original and, when taken
together, shall constitute one agreement.
<PAGE>
12
SECTION 7.11. Headings. Section headings in this Agreement are included
herein for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose.
[Signatures begin on following page]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
SELLER:
------
AGL GAS MARKETING, INC.
By /s/ Walter M. Higgins
--------------------------
Name: Walter M. Higgins
Title: President
Address: c/o AGL Resources Inc.
P.O. Box 4569
Atlanta, GA 30302
Telecopier: (404) 584-3419
Attention: Paul R. Shlanta,
Senior Vice President
and General Counsel
PURCHASER:
---------
SONAT ENERGY SERVICES COMPANY
By /s/ Richard B. Bates
--------------------
Richard B. Bates,
President
Address: 1900 5th Avenue North
Birmingham, AL 35203
with a copy to:
Sonat Marketing Company
1900 5th Avenue North
Birmingham, AL 35203
Telecopier: (205) 325-3711
Attention: Richard B. Bates, President
and to:
King & Spalding
1185 Avenue of Americas
New York, NY 10036
Telecopier: (212) 556-2222
Attention: E. William Bates, II
1
<PAGE>
SONAT MARKETING COMPANY
By /s/ Richard B. Bates
--------------------
Richard B. Bates
President
SONAT INC.
By /s/ James E. Moylan, Jr.
------------------------
James E. Moylan, Jr.
Senior Vice President and
Chief Financial Officer
AGL RESOURCES INC.
By /s/ Walter M. Higgins
---------------------
Name: Walter M. Higgins
Title: Chairman and Chief Executive Officer
2
<PAGE>
List of Exhibits and Schedules Not Filed with Purchase Agreement *
------------------------------------------------------------------
Exhibit A Form of Assignment of Limited Partner Interest
Exhibit B Supplementary Agreement
Exhibit C Amendment to that Certain Limited Partnership Agreement of
Sonat Marketing L.P.
Schedule 4.4 Sonat Marketing L.P. and Subsidiaries Consolidated Balance
Sheets as of June 30, 1999, (unaudited) and December 31,
1998; Consolidated Statements of Operations for the six
months ended June 30, 1999, (unaudited); and Consolidated
Statements of Changes in Partners' Equity for the six months
ended June 30, 1999, (unaudited).
_____________________________
* A copy of any omitted Exhibit or Schedule will be furnished supplementally to
the Commission upon request.
<PAGE>
EXHIBIT 4.1
NUMBER SHARES
ATG
COMMON STOCK COMMON STOCK
Par Value $5.00 Par Value $5.00
AGL RESOURCES INC.
CUSIP 001204 10 6
SEE REVERSE FOR CERTAIN DEFINITIONS
This Certificate is THIS CERTIFIES THAT
Transferable in
Boston, Mass. or
New York, N.Y.
Incorporated Under
the Laws of the State
of Georgia
IS THE OWNER OF
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK OF
AGL Resources Inc., transferable on the books of the
Corporation by the holder hereof in person or by duly
authorized attorney upon surrender of this certificate
properly endorsed. This certificate is not valid until
countersigned by the Transfer Agent and registered by
the Registrar.
Witness the facsimile seal of the Corporation and
the facsimile signatures of its duly authorized
officers.
Dated:
/s/ Melanie McGee Platt [LOGO OF AGL RESOURCES INC.] /s/ Walter M. Higgins
Corporate Secretary President
Countersigned and Registered:
EQUISERVE TRUST COMPANY, N.A.
(Boston, Mass.) Transfer Agent
and Registrar
By
Authorized Signature
<PAGE>
This certificate also evidences and entitles the holder hereof to certain
rights as set forth in a Rights Agreement between AGL Resources Inc., a Georgia
corporation, and EquiServe Trust Company, N.A., dated as of March 6, 1996 and
amended as of June 1, 1999 as the same may be amended from time to time (the
"Rights Agreement"), the terms of which are hereby incorporated herein by
reference and a copy of which is on file at the principal executive offices of
AGL Resources Inc. Under certain circumstances, as set forth in the Rights
Agreement, such Rights will be evidenced by separate certificates and will no
longer be evidenced by this certificate. AGL Resources Inc. will mail to the
holder of this certificate a copy of the Rights Agreement without charge after
receipt of a written request therefor. Under certain circumstances, as set forth
in the Rights Agreement, Rights owned by or transferred to any Person who
becomes an Acquiring Person (as defined in the Rights Agreement) and certain
transferees thereof will become null and void and will no longer be
transferable.
AGL RESOURCES INC.
THE CORPORATION WILL FURNISH TO THE HOLDER HEREOF UPON REQUEST IN WRITING
AND WITHOUT CHARGE, A FULL STATEMENT OF THE DESIGNATIONS, PREFERENCES,
LIMITATIONS AND RELATIVE RIGHTS, AND THE VARIATIONS IN RELATIVE RIGHTS AND
PREFERENCES, OF EACH CLASS OF STOCK OR SERIES THEREOF WHICH THE CORPORATION IS
AUTHORIZED TO ISSUE, TOGETHER WITH THE AUTHORITY OF THE BOARD OF DIRECTORS OR
SHAREHOLDERS TO FIX AND DETERMINE THE RELATIVE RIGHTS AND PREFERENCES OF
SUBSEQUENT CLASSES AND SERIES.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT Custodian
...............................
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right of
survivorship and not as tenants under Uniform Gifts to Minors
in common
Act .....................
(State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
For value received, ........................................ hereby sell,
assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- ---------------------------------------
- --------------------------------------- ........................................
................................................................................
Please print or typewrite name and address including postal zip code of assignee
................................................................................
......................................................................... Shares
of the capital stock represented by the within certificate, and do hereby
irrevocably constitute and appoint..............................................
................................................................................
Attorney, to transfer the said stock on the books of the within-named
Corporation with full power of substitution in the premises.
Dated:................................
Signature(s) Guaranteed: ....................................
Signature(s)
...................................... ....................................
THE SIGNATURE(S) SHOULD BE GUARANTEED NOTICE: THE SIGNATURE(S) ON THIS
BY AN ELIGIBLE GUARANTOR INSTITUTION, ASSIGNMENT MUST CORRESPOND WITH THE
AS DEFINED IN RULE 17Ad-15 UNDER THE NAME(S) AS WRITTEN UPON THE FACE OF
SECURITIES AND EXCHANGE ACT OF 1934, THE CERTIFICATE, IN EVERY
AS AMENDED. PARTICULAR, WITHOUT ALTERATION OR
ENLARGEMENT, OR ANY CHANGE WHATEVER.
<PAGE>
EXHIBIT 4.2.b
FIRST AMENDMENT TO RIGHTS AGREEMENT
THIS FIRST AMENDMENT to the Rights Agreement (as defined below) is entered
into as of June 1, 1999 between AGL Resources Inc., a Georgia corporation (the
"Company"), and EquiServe Trust Company, N.A., a national banking association
("EquiServe").
WHEREAS, Wachovia Bank of North Carolina, N.A. ("Wachovia") has acted as
the Rights Agent pursuant to the Rights Agreement dated as of March 6, 1996,
between the Company and Wachovia (the "Rights Agreement");
WHEREAS, Wachovia has notified the Company of its intent to resign and be
discharged from its duties as Rights Agent under the Rights Agreement;
WHEREAS, pursuant to Section 21 of the Rights Agreement, the Company has
appointed EquiServe as the successor Rights Agent;
WHEREAS, EquiServe is a national banking association organized and doing
business under the laws of the United States, is authorized under such laws to
exercise corporate trust or stock transfer powers, is subject to supervision or
examination by a state or federal authority and, together with its affiliates,
has a combined capital and surplus of at least $50 million; and
WHEREAS, the Company desires to amend the Rights Agreement to reflect the
appointment of EquiServe as Rights Agent.
NOW THEREFORE, in consideration of the premises and the mutual agreements
herein set forth, the Rights Agreement hereby is amended as follows:
1. The first sentence of the Rights Agreement hereby is amended by
deleting such sentence in its entirety and substituting the following in lieu
thereof:
"Agreement, dated as of March 6, 1996 and as amended as of
June 1, 1999, between AGL Resources Inc., a Georgia corporation
(the "Company"), and EquiServe Trust Company, N.A., a
national banking association (the "Rights Agent")."
2. Section 2 of the Rights Agreement is hereby amended by deleting the
last sentence of that section in its entirety and substituting in lieu thereof
the following:
<PAGE>
"The Company may from time to time appoint such co-Rights Agents as it
may deem necessary or desirable, upon ten (10) days' prior written
notice to the Rights Agent. The Rights Agent shall have no duty to
supervise, and shall in no event be liable for, the acts or omissions
of any such co-Rights Agent."
3. Section 3(c) of the Rights Agreement is hereby amended by deleting the
first sentence of the legend set forth in that section and substituting in lieu
thereof the following:
"This certificate also evidences and entitles the holder hereof to
certain rights as set forth in a Rights Agreement between AGL
Resources Inc., a Georgia corporation, and EquiServe Trust Company,
N.A., dated as of March 6, 1996 and as amended as of June 1, 1999, as
the same may be amended from time to time (the "Rights Agreement"),
the terms of which are hereby incorporated herein by reference and a
copy of which is on file at the principal executive offices of AGL
Resources Inc."
4. Section 21 of the Rights Agreement is hereby amended by deleting the
fifth sentence of that section in its entirety and substituting in lieu thereof
the following:
"Any successor Rights Agent, whether appointed by the Company or by
such a court, shall be a corporation, national banking association or
trust company organized and doing business under the laws of the
United States or any State thereof, which is authorized under such
laws to exercise corporate trust or stock transfer powers and is
subject to supervision or examination by federal or state authority
and which either itself has, or together with an affiliate has, at the
time of its appointment as Rights Agent, a combined capital and
surplus of at least $50 million."
5. (a) Effective July 1, 1999, Section 26 of the Rights Agreement is
hereby amended by deleting the address of the Company and inserting the
following:
AGL Resources Inc.
The Biltmore
817 W. Peachtree Street, N.W.
Atlanta, Georgia 30308
Attention: Corporate Secretary
(b) Section 26 of the Rights Agreement is hereby amended by deleting
the address of the Rights Agent and inserting the following:
<PAGE>
EquiServe Trust Company, N.A.
c/o EquiServe Limited Partnership
150 Royall Street
Canton, Massachusetts 02021
Attention: Client Administration
6. Exhibit A to the Rights Agreement is hereby amended by deleting the
first sentence in its entirety and substituting in lieu thereof the following:
This certifies that _____________________ or registered
assigns, is the registered owner of the number of Rights set
forth above, each of which entitles the owner thereof,
subject to the terms, provisions and conditions of the
Rights Agreement, dated as of March 6, 1996 and as amended
as of June 1, 1999, as the same may be amended from time to
time (the "Rights Agreement"), between AGL Resources Inc., a
Georgia corporation (the "Company") and EquiServe Trust
Company, N.A., a national banking association (the "Rights
Agent"), to purchase from the Company at any time after the
Distribution Date (as such term is defined in the Rights
Agreement) and prior to 5:00 P.M., New York City time, on
March 6, 2006 at the office or agency of the Rights Agent
designated for such purpose, or of its successor as Rights
Agent, one one-hundredth of a fully paid non-assessable
share of Class A Junior Participating Preferred Stock, no
par value per share (the "Preferred Stock"), of the Company,
at a purchase price of $60 per one one-hundredth of a share
of Preferred Stock (the "Purchase Price"), upon presentation
and surrender of this Right Certificate with the Form of
Election to Purchase duly executed.
7. Exhibit A of the Rights Agreement is further amended by deleting the
counter-signature from the signature page of Exhibit A and substituting in lieu
thereof the following:
"Countersigned:
EQUISERVE TRUST COMPANY, N.A.,
As Rights Agent
By:__________________________________
Name:________________________________
Title:_______________________________"
8. Exhibit B of the Rights Agreement is hereby amended by deleting the
last sentence of the first paragraph in its entirety and substituting in lieu
thereof the following:
<PAGE>
"The description and terms of the Rights are set forth in a
Rights Agreement dated as of March 6, 1996 and as amended as
of June 1, 1999, as the same may be amended from time to
time (the "Rights Agreement") between the Company and
EquiServe Trust Company, N.A. (the "Rights Agent")."
9. All other references in the Rights Agreement to "Wachovia Bank of
North Carolina" hereby are changed to "EquiServe Trust Company, N.A." and all
references to the Rights Agent shall be deemed to be references to EquiServe
Trust Company, N.A.
Capitalized terms used herein and not otherwise defined shall have those
meanings ascribed to them in the Rights Agreement.
(Signatures on following page)
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to
the Rights Agreement to be duly executed as of the 1/st/ day of June, 1999.
AGL RESOURCES INC.
Attest:
/s/ Melanie M. Platt By: /s/ J. Michael Riley
- ----------------------------- --------------------
Corporate Secretary Senior Vice President and Chief
Financial Officer
[Corporate Seal]
EQUISERVE TRUST COMPANY, N.A.
Attest:
/s/ By: /s/ Charles Rossi
- ----------------------------- ---------------------
Managing Director Director
[Seal]
<PAGE>
By signing hereunder, Wachovia Bank, N.A. (formerly Wachovia Bank of North
Carolina, N.A.) hereby acknowledges its resignation as Rights Agent and the
appointment of EquiServe Trust Company, N.A. as successor Rights Agent.
WACHOVIA BANK, N.A.
Attest:
/s/ By: /s/ Deborah N. Keaton
- ---------------------------- ----------------------
Assistant Secretary Vice President
[Seal]
<PAGE>
EXHIBIT 10.1(E)
July 23, 1999
Mr. Charles W. Bass
1675 Redbourne Drive
Dunwoody, GA 30350
Dear Charlie:
The purpose of this letter agreement (the "Agreement") is to set out the
terms and conditions of your provision of consulting services to AGL Resources
Inc. (the "Company").
1. Term. The term of the Agreement shall be two years, beginning on August 1,
----
1999 (the "Effective Date") and continuing until July 31, 2001, unless
terminated earlier as provided in Section 13 hereof.
2. Consulting Services. During the term of the Agreement, you will provide
-------------------
consulting services to the Company at such times and in such capacities as
may reasonably be requested by the Chief Executive Officer of the Company.
In addition, during the Term, you will serve as a member of the board of
directors or equivalent governing body of certain subsidiaries and/or
affiliated entities of the Company, as requested by the Chief Executive
Officer. The Company anticipates that your consulting services will require
approximately 400 hours of your time each year during the Term.
3. Compensation. The Company will pay you an annual consulting fee of
------------
$80,000.00 for each year of the Term during which you provide consulting
services to the Company under this Agreement. The consulting fee will be
paid to you on a monthly basis in arrears as of the last day of each month.
4. Business Expenses. The Company will reimburse you for any reasonable
-----------------
business expenses that you incur while performing consulting services under
this Agreement, subject to your compliance with Company policies and
procedures regarding documentation for reimbursement of business expenses.
5. Independent Contractor. You will provide consulting services under this
----------------------
Agreement as an independent contractor to the Company. That means that, in
your capacity as a consultant under this Agreement, you will not be entitled
to participate in any employee benefit plans, coverages, payroll policies
(such as vacation, holiday or sick pay) or other programs of the Company
during the Term. In addition, you are responsible for reporting all income
and compensation provided to you by the Company under this Agreement, and
<PAGE>
you are responsible for paying all social security or federal, state or
local income taxes, as well as any self-employment taxes, arising therefrom.
You will also be required to provide your own workers' compensation coverage
if such coverage is required by applicable law. As an independent
contractor, you will have control over the method, manner and means of
providing consulting services under this Agreement.
6. Covenant Not to Compete. You hereby covenant and agree that, during a
-----------------------
period beginning on the Effective Date and ending one (1) year after the
termination of this Agreement, you will not directly or indirectly, on your
own behalf or on behalf of any person or entity, compete with the Company by
performing activities or duties substantially similar or related to the
functions, activities or duties performed by you for the Company for any
business entity engaged in direct competition with the Company. A business
entity shall be considered to be "in direct competition" with the Company if
it is engaged in producing, manufacturing, distributing, marketing, selling,
servicing or repairing products similar to products produced, manufactured,
distributed, marketed, sold, serviced or repaired by the Company, including
(but not limited to) any type of production or distribution of any energy
source, whether by cultivation of natural resources or by technology. This
restriction shall apply only to a restricted territory within a 100-mile
radius of any locations, sites or facilities in which the Company (including
its affiliates) maintains offices, operations or service contracts or has
provided services during the Term of this Agreement, or with regard to the
1-year noncompetition period following the termination of this Agreement,
the 1-year period immediately preceding the date of termination of this
Agreement. Notwithstanding the above, this provision shall apply to any
business entity involved in the production, manufacture, distribution,
marketing, sales, service or repair of products or services in the propane
industry only for such portion of the 1-year noncompetition period following
termination of this Agreement as the Company (or any of its affiliates,
related entities or joint ventures) owns or operates all or part of a
propane business entity. To the extent that you have concerns about any
employment or engagement opportunities that you may have and the limitations
thereon presented by this noncompetition provision, the Company agrees to
discuss those opportunities with you and provide a prompt response to you as
to whether the Company will consider such employment or engagement (or any
part thereof) to be a violation of this provision.
7. Nondisclosure of Trade Secrets and Confidential Information. As a
-----------------------------------------------------------
consultant to the Company, you acknowledge and agree that during the term of
this Agreement, you will have access to trade secrets and other confidential
information unique to the business of the Company and that the disclosure or
unauthorized use of such trade secrets or confidential information by you
would injure the Company's business. Therefore, you agree that you will not,
at any time during the term of this Agreement and for a period of one (1)
year thereafter, use, reveal or divulge any trade secrets or any other
confidential information which, while not trade secrets or information
unique to the Company's business, is confidential and constitutes a valuable
asset of the Company by reason of the material investment of the Company's
time and money in the production of such
<PAGE>
information. You also agree that you will not use, reveal or divulge any
general confidential or customer-related information.
8. Nonsolicitation. Due to your extensive knowledge of the specifics of the
---------------
Company's business, and its customers and clients, you agree that during the
term of this Agreement and for a period of one (1) year thereafter, you will
not, without the prior written consent of the Company, either directly or
indirectly, on your own behalf or in the service or on behalf of others,
solicit, divert or appropriate, or attempt to solicit, divert or
appropriate, to any business that competes with the Company's business, any
person or entity who transacted business with the Company during the Term of
this Agreement or during the year preceding the Effective Date of this
Agreement. The persons or entities referred to in the immediately preceding
sentence shall include any and all persons or entities with respect to whom
you have (i) had direct contact, (ii) been directly involved in the
Company's marketing or sales strategies directed to such persons or
entities, or (iii) been privy to the Company's marketing or sales strategies
directed to such persons or entities. For purposes of this provision, the
Company's business shall include any and all aspects of producing,
manufacturing, distributing, marketing, selling, servicing or repairing
products similar to products produced, manufactured, distributed, marketed,
sold, serviced or repaired by the Company and/or any of its affiliates,
including (but not limited to) any type of production or distribution of any
energy source, whether by cultivation of natural resources or by technology.
You also agree that during the term of this Agreement and for a period of
one (1) year thereafter, you will not, either directly or indirectly, on
your own behalf or in the service or on behalf of others solicit, divert or
hire away, or attempt to solicit, divert or hire away to any business that
competes with Company's business any person employed by the Company, or any
person employed by the Company at any time during the Term of this
Agreement.
9. Remedies. In addition to any legal or equitable remedies available to the
--------
Company, including injunctive relief, the Employee agrees and acknowledges
that if he violates any provision of this Agreement, the Company may
immediately cease any and all payments payable hereunder.
10. Invalidity of Any Provision. It is the intent of the parties hereto that
---------------------------
the provisions of this Agreement will be enforced to the fullest extent
permissible under the laws and public policies of each state and
jurisdiction in which such enforcement is sought, but that the
unenforceability (or the modification to conform with such laws or public
policies) of any provision hereof shall not render unenforceable or impair
the remainder of this Agreement which shall be deemed amended to delete or
modify, as necessary, the invalid or unenforceable provisions.
11. Governing Law/Survival/Binding Effect. This Agreement will be governed by
-------------------------------------
the laws of the State of Georgia. The provisions of paragraphs 6, 7, 8, 9
and 10 will survive the termination of this Agreement. The Company may
assign its rights and/or obligations under this Agreement. You may not
assign your rights and/or obligations under this Agreement; however, you may
assign your rights and/or obligations under this Agreement to any business
or entity in which you and/or your spouse own a controlling interest and
which business or
<PAGE>
entity affirmatively assumes your obligations under this Agreement,
including the obligation that you will be personally performing the services
hereunder.
12. Amendment/Entire Agreement. Once you sign this Agreement, it may not be
--------------------------
amended or modified except by a writing executed by you and the Company that
specifically refers to this Agreement and expressly states that it is
intended to amend this Agreement. You agree that this Agreement, in
conjunction with your Early Retirement Agreement with the Company, contains
the entire agreement between you and the Company regarding your provision of
consulting services to the Company.
13. Termination of Agreement. This Agreement may be terminated by either
------------------------
party upon thirty (30) days' prior written notice to the other party;
provided, however, that upon and after a "change in control" of the Company
(as defined in the Company's Long-Term Incentive Plan), the Agreement may
not be terminated by the Company prior to the end of its Term.
Please sign this Agreement to acknowledge your understanding and acceptance
its terms and conditions and return it to the Company. You should keep a copy
of this letter for your records.
Very truly yours,
/s/ Walter M. Higgins
Walter M. Higgins
Chief Executive Officer
Agreed to and Accepted:
/s/ Charles W. Bass
- --------------------
Charles W. Bass
Date: July 28, 1999
-------------
<PAGE>
EXHIBIT 10.1(f)
AGL RESOURCES INC.
LONG-TERM INCENTIVE PLAN (1999)
<PAGE>
AGL RESOURCES INC.
LONG-TERM INCENTIVE PLAN (1999)
Section 1
PLAN INFORMATION
1.1 Purpose. AGL Resources Inc. (the "Company") has established the AGL
-------
Resources Inc. Long-Term Incentive Plan (1999) (the "LTIP") to further the
growth and development of the Company. The LTIP encourages Eligible Employees
of the Company and its Related Companies to obtain a proprietary interest in the
Company by owning its stock. The LTIP also will provide the Eligible Employees
with an added incentive to continue in the employ of the Company or a Related
Company and will stimulate their efforts in promoting 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.
1.2 Awards Available Under the LTIP. The LTIP permits Awards of Stock
-------------------------------
Options, Restricted Stock and/or Performance Units. Stock Options consist of
incentive stock options ("ISOs"), nonqualified stock options ("NQSOs") and
Reload Options. The Company intends that ISOs granted under the LTIP qualify as
incentive stock options under Code (S)422. NQSOs are options that do not
qualify as ISOs and are subject to taxation under Code (S)83. Awards of
Restricted Stock and/or Performance Units are subject to taxation under Code
(S)83.
1.3 Effective Date and Term of the LTIP. The Board of Directors of the
-----------------------------------
Company adopted the LTIP on November 5, 1998, and the shareholders approved the
LTIP at the February 5, 1999 annual meeting of shareholders. The LTIP is
effective as of January 1, 1999 (the "Effective Date"). Unless terminated by
the Company, the LTIP will remain in effect until the tenth anniversary of the
earlier of the date the Board adopted the LTIP or the shareholders approved the
LTIP. If the LTIP is terminated earlier, then it will remain in effect as long
as any Awards are outstanding.
1.4 Operation, Administration and Definitions. The operation and
-----------------------------------------
administration of the LTIP is subject to the provisions of this plan document.
Capitalized terms used in the LTIP are defined in Section 2 below or may be
defined within the LTIP.
Section 2
PLAN DEFINITIONS
For purposes of the LTIP, the terms listed below are defined as follows:
2.1 "1933 Act" means the Securities Act of 1933, as amended.
--------
2.2 "1934 Act" means the Securities Exchange Act of 1934, as amended.
--------
<PAGE>
2.3 "Agreement" means a Performance Unit Agreement, Restricted Stock
---------
Agreement or Stock Option Agreement, as applicable, the terms and conditions of
which have been established by the Committee.
2.4 "Award" means any award or benefit granted to any Participant under
-----
the LTIP, including, without limitation, the grant of Stock Options and the
award of Restricted Stock and/or Performance Units.
2.5 "Board" means the Board of Directors of the Company.
-----
2.6 "Change of Control" means that:
-----------------
(a) any "person" as defined in Section 3(a)(9) of the 1934 Act, and as
used in Section 13(d) and 14(d) thereof, including a "group" as defined in
Section 13(d) of the 1934 Act but excluding the Company and any subsidiary
and any employee benefit plan sponsored or maintained by the Company or any
subsidiary (including any trustee of such plan acting as trustee), directly
or indirectly, becomes the "beneficial owner" (as defined in Rule 13d-3
under the 1934 Act), of securities of the Company representing 10% or more
of the combined voting power of the Company's then outstanding securities
(unless the event causing the 10% threshold to be crossed is an acquisition
of securities directly from the Company); or
(b) the shareholders of the Company approve any merger or other
business combination of the Company, sale of 50% or more of the Company's
assets or combination of the foregoing transactions (the "Transactions")
other than a Transaction immediately following which the shareholders of
the Company and any trustee or fiduciary of any Company employee benefit
plan immediately prior to the Transaction owns at least 80% of the voting
power, directly or indirectly, of (i) the surviving corporation in any such
merger or other business combination; (ii) the purchaser of the Company's
assets; (iii) both the surviving corporation and the purchaser in the event
of any combination of Transactions; or (iv) the parent company owning 100%
of such surviving corporation, purchaser or both the surviving corporation
and the purchaser, as the case may be; or
(c) within any twenty-four month period, the persons who were
directors immediately before the beginning of such period (the "Incumbent
Directors") cease (for any reason other than death) to constitute at least
a majority of the Board or the board of directors of a successor to the
Company. For this purpose, any director who was not a director at the
beginning of such period will be deemed to be an Incumbent Director if such
director was elected to the Board by, or on the recommendation of or with
the approval of, at least two-thirds of the directors who then qualified as
Incumbent Directors (so long as such director was not nominated by a person
who has entered into an agreement to effect a Change of Control or
expressed an intent to cause such a Change of Control).
2.7 "Code" means the Internal Revenue Code of 1986, as amended. A
----
reference to any provision of the Code includes reference to any successor
provision of the Code.
2.8 "Common Stock" means the common stock, $5.00 par value per share, of
------------
the Company.
2.9 "Company" means AGL Resources Inc.
-------
2
<PAGE>
2.10 "Effective Date" means January 1, 1999, subject to shareholder
--------------
approval.
2.11 "Eligible Employee" means any common law key employee of the Company
-----------------
or a Related Company who is actively employed at the time Awards are made.
However, only employees of the Company and any "parent" or "subsidiary" of the
Company (as those terms are defined in Code (S)424) are eligible to receive
ISOs.
2.12 "Exercise Price" means the purchase price of the shares of Common
--------------
Stock underlying a Stock Option.
2.13 "Fair Market Value" means, as of any date of determination, the most
-----------------
recent closing price per share of the Common Stock as published in the Eastern
Edition of The Wall Street Journal report on the New York Stock Exchange
Composite Transactions (or other established exchange on which the Common Stock
is listed).
2.14 "Incentive Stock Option" or "ISO" means an incentive stock option
---------------------- ---
within the meaning of Code (S)422(b).
2.15 "LTIP" means this AGL Resources Inc. Long-Term Incentive Plan (1999).
----
2.16 "Nonqualified Stock Option" or "NQSO" means an option which is not an
------------------------- ----
incentive stock option within the meaning of Code (S)422(b).
2.17 "Optionee" means an Eligible Employee who is granted a Stock Option.
--------
2.18 "Participant" means an Optionee or a Recipient.
-----------
2.19 "Performance Unit" means an award of the right, subject to such
----------------
conditions, restrictions and contingencies as the Committee determines, to
receive one share of Common Stock in the future.
2.20 "Performance Unit Agreement" means a written agreement signed and
--------------------------
dated by the Committee and a Recipient that specifies the terms and conditions
of an Award of Performance Units.
2.21 "Pricing Date" means the date on which a Stock Option is granted.
------------
However, the Committee may specify as the Pricing Date in the Option Agreement
of an NQSO the date on which the Optionee is hired or promoted (or some similar
event).
2.22 "Recipient" means an Eligible Employee who is awarded Restricted Stock
---------
or Performance Units.
2.23 "Related Company" means any member within the Company's controlled
---------------
group of corporations, as that term is defined in Code (S)1563(a).
2.24 "Reload Option" means a Stock Option granted to an Optionee who
-------------
exercises a previously-held Stock Option by tendering Common Stock for part or
all of the Exercise Price, pursuant to the provisions of Section 6.7 of the
LTIP.
3
<PAGE>
2.25 "Reporting Person" means an Eligible Employee who is subject to the
----------------
reporting requirements of Section 16 of the 1934 Act.
2.26 "Restricted Stock" means an Award of Common Stock subject to such
----------------
conditions, restrictions and contingencies as the Committee determines.
2.27 "Restricted Stock Agreement" means a written agreement signed and
--------------------------
dated by the Committee and a Recipient that specifies the terms and conditions
of an Award of Restricted Stock.
2.28 "Stock Option" means an ISO, NQSO or Reload Option, as applicable,
------------
granted to an Eligible Employee under the LTIP.
2.29 "Stock Option Agreement" means a written agreement signed and dated by
----------------------
the Committee and an Optionee that specifies the terms and conditions of an
Award of a Stock Option or Reload Option.
Section 3
PLAN ADMINISTRATION
3.1 Administration. The Nominating and Compensation Committee of the
--------------
Board of Directors of the Company (the "Committee") will control and manage the
operation and administration of the LTIP.
(a) The Committee may make one or more Awards under the LTIP to an
Eligible Employee, who will become a Participant in the LTIP. In
addition, the Committee may make one or more Awards (other than grants of
ISOs) to an individual who has accepted an offer of employment from the
Company or one of its Related Companies but who has not yet become an
Eligible Employee; provided, that the Committee will subject such Award(s)
to appropriate restrictions in the event that such individual does not
become an Eligible Employee. The Committee will decide to whom and when to
grant an Award, the type of Award that it will grant and the number of
shares of Common Stock covered by the Award. The Committee also will
decide the terms, conditions, performance criteria, restrictions and other
provisions of the Award. The Committee may grant a single Award or an Award
in combination with another Award(s) to a Participant. In making Award
decisions, the Committee may take into account the nature of services
rendered by the Eligible Employee, the Eligible Employee's present and
potential contribution to the Company's success and such other factors as
the Committee, in its sole discretion, deems relevant.
(b) In accordance with Section 5 of the LTIP, the Committee will
decide whether and to what extent Awards under the LTIP will be structured
to conform with Code (S)162(m) requirements applicable to performance-based
compensation. The Committee may take any action, establish any procedures
and impose any restrictions that it finds necessary or appropriate to
conform with Code (S)162(m). If every member of the Committee does not
meet the definition of "outside director" as defined in Code (S)162(m), the
Committee will form a subcommittee of those members who do meet that
definition,
4
<PAGE>
and that subcommittee will have all authority and discretion to act as the
Committee to make Awards that conform with Code (S)162(m).
(c) The Committee will interpret the LTIP, establish and rescind any
rules and regulations relating to the LTIP, decide the terms and provisions
of any Agreements made under the LTIP, and determine how to administer the
LTIP. The Committee also will decide administrative methods for the
exercise of Stock Options. Each Committee decision will be final,
conclusive and binding on all parties.
(d) The Committee will act by a majority of its then members at a
meeting of the Committee or by unanimous written consent. The Committee
will keep adequate records concerning the LTIP and the Committee's
proceedings and acts in such form and detail as the Committee may decide.
3.2 Delegation by Committee. Unless prohibited by applicable law or the
-----------------------
applicable rules of a stock exchange, the Committee may allocate all or some of
its responsibilities and powers to any one or more of its members. The
Committee also may delegate all or some of its responsibilities and powers to
any person or persons it selects. The Committee may revoke any such allocation
or delegation at any time. The Committee delegates to the Company's Corporate
Secretary the authority to document any and all grants and awards made by the
Committee under the LTIP.
3.3 Information to be Furnished to Committee. In order for the Committee
----------------------------------------
to discharge its duties, it may require the Company, its Related Companies,
Participants and other persons entitled to benefits under the Plan to provide it
with certain data and information.
3.4 Indemnification. In addition to such other rights of indemnification
---------------
that they have as members of the Board or the Committee, the Company will
indemnify the members of the Committee, to the extent permitted by applicable
law, against reasonable expenses (including, without limitation, attorney's
fees) actually and necessarily incurred in connection with the defense of any
action, suit or proceeding, or in connection with any appeal, to which they or
any of them may be a party by reason of any action taken or failure to act under
or in connection with the LTIP or any Award awarded hereunder, and against all
amounts paid by them in settlement thereof (provided such settlement is approved
to the extent required by and in the manner provided by the articles of
incorporation or the bylaws of the Company relating to indemnification of the
members of the Board) or paid by them in satisfaction of a judgment in any such
action, suit or proceeding, except in relation to such matters as to which it is
adjudged in such action, suit or proceeding that such Committee member or
members did not act in good faith and in a manner reasonably believed to be in
or not opposed to the best interests of the Company.
5
<PAGE>
Section 4
STOCK SUBJECT TO THE PLAN
4.1 Stock Subject to Awards.
-----------------------
Stock subject to Awards and other provisions of the LTIP will consist of
the following:
(a) authorized but unissued shares of Common Stock;
(b) shares of Common Stock held by the Company in its treasury; or
(c) shares of Common Stock purchased by the Company in the open
market.
4.2 Shares of Common Stock Subject to Awards.
----------------------------------------
(a) Subject to adjustment in accordance with the provisions of Section
9, the maximum number of shares of Common Stock that may be issued under
the LTIP will be 2,800,000 shares of Common Stock, which may include:
(i) the number of shares of Common Stock available for issuance
under the AGL Resources Inc. Long-Term Stock Incentive Plan
of 1990 (the "LTSIP") as of the Effective Date;
(ii) the number of shares of Common Stock subject to awards
(other than awards of restricted stock) under the LTSIP
which are forfeited, canceled or expired without the
issuance of Common Stock; and/or
(iii) the number of shares of Common Stock, to the extent
authorized by the Board for purposes of the LTIP, which are
repurchased by the Company in the open market or in a
private transaction after the Effective Date.
(b) The number of shares of Common Stock subject to Awards (other than
Awards of Restricted Stock) which are forfeited, canceled or expired
without the issuance of Common Stock shall again be available for issuance
pursuant to new Awards made under the LTIP.
Section 5
PERFORMANCE-BASED COMPENSATION
5.1 Performance-Based Compensation. The Committee may, in its sole
------------------------------
discretion, make Awards to Participants intended to comply with the
"performance-based" compensation requirements of Code (S)162(m). Vesting of
such Awards will be determined based on the attainment of objective written
performance goals for a performance period. The performance
6
<PAGE>
goal will state, in terms of an objective formula or standard, the method for
computing the vesting of the Award if the goal is attained. The performance
goals must be established by the Committee in writing no later 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. Performance goals will
be based on the attainment of one or more performance measures. To the degree
consistent with Code (S)162(m), the performance goals may be calculated without
regard to extraordinary items.
5.2 Performance Measures. Performance measures may include the following:
--------------------
(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; (xvi) costs; (xvii) cash flow; (xviii) working capital; (xix)
return on assets; or (xx) gross or net profit. Performance measures 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.
5.3 Additional Requirements. For Awards under this Section 5 to
-----------------------
constitute performance-based compensation under Code (S)162(m), the material
terms of the performance goal attributable to such Award must be disclosed to
and subsequently approved by the Company's shareholders before any compensation
attributable to such Award is paid. The Committee must certify in writing prior
to the payment of performance-based compensation attributable to Awards of
Restricted Stock and/or Performance Units that the performance goals applicable
to such Awards, as well as any other material terms applicable to such Awards,
were satisfied. Such written certification may include the approved minutes of
the Committee meeting in which the certification is made.
Section 6
STOCK OPTIONS
6.1 Stock Option Agreement. When the Committee grants a Stock Option
----------------------
under the LTIP, it will prepare (or cause to be prepared) a Stock Option
Agreement that specifies the following terms:
(a) the name of the Optionee;
(b) the total number of shares of Common Stock to which the Stock
Option pertains;
(c) the Exercise Price of the Stock Option;
7
<PAGE>
(d) the date as of which the Committee granted the Stock Option;
(e) the type of Stock Option granted;
(f) the requirements that must be met for the Stock Option to first
become exercisable;
(g) whether Reload Options are available with respect to the Stock
Option and if so, any limitations on the granting of or number of
successive Reload Options that may be granted with regard to the Stock
Option and any Reload Options under the Stock Option; and
(h) the expiration date of the Stock Option.
6.2 Maximum Award Per Year. Subject to adjustment in accordance with
----------------------
Section 9 of the LTIP, no more than 500,000 shares of Common Stock may be made
subject to Stock Options granted during a calendar year to any one Eligible
Employee.
6.3 Exercise Price.
--------------
(a) The Exercise Price of each Stock Option will be 100% of the Fair
Market Value of a share of Common Stock as of the Pricing Date (110% of the
Fair Market Value of a share of Common Stock as of the Pricing Date for an
ISO optionee who owns more than ten percent 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).
(b) Notwithstanding any other provision of the LTIP to the contrary
(other than the provisions of Section 9.1 relating to adjustments due to
certain corporate transactions), (i) the Exercise Price of a Stock Option
may not be changed subsequent to the date of grant of the Stock Option, and
(ii) a Stock Option may not be repriced subsequent to its date of grant by
replacing, regranting or canceling the Stock Option.
6.4 Exercisability.
--------------
(a) General Schedule. Each Stock Option will become exercisable
----------------
according to the schedule set forth in the applicable Stock Option
Agreement; provided, however, that the Committee will always have the
authority to accelerate the exercisability of any Stock Option granted
under the LTIP.
(b) Accelerated Exercisability. In the event of an Optionee's
--------------------------
termination of employment with the Company and all Related Companies under
one of the following conditions, any outstanding Stock Options will become
immediately exercisable and remain exercisable until the expiration date of
the Stock Option:
(i) death;
(ii) disability (as determined by the Committee in its sole
discretion); or
8
<PAGE>
(iii) retirement under the terms of the AGL Resources Inc.
Retirement Plan or any other retirement plan approved by
the Board for that purpose.
In addition, any outstanding Stock Option will become immediately
exercisable and remain exercisable until the expiration date of the Stock
Option upon a Change of Control of the Company.
6.5 Expiration Date.
---------------
(a) Original Expiration Date. Unless the Committee specifies
------------------------
otherwise in the Stock Option Agreement, subject to section (b) below, the
term of a Stock Option granted under the LTIP begins on the date of grant
and ends ten years after the date of grant (or five years from the date of
grant for an ISO optionee who owns more than ten percent 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).
(b) Accelerated Expiration Date. Unless the Committee specifies
---------------------------
otherwise in the Stock Option Agreement, a Stock Option granted under the
LTIP will expire upon the earliest to occur of the following:
(i) The Original Expiration Date of the Stock Option;
(ii) Death. The one-year anniversary of the Optionee's death;
-----
(iii) Disability. The one-year anniversary of the Optionee's
----------
termination of employment with the Company and all Related
Companies due to disability (as determined by the
Committee in its sole discretion);
(iv) Retirement. The one-year anniversary of the Optionee's
----------
termination of employment with the Company and all Related
Companies due to retirement under the terms of the AGL
Resources Inc. Retirement Plan or any other retirement
plan approved by the Board for that purpose (provided,
that if all or part of an ISO is not exercised within
three months after the Optionee's retirement, the
unexercised portion thereof will automatically become an
NQSO for the remainder of the one-year period); or
(v) Termination of Employment. The date of the Optionee's
-------------------------
termination of employment with the Company and all Related
Companies for any reason other than death, disability or
retirement (as described above); provided, that if the
Optionee's termination of employment is due to a layoff,
office or operation closing, or other involuntary
severance by the Company or Related Company (except for
performance reasons), then the date sixty (60) days
following the date of the Optionee's termination of
employment.
9
<PAGE>
The Committee will always have the authority and discretion to extend the
Expiration Date of any Stock Option as long as the extended Expiration Date is
not later than the Original Expiration Date. If the Committee extends the
Expiration Date of an ISO beyond any legal period for ISO tax treatment, then
the ISO will automatically convert to an NQSO for the remainder of the extended
exercise period.
6.6 Terms of Stock Option Exercise. Unless the Committee specifies
------------------------------
otherwise in the Stock Option Agreement, an Optionee may exercise a Stock Option
for less than the full number of shares of Common Stock subject to the Stock
Option. However, such exercise may not be made for less than 100 shares or the
total remaining shares subject to the Stock Option. The Committee may in its
discretion specify other Stock Option terms, including restrictions on frequency
of exercise and periods during which Stock Options may not be exercised.
6.7 Payment of Exercise Price. The Optionee must pay the full Exercise
-------------------------
Price for shares of Common Stock purchased upon the exercise of any Stock Option
at the time of such exercise by one of the following forms of payment:
(a) cash;
(b) by tendering unrestricted shares of Common Stock which have a
Fair Market Value equal to the Exercise Price. The Optionee must have held
the tendered shares of Common Stock for at least six months before their
tender. The Optionee may tender shares of Common Stock either by
attestation or by the delivery of a certificate or certificates for shares
duly endorsed for transfer to the Company, and if required, with medallion
level signature guarantee by a member firm of a national stock exchange, by
a national or state bank, or by the Company's credit union (or guaranteed
or notarized in such other manner as the Committee may require);
(c) broker-assisted cashless exercise; or
(d) any combination of the above forms or any other form of payment
permitted by the Committee.
6.8 Reload Options. When the Committee grants a Stock Option, it will
--------------
designate in the Stock Option Agreement whether a Reload Option accompanies such
Stock Option and any limitations that will apply to the granting of the Reload
Option or the number of successive Reload Options. The Committee, in its
discretion, may grant one or more successive Reload Options to an Optionee who
pays all or a portion of the Exercise Price of a Stock Option with shares of
Common Stock. Notwithstanding the terms of any Stock Option, the Committee will
grant Reload Options only to Participants who are actively employed by the
Company or a Related Company at the time the grant is to be made. If the
Committee has designated a Stock Option as having an accompanying Reload Option,
the Committee will grant a Reload Option for the same number of shares as is
tendered in payment of the Exercise Price (but not for shares tendered for tax
or other withholding obligations) upon exercise of the Stock Option. The Reload
Option will have the same terms and conditions as the related original Stock
Option, including the expiration date of the original Stock Option, except that
(i) the Exercise Price for a Reload Option will be the Fair Market Value of the
Common Stock as of the date of grant of
10
<PAGE>
such Reload Option, and (ii) the Reload Option will become fully exercisable six
months after its date of grant (except as may be limited by ISO limitations).
6.9 Transferability. Unless the Committee specifies otherwise in the
---------------
Stock Option Agreement, an Optionee may transfer Stock Options under the LTIP
only by will or by the laws of descent and distribution. After the death of an
Optionee, only the executor or administrator of the Optionee's estate may
exercise an outstanding Stock Option.
6.10 Rights as a Shareholder. An Optionee will first have rights as a
-----------------------
shareholder of the Company with respect to shares of Common Stock covered by a
Stock Option only when the Optionee has paid the Exercise Price in full and the
shares have been issued to the Optionee.
Section 7
RESTRICTED STOCK
7.1 Restricted Stock Agreement. When the Committee awards Restricted
--------------------------
Stock under the LTIP, it will prepare (or cause to be prepared) a Restricted
Stock Agreement that specifies the following terms:
(a) the name of the Recipient;
(b) the total number of shares of Common Stock to which the Award of
Restricted Stock pertains;
(c) the manner in which the Restricted Stock will become vested and
nonforfeitable and a description of any restrictions applicable to the
Restricted Stock; and
(d) the date as of which the Committee awarded the Restricted Stock.
7.2 Maximum Award Per Year. Subject to adjustment in accordance with
----------------------
Section 9 of the LTIP, no more than 50,000 shares of Restricted Stock may be
awarded during a calendar year to any one Eligible Employee.
7.3 Vesting. Restricted Stock will become vested and nonforfeitable in
-------
accordance with the vesting schedule and/or vesting requirements set forth in
the applicable Restricted Stock Agreement. The Committee may determine, in
accordance with Section 5 of the LTIP, whether such vesting schedule and/or
vesting requirements will conform with the requirements applicable to
performance-based compensation under Code (S)162(m). Restricted Stock will
become immediately vested and nonforfeitable upon a Change of Control of the
Company. In addition, the Committee will always have the authority to
accelerate vesting of any Restricted Stock awarded under this LTIP.
7.4 Termination of Employment. Unless the Committee decides otherwise,
-------------------------
all shares of Restricted Stock which remain subject to restriction upon the
Recipient's termination of employment for any reason (including death,
disability or retirement under the terms of the AGL Resources Inc. Retirement
Plan or any other retirement plan approved by the Board for that purpose) will
be forfeited as of the date of such termination of employment.
11
<PAGE>
7.5 Delivery of Restricted Stock. The Company will issue the shares of
----------------------------
Restricted Stock within a reasonable period of time after execution of the
Restricted Stock Agreement. As long as any restrictions apply to the
Restricted Stock, the shares of Restricted Stock shall be held by the Committee
in uncertificated form in a restricted account.
7.6 Transferability. Unless the Committee specifies otherwise in the
---------------
Restricted Stock Agreement, a Recipient may not sell, exchange, transfer,
pledge, hypothecate or otherwise dispose of shares of Restricted Stock awarded
under this LTIP while such shares are still subject to restriction.
7.7 Effect of Restricted Stock Award. Upon issuance of the shares of the
--------------------------------
Restricted Stock, the Recipient 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.
Section 8
PERFORMANCE UNITS
8.1 Performance Unit Agreement. When the Committee awards Performance
--------------------------
Units under the LTIP, the Committee will prepare (or cause to be prepared) a
Performance Unit Agreement that specifies the following terms:
(a) the name of the Recipient;
(b) the total number of Performance Units awarded;
(c) the manner in which the Performance Units will become vested and
nonforfeitable; and
(d) the date as of which the Committee awarded the Performance Units.
8.2 Maximum Award Per Year. Subject to adjustment in accordance with
----------------------
Section 9 of the LTIP, no more than 50,000 Performance Units may be awarded
during a calendar year to any one Eligible Employee.
8.3 Performance Unit Account. When the Committee awards Performance Units
------------------------
under the LTIP, the Company will establish a bookkeeping account for the
Recipient which will accurately reflect the number of Performance Units awarded
to the Recipient.
8.4 Dividends. On each date on which a dividend is distributed by the
---------
Company on shares of Common Stock (whether paid in cash, Common Stock or other
property), the Recipient's Performance Unit account will be credited with an
additional whole or fractional number of Performance Units. The number of
additional Performance Units to be credited will be determined by dividing the
product of the dividend value times the number of Performance Units standing in
the Recipient's account on the dividend record date by the Fair Market Value of
the Common Stock on the date of the distribution of the dividend (i.e., dividend
amount x
12
<PAGE>
number of whole and fractional Performance Units as of the dividend record
date / Fair Market Value of Common Stock as of dividend distribution date).
Accounts will be maintained and determinations will be calculated to three
decimal places.
8.5 Vesting. Performance Units will become vested and nonforfeitable in
-------
accordance with the vesting schedule and/or vesting requirements set forth in
the applicable Performance Unit Agreement. The Committee may determine, in
accordance with Section 5 of the LTIP, whether such vesting schedule and/or
vesting requirements will conform with the requirements applicable to
performance-based compensation under Code (S)162(m). Performance Units will
become immediately vested and nonforfeitable upon a Change of Control of the
Company at the "target level," as prorated on a daily basis based on the
completed portion of any applicable performance period as of the date of the
Change of Control. In addition, the Committee will always have the authority to
accelerate vesting of any Performance Units awarded under this LTIP.
8.6 Termination of Employment. Unless otherwise specified by the
-------------------------
Committee, unvested Performance Units will be forfeited as of the date of the
Recipient's termination of employment for any reason (including death,
disability or retirement under the terms of the AGL Resources Inc. Retirement
Plan or any other retirement plan approved by the Board for that purpose).
8.7 Delivery of Common Stock. Upon vesting, Performance Units will be
------------------------
converted into Common Stock and the Common Stock will be issued to the Recipient
within a reasonable period of time. Upon issuance of the Common Stock to the
Recipient, the Recipient of a Performance Unit Award will have immediate rights
of ownership in the shares of Common Stock, including the right to vote the
shares and the right to receive dividends with respect to the shares.
8.8 Transferability. A Recipient may not sell, exchange, transfer,
---------------
pledge, hypothecate or otherwise dispose of Performance Units awarded under this
LTIP.
8.9 Waiver of Restrictions. The Committee may elect, in its sole
----------------------
discretion, to waive any or all restrictions with respect to an award of
Performance Units.
Section 9
PLAN OPERATION
9.1 Certain Corporate Transactions.
------------------------------
(a) Recapitalization. If the Company is involved in a corporate
----------------
transaction (including, without limitation, 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 of Control,
then the Committee will adjust Awards to preserve the benefits or potential
benefits of the Awards as follows:
13
<PAGE>
(i) the Committee will take action to adjust the number and
kind of shares of Common Stock that are issuable under the
LTIP;
(ii) the Committee will take action to adjust the number and
kind of shares of Common Stock subject to outstanding
Awards;
(iii) the Committee will take action to adjust the Exercise
Price of outstanding Stock Options; and
(iv) the Committee will make any other equitable adjustments.
Only whole shares of Common Stock will be issued in making the above
adjustments. Further, the number of shares available under the LTIP or the
number of shares of Common Stock subject to any outstanding Awards will be
the next lower number of shares, so that fractions are rounded downward.
Any adjustment to or assumption of ISOs under this Section will be made in
accordance with Code (S)424. If the Company issues any rights or warrants
to subscribe for additional shares pro rata to holders of outstanding
shares of the class or classes of stock then set aside for the LTIP, then
each Optionee will be entitled to the same rights or warrants on the same
basis as holders of outstanding shares with respect to such portion of the
Optionee's Stock Option as is exercised on or prior to the record date for
determining shareholders entitled to receive or exercise such rights or
warrants.
(b) Reorganization. If the Company is part of any reorganization
--------------
involving merger, consolidation, acquisition of the stock or acquisition of
the assets of the Company which requires shareholder approval but does not
constitute a Change of Control, the Committee, in its discretion, may
decide that:
(i) any or all outstanding Stock Options granted under the
LTIP will pertain to and apply, with appropriate
adjustment as determined by the Committee, to the
securities of the resulting corporation to which a holder
of the number of shares of the Common Stock subject to
such Stock Option would have been entitled;
(ii) any or all outstanding Stock Options granted under the
LTIP will become immediately fully exercisable (to the
extent permitted under federal or state securities laws);
(iii) any or all outstanding Stock Options granted under the
LTIP will become immediately fully exercisable (to the
extent permitted under federal or state securities laws)
and will be terminated after giving at least 30 days'
notice to the Participants to whom such Stock Options have
been granted; and/or
(iv) any or all awards of Restricted Stock and/or Performance
Units hereunder will become immediately fully vested and
nonforfeitable.
14
<PAGE>
(c) Limits on Adjustments. Any issuance by the Company of stock of
---------------------
any class other than the Common Stock, or securities convertible into
shares of stock of any class, will not affect, and no adjustment by reason
thereof will be made with respect to, the number or price of shares of the
Common Stock subject to any Stock Option, except as specifically provided
otherwise in this LTIP. The grant of Awards under the LTIP will not affect
in any way the right or authority of the Company to make adjustments,
reclassifications, reorganizations or changes of its capital or business
structure or to merge, consolidate or dissolve, or to liquidate, sell or
transfer all or any part of its business or assets. All adjustments the
Committee makes under this LTIP will be conclusive.
9.2 Compliance with Other Laws and Regulations. Distribution of shares of
------------------------------------------
Common Stock under the LTIP will be subject to the following:
(a) Notwithstanding any other provision of the LTIP, the Company will
not be required to issue any shares of Common Stock under the LTIP unless
such issuance complies with all applicable laws (including, without
limitation, the requirements of the 1933 Act and Section 16 of the 1934
Act) and the applicable requirements of any securities exchange or similar
entity. For Reporting Persons, the Company believes that the LTIP and all
transactions under the LTIP comply with all applicable conditions of Rule
16b-3 under the 1934 Act. If any provision of the LTIP, or action by the
Committee, fails to so comply, then the Committee will declare such
provision or action null and void ab initio.
(b) When the LTIP provides for issuance of Common Stock, the Company
may issue shares of Common Stock on a noncertificated basis as long as it
is not prohibited by applicable law or the applicable rules of any stock
exchange.
(c) The Company may require a Participant to submit evidence that the
Participant is acquiring shares of Common Stock for investment purposes.
9.3 Tax Withholding. The Participant must pay to the Company an amount
---------------
necessary to cover all applicable income tax and other withholdings before the
Company will issue Common Stock under the LTIP. The Participant may satisfy the
withholding requirements by any one or combination of the following methods:
(a) cash; or
(b) withholding shares of Common Stock which are otherwise issuable
as part of the Award.
9.4 Limitation of Implied Rights. The LTIP is not a contract of
----------------------------
employment. An Eligible Employee selected as a Participant will not have the
right to be retained as an employee of the Company or any Related Company and
will not have any right or claim under the LTIP, unless such right or claim has
specifically accrued under the terms of the LTIP.
9.5 Conditions of Participation in the LTIP. When the Committee makes an
---------------------------------------
Award, it
15
<PAGE>
will require a Participant to enter into an Agreement in a form specified by the
Committee, agreeing to the terms and conditions of the Award and to such
additional terms and conditions, not inconsistent with the terms and conditions
of the LTIP, as the Committee may, in its sole discretion, prescribe. If there
is a conflict between any provision of an Agreement and the LTIP, the LTIP will
control.
9.6 Evidence. Anyone required to give evidence under the LTIP may give
--------
such evidence by certificate, affidavit, document or other information which the
person acting on the evidence considers pertinent, reliable and signed, made or
presented by the proper party or parties.
9.7 Amendment and Termination of the LTIP and Agreements. The Board may
----------------------------------------------------
amend or terminate the LTIP at any time. No such amendment or termination will
adversely affect, in any way, the rights of individuals who have outstanding
Awards unless such individuals consent to such amendment or termination. The
Committee may amend any Agreement which it previously has authorized under the
LTIP if the amended Agreement is signed by the Company and the applicable
Participant.
9.8 Action by Company or Related Company. The board of directors of the
------------------------------------
Company or any Related Company will take any action required or permitted to be
taken by resolution.
9.9 Gender and Number; Headings. Words in any gender will include any
---------------------------
other gender, words in the singular will include the plural and the plural will
include the singular. The headings in this LTIP are for convenience of
reference. Headings are not a part of the LTIP and will not be considered in
the construction of the LTIP.
9.10 Legal References. Any reference in this LTIP to a provision of law
----------------
which is later revised, modified, finalized or redesignated, will automatically
be considered a reference to such revised, modified, finalized or redesignated
provision of law.
9.11 Notices. In order for a Participant or other individual to give
-------
notice or other communication to the Committee, the notice or other
communication will be in the form specified by the Committee and delivered to
the location designated by the Committee in its sole discretion.
9.12 Governing Law. The LTIP is governed by and will be construed in
-------------
accordance with the laws of the State of Georgia.
ADOPTED BY BOARD OF DIRECTORS ON NOVEMBER 5, 1998
APPROVED BY SHAREHOLDERS ON FEBRUARY 5, 1999
16
<PAGE>
EXHIBIT 10.1(O)
AGL RESOURCES INC.
NONQUALIFIED SAVINGS PLAN
July 1, 1998
<PAGE>
AGL RESOURCES INC.
NONQUALIFIED SAVINGS PLAN
Effective as of the 1st day of July, 1998, AGL Resources Inc., a
corporation duly organized and existing under the laws of the State of Georgia
(the "Controlling Company"), hereby amends and restates the AGL Resources Inc.
Nonqualified Savings Plan (the "Plan"). The Plan was originally established as
of the 1st day of July, 1995.
STATEMENT OF PURPOSE
--------------------
A. The primary purpose of the Plan is to recognize the contributions
made to the Controlling Company and its participating affiliates by certain
employees and to reward those contributions by providing eligible employees with
an opportunity to accumulate savings for their future security.
B. The Plan is intended to be an unfunded nonqualified deferred
compensation plan maintained by the Controlling Company primarily for the
purpose of providing deferred compensation for a select group of management or
highly compensated employees (within the meaning of (S)(S)201(2), 301(a)(3),
401(a)(1) and 4021(b)(6) of the Employee Retirement Income Security Act of 1974,
as amended), and shall be construed in all respects in accordance with such
intended purposes.
C. Any trust fund established to maintain and invest the amounts
contributed to the Plan shall be established under a trust agreement which meets
the requirements of a "rabbi trust," pursuant to guidelines issued by the
Internal Revenue Service (the "IRS").
D. Regardless of the establishment of a trust fund, all assets of the
Plan shall remain assets of the Controlling Company and shall be subject to the
general creditors of the Controlling Company. Participants and Beneficiaries
shall have only the rights of unsecured creditors with respect to any assets of
the Plan.
STATEMENT OF AGREEMENT
In order to amend and restate the Plan with the purposes and goals as
hereinabove described, the Controlling Company hereby sets forth the terms and
provisions of the amended and restated Plan as follows:
<PAGE>
AGL RESOURCES INC.
NONQUALIFIED SAVINGS PLAN
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I DEFINITIONS.............................................................. 1
1.1 Account.......................................................... 1
1.2 Active Participant............................................... 1
1.3 Administrative Committee......................................... 1
1.4 Affiliate........................................................ 1
1.5 Before-Tax Account............................................... 1
1.6 Before-Tax Contributions......................................... 1
1.7 Beneficiary...................................................... 1
1.8 Board............................................................ 1
1.9 Break in Service................................................. 1
1.10 Change in Control................................................ 2
1.11 Code............................................................. 5
1.12 Company Contributions............................................ 5
1.13 Company Stock.................................................... 5
1.14 Compensation..................................................... 5
1.15 Contributions.................................................... 5
1.16 Controlling Company.............................................. 6
1.17 Covered Employee................................................. 6
1.18 Deferral Election................................................ 6
1.19 Disabled......................................................... 6
1.20 Effective Date................................................... 6
1.21 Employee......................................................... 6
1.22 Entry Date....................................................... 6
1.23 Forfeiture....................................................... 6
1.24 Hour of Service.................................................. 6
1.25 Investment Fund or Funds......................................... 7
1.26 Leave of Absence................................................. 8
1.27 Matching Account................................................. 8
1.28 Matching Contributions........................................... 8
1.29 Maternity or Paternity Leave..................................... 8
1.30 Normal Retirement Age............................................ 8
1.31 Participant...................................................... 8
1.32 Participating Company............................................ 8
1.33 Plan............................................................. 8
1.34 Plan Year........................................................ 8
1.35 Spouse or Surviving Spouse....................................... 8
1.36 Retirement Savings Plus Plan or RSP.............................. 9
1.37 Trust or Trust Agreement......................................... 9
1.38 Trustee.......................................................... 9
1.39 Trust Fund....................................................... 9
1.40 Valuation Date................................................... 9
1.41 Year of Vesting Service.......................................... 9
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C>
ARTICLE II ELIGIBILITY........................................................................... 9
2.1 Initial Eligibility Requirements............................................... 9
(a) General Rule.............................................................. 9
(b) New Participating Companies............................................... 10
2.2 Subsequent Eligibility Requirements............................................ 10
2.3 Treatment of Interruptions of Service.......................................... 10
(a) Leave of Absence.......................................................... 10
(b) Reparticipation Upon Reemployment......................................... 10
2.4 Change in Status............................................................... 10
ARTICLE III CONTRIBUTIONS......................................................................... 10
3.1 Before-Tax Contributions....................................................... 10
(a) Before-Tax Contributions.................................................. 10
(b) Deferral Elections........................................................ 11
3.2 Matching Contributions......................................................... 12
3.3 Form of Contributions.......................................................... 12
3.4 Timing of Contributions........................................................ 12
ARTICLE IV PARTICIPANTS' ACCOUNTS; CREDITING AND ALLOCATIONS..................................... 12
4.1 Establishment of Participants' Accounts........................................ 12
4.2 Allocation and Crediting of Before-Tax and Matching Contributions.............. 12
4.3 Allocation and Crediting of Investment Experience.............................. 13
(a) Determination of Earnings or Losses....................................... 13
(b) Formula For Allocation.................................................... 13
4.4 Notice to Participants of Account Balances..................................... 13
4.5 Good Faith Valuation Binding................................................... 13
4.6 Errors and Omissions in Accounts............................................... 14
ARTICLE V INVESTMENT OF ACCOUNTS................................................................ 14
5.1 Establishment of Trust Fund.................................................... 14
(a) No Trust Required......................................................... 14
(b) Rabbi Trust Permitted..................................................... 14
(c) Trust Required Upon Change in Control..................................... 14
5.2 Investment Funds............................................................... 14
(a) Named Investment Funds.................................................... 14
(b) Other Investment Funds.................................................... 14
(c) Reinvestment of Cash Earnings............................................. 15
5.3 Investment Procedures.......................................................... 15
(a) Investment of Future Contributions........................................ 15
(b) Investment of Existing Account Balances................................... 15
(c) Conditions Applicable to Elections........................................ 15
(d) Compliance with SEC Rule 16b-3............................................ 16
5.4 Acquisition of Company Stock................................................... 16
(a) In General................................................................ 16
(b) Stock Rights, Warrants or Options......................................... 16
5.5 Value of Assets................................................................ 16
ARTICLE VI VESTING IN ACCOUNTS................................................................... 17
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C>
6.1 General Vesting Rule...................................................... 17
6.2 Vesting Upon Other Occurrences............................................ 17
6.3 Timing of Forfeitures..................................................... 17
ARTICLE VII PAYMENT OF BENEFITS.............................................................. 18
7.1 Benefit Payments Upon Termination of Service for any Reason Other
Than Death................................................................ 18
7.2 Death Benefits............................................................ 18
7.3 Form of Distribution...................................................... 18
7.4 Beneficiary Designation................................................... 18
(a) General.............................................................. 18
(b) No Designation or Designee Dead or Missing........................... 18
7.5 Hardship Withdrawals...................................................... 19
(a) Parameters of Hardship Withdrawals................................... 19
(b) Unforeseeable Emergency.............................................. 19
(c) Application for Hardship Withdrawal.................................. 19
(d) Payment of Withdrawal................................................ 19
7.6 Unclaimed Benefits........................................................ 20
7.7 Claims.................................................................... 20
(a) Procedure............................................................ 20
(b) Review Procedure..................................................... 20
(c) Satisfaction of Claims............................................... 21
ARTICLE VIII ALLOCATION OF AUTHORITY AND RESPONSIBILITIES..................................... 21
8.1 Administrative Committee.................................................. 21
(a) Appointment and Term of Office....................................... 21
(b) Organization......................................................... 21
(c) Powers and Responsibility............................................ 21
(d) Administrative Committee Records..................................... 22
(e) Reporting and Disclosure............................................. 22
(f) Plan Construction.................................................... 22
(g) Assistants and Advisers.............................................. 22
(h) Indemnification...................................................... 22
8.2 Controlling Company and Board............................................. 23
(a) General Responsibilities............................................. 23
(b) Allocation of Authority.............................................. 23
(c) Authority of Participating Companies................................. 23
8.3 Trustee................................................................... 23
8.4 Delegation................................................................ 23
ARTICLE IX AMENDMENT, TERMINATION AND ADOPTION.............................................. 24
9.1 Amendment................................................................. 24
9.2 Termination............................................................... 24
(a) Right to Terminate................................................... 24
(b) Dissolution of Trust................................................. 24
9.3 Adoption of the Plan by a Participating Company........................... 24
(a) Procedures for Participation......................................... 24
(b) Authority under Plan................................................. 24
(c) Contributions to Plan................................................ 25
</TABLE>
-iii-
<PAGE>
<TABLE>
<S> <C>
(d) Withdrawal from Plan.............................................. 25
ARTICLE X MISCELLANEOUS................................................................. 25
10.1 Nonalienation of Benefits and Spendthrift Clause........................ 25
10.2 Headings................................................................ 25
10.3 Construction, Controlling Law........................................... 26
10.4 No Contract of Employment............................................... 26
10.5 Legally Incompetent..................................................... 26
10.6 Heirs, Assigns and Personal Representatives............................. 26
10.7 Unsecured Creditor Rights............................................... 26
10.8 Legal Action............................................................ 26
10.9 Severability............................................................ 26
10.10 Predecessor Service..................................................... 27
10.11 Plan Expenses........................................................... 27
SCHEDULE A EFFECTIVE DATES FOR PARTICIPATING COMPANIES................................... 28
SCHEDULE B ITEMS EXCLUDED FROM "COMPENSATION" UNDER (S)1.15(3)(i)........................ 29
</TABLE>
-iv-
<PAGE>
ARTICLE I
DEFINITIONS
-----------
For purposes of the Plan, the following terms, when used with an initial
capital letter, shall have the meanings set forth below unless a different
meaning plainly is required by the context.
1.1 Account shall mean, with respect to a Participant or Beneficiary, the
-------
amount of money or other property as is evidenced by the last balance posted in
accordance with the terms of the Plan to the account record established for such
Participant or Beneficiary. The Administrative Committee may establish and
maintain separate subaccounts for each Participant and Beneficiary, provided
allocations are made to such subaccounts in the manner described in Article IV
of the Plan. "Account" shall refer to the aggregate of all separate subaccounts
or to individual, separate subaccounts, as may be appropriate in context.
1.2 Active Participant shall mean, for any Plan Year (or any portion
------------------
thereof), any Covered Employee who is eligible to make contributions to the Plan
for that Plan Year.
1.3 Administrative Committee shall mean the committee designated by the
------------------------
Board which shall act on behalf of the Controlling Company to administer the
Plan; provided, the Controlling Company may act in lieu of the Administrative
Committee as it deems appropriate or desirable.
1.4 Affiliate shall mean, as of any date, (i) a Participating Company,
---------
and (ii) any company, person or organization which, on such date, (A) is a
member of the same controlled group of corporations [within the meaning of Code
(S)414(b)] as is a Participating Company; (B) is a trade or business (whether or
not incorporated) which controls, is controlled by or is under common control
with [within the meaning of Code (S)414(c)] a Participating Company; (C) is a
member of an affiliated service group [as defined in Code (S)414(m)] which
includes a Participating Company; or (D) is required to be aggregated with a
Participating Company pursuant to regulations promulgated under Code (S)414(o).
1.5 Before-Tax Account shall mean the separate subaccount established and
------------------
maintained on behalf of a Participant or his Beneficiary to reflect his interest
in the Plan attributable to his Before-Tax Contributions.
1.6 Before-Tax Contributions shall mean the amounts paid by each
------------------------
Participating Company to the Plan at the election of Participants, all pursuant
to the terms of (S)3.1(a).
1.7 Beneficiary shall mean the person(s) designated in accordance with
-----------
(S)7.4 to receive any death benefits that may be payable under the Plan upon the
death of a Participant.
1.8 Board shall mean the board of directors of the Controlling Company. A
-----
reference to the board of directors of any other Participating Company shall
specify it as such.
1.9 Break in Service shall mean, with respect to an Employee, any year
----------------
during which such Employee fails to complete more than 500 Hours of Service;
provided, a Break in Service shall not be deemed to have occurred during any
period for which he is granted a Leave of Absence if he returns to the service
of an Affiliate within the time permitted as set forth in the Plan. A Break in
Service shall be deemed to have commenced on the first day of the year in which
it occurs.
<PAGE>
For purposes of determining whether or not an Employee has incurred a Break
in Service, an Employee absent from work due to a Maternity or Paternity Leave
shall be credited with (i) the number of Hours of Service with which he normally
would have been credited but for the Maternity or Paternity Leave, or (ii) if
the Administrative Committee is unable to determine the hours described in (i),
8 Hours of Service for each day of absence included in the Maternity or
Paternity Leave; provided, the maximum number of Hours of Service credited for
purposes of this Section shall not exceed 501 hours. Hours of Service so
credited shall be applied only to the year in which the Maternity or Paternity
Leave begins, unless such Hours of Service are not required to prevent the
Employee from incurring a Break in Service, in which event such Hours of Service
shall be credited to the Employee in the immediately following year. No Hour of
Service shall be credited due to Maternity or Paternity Leave as described in
this Section unless the Employee furnishes proof satisfactory to the
Administrative Committee (A) that his absence from work was due to a Maternity
or Paternity Leave and (B) of the number of days he was absent due to the
Maternity or Paternity Leave. The Administrative Committee shall prescribe
uniform and nondiscriminatory procedures by which to make the above
determinations.
As used in this Section, the term "year" shall mean the same 12-month
period as forms the basis for determining a Year of Vesting Service.
1.10 Change in Control shall mean:
-----------------
(a) the occurrence of any one of the following events (the terms used
in this Section 1.11 with an initial capital letter shall have the meanings set
forth in Section 1.11(b) unless otherwise defined in the Plan):
(1) The acquisition by a Person, together with Affiliates and
Associates of such Person, whether by purchase, tender offer, exchange,
reclassification, recapitalization, merger or otherwise, of a sufficient
number of shares of Company Stock or Company Stock Equivalents to
constitute the Person an Acquiring Person; or
(2) During any period of two consecutive years, individuals who
at the beginning of such period constitute the Board cease for any reason
to constitute at least a majority thereof, unless the election of each
director who was not a director at the beginning of such period has been
approved in advance by a majority of the Continuing Directors then in
office; or
(3) Any merger or consolidation the result of which is that less
than 90 percent of the common stock, Voting Securities or other equity
interests of the surviving or resulting corporation or other Person shall
be owned in the aggregate by the former shareholders of the Controlling
Company, other than Affiliates or Associates of any party to such merger or
consolidation, as the same shall have existed immediately prior to such
merger or consolidation; or
(4) The sale by the Controlling Company, in one transaction or a
series of related transactions, whether in liquidation, dissolution or
otherwise, of assets or earning power aggregating more than 50 percent of
the assets or earning power of the Company and its Subsidiaries (taken as a
whole) to any other Person or Persons.
(b) The following definitions shall apply in determining when a
Change in Control has occurred:
2
<PAGE>
(1) "Acquiring Person" shall mean any Person who or which,
together with all Affiliates and Associates of such Person, shall become
the Beneficial Owner of 10 percent or more of the shares of Company Stock
then outstanding, but shall not include the Company, any Subsidiary of the
Controlling Company, or any Person who or which, together with all
Affiliates and Associates of such Person, is the Beneficial Owner of 10
percent or more of the shares of Company Stock as of the effective date of
the Plan, any employee benefit plan of the Company or of any Subsidiary of
the Company [if approved by a majority of the Continuing Directors], or any
Person or entity organized, appointed or established by the Company for or
pursuant to the terms of any such plan.
(2) "Affiliate" shall have the meaning ascribed to such term in
Rule 12b-2 of the General Rules and Regulations under the Securities
Exchange Act of 1934, as amended and in effect on the effective date of the
Plan (the "Exchange Act").
(3) "Associate" shall mean:
(A) Any corporation or organization, or parent or
subsidiary of such corporation or organization, of which a Person is
an officer, director or partner or is, directly or indirectly, the
Beneficial Owner of 10 percent or more of any class of equity
securities;
(B) Any trust or other estate in which a Person has a
beneficial interest of 10 percent or more or as to which such Person
serves as trustee or in a similar fiduciary capacity; and
(C) Any brother or sister (whether by whole or half
blood), ancestor, lineal descendant or spouse of a Person, or any such
relative of such spouse.
(4) "Beneficial Owner" shall mean, with respect to any
securities, any Person who, together with such Person's Affiliates and
Associates, directly or indirectly:
(A) Has the right to acquire such securities (whether
such right is exercisable immediately or only after the passage of
time) pursuant to any agreement, arrangement or understanding (whether
or not in writing) or upon the exercise of conversion rights, exchange
rights, rights, warrants or options, or otherwise; provided, a Person
shall not be deemed the Beneficial Owner of, or to Beneficially Own:
(i) Securities acquired by participation in good
faith in a firm commitment underwriting by a Person engaged in
business as an underwriter of securities until the expiration of
40 days after the date of such acquisition; or
(ii) Securities tendered pursuant to a tender or
exchange offer made by such Person or any of such Person's
Affiliates or Associates until such tendered securities are
accepted for purchase or exchange; or
3
<PAGE>
(iii) Securities issuable upon exercise of rights
issued to all shareholders generally, which rights are only
exercisable upon separation from the Company Stock, or securities
issuable upon exercise of rights that have separated from the
Company Stock upon the occurrence of events specified in a rights
agreement between the Company and a rights agent;
(B) Has the right to vote or dispose of or has
Beneficial Ownership (as determined pursuant to Rule 13d-3 of the
General Rules and Regulations under the Exchange Act) of such
securities, including pursuant to any agreement, arrangement or
understanding, whether or not in writing; provided, a Person shall not
be deemed the Beneficial Owner of, or to Beneficially Own, any
security under this subparagraph (ii) as a result of an agreement,
arrangement or understanding to vote such security if such agreement,
arrangement or understanding:
(i) Arises solely from a revocable proxy given in
response to a public proxy or consent solicitation made pursuant
to, and in accordance with, the applicable provisions of the
General Rules and Regulations under the Exchange Act; and
(ii) Is not also then reportable by such Person on
Schedule 13D under the Exchange Act (or any comparable or
successor report); or
(C) With respect to any securities which are
Beneficially Owned, directly or indirectly, by any other Person (or
any Affiliate or Associate thereof), has any agreement, arrangement or
understanding (whether or not in writing), for the purpose of
acquiring, holding, voting (except pursuant to a revocable proxy as
described herein or disposing of any voting securities of the Company.
(5) "Company Stock Equivalents" shall mean preferred stock or
other entity securities of the Controlling Company having the right to be
converted by the holders thereof into shares of Company Stock, or having the
right to vote generally for the election of directors and on other matters. For
purposes of determining the total amount of Company Stock and Company Stock
Equivalents owned by any Person, such Company Stock Equivalents shall be equal
to the number of shares into which they may be converted by the holders thereof,
or in the case of securities that are not convertible having the right to vote,
shall be equal to the number of votes they are entitled to cast in elections for
directors.
(6) "Continuing Director" shall mean:
(A) Any member of the Board who is not an Acquiring Person,
or an Affiliate or Associate of an Acquiring Person, or a
representative of an Acquiring Person or of any such Affiliate or
Associate, and was a member of the Board prior to the effective
date of the Plan; or
4
<PAGE>
(B) Any Person who subsequently becomes a member of the
Board who is not an Acquiring Person, or an Affiliate or
Associate of an Acquiring Person, or a representative of an
Acquiring Person or of any such Affiliate or Associate, if such
Person's nomination for election or election to the Board is
recommended or approved by a majority of the Continuing
Directors.
(7) "Person" shall mean any individual, firm, corporation,
partnership or other entity.
(8) "Subsidiary" shall mean any corporation, partnership, joint
venture, trust or other entity more than 50 percent of the Voting Securities of
which are Beneficially Owned, directly or indirectly, by a Person.
(9) "Voting Securities" shall mean any class of then outstanding
shares of stock or other beneficial interests entitled to vote in election of
directors or other Persons charged with management of a Person."
1.11 Code shall mean the Internal Revenue Code of 1986, as amended, and
----
any succeeding federal tax provisions.
1.12 Company Contributions shall mean Before-Tax and Matching
---------------------
Contributions made by the Participating Companies pursuant to the terms of the
Plan.
1.13 Company Stock shall mean the $5.00 par value common stock of AGL
-------------
Resources Inc.
1.14 Compensation shall mean, for any Plan Year, the total of the amounts
------------
described in subsections (1) and (2), minus the amount described in subsection
(3):
(1) all such Participant's wages, as defined in Code (S)3401(a)
for purposes of income tax withholding at the source, that are reportable for
federal income tax purposes on IRS Form W-2 (determined without regard to any
rules that limit the remuneration included in wages based on the nature or
location of the employment or the services performed (such as the exception for
agricultural labor in Code (S)3401(a)(2)), but only to the extent that such
wages are attributable to items listed on the attached Schedule B; plus
----
(2) all before-tax, salary deferral or reduction contributions
made to the Plan and other (S)401(k) and(S)125 plans (such as the Controlling
Company's Flex Plan) of the Participating Companies on behalf of a Participant
for such Plan Year [including any contributions made under Code (S)402(a)(8) or
(S)402(h)]; minus
-----
(3) any amounts paid or made available to a Participant during
the Plan Year while he is not an Active Participant.
1.15 Contributions shall mean, individually or collectively, the Before-
-------------
Tax and Matching Contributions permitted under the Plan.
5
<PAGE>
1.16 Controlling Company shall mean AGL Resources Inc., a Georgia
-------------------
corporation with its principal office in Atlanta, Georgia, and its successors.
1.17 Covered Employee shall mean any Employee of a Participating Company
----------------
who, as of his initial Entry Date or as of the December 1 immediately preceding
a subsequent Plan Year, had an annual base salary in an amount equal to or in
excess of the compensation limit designated by the IRS for determining "highly
compensated employee" under Code (S)414(q)(1)(C) plus $10,000 (for example, the
----
1998 IRS limit is $80,000 plus $10,000 = $90,000).
----
1.18 Deferral Election shall mean a written election by an Active
-----------------
Participant directing the Participating Company of which he is an Employee to
withhold a percentage of his current Compensation from his paychecks and to
contribute such withheld amount to the Plan as a Before-Tax Contribution, all as
provided in (S)3.1.
1.19 Disabled shall mean that a Participant is (i) wholly prevented from
--------
engaging in any substantially gainful activity by reason of a medically-
determinable physical or mental impairment which can be expected to result in
death or to be of long-continued and indefinite duration, and (ii) determined
eligible to receive long term disability benefits from a Participating Company's
long term disability plan, or if no such plan exists, upon the discretionary
determination by the Administrative Committee that the employee meets the
definition of "disabled" under the Controlling Company's long-term disability
plan.
1.20 Effective Date shall mean July 1, 1998, the date that the restatement
--------------
and amendment of this Plan initially shall be effective; provided, any effective
date specified herein for any provision, if different from the "Effective Date",
shall control. The Plan was initially adopted effective as of July 1, 1995. The
effective date of participation in the Plan for each Participating Company shall
be the date set forth with respect to the Participating Company in Schedule A
hereto.
1.21 Employee shall mean any individual who is a common law employee of a
--------
Participating Company (including officers, but excluding directors who are not
officers or otherwise employees).
1.22 Entry Date shall mean each business day during which the Plan remains
----------
in effect.
1.23 Forfeiture shall mean, for any Plan Year, the nonvested dollar amount
----------
of an Account of a former Participant who separates from service from all
Affiliates. Forfeitures shall be used to reduce Matching Contributions.
1.24 Hour of Service shall mean the increments of time described in
---------------
subsection (a) hereof, as modified by subsections (b), (c) and (d) hereof:
(a) (1) Each hour for which an Employee is paid, or entitled to
payment, for the performance of duties for an Affiliate during the
applicable computation period;
(2) Each hour for which an Employee is paid, or entitled to
payment, by an Affiliate on account of a period of time during which no
duties are performed (irrespective of whether the employment relationship
has terminated) due to vacation, holiday, illness, incapacity (including
disability), layoff, jury duty, military duty or Leave of Absence;
provided:
(A) No more than 501 Hours of Service shall be credited
under this subsection (2) to an Employee for any single continuous
period during which he
6
<PAGE>
performs no duties as an employee of an Affiliate (whether or not
such period occurs in a single computation period);
(B) An hour for which an Employee is directly or indirectly
paid, or entitled to payment, on account of a period during which he
performs no duties as an employee of an Affiliate shall not be
credited as an Hour of Service if such payment is made or due under a
plan maintained solely to comply with applicable workers'
compensation, unemployment compensation or disability insurance laws;
and
(C) Hours of Service shall not be credited to an Employee
for a payment which solely reimburses such Employee for medical or
medically related expenses incurred by him.
For purposes of this subsection (2), a payment shall be deemed to be made
by or due from an Affiliate regardless of whether such payment is made by
or due from an Affiliate directly, or indirectly through, among others, a
trust fund or insurer, to which the Affiliate contributes or pays premiums
and regardless of whether contributions made or due to the trust fund,
insurer or other entity are for the benefit of particular employees or are
on behalf of a group of employees in the aggregate; and
(3) Each hour for which back pay, irrespective of mitigation of
damages, is either awarded or agreed to by an Affiliate; provided, the same
Hours of Service shall not be credited both under subsection (1) or
subsection (2), as the case may be, and under this subsection (3); and,
provided further, crediting of Hours of Service for back pay awarded or
agreed to with respect to periods described in subsection (2) shall be
subject to the limitations set forth in that subsection.
(b) Each Employee for whom an Affiliate does not keep records of
actual Hours of Service shall be credited, in accordance with this Section and
applicable regulations promulgated by the Department of Labor, with 45 Hours of
Service for each week for which such Employee would be required to be credited
with at least 1 Hour of Service.
(c) The rate or manner used for crediting Hours of Service may be
changed at the direction of the Administrative Committee from time to time so as
to facilitate administration and to equitably reflect the purposes of the Plan;
provided, no change shall be effective as to any Plan Year for which allocations
have been made pursuant to Article IV at the time such change is made; and,
provided further, Hours of Service shall be credited and determined in
compliance with Department of Labor Regulation (S)2530.200b-2(b) and (c), 29 CFR
Part 2530, as may be amended from time to time, or such other federal
regulations as may from time to time be applicable.
(d) For purposes of this Section, a "computation period" shall mean
the 12-month period that forms the basis for determining an Employee's Years of
Vesting Service.
1.25 Investment Fund or Funds shall generally mean the investment fund or
------------------------
funds established under the Retirement Savings Plus Plan, and any other
investment funds established from time to time pursuant to (S)5.2 hereof.
7
<PAGE>
1.26 Leave of Absence shall mean an excused leave of absence granted to an
----------------
Employee by an Affiliate in accordance with applicable federal or state law or
the Affiliate's personnel policy. Among other things, Leave of Absence shall be
granted to an Employee:
(a) who leaves the service of an Affiliate, voluntarily or
involuntarily, to enter the Armed Forces of the United States; provided, (i) the
Employee is legally entitled to reemployment under the veteran's reemployment
rights provisions as codified at 38 USC (S)2021, et seq., its predecessors and
successors; and (ii) the Employee applies for and reenters service with an
Affiliate within the time, in the manner and under the conditions prescribed by
law;
(b) for any time such Employee is drawing workers' compensation
benefits or is sick, disabled or incapacitated, if he is thereby precluded from
properly performing his assigned duties for a temporary period of time; and
(c) under such other circumstances as the Administrative Committee
shall determine are fair, reasonable and equitable as applied uniformly among
Employees under similar circumstances.
1.27 Matching Account shall mean the separate subaccount established and
----------------
maintained on behalf of a Participant or his Beneficiary to reflect his interest
in the Plan attributable to Matching Contributions.
1.28 Matching Contributions shall mean the amounts paid by each
----------------------
Participating Company to the Plan as a match to Participants' Before-Tax
Contributions, all as pursuant to the terms of (S)3.2.
1.29 Maternity or Paternity Leave shall mean any period, during which an
----------------------------
Employee is absent from work as an employee of an Affiliate (i) because of the
pregnancy of such Employee; (ii) because of the birth of a child of such
Employee; (iii) because of the placement of a child with such Employee in
connection with the adoption of such child by such Employee; or (iv) for
purposes of such Employee caring for a child immediately after the birth or
placement of such child.
1.30 Normal Retirement Age shall mean age 65.
---------------------
1.31 Participant shall mean any person who has an Account under the Plan.
-----------
1.32 Participating Company shall mean all companies which have adopted or
---------------------
hereafter may adopt the Plan for the benefit of their employees and which
continue to participate in the Plan, all as provided in (S)9.3.
1.33 Plan shall mean the AGL Resources Inc. Nonqualified Savings Plan as
----
contained herein and all amendments thereto. The Plan is intended to be an
unfunded nonqualified deferred compensation plan for the benefit of a select
group of management or highly compensated employees.
1.34 Plan Year shall mean each 12-month period beginning on January 1 and
---------
ending on December 31.
1.35 Spouse or Surviving Spouse shall mean, with respect to a Participant,
--------------------------
the person who is treated as married to such Participant under the laws of the
state in which the Participant resides. The determination of a Participant's
Spouse or Surviving Spouse shall be made as of the earlier of the date as
8
<PAGE>
of which benefit payments from the Plan to such Participant are made or commence
(as applicable) or the date of such Participant's death.
1.36 Retirement Savings Plus Plan or RSP shall mean the AGL Resources Inc.
-----------------------------------
Retirement Savings Plus Plan, as it may be amended from time to time.
1.37 Trust or Trust Agreement shall mean a separate agreement between the
------------------------
Controlling Company and the Trustee governing the creation of the Trust Fund,
and all amendments thereto.
1.38 Trustee shall mean the party or parties so designated from time to
-------
time pursuant to the Trust Agreement.
1.39 Trust Fund shall mean the total amount of cash and other property
----------
held by the Trustee (or any nominee thereof) at any time under the Trust
Agreement.
1.40 Valuation Date shall mean each date on which the fair market value of
--------------
the accounts under the Plan are determined. For periods prior to July 1, 1998,
the term "Valuation Date" shall mean every March 31, June 30, September 30 and
December 31 and each interim date on which a valuation is made; for periods
beginning on and after July 1, 1998, the term "Valuation Date" shall mean each
business day of each period during which the Plan remains in effect.
1.41 Year of Vesting Service shall mean a Plan Year during which an
-----------------------
Employee completes no less than 1,000 Hours of Service; provided:
(a) Years of Vesting Service completed prior to a period in which
the Participant incurred 5 or more consecutive Breaks in Service shall be
disregarded under the Plan if the Participant had no vested interest in his
Account at the time the first such Break in Service commenced and the number of
such consecutive Breaks in Service equals or exceeds the number of his prior
Years of Vesting Service;
(b) Years of Vesting Service completed after a period in which the
Participant had at least 5 consecutive Breaks in Service shall be disregarded
for the purpose of determining his vested interest in that portion of his
Account which accrued before such Breaks in Service; and
(c) For purposes of this Section, employment with an Affiliate shall
be considered employment with the Company, and in the case of a leased employee
(within the meaning of Code (S)414(n)) of any Affiliate, such leased employee
shall be considered as being a leased employee of the Company.
ARTICLE II
ELIGIBILITY
-----------
2.1 Initial Eligibility Requirements.
--------------------------------
(a) General Rule. Except as provided in subsection (b) hereof, each
------------
Covered Employee shall first become eligible to make contributions under the
Plan as of the Entry Date coincident
9
<PAGE>
with or next following such Covered Employee's attainment of age 21 and
completion of thirty (30) days of employment as a Covered Employee.
(b) New Participating Companies. Each Covered Employee employed by a
---------------------------
Participating Company on the date such Participating Company first becomes a
Participating Company shall first become eligible to make contributions under
the Plan as of the business day coincident with or next following such Covered
Employee's attainment of age 21 and completion of thirty (30) days of employment
with such Participating Company.
2.2 Subsequent Eligibility Requirements.
-----------------------------------
Each Covered Employee shall be eligible to make contributions under the
Plan for each Plan Year following the Plan Year in which the Covered Employee
first became eligible to make contributions under the Plan if such Covered
Employee satisfies the compensation requirements for Covered Employees as of the
December 1 immediately preceding the first day of such subsequent Plan Year.
2.3 Treatment of Interruptions of Service.
-------------------------------------
(a) Leave of Absence. If a Covered Employee satisfies the eligibility
----------------
requirements set forth in (S)2.1 but is on a Leave of Absence on the Entry Date
on which he otherwise would have become an Active Participant, he shall become
an Active Participant as of the date he subsequently resumes the performance of
duties as a Covered Employee in accordance with the terms of his Leave of
Absence.
(b) Reparticipation Upon Reemployment. If an Active Participant
---------------------------------
separates from service with a Participating Company (and all other Participating
Companies), his active participation in the Plan shall cease immediately, and he
again shall become an Active Participant as of the day he is reemployed as a
Covered Employee, regardless of whether he has received a distribution of his
Account balance under the Plan at the time of his reemployment. However,
regardless of whether he again becomes an Active Participant, he shall continue
to be a Participant until he no longer has an Account under the Plan.
2.4 Change in Status. If an Active Participant changes his status of
----------------
employment (but remains employed) so that he is no longer a Covered Employee, he
shall continue to be a Participant until he no longer has an Account under the
Plan. If an Active Participant does not meet the compensation requirements for
Covered Employees as of the December 1 immediately preceding the first day of
any Plan Year, he shall continue to be a Participant until he no longer has an
Account under the Plan and may again become an Active Participant in the Plan
if, as of the December 1 immediately preceding the first day of a Plan Year, he
meets the compensation requirements for Covered Employees.
ARTICLE III
CONTRIBUTIONS
-------------
3.1 Before-Tax Contributions.
------------------------
(a) Before-Tax Contributions. Each Participating Company shall
------------------------
contribute to the Plan, on behalf of each Active Participant employed by such
Participating Company and for each payroll
10
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period for which such Active Participant has a Before-Tax Deferral Election in
effect with such Participating Company, a Before-Tax Contribution in an amount
equal to the amount by which such Active Participant's Compensation has been
reduced for such period pursuant to his Before-Tax Deferral Election. The amount
of the Before-Tax Contribution shall be determined in percentage increments of
such Active Participant's Compensation for each payroll period. The Active
Participant may elect to reduce his Compensation for any period by a maximum of
50 percent; provided, that the total of the Active Participant's Before-Tax
Contributions to the Plan and to the Retirement Savings Plus Plan shall not
exceed 50 percent of his Compensation.
(b) Deferral Elections. Each Active Participant who desires that his
------------------
Participating Company make a Before-Tax Contribution on his behalf shall
complete and deliver to the Participating Company (or its designee) a Before-Tax
Deferral Election. Such Deferral Election shall provide for the reduction of his
Compensation for each Plan Year for which the Deferral Election is applicable,
as determined below. The Administrative Committee, in its sole discretion, shall
prescribe the form of all Deferral Elections and may prescribe such
nondiscriminatory terms and conditions governing the use of the Deferral
Elections as it deems appropriate. Subject to any modifications, additions or
exceptions which the Administrative Committee, in its sole discretion, deems
necessary, appropriate or helpful, the following terms shall apply to Deferral
Elections:
(1) Effective Date. An Active Participant's initial Deferral
--------------
Election with a Participating Company shall be effective for the first
payroll period which ends after the Deferral Election is made and after the
effective date specified for such Deferral Election. If an Active
Participant fails to submit an initial Deferral Election in a timely
manner, he shall be deemed to have elected a deferral of zero percent.
(2) Term. Each Active Participant's Deferral Election with a
----
Participating Company shall remain in effect in accordance with its
original terms until the earlier of (A) the date the Active Participant
ceases to be an Employee of all Participating Companies, (B) the date the
Active Participant revokes or modifies such Deferral Election pursuant to
the terms of subsection (b)(3) hereof, or (C) the date the Administrative
Committee modifies such Deferral Election pursuant to the terms of
subsection (b)(4) hereof. If a Participant is transferred from the
employment of a Participating Company to the employment of another
Participating Company, his Deferral Election with the first Participating
Company will remain in effect and will apply to his Compensation from the
second Participating Company until the earlier of (A), (B) or (C) of the
preceding sentence.
(3) Modification and Revocation. An Active Participant's
---------------------------
Deferral Election with a Participating Company shall terminate upon his
ceasing to be an Employee of such Participating Company. Otherwise, an
Active Participant's Deferral Election with respect to a Plan Year may not
be modified or revoked by the Active Participant during that Plan Year. If
an Active Participant does not make a new Deferral Election for any
subsequent Plan Year, the most recent Deferral Election in place will
remain in effect for that subsequent Plan Year.
(4) Compliance with SEC Rule 16b-3. Notwithstanding any other
------------------------------
provision of the Plan, the Administrative Committee shall take any and all
actions as may be necessary with regard to Deferral Elections made by
Participants who are deemed to be "insiders" of the Company under the terms
of the Securities Exchange Act of 1934, as amended (the "1934 Act"), in
order to meet the requirements of Rule 16b-3 and regulations promulgated
thereunder.
11
<PAGE>
3.2 Matching Contributions.
----------------------
For each Active Participant on whose behalf a Participating Company
has made, with respect to a payroll period, any Before-Tax Contributions, such
Participating Company shall make, with respect to such payroll period, a
Matching Contribution equal to 65 percent of the aggregate amount of such
Before-Tax Contributions up to the first 6 percent of the Participant's
Compensation (or the difference between the amount of Before-Tax Contributions
made by the Participant and matched by the Company under the Retirement Savings
Plus Plan so that only a total of 6 percent of the Participant's Compensation is
matched under both the RSP and the Plan). Matching Contributions for a Plan
Year shall be reduced by the amount of any Forfeitures available for
reallocation during that Plan Year.
3.3 Form of Contributions.
---------------------
All Contributions shall be paid to the Trustee in the form of cash or
Company Stock or a combination thereof, as the Controlling Company or
Administrative Committee may determine from time to time.
3.4 Timing of Contributions.
-----------------------
Each Participating Company which withholds Before-Tax Contributions
from an Active Participant's paychecks pursuant to a Deferral Election shall pay
such Before-Tax Contributions to the Plan as of the earliest date on which such
Contributions can reasonably be transmitted, so long as such date is in
compliance with any applicable laws or regulations.
ARTICLE IV
PARTICIPANTS' ACCOUNTS; CREDITING AND ALLOCATIONS
-------------------------------------------------
4.1 Establishment of Participants' Accounts.
---------------------------------------
To the extent appropriate, the Administrative Committee shall
establish and maintain, on behalf of each Participant and Beneficiary, an
Account which shall be divided into segregated subaccounts. The subaccounts
shall include Before-Tax and Matching Accounts and such other subaccounts as the
Administrative Committee shall deem appropriate or helpful. Each Account shall
be credited with Contributions allocated to such Account and generally shall be
credited with income on investments derived from the assets of such Accounts.
Each Account of a Participant or Beneficiary shall be maintained until the value
thereof has been distributed to or on behalf of such Participant or Beneficiary.
4.2 Allocation and Crediting of Before-Tax and Matching Contributions.
-----------------------------------------------------------------
As of each Valuation Date coinciding with or immediately following the
date on which Before-Tax and Matching Contributions are received on behalf of an
Active Participant, such Contributions shall be allocated and credited directly
to the appropriate Before-Tax and Matching Accounts, respectively, of such
Active Participant.
12
<PAGE>
4.3 Allocation and Crediting of Investment Experience.
-------------------------------------------------
As of each Valuation Date, the Administrative Committee or its
designated recordkeeper shall determine the fair market value of the Trust Fund
which shall be the sum of the fair market values of the Investment Funds. The
Administrative Committee shall determine the amount of the Accounts as follows:
(a) Determination of Earnings or Losses. As of each Valuation Date,
-----------------------------------
the investment earnings (or losses) of each Investment Fund shall be the amount
by which the sum determined in (1) exceeds (or is less than) the sum determined
in (2), where (1) and (2) are as follows:
(1) The sum of (A) the fair market value of such Investment Fund
as of such Valuation Date, plus (B) the amount of any distributions,
withdrawals and transfers to other Investment Funds made since the
immediately preceding Valuation Date from amounts invested in the
Investment Fund; and
(2) The sum of (A) the fair market value of the Investment Fund
as of the immediately preceding Valuation Date, plus (B) Contributions
deposited in and amounts transferred to such Investment Fund since the
immediately preceding Valuation Date.
(b) Formula For Allocation. As of each Valuation Date and prior to
----------------------
the allocations described in (S)(S)4.2, and 4.3, each Participant's Account
shall be allocated and shall be credited with a portion of such earnings or
debited with a portion of such losses of each Investment Fund, as determined in
accordance with subsection (a) hereof, in the proportion that (i)(A) the amount
credited to such Account that was invested in such Investment Fund as of the
immediately preceding Valuation Date, minus (B) any distributions, withdrawals
or transfers to other Investment Funds which were made from such Account since
such preceding Valuation Date and on or before such current Valuation Date, plus
(C) any Contributions deposited in and amounts transferred to such Investment
Fund from such Account since the preceding Valuation Date; bears to (ii)(A) the
total amount invested in such Investment Fund by all Participants as of the
immediately preceding Valuation Date, minus (B) any distributions, withdrawals
or transfers to other Investment Funds which were made from such Accounts since
such preceding Valuation Date and on or before such current Valuation Date, plus
(C) any Contributions deposited in and amounts transferred to such Investment
Fund since the preceding Valuation Date.
4.4 Notice to Participants of Account Balances.
------------------------------------------
At least once for each Plan Year, the Administrative Committee shall
cause a written statement of a Participant's Account balance to be distributed
to the Participant.
4.5 Good Faith Valuation Binding.
----------------------------
In determining the value of the Accounts, the Administrative Committee
and/or its designated recordkeeper shall exercise its best judgment, and all
such determinations of value (in the absence of bad faith) shall be binding upon
all Participants and Beneficiaries.
13
<PAGE>
4.6 Errors and Omissions in Accounts.
--------------------------------
If an error or omission is discovered in the Account of a Participant
or Beneficiary, the Administrative Committee shall cause appropriate, equitable
adjustments to be made as of the Valuation Date coinciding with or immediately
following the discovery of such error or omission.
ARTICLE V
INVESTMENT OF ACCOUNTS
----------------------
5.1 Establishment of Trust Fund.
---------------------------
(a) No Trust Required. The Controlling Company may, but is not
-----------------
required to, establish a trust fund to hold the assets of the Plan. If no trust
fund is established, benefits shall be payable from the general assets of the
Controlling Company.
(b) Rabbi Trust Permitted. If the Controlling Company desires to
---------------------
establish a trust fund, all Contributions are to be paid over to the Trustee to
be held in the Trust Fund and invested in accordance with the terms of the Plan
and the Trust Agreement. If a Trust Fund is established, it shall exist under
an agreement constituting a "rabbi trust" agreement, under which all assets of
the Trust Fund shall be considered to be subject to the general creditors of the
Controlling Company, and all Plan participants shall be unsecured creditors
under such Trust Agreement.
(c) Trust Required Upon Change in Control. Upon a Change in Control
-------------------------------------
of the Controlling Company, the Controlling Company must within ten (10)
business days after such Change in Control, establish and fully fund a rabbi
trust (if and to the extent such a fully funded rabbi trust does not already
exist) to pay all benefits accrued by Participants through that date under the
Plan. Further, upon a Change of Control, an entity other than the Controlling
Company, a Participating Company, any Affiliate or any employee, officer or
director of such companies shall be named by the Board as Trustee of the rabbi
trust. This subsection 5.1(c) of the Plan shall be irrevocable and may not be
amended by the Controlling Company or any other company after the effective date
of the Plan (unless required by law).
5.2 Investment Funds. To the extent a trust fund is established, all
----------------
Contributions to the Plan shall be invested in the following manner:
(a) Named Investment Funds. In accordance with instructions from the
----------------------
Administrative Committee and the terms of the Plan, the Trustee shall generally
establish, for the investment of assets of the trust fund, the investment fund
or funds established under the Retirement Savings Plus Plan.
(b) Other Investment Funds. At the direction of the Administrative
----------------------
Committee, the Trustee shall establish other Investment Funds, in addition to or
in lieu of the Investment Funds described herein, which may include, for
example, other income funds or equity funds. Such other Investment Funds shall
be established without necessity of amendment to the Plan or the Trust and shall
have the investment objectives prescribed by the Administrative Committee and to
which the Trustee consents. Such other Investment Funds also may be established
and maintained for any limited purposes the Administrative Committee may direct.
14
<PAGE>
(c) Reinvestment of Cash Earnings. Any investment earnings received
-----------------------------
in the form of cash with respect to any Investment Fund (in excess of the
amounts necessary to make cash distributions for fractional shares of Company
Stock or to pay Plan or Trust expenses) shall be reinvested in such Investment
Fund.
5.3 Investment Procedures.
---------------------
Each Participant or Beneficiary generally may direct the manner in
which his Accounts shall be invested in and among the Investment Funds;
provided, however, that the Administrative Committee shall have sole discretion
as to investment of a Participant's or Beneficiary's Accounts and may refuse to
follow a Participant's or Beneficiary's investment directions. A Participant's
or Beneficiary's investment directions shall be made in accordance with the
following terms:
(a) Investment of Future Contributions. Except as otherwise provided
----------------------------------
in this Section [relating to special Investment Funds described in (S)5.2(b)],
each Participant may elect, on a form provided by the Administrative Committee,
the percentage of his future Before-Tax and Matching Contributions that will be
invested in each Investment Fund. An initial election of a Participant shall be
made as of the date the Participant commences or recommences participation in
the Plan and shall apply to all Before-Tax and Matching Contributions
attributable to payroll periods ending after such date. Such Participants may
make subsequent elections no more than once per week on a form provided by the
Administrative Committee, and such elections shall apply to all Before-Tax and
Matching Contributions attributable to payroll periods ending after such date.
Any election made pursuant to this subsection with respect to future Before-Tax
and Matching Contributions shall remain effective until changed by such
Participant.
(b) Investment of Existing Account Balances. Except as otherwise
---------------------------------------
provided in this Section, each Participant or Beneficiary may elect, on a form
provided by the Administrative Committee, the percentage of his existing
Accounts that will be invested in each Investment Fund. Such Participant or
Beneficiary may make such elections no more than once per week on a form
provided by the Administrative Committee. Each such election shall apply to such
Participant's or Beneficiary's Account balance as of the date of such election,
and shall remain in effect until changed by such Participant or Beneficiary. In
the event a Participant fails to make an election for his existing Accounts
pursuant to the terms of this subsection (2) which is separate from his election
made for his future Before-Tax and Matching Contributions pursuant to the terms
of subsection (1) hereof, or if a Participant's investment election form is
incomplete or insufficient in some manner, the Participant's existing Accounts
will continue to be invested in the same manner provided under the terms of the
most recent election affecting that portion of his Accounts. The Administrative
Committee may determine at its discretion to charge a reasonable surcharge for
changes to investment of existing Account balances; payment of any such
surcharges may be made outside the Plan though payroll deduction or other
methods as may be determined by the Administrative Committee.
(c) Conditions Applicable to Elections. Allocations of investments in
----------------------------------
the various Investment Funds, as described in subsections (1) and (2) hereof,
shall be made in even multiples of 1 percent as directed by the Participant or
Beneficiary. The Administrative Committee shall have complete discretion to
adopt and revise procedures to be followed in making such investment elections.
Such procedures may include, but are not limited to, the format of the election
forms, the deadline for filing elections and the effective date of such
elections; provided, elections must be permitted at least once every 3 months.
Any procedures adopted by the Administrative Committee that are inconsistent
with the
15
<PAGE>
deadlines specified in this Section shall supersede such provisions of this
Section without the necessity of a Plan amendment.
(d) Compliance with SEC Rule 16b-3. Notwithstanding any other
------------------------------
provisions of the Plan, the Administrative Committee shall take any and all
actions as may be necessary with regard to investment directions made by
Participants who are deemed to be "insiders" of the Company under the terms of
the 1934 Act, in order to meet the requirements of Rule 16b-3 and regulations
promulgated thereunder.
5.4 Acquisition of Company Stock.
----------------------------
(a) In General. To the extent that Contributions and investment
----------
earnings on Company Stock are paid in cash, the Trustee, as directed by the
Administrative Committee, shall effect purchases of Company Stock in compliance
with all applicable securities laws, and in its sole discretion, may purchase
Company Stock in the open market and/or in privately negotiated transactions
with holders of Company Stock and/or the Controlling Company. All purchases of
Company Stock by the Trust will be made at a price or prices which, in the
judgment of the Trustee, do not exceed the fair market value of such Company
Stock as of the date of the purchase.
(b) Stock Rights, Warrants or Options. In the event any rights,
---------------------------------
warrants or options are issued on Company Stock, the Trustee may exercise them
for the acquisition of additional Company Stock, to the extent that cash is then
available and allocable to the Company Stock Fund. Any Company Stock acquired in
this fashion will be treated as Company Stock bought by the Trustee for the net
price paid. Any rights, warrants or options on Company Stock which cannot be
exercised for lack of available cash may be sold by the Trustee (provided the
sale thereof is reasonably practicable), and the proceeds of such a sale shall
be treated as a current cash dividend received on Company Stock.
5.5 Value of Assets.
---------------
For purposes under the Plan for which the value of assets must be
determined, the value of such assets shall be the fair market value. For
purposes of purchasing or selling Company Stock through an exchange on any day,
the fair market value per share of such stock on such day shall be the price of
the stock on the New York Stock Exchange at the time of the purchase or sale.
For all other purposes under the Plan, the fair market value per share of the
Company Stock on any particular day shall be the closing price of such Company
Stock as reported on the New York Stock Exchange Composite Transaction listing
on the day preceding the particular day in question. If, for any reason, the
fair market value per share of Company Stock cannot be ascertained or is
unavailable for a particular day, the fair market value of such stock shall be
determined as of the nearest preceding day on which such fair market value can
be ascertained pursuant to the terms hereof.
16
<PAGE>
ARTICLE VI
VESTING IN ACCOUNTS
-------------------
6.1 General Vesting Rule.
--------------------
All Participants shall at all times be fully vested in their Before-
Tax Account. Except as provided in (S)6.2, the Matching Account of a
Participant shall vest in accordance with the following vesting schedule, based
on the total of the Participant's Years of Vesting Service:
Years of Vesting Service Vested Percentage of
Completed by Participant Participant's Matching Account
------------------------ ------------------------------
Less than 3 Years None
3 Years, but less than 4 50%
4 Years, but less than 5 75%
5 Years or more 100%
6.2 Vesting Upon Other Occurrences.
-------------------------------
Notwithstanding (S)6.1, a Participant's Matching Account shall become
100 percent vested and nonforfeitable upon the occurrence of any of the
following events:
(a) The Participant's attainment of Normal Retirement Age while still
employed as an employee of any Affiliate;
(b) The Participant's death while still employed as an employee of
any Affiliate; or
(c) The Participant's becoming Disabled while still employed as an
employee of any Affiliate.
Notwithstanding (S)6.1, effective as of September 30, 1998, the
Matching Account of those Participants who were employed by an Affiliate, but
who terminated employment with such Affiliate to go directly to work for
SouthStar Energy Services LLC on September 30, 1998, shall be 100 percent vested
and nonforfeitable as of such date.
6.3 Timing of Forfeitures.
---------------------
If a Participant who is not yet 100 percent vested in his Matching
Account separates from service with all Affiliates, the nonvested amount in his
Matching Account shall be immediately forfeited and shall become available as a
Forfeiture as of the Valuation Date coincident with or immediately following the
date on which such termination occurs; provided, if a Participant has no vested
interest in his Account at the time he separates from service, he shall be
deemed to have received a cash-out distribution at the time he separates from
service, and the forfeiture provisions of this Section shall apply. If such a
Participant resumes employment with an Affiliate, such forfeited amount shall
not be restored.
17
<PAGE>
ARTICLE VII
PAYMENT OF BENEFITS
-------------------
7.1 Benefit Payments Upon Termination of Service for any Reason Other Than
----------------------------------------------------------------------
Death.
- -----
If a Participant separates from service with all Affiliates for any
reason other than death, he (or his Beneficiary, if he dies after such
separation from service) shall be entitled to receive a distribution of the
total of (i) the entire vested amount credited to his Account, determined as of
the Valuation Date coincident with or immediately preceding the date payment of
such distribution is to be made, plus (ii) the vested amount of any
Contributions made on his behalf since such Valuation Date. For purposes of this
subsection, the "date payment of such distribution is to be made" refers to the
date established for such purpose by administrative practice, even if actual
payment is made at a later date due to delays in the valuation, administrative
or any other procedure. Benefits payable to a Participant under this Section
shall be distributed within sixty days after the end of the Plan Year after such
Participant separates from service with all Affiliates for any reason other than
death.
7.2 Death Benefits.
--------------
If a Participant dies before payment of his benefits from the Plan is
made, the Beneficiary or Beneficiaries designated by such Participant in his
latest beneficiary designation form filed with the Administrative Committee in
accordance with the terms of (S)7.4 shall be entitled to receive a distribution
of the total of (i) the entire vested amount credited to such Participant's
Account, determined as of the Valuation Date coincident with or immediately
preceding the date payment of such distribution is to be made, plus (ii) any
Contributions made on such Participant's behalf since such Valuation Date. For
purposes of this subsection, the "date payment of such distribution is to be
made" refers to the date established for such purpose by administrative
practice, even if actual payment is made at a later date due to delays in the
valuation, administrative or any other procedure. Benefits payable to a
Beneficiary or Beneficiaries under this Section shall be distributed sixty days
after the end of the Plan Year in which the Participant's death occurs.
7.3 Form of Distribution.
--------------------
Any distribution to a Participant or his Beneficiary or Beneficiaries
shall be made in the form of a single sum cash payment. Such single sum cash
payment may be divided among multiple Beneficiaries, as applicable.
7.4 Beneficiary Designation.
-----------------------
(a) General. Participants shall designate and from time to time may
-------
redesignate their Beneficiary or Beneficiaries in such form and manner as the
Administrative Committee may determine. If any Participant dies prior to
receiving his benefits under the Plan, his Account shall be changed to the name
of such deceased Participant's named or deemed Beneficiary or Beneficiaries.
(b) No Designation or Designee Dead or Missing. In the event that:
------------------------------------------
(1) a Participant dies without designating a Beneficiary;
18
<PAGE>
(2) the Beneficiary designated by a Participant is not surviving
when a payment is to be made to such person under the Plan, and no
contingent Beneficiary was designated by the Participant; or
(3) the Beneficiary designated by a Participant cannot be
located by the Administrative Committee within 1 year from the date
benefits are to commence to such person; then, in any of such events, the
Beneficiary of such Participant with respect to any benefits that remain
payable under the Plan shall be the Participant's Surviving Spouse, if any,
and if not, then the estate of the Participant.
7.5 Hardship Withdrawals.
--------------------
(a) Parameters of Hardship Withdrawals. A Participant may make a
----------------------------------
withdrawal on account of hardship from his vested Account. For purposes of this
subsection, a withdrawal will be on account of "hardship" only if it is
necessary to respond to an "unforeseeable emergency" resulting in a severe
financial need of the Participant. A withdrawal based on financial hardship
cannot exceed the amount necessary to meet the severe financial need created by
the hardship and not reasonably available from other resources of the
Participant. The Administrative Committee shall make its determination, as to
whether a Participant has suffered a severe financial need as a result of an
unforeseeable emergency and whether it is necessary to use a hardship withdrawal
from the Plan to satisfy that need on the basis of all relevant facts and
circumstances.
(b) Unforeseeable Emergency. For purposes of the Plan, an
-----------------------
unforeseeable emergency shall be a sudden and unexpected illness or accident of
the Participant or of a dependent (as defined in Code Section 152(a)) of the
Participant, loss of the Participant's property due to casualty, or other
similar extraordinary and unforeseeable circumstances arising as a result of
events beyond the control of the Participant. The circumstances that will
constitute an unforeseeable emergency will depend upon the facts of each case,
but, in any case, payment may not be made to the extent that such hardship is or
may be relieved -
(i) through reimbursement or compensation by insurance or
otherwise;
(ii) by liquidation of the Participant's assets, to the extent
the liquidation of such assets would not itself cause severe financial
hardship; or
(iii) by cessation of deferrals under the Plan.
Examples of events not considered to be unforeseeable emergencies include the
need to send a participant's child to college or the desire to purchase a home.
(c) Application for Hardship Withdrawal. All applications for
-----------------------------------
hardship withdrawals shall be in writing on a form provided by the
Administrative Committee and shall contain such information as the
Administrative Committee may reasonably request.
(d) Payment of Withdrawal. The amount of a hardship withdrawal shall
---------------------
be paid to a Participant in a single sum in cash as soon as practicable after
the Administrative Committee approves the withdrawal application.
19
<PAGE>
7.6 Unclaimed Benefits.
------------------
In the event a Participant becomes entitled to benefits under the Plan
other than death benefits and the Administrative Committee is unable to locate
such Participant (after sending a letter, return receipt requested, to the
Participant's last known address, and after such further diligent efforts as the
Administrative Committee in its sole discretion deems appropriate) within 1 year
from the date upon which he becomes so entitled, the Administrative Committee
shall direct that such benefits be paid to the Beneficiary of such Participant;
provided, if the distribution is payable upon the termination of the Plan, the
Administrative Committee shall not be required to wait until the end of such 1-
year period. If the Participant and the Beneficiary cannot be located and fail
to claim such benefits by the end of the 5th Plan Year following the Plan Year
in which such Participant becomes entitled to such benefits, then the full
Account of the Participant shall be deemed abandoned and shall be used to reduce
the Matching Contributions of the Participating Company or Companies which
employed such Participant; provided, in the event such Participant or
Beneficiary is located or makes a claim subsequent to the allocation of the
abandoned Account but prior to the expiration of the time within which any such
person's claim to the Account would expire under appropriate state law, then the
amount of the abandoned Account (unadjusted for any investment gains or losses
from the time of abandonment) shall be restored (from abandoned Accounts, Trust
earnings or Contributions made by the Participating Company or Companies with
whom the Participant formerly was employed) and paid to such Participant or
Beneficiary, as appropriate; and, provided, further, the Administrative
Committee, in its sole discretion, may delay the deemed date of abandonment of
any such Account for a period longer than the prescribed 5 Plan Years if it
believes that it is in the best interest of the Plan to do so.
7.7 Claims.
------
(a) Procedure. Claims for benefits under the Plan may be filed with
---------
the Administrative Committee on forms supplied by the Administrative Committee.
The Administrative Committee shall furnish to the claimant written notice of the
disposition of a claim within 90 days after the application therefor is filed;
provided, if special circumstances require an extension of time for processing
the claim, the Administrative Committee shall furnish written notice of the
extension to the claimant prior to the termination of the initial 90-day period,
and such extension shall not exceed one additional, consecutive 90-day period.
In the event the claim is denied, the notice of the disposition of the claim
shall provide the specific reasons for the denial, cites of the pertinent
provisions of the Plan, and, where appropriate, an explanation as to how the
claimant can perfect the claim and/or submit the claim for review.
(b) Review Procedure. Any Participant or Beneficiary who has been
----------------
denied a benefit, or his duly authorized representative, shall be entitled, upon
request to the Administrative Committee, to appeal the denial of his claim. To
do so, the claimant must make a written request to the Administrative Committee
for further consideration of his position. The claimant, or his duly authorized
representative, may review pertinent documents related to the Plan and in the
Administrative Committee's possession in order to prepare the appeal. The form
containing the request for review, together with a written statement of the
claimant's position, must be filed with the Administrative Committee no later
than 60 days after receipt of the written notification of denial of a claim
provided for in subsection (a). The Administrative Committee's decision shall be
made within 120 days following the filing of the request for review and shall be
communicated in writing to the claimant. If unfavorable, the notice of decision
shall explain the reason or reasons for denial and indicate the provisions of
the Plan or other documents used to arrive at the decision.
20
<PAGE>
(c) Satisfaction of Claims. Any payment to a Participant or
----------------------
Beneficiary or to their legal representative or heirs at law, all in accordance
with the provisions of the Plan, shall to the extent thereof be in full
satisfaction of all claims hereunder against the Trustee, the Administrative
Committee and the Controlling Company, any of whom may require such Participant,
Beneficiary, legal representative or heirs at law, as a condition to such
payment, to execute a receipt and release therefor in such form as shall be
determined by the Trustee, the Administrative Committee or the Controlling
Company, as the case may be. If receipt and release shall be required but
execution by such Participant, Beneficiary, legal representative or heirs at law
shall not be accomplished so that the terms of (S)(S) 7.1 and 7.2 may be
fulfilled, such benefits may be distributed or paid into any appropriate court
or to such other place as such court shall direct, for disposition in accordance
with the order of such court, and such distribution shall be deemed to comply
with the requirements of (S)(S)7.1 and 7.2.
ARTICLE VIII
ALLOCATION OF AUTHORITY AND RESPONSIBILITIES
--------------------------------------------
8.1 Administrative Committee
------------------------
(a) Appointment and Term of Office. The Administrative Committee
------------------------------
shall consist of not less than one member who shall be appointed by and serve at
the pleasure of the Board. The Board shall have the right to remove any member
of the Administrative Committee at any time. A member may resign at any time by
written resignation to the Board. If a vacancy in the Administrative Committee
should occur, a successor may be appointed by the Board. A written certification
shall be given to the Trustee by the Board of all members of the Administrative
Committee together with a specimen signature of each member. For all purposes
hereunder, the Trustee shall be conclusively entitled to rely upon such
certification until the Trustee is otherwise notified in writing.
(b) Organization. The Administrative Committee may elect a Chairman
------------
and a Secretary from among its members. In addition to those powers set forth
elsewhere in the Plan, the Administrative Committee may appoint such agents, who
need not be members of such Administrative Committee, as it may deem necessary
for the effective performance of its duties and may delegate to such agents such
powers and duties, whether ministerial or discretionary, as the Administrative
Committee may deem expedient or appropriate. The compensation of such agents who
are not full-time Employees of a Participating Company shall be fixed by the
Administrative Committee within limits set by the Board and shall be paid by the
Controlling Company (to be divided equitably among the Participating Companies)
or from the Trust Fund as determined by the Administrative Committee. The
Administrative Committee shall act by majority vote. Its members shall serve as
such without compensation.
(c) Powers and Responsibility. The Administrative Committee shall
-------------------------
have complete control of the administration of the Plan hereunder, with all
powers necessary to enable it properly to carry out its duties as set forth in
the Plan and the Trust Agreement. The Administrative Committee shall have the
sole authority in its discretion to (i) construe the Plan and to determine all
questions that shall arise thereunder; (ii) decide all questions relating to the
eligibility of Employees to participate in the benefits of the Plan; (iii)
determine the benefits of the Plan to which any Participant or Beneficiary may
be entitled; (iv) maintain and retain records relating to Participants and
Beneficiaries; (v) provide the Trustee with general investment policy guidelines
and directions to assist the Trustee respecting investments made in compliance
with, and pursuant to, the terms of the Plan. (vi) prepare and furnish to the
Trustee sufficient employee data and the amount of Contributions received from
all sources so that the Trustee may maintain separate accounts for Participants
and Beneficiaries and make required payments of benefits; (vii) arrange for any
required fiduciary bonding and (viii) prepare and file or publish with the
Secretary of Labor, the Secretary of the Treasury, their delegates and all other
21
<PAGE>
appropriate government officials all reports and other information required
under law to be so filed or published.
(d) Administrative Committee Records. Any notice, direction, order,
--------------------------------
request, certification or instruction of the Administrative Committee to the
Trustee shall be in writing and shall be signed by a member of the
Administrative Committee. The Trustee and every other person shall be entitled
to rely conclusively upon any and all such notices, directions, orders,
requests, certifications and instructions received from the Administrative
Committee and reasonably believed to be properly executed, and shall act and be
fully protected in acting in accordance therewith. All acts and determinations
of the Administrative Committee shall be duly recorded by its Secretary or under
his supervision, and all such records, together with such other documents as may
be necessary for the administration of the Plan, shall be preserved in the
custody of such Secretary.
(e) Reporting and Disclosure. The Administrative Committee shall
------------------------
keep all individual and group records relating to Participants and Beneficiaries
and all other records necessary for the proper operation of the Plan. Such
records shall be made available to the Participating Companies and to each
Participant and Beneficiary for examination during normal business hours except
that a Participant or Beneficiary shall examine only such records as pertain
exclusively to the examining Participant or Beneficiary and the Plan and Trust
Agreement. The Administrative Committee shall prepare and shall file as required
by law or regulation all reports, forms, documents and other items required by
any relevant statute, each as amended, and all regulations thereunder. This
provision shall not be construed as imposing upon the Administrative Committee
the responsibility or authority for the preparation, preservation, publication
or filing of any document required to be prepared, preserved or filed by the
Trustee or by any other entity to whom such responsibilities are delegated by
law or by the Plan.
(f) Plan Construction. The Administrative Committee shall take such
-----------------
steps as are considered necessary and appropriate to remedy any inequity that
results from incorrect information received or communicated in good faith or as
the consequence of an administrative error. The Administrative Committee shall
interpret the Plan and shall determine the questions arising in the
administration, interpretation and application of the Plan. The Administrative
Committee shall endeavor to act, whether by general rules or by particular
decisions, so as not to discriminate in favor of or against any person and so as
to treat all persons in similar circumstances uniformly. The Administrative
Committee shall correct any defect, reconcile any inconsistency or supply any
omission with respect to the Plan.
(g) Assistants and Advisers. The Administrative Committee shall
-----------------------
have the right to hire, at the expense of the Controlling Company (to be divided
equitably among the Participating Companies), such professional assistants and
consultants as it, in its sole discretion, deems necessary or advisable. To the
extent that the costs for such assistants and advisers are not so paid by the
Controlling Company, they shall be paid at the direction of the Administrative
Committee from the Trust Fund as an expense of the Trust Fund. The
Administrative Committee and the Participating Companies shall be entitled to
rely upon all certificates and reports made by an actuary, accountant or
attorney selected pursuant to this (S)8.1; the Administrative Committee, the
Participating Companies, and the Trustee shall be fully protected in respect to
any action taken or suffered by them in good faith in reliance upon the advice
or opinion of any such actuary, accountant or attorney; and any action so taken
or suffered shall be conclusive upon each of them and upon all other persons
interested in the Plan.
(h) Indemnification. The Administrative Committee and each member of
---------------
that Committee shall be indemnified by the Participating Companies against
judgment amounts, settlement amounts (other than amounts paid in settlement to
which the Participating Companies do not consent) and expenses reasonably
incurred by the Committee or each member of the Committee in connection with any
action to which the Committee or any member thereof may be a party (by reason of
his service
22
<PAGE>
as a member of the Committee) except in relation to matters as to which the
Committee or any member thereof shall be adjudged in such action to be
personally guilty of gross negligence or willful misconduct in the performance
of its or any member's duties. The foregoing right to indemnification shall be
in addition to such other rights as such Committee or each Committee member may
enjoy as a matter of law or by reason of insurance coverage of any kind. Rights
granted hereunder shall be in addition to and not in lieu of any rights to
indemnification to which such Committee or each Committee member may be entitled
pursuant to the by-laws of the Controlling Company. Service on the
Administrative Committee shall be deemed in partial fulfillment of a Committee
member's function, if any, as an Employee, officer and/or director of the
Controlling Company or any Participating Company.
8.2 Controlling Company and Board.
-----------------------------
(a) General Responsibilities. The Controlling Company and the Board
------------------------
shall have the authority and responsibility to (i) appoint the Trustee and the
Administrative Committee and to monitor each of their performances; (ii)
communicate such information to the Trustee and the Administrative Committee as
each needs for the proper performance of its duties; (iii) provide channels and
mechanisms through which the Administrative Committee and/or the Trustee can
communicate with Participants and Beneficiaries; and (iv) perform such duties as
are imposed by law or by regulation and serve as Plan Administrator in the
absence of an appointed Administrative Committee.
(b) Allocation of Authority. In the event any of the areas of
-----------------------
authority and responsibilities of the Controlling Company and the Board overlap
with that of any other entity, the Controlling Company and the Board shall
coordinate with such other entity the execution of such authority and
responsibilities; provided, the decision of the Controlling Company and the
Board with respect to such authority and responsibilities ultimately shall be
controlling.
(c) Authority of Participating Companies. Notwithstanding anything
------------------------------------
herein to the contrary, and in addition to the authority and responsibilities
specifically given to the Participating Companies in the Plan, the Controlling
Company, in its sole discretion, may grant the Participating Companies such
authority and charge them with such responsibilities as the Controlling Company
deems appropriate.
8.3 Trustee.
-------
The Trustee shall have the powers and duties set forth in the Trust
Agreement.
8.4 Delegation.
----------
Entities described in this section shall have the power to delegate
specific responsibilities (other than Trustee responsibilities) to persons whom
shall serve at the pleasure of the entity making such delegation and, if full-
time Employees of a Participating Company, without compensation. Any such person
may resign by delivering a written resignation to the delegating entity.
Vacancies created by any reason may be filled by the appropriate entity or the
assigned responsibilities may be reabsorbed or redelegated by the entity.
23
<PAGE>
ARTICLE IX
AMENDMENT, TERMINATION AND ADOPTION
-----------------------------------
9.1 Amendment.
---------
The provisions of the Plan may be amended at any time and from time to
time by the Board; provided:
(a) No amendment shall increase the duties or liabilities of the
Trustee without the consent of such party;
(b) No amendment shall decrease the balance or vested percentage of
an Account;
(c) Each amendment shall be approved by the Board by resolution; and
(d) No amendment shall be made to Section 5.1(c) of the Plan (unless
required by law).
9.2 Termination.
-----------
(a) Right to Terminate. The Controlling Company expects the Plan to
------------------
be continued indefinitely, but it reserves the right to terminate the Plan or to
completely discontinue Contributions to the Plan at any time by action of the
Board. In either event, the Administrative Committee, each Participating Company
and the Trustee shall be promptly advised of such decision in writing.
(b) Dissolution of Trust. In the event that the Administrative
--------------------
Committee decides to dissolve the Trust, as soon as practicable following the
termination of the Plan or the Administrative Committee
's decision, whichever is
later, the assets under the Plan shall be converted to cash or other
distributable assets, to the extent necessary to effect a complete distribution
of the Trust assets to the Controlling Company.
9.3 Adoption of the Plan by a Participating Company.
-----------------------------------------------
(a) Procedures for Participation. In order for a company to become a
----------------------------
Participating Company, the Administrative Committee must designate such company
as a Participating Company and specify the effective date of such designation.
The name of any company which shall commence participation in the Plan, along
with the effective date of its participation, shall be recorded on Schedule A
hereto which shall be appropriately modified each time a Participating Company
is added or deleted. To adopt the Plan as a Participating Company, the board of
directors of the company must approve a resolution expressly adopting the Plan
for the benefit of its eligible employees and accepting designation as a
Participating Company, subject to all of the provisions of this Plan and of the
Trust. The resolution shall specify the date as of which the designation as a
Participating Company shall be effective. A copy of the resolution (certified if
requested) of the board of directors of the adopting Participating Company shall
be provided to the Administrative Committee. Upon adoption of the Plan by a
Participating Company as herein provided, the Employees of such company shall be
eligible to participate in the Plan subject to the terms hereof and of the
resolution of the Administrative Committee designating the adopting company as
such.
(b) Authority under Plan. As long as a Participating Company's
--------------------
designation as such remains in effect, such Participating Company shall be bound
by, and subject to, all provisions of the Plan and the Trust. The exclusive
authority to amend the Plan and the Trust shall be vested in the
24
<PAGE>
Administrative Committee, and no Participating Company other than the
Controlling Company shall have any right to amend the Plan or the Trust. Any
amendment to the Plan or the Trust adopted by the Administrative Committee shall
be binding upon every Participating Company without further action by such
Participating Company.
(c) Contributions to Plan. As long as each Participating Company
---------------------
shall be so designated, such Participating Company shall be required to make
Contributions to the Plan at such times and in such amounts as specified in
Article III. The Contributions made (or to be made) to the Plan by the
Participating Companies shall be allocated between and among such companies in
whatever equitable manner or amounts as the Administrative Committee shall
determine.
(d) Withdrawal from Plan. No Participating Company other than the
--------------------
Controlling Company shall have the right to terminate the Plan. However, any
Participating Company may withdraw from the Plan, with the approval of the
Administrative Committee, by action of its board of directors, provided such
action is communicated in writing to the Administrative Committee. The
withdrawal of a Participating Company shall be effective as of the last day of
the Plan Year which follows receipt of the notice of withdrawal (unless the
Controlling Company consents to a different effective date). In addition, the
Administrative Committee may terminate the designation of a Participating
Company to be effective on such date as the Administrative Committee specifies.
Any such Participating Company which ceases to be a Participating Company shall
be liable for all costs accrued through the effective date of its withdrawal or
termination. In the event of the withdrawal or termination of a Participating
Company as provided in this Section, such Participating Company shall have no
right to direct that assets of the Plan be transferred to a successor plan for
its employees, unless such transfer is approved by the Controlling Company or
Administrative Committee in its sole discretion.
ARTICLE X
MISCELLANEOUS
-------------
10.1 Nonalienation of Benefits and Spendthrift Clause.
------------------------------------------------
None of the Accounts, benefits, payments, proceeds or distributions
under the Plan shall be subject to the claim of any creditor of a Participant or
Beneficiary or to any legal process by any creditor of such Participant or of
such Beneficiary; and neither such Participant nor any such Beneficiary shall
have any right to alienate, commute, anticipate or assign any of the Accounts,
benefits, payments, proceeds or distributions under the Plan except to the
extent expressly provided herein. If any Participant shall attempt to dispose of
his Account or the benefits provided for him hereunder or to dispose of the
right to receive such benefits, or, in the event there should be an effort to
seize such Account or benefits by attachment, execution or other legal or
equitable process, such right may pass and be transferred, at the discretion of
the Administrative Committee, to such person or persons as may be selected by
the Administrative Committee from among the Beneficiaries, if any, theretofore
designated by the Participant, or from the Spouse, children or other dependents
of the Participant, in such shares as the Administrative Committee may appoint.
Any appointments so made by the Administrative Committee may be revoked by it at
any time, and further appointments made by it may include the Participant.
10.2 Headings.
--------
The headings and subheadings in the Plan have been inserted for
convenience of reference only and are to be ignored in any construction of the
provisions hereof.
25
<PAGE>
10.3 Construction, Controlling Law.
-----------------------------
In the construction of the Plan, the masculine shall include the
feminine and the feminine the masculine, and the singular shall include the
plural and the plural the singular, in all cases where such meanings would be
appropriate. Unless otherwise specified, any reference to a section shall be
interpreted as a reference to a section of the Plan. The Plan shall be construed
in accordance with the laws of the State of Georgia and applicable federal laws.
10.4 No Contract of Employment.
-------------------------
Neither the establishment of the Plan, nor any modification thereof,
nor the creation of any fund, trust or account, nor the payment of any benefits
shall be construed as giving any Participant, Employee or any person whomsoever
the right to be retained in the service of any Affiliate, and all Participants
and other Employees shall remain subject to discharge to the same extent as if
the Plan had never been adopted.
10.5 Legally Incompetent.
-------------------
The Administrative Committee may in its discretion direct that
payment be made and the Trustee shall make payment on such direction, directly
to an incompetent or disabled person, whether incompetent or disabled because of
minority or mental or physical disability, or to the guardian of such person or
to the person having legal custody of such person, without further liability
with respect to or in the amount of such payment either on the part of any
Participating Company, the Administrative Committee or the Trustee.
10.6 Heirs, Assigns and Personal Representatives.
-------------------------------------------
The Plan shall be binding upon the heirs, executors, administrators,
successors and assigns of the parties, including each Participant and
Beneficiary, present and future.
10.7 Unsecured Creditor Rights.
-------------------------
No Participant or Beneficiary shall have any right to, or interest
in, any assets of the Trust Fund other than that of a general unsecured creditor
of the Controlling Company.
10.8 Legal Action.
------------
In any action or proceeding involving the assets held with respect to
the Plan or Trust Fund or the administration thereof, the Participating
Companies, the Administrative Committee and the Trustee shall be the only
necessary parties and no Participants, Employees, or former Employees of the
Company, their Beneficiaries or any other person having or claiming to have an
interest in the Plan shall be entitled to any notice of process; provided, that
such notice as is required by the IRS and the Department of Labor to be given in
connection with Plan amendments, termination, curtailment or other activity
shall be given in the manner and form and at the time so required. Any final
judgment which is not appealed or appealable that may be entered in any such
action or proceeding shall be binding and conclusive on the parties hereto, the
Administrative Committee and all persons having or claiming to have an interest
in the Plan.
10.9 Severability.
------------
If any provisions of the Plan shall be held invalid or unenforceable,
such invalidity or unenforceability shall not affect any other provisions
hereof, and the Plan shall be construed and enforced as if such provisions had
not been included.
26
<PAGE>
10.10 Predecessor Service.
-------------------
In the event a Participating Company maintains the Plan as successor
to a predecessor employer who maintained the Plan, service for the predecessor
employer shall be treated as service for the Participating Company.
10.11 Plan Expenses.
-------------
Expenses incurred with respect to administering the Plan and Trust
shall be paid by the Trustee from the Trust Fund only to the extent such costs
are not paid by the Participating Companies or to the extent the Controlling
Company requests that the Trustee reimburse it for its payment of such expenses.
IN WITNESS WHEREOF, the Controlling Company has caused this Plan to
be executed by its duly authorized officers and its corporate seal to be affixed
hereto, all as of the date first above written.
AGL RESOURCES INC.
By: /s/ Michele H. Collins
--------------------------------
Title: Senior Vice President and
Chief Administrative and
Technology Officer
27
<PAGE>
SCHEDULE A
----------
EFFECTIVE DATES FOR PARTICIPATING COMPANIES
Name of Effective Date
Participating Company of Participation
- --------------------- ----------------
Atlanta Gas Light Company July 1, 1995
Georgia Gas Company July 1, 1995
Chattanooga Gas Company July 1, 1995
Georgia Gas Service Company July 1, 1995
(other than:
Alabama Gas Service Company
GBJ Investment Co., Inc.
Gasco Lending, Inc.
Jordan Gas Company, Inc.
Good Neighbor Gas Company, Inc.
Southern Butane Co., Inc.
Waters L.P. Gas, Inc.
Jordan Gas Service, Inc.
J&H Propane, Inc.)
AGL Resources Inc. July 1, 1996
AGL Investments, Inc. July 1, 1996
(other than:
AGL Consumer Services, Inc.
AGL Gas Marketing, Inc.
AGL Power Services, Inc.
Georgia Energy Company
Trustees Investments, Inc.)
The Energy Spring, Inc. July 1, 1996
AGL Energy Services, Inc. July 1, 1996
(other than:
Peachtree Pipeline Co.)
AGL Resources Service Company, Inc. July 1, 1996
28
<PAGE>
SCHEDULE B
----------
ITEMS INCLUDED IN "COMPENSATION" UNDER (S)1.14(1) OF NSP
Description of Payroll Item Code Spcl Accum
--------------------------------------------------------
Bad Weather WEA 401
--------------------------------------------------------
Beeper Pay BEP 401
--------------------------------------------------------
Birthday Holiday BDY 401
--------------------------------------------------------
Bottle Pay BTL 401
--------------------------------------------------------
Doctor/Dentist Appt. DOC 401
--------------------------------------------------------
Earn Pay 12 Hr. Shift EAR 401
--------------------------------------------------------
Flex Vacation Pay FVA 401
--------------------------------------------------------
Funeral Pay FRL 401
--------------------------------------------------------
Holiday Pay HOL 401
--------------------------------------------------------
Injury INJ 401
--------------------------------------------------------
Jury duty JUR 401
--------------------------------------------------------
Lump Sum Vacation LUM 401
--------------------------------------------------------
Mile Pay - Propane MPY 401
--------------------------------------------------------
Military Pay MIL 401
--------------------------------------------------------
Miscellaneous Pay MIS 401
--------------------------------------------------------
Overtime Pay OTP 401
--------------------------------------------------------
Personal Temp Illness PTI 401
--------------------------------------------------------
Regular Pay REG 401
--------------------------------------------------------
Retro Pay RET 401
--------------------------------------------------------
S/T Disability STD 401
--------------------------------------------------------
Shift Pay SH1 401
--------------------------------------------------------
Shift Pay Overtime SH2 401
--------------------------------------------------------
Sick Pay SIC 401
--------------------------------------------------------
Vacation VAC 401
--------------------------------------------------------
29
<PAGE>
EXHIBIT 10.65
By Federal Express
October 14, 1999
Atlanta Gas Light Company
817 West Peachtree Street, NW
Suite 1000
Atlanta, Georgia 30308
Attention: Mr. David Guinn
Re: Precedent Agreement Dated April 16, 1998,
As Amended By Letter Agreements Dated
October 13, 1998, December 14, 1998,
February 15, 1999, and August 11, 1999
(collectively, the "Agreement"), By
and Between Etowah LNG Company, L.L.C. ("Etowah")
and Atlanta Gas Light Company ("AGLC")
Dear David:
The August 11, 1999 Letter Agreement referenced above provides that AGLC has
until October 15, 1999, in which to exercise its rights to terminate the
Agreement pursuant to the so-called "PSC-Out" contained in Paragraph 3 of the
Agreement. In lieu of exercising its termination rights under Paragraph 3 of
the Agreement at this time, AGLC would like an extension of time in which to
assess the extent and timing of its storage needs and to determine the role of
the Etowah service in AGLC's gas capacity plan. Accordingly, in consideration
of AGLC foregoing its present right to exercise the PSC-Out and in consideration
of the mutual agreements set forth in this letter, AGLC and Etowah agree as
follows:
1. Paragraph 3 of the Agreement is hereby amended and restated in its
entirety as follows:
3. If Company accepts its FERC Authorization, then within 30
days Company and Customer shall execute and deliver an LNG-1
Service Agreement that provides for (i) a Maximum Daily
Vaporization Quantity (MDVQ) of 200,000 Mcf per day, (ii) a
Primary Delivery Point (subject to change by mutual agreement
and according to Company's FERC-approved tariff)
<PAGE>
Atlanta Gas Light Company
October 14, 1999
Page 2
at the interconnect between Company's Facility and Customer's
Facility, and (iii) a primary term of 20 years from the in-
service date, subject to Paragraph 8(a); provided, however, that
Company's obligation to provide service pursuant to the executed
Service Agreement remains subject to Company's receipt and
acceptance of any remaining necessary contractual and property
rights, financing arrangements, and regulatory approvals, in form
and substance satisfactory to Company. Any other provision of
this Paragraph 3 to the contrary notwithstanding, Customer and
Company agree that the obligations, agreements, and
representations in this Precedent Agreement remain subject of the
following (PSC-Out): if Customer (i) files a bona fide Gas
supply Plan, which includes, among other things, the service for
which Customer has subscribed from Company (Storage Service) with
the Georgia Public Service Commission (PSC) on or before August
1, 1998; (ii) pursues, on a best efforts basis, approval of the
Gas Supply Plan; and (iii) either (a) receives from the PSC by
September 30, 2000, an order(s) rejecting, disapproving, or
excluding those portions of the Gas Supply Plan that specifically
relate to the Storage Service, or (b) receives from the PSC by
September 30, 2000, an order that places Customer at unreasonable
risk, in Customer's sole judgment, for rejection, disapproval, or
exclusion of the Storage Service in future Gas Supply Plan
filings, or through an amendment to Customer's Gas Supply Plan,
or (c) concludes that Customer is at unreasonable risk, in
Customer's sole judgment, for rejection, disapproval, or
exclusion of the Storage Service in future Gas Supply Plan
filings, or through an amendment to Customer's Gas Supply Plan,
because the PSC failed to act by September 30, 2000, on the PSC
Staff's recommendation with respect to the Storage Service as
contemplated by the September 11, 1998 PSC order or (d) if, for
any other reason, Customer concludes, in Customer's sole
judgment, that execution and delivery of the above-referenced
LNG-1 Service Agreement is not in Customer's best interest, then
Customer may terminate this Precedent Agreement if Company
receives a written notice of termination, enclosing a copy of the
applicable order(s), if any, from the PSC, by October 15, 2000;
provided, however, that if Company has not received the specified
------------------
notice of termination by October 15, 2000, then this PSC-Out
shall become null and void and have no effect, and the other
provisions of this Precedent Agreement shall continue with full
force and effect. If Customer terminates this Precedent
Agreement pursuant to this PSC-Out, then such termination
relieves Customer and Company of further liability; provided,
---------
however, that Customer agrees to
--------
<PAGE>
Atlanta Gas Light Company
October 14. 1999
Page 3
reimburse Company for all actual costs, including without
limitation (i) expenses incurred in the design and engineering of
the Facility, (ii) expenses incurred in preparing for regulatory
approvals, (iii) the cost of all land and materials, and (iv) an
after-tax carrying charge of 7% on all such actual costs. Upon
reimbursement, Company agrees to convey its interest in any land
acquired for the Facility to Customer or to another entity that
Customer designates.
2. Etowah and AGLC agree and confirm that the Agreement, as amended by
this letter, is in full force and effect.
3 Etowah confirms that it will suspend any further engineering, design,
and other preparatory activities for the Etowah LNG project, including
efforts to obtain necessary regulatory approvals. AGLC confirms its
understanding that in the event it terminates the Agreement by October
15, 2000, pursuant to the PSC-Out provision in Paragraph 3, it will
reimburse Etowah for all actual costs as provided in Paragraph 3 of
the Agreement.
Agreed to and Accepted as of
this 14/th/ day of October, 1999.
ETOWAH LNG COMPANY, L.L.C.
By: /s/ James C. Yardley
--------------------
James C. Yardley
Its: Vice President
ATLANTA GAS LIGHT COMPANY
By: /s/ Walter M. Higgins
---------------------
Walter M. Higgins
Its: Chairman and Chief Executive Officer
<PAGE>
EXHIBIT 10.68
GUARANTY
--------
THIS AGREEMENT between the undersigned Guarantor and ATLANTA GAS LIGHT
COMPANY (Company) is effective November 1, 1998.
WHEREAS, the Company supplies SouthStar Energy Services, LLC d/b/a Georgia
Natural Gas Services (Pooler) with natural gas delivery service; and
WHEREAS, the undersigned Guarantor derives substantial benefit from
Pooler's activities associated with company's natural gas delivery service; and
WHEREAS, the undersigned Guarantor wishes to guaranty the payment and
performance by the Pooler of its obligations under its agreement with the
Company; and
WHEREAS, this Agreement expresses the terms and conditions of the
aforementioned guaranty:
NOW, THEREFORE, for and in consideration of the premises and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by the parties hereto, the undersigned Guarantor hereby agrees as
follows:
1. The undersigned Guarantor unconditionally guaranties to Company the
full and prompt performance by the Pooler of all obligations which Pooler
presently or hereafter may have to Company and the full and prompt payment when
due of all sums presently or hereafter owing by Pooler to Company. Guarantor
agrees that the liability of Guarantor shall be direct and immediate and that
Company may enforce this Guaranty without having first to proceed against the
Pooler or any other person and without company having to exhaust any other
remedy available to Company.
2. For purposes of this guaranty, all sums owing to Company by Pooler
shall be deemed to have become immediately due and payable if (a) Pooler
defaults in any of its obligations to Company; (b) a petition is filed by Pooler
under the bankruptcy laws of any jurisdiction or a petition is filed by the
Pooler for the appointment of a receiver of any part of the property of the
Pooler; (c) such a petition is filed against the Pooler and is not dismissed
within thirty (30) days; or (d) Pooler makes a general assignment for the
benefit of creditors, suspends business, or commits any act amounting to a
business failure.
3. This shall be a continuing guaranty, and irrespective of the lack of
any notice to consent of the undersigned Guarantor, its obligations hereunder
shall not be impaired in any manner whatsoever by any (a) new agreements or
obligations of the Pooler with or to the Company; (b) amendments, extensions,
modifications, renewals or waivers of default as to any existing or future
agreements or obligations of Pooler with or to the Company; (c) invalidity or
unenforceability, for any reason, of any agreement, instrument or writing
between Company and Pooler; or (d) interruptions in the business relations
between Pooler and Company.
4. Notice of (a) Company's acceptance hereof, (b) default and nonpayment
by Pooler, (c) presentment, protest, and demand and (d) all other matters to
which the undersigned Guarantor otherwise might be entitled, is hereby waived by
Guarantor.
5. The undersigned Guarantor may terminate its obligations hereunder as
to then future transactions between the Pooler and Company only by written
notice sent to Company by registered mail. Notice shall be sent to Company at:
J. B. Briggs
Location 1190
Post Office Box 4569
Atlanta, Georgia 30302
<PAGE>
Provided, however, that such termination shall not affect the undersigned
Guarantor's liability hereunder with respect to any and all obligations of
Pooler to Company incurred prior to Company's receipt of such notice.
6. The undersigned Guarantor shall reimburse the Company for all
expenses, including reasonable attorneys' fees, incurred by Company in the
enforcement or attempted enforcement of any of Company's rights hereunder.
7. This guaranty may not be assigned by the undersigned Guarantor without
Company's prior written consent, which consent shall not be reasonably withheld.
This guaranty shall inure to the benefit of and may be enforced by Company and
its successors and assigns and shall be binding upon and enforceable against the
undersigned Guarantor its successors, and assigns.
8. This Agreement shall be interpreted, construed and governed by and in
accordance with the laws of the State of Georgia.
9. This Agreement constitutes the entire Agreement between the
undersigned Guarantor and the Company. No modification shall be binding on the
company unless it is in writing and signed by the Company.
10. The invalidity of any portion, provision or paragraph of this
Agreement shall not affect or render invalid any other portion, provision or
paragraph of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their duly authorized officer or representative.
ATLANTA GAS LIGHT COMPANY AGL RESOURCES INC.
GUARANTOR
BY: /s/ J. Michael Riley BY: /s/ Paul R. Shlanta
--------------------------- ---------------------------
NAME: J. Michael Riley NAME: Paul R. Shlanta
--------------------------- ---------------------------
TITLE: Senior Vice President & CFO TITLE: Senior Vice President
--------------------------- ---------------------------
WITNESS: /s/ Edith L. Law WITNESS: /s/ Connie C. Harris
--------------------------- ---------------------------
<PAGE>
EXHIBIT 10.69
INDEMNIFICATION AGREEMENT
This Indemnification Agreement is made and entered into on this 15/th/ day
of January 1999 by Piedmont Propane Company ("Indemnifying Party") in favor of
AGL Resources Inc. ("AGLR"). AGLR's affiliate, Atlanta Gas Light Services, Inc.,
and the Indemnifying Party's affiliate, Piedmont Energy Company (the
"Affiliate"), are parties to that certain Limited Liability Company Agreement of
SouthStar Energy Services LLC dated July 1, 1998 ("LLC Agreement") as members of
SouthStar Energy Services LLC ("SouthStar"). Pursuant to that certain Guaranty
Agreement (the "Guaranty"), effective November 1, 1998, between AGLR and Atlanta
Gas Light Company, AGLR has agreed to guaranty SouthStar's obligations to
Atlanta Gas Light Company. AGLR's agreement with SouthStar to provide the
Guaranty to Atlanta Gas Light Company was subject to the condition that certain
affiliates of each member of SouthStar would indemnify AGLR against any losses
AGLR incurs as a result of AGLR providing financial support for SouthStar under
the Guaranty in accordance with the applicable SouthStar member's Allocable
Share of Net Profits and Losses, as set forth in the LLC Agreement. This
Indemnification Agreement sets forth the terms and conditions of that
indemnification.
In consideration of the benefit the Indemnifying Party and its affiliates
derive from AGLR providing financial support to SouthStar pursuant to the
Guaranty and the benefit to AGLR of the Indemnifying Party indemnifying AGLR,
the parties agree as follows:
1. The Indemnifying Party shall indemnify, defend and hold AGLR harmless
against any losses, costs, fees, liabilities or other expenses AGLR incurs
as a result of AGLR's providing financial support for SouthStar under the
Guaranty ("Indemnified Expenses"). The Indemnifying Party shall be liable
for indemnifying AGLR hereunder for an amount equal to the product of the
Affiliate's Allocable Share (as set forth in the LLC Agreement or any
successor agreement) and the Indemnified Expenses. Notwithstanding any
statement herein to the contrary, the Indemnifying Party shall not be liable
to AGLR to the extent that the Indemnified Expenses resulted from AGLR's
gross negligence or willful misconduct.
2. AGLR shall invoice the Indemnifying Party (at the address set forth in
numbered paragraph 9 below) no later than ten days prior to the end of each
calendar month for the Indemnifying Party's share of the Indemnified
Expenses due from the previous calendar month or any portion thereof. The
Indemnifying Party shall pay AGLR the amount of such invoice (via wire
transfer to the account specified on the invoice) no later than the last day
of the calendar month during which AGLR sent the Indemnifying Party an
invoice.
<PAGE>
If the Indemnifying Party fails to pay all of the amount of any invoice when
that amount becomes due, the Indemnifying Party shall pay AGLR a late charge
on the unpaid balance that shall accrue daily on each calendar day from the
due date at an annual rate equal to two percentage points above the then-
effective monthly prime commercial lending rate per annum announced by
NationsBank, N.A. from time to time multiplied by the unpaid balance;
provided, that for any period that such rate exceeds any applicable maximum
rate permitted by law, the rate shall equal the applicable maximum rate.
3. This Indemnification Agreement shall inure to the benefit of each party, its
successors, assigns and creditors, and can be modified only by a written
instrument signed by the Indemnifying Party and AGLR. No Indemnifying Party
shall have the right to assign this Indemnification Agreement or its
obligations hereunder to any person or entity without the prior written
consent of AGLR, which shall not be unreasonably withheld.
4. This Indemnification Agreement shall be governed by, and construed in
accordance with the internal laws (but not the laws concerning conflicts of
laws) of the state of Georgia.
5. The Indemnifying Party represents and warrants to AGLR that it is authorized
to indemnify AGLR under the terms of this Indemnification Agreement, that it
has all of the rights and powers necessary to do so, and that the individual
signing below is authorized to bind the Indemnifying Party to its
obligations under this Indemnification Agreement.
6. The Indemnifying Party hereby agrees to provide AGLR with copies of
Indemnifying Party's annual financial statements (consisting of at least a
balance sheet and statements of income and cash flows) within 90 days
following the end of the fiscal year to which such financial statements
relate. If such financial statements have been reviewed or audited, the
statements provided pursuant to the immediately preceding sentence shall be
the reviewed or audited statements, as the case may be.
7. The Indemnifying Party hereby agrees to notify AGLR within 45 days following
the close of each of the first three quarters of each of Indemnifying
Party's fiscal years if at the end of such quarter, Indemnifying Party's
stockholders' equity, determined in accordance with generally accepted
accounting principles consistently applied, shall be less than $30 million.
8. On the date of each delivery of financial statements pursuant numbered
paragraph 6 above, Indemnifying Party represents and warrants to AGLR that
the balance sheet delivered by Indemnifying Party on such date reflects all
obligations, contingent or otherwise, which in accordance with generally
accepted accounting principles should be classified upon Indemnifying
Party's balance sheet as liabilities or disclosed in footnotes thereto.
<PAGE>
9. Notices hereunder must be given in writing (which may be a facsimile
transmission) to be effective and shall be effective upon receipt by AGLR or
the Indemnifying Party at the address set forth below or at such other
address as AGLR or the Indemnifying Party may notify the other:
If to AGLR:
AGL Resources Inc.
P. O. Box 4569
Atlanta, Georgia 30302-4569
Attention: Chief Financial Officer
Facsimile No.: (404) 584-3419
If to Indemnifying Party:
Piedmont Propane Company
1915 Rexford Road
Charlotte, NC 28211
Attention: Treasurer
Facsimile No.: (704)365-8515
10. THE INDEMNIFYING PARTY HEREBY INTENTIONALLY AND VOLUNTARILY WAIVES ANY
DEFENSE TO PAYMENT UNDER THIS INDEMNIFICATION AGREEMENT THAT IS BASED UPON
OR ARISES OUT OF AGLR'S DIRECT OR INDIRECT OWNERSHIP OF AN EQUITY INTEREST
IN SOUTHSTAR AND/OR ATLANTA GAS LIGHT COMPANY.
AGREED TO AND ENTERED INTO the date first written above by:
AGL Resources Inc. Piedmont Propane Company
By: /s/ Paul R. Shlanta By: /s/ David J. Dzuricky
------------------------ ---------------------
Title: Senior Vice President Title: Vice President
--------------------- -------------------
<PAGE>
EXHIBIT 10.70
INDEMNIFICATION AGREEMENT
This Indemnification Agreement is made and entered into on this 15/th/ day
of January 1999 by Dynegy Inc. ("Indemnifying Party") in favor of AGL Resources
Inc. ("AGLR"). AGLR's affiliate, Atlanta Gas Light Services, Inc., and the
Indemnifying Party's affiliate, Dynegy Hub Services, Inc. (the "Affiliate"), are
parties to that certain Limited Liability Company Agreement of SouthStar Energy
Services LLC dated July 1, 1998 ("LLC Agreement") as members of SouthStar Energy
Services LLC ("SouthStar"). Pursuant to that certain Guaranty Agreement (the
"Guaranty"), effective November 1, 1998, between AGLR and Atlanta Gas Light
Company, AGLR has agreed to guaranty SouthStar's obligations to Atlanta Gas
Light Company. AGLR's agreement with SouthStar to provide the Guaranty to
Atlanta Gas Light Company was subject to the condition that certain affiliates
of each member of SouthStar would indemnify AGLR against any losses AGLR incurs
as a result of AGLR providing financial support for SouthStar under the Guaranty
in accordance with the applicable SouthStar member's Allocable Share of Net
Profits and Losses, as set forth in the LLC Agreement. This Indemnification
Agreement sets forth the terms and conditions of that indemnification.
In consideration of the benefit the Indemnifying Party derives from AGLR
providing financial support to SouthStar pursuant to the Guaranty and the
benefit to AGLR of the Indemnifying Party indemnifying AGLR, the parties agree
as follows:
1. The Indemnifying Party shall indemnify, defend and hold AGLR harmless
against any losses, costs, fees, liabilities or other expenses AGLR incurs
as a result of AGLR's providing financial support for SouthStar under the
Guaranty ("Indemnified Expenses"). The Indemnifying Party shall be liable
for indemnifying AGLR hereunder for an amount equal to the product of the
Affiliate's Allocable Share (as set forth in the LLC Agreement or any
successor agreement) and the Indemnified Expenses. Notwithstanding any
statement herein to the contrary, the Indemnifying Party shall not be liable
to AGLR to the extent that the Indemnified Expenses resulted from AGLR's
gross negligence or willful misconduct.
2. AGLR shall invoice the Indemnifying Party (at the address set forth in
numbered paragraph 6 below) no later than ten days prior to the end of each
calendar month for the Indemnifying Party's share of the Indemnified
Expenses due from the previous calendar month or any portion thereof. The
Indemnifying Party shall pay AGLR the amount of such invoice (via wire
transfer to the account specified on the invoice) no later than the last day
of the calendar month during which AGLR sent the Indemnifying Party an
invoice.
<PAGE>
If the Indemnifying Party fails to pay all of the amount of any invoice
when that amount becomes due, the Indemnifying Party shall pay AGLR a late
charge on the unpaid balance that shall accrue daily on each calendar day
from the due date at an annual rate equal to two percentage points above
the then-effective monthly prime commercial lending rate per annum
announced by NationsBank, N.A. from time to time multiplied by the unpaid
balance; provided, that for any period that such rate exceeds any
applicable maximum rate permitted by law, the rate shall equal the
applicable maximum rate.
3. This Indemnification Agreement shall inure to the benefit of each party, its
successors, assigns and creditors, and can be modified only by a written
instrument signed by the Indemnifying Party and AGLR. No Indemnifying Party
shall have the right to assign this Indemnification Agreement or its
obligations hereunder to any person or entity without the prior written
consent of AGLR, which shall not be unreasonably withheld.
4. This Indemnification Agreement shall be governed by, and construed in
accordance with the internal laws (but not the laws concerning conflicts of
laws) of the state of Georgia.
5. The Indemnifying Party represents and warrants to AGLR that it is authorized
to indemnify AGLR under the terms of this Indemnification Agreement, that it
has all of the rights and powers necessary to do so, and that the individual
signing below is authorized to bind the Indemnifying Party to its
obligations under this Indemnification Agreement.
6. Notices hereunder must be given in writing (which may be a facsimile
transmission) to be effective and shall be effective upon receipt by AGLR or
the Indemnifying Party at the address set forth below or at such other
address as AGLR or the Indemnifying Party may notify the other:
If to AGLR:
AGL Resources Inc.
P. O. Box 4569
Atlanta, Georgia 30302-4569
Attention: Chief Financial Officer
Facsimile No.: (404) 584-3419
If to Indemnifying Party:
Dynegy Inc.
1000 Louisiana
Suite 5800
Houston, Texas 77002
Attention: Treasurer
Facsimile No.: (713) 507-6821
<PAGE>
7. THE INDEMNIFYING PARTY HEREBY INTENTIONALLY AND VOLUNTARILY WAIVES ANY
DEFENSE TO PAYMENT UNDER THIS INDEMNIFICATION AGREEMENT THAT IS BASED UPON
OR ARISES OUT OF AGLR'S DIRECT OR INDIRECT OWNERSHIP OF AN EQUITY INTEREST
IN SOUTHSTAR AND/OR ATLANTA GAS LIGHT COMPANY.
AGREED TO AND ENTERED INTO the date first written above by:
AGL Resources Inc. Dynegy, Inc.
By: /s/ Paul R. Shlanta By: /s/ Pryor Lindsey
-------------------------- -----------------------------------
Title: Senior Vice President Title: Assistant Treasurer, Operations
----------------------- ---------------------------------
<PAGE>
EXHIBIT 10.71
LOAN AGREEMENT
This Loan Agreement (hereinafter called "Agreement") is effective June 30, 1999
and is between SouthStar Energy Services, LLC (hereinafter called "SouthStar"),
Georgia Natural Gas Company (hereinafter called "GNG"), Piedmont Energy Company
(hereinafter called "Piedmont") and Dynegy Hub Services Inc. (hereinafter called
"Dynegy").
WHEREAS, SouthStar, a joint venture of GNG, Piedmont and Dynegy, was formed for
the purpose of selling, on a non-regulated basis, energy commodities to retail
customers; and
WHEREAS, SouthStar wishes to establish lines of credit in the maximum aggregate
available principal amount of $75,000,000.00 which lines of credit contemplate
borrowing directly from GNG and Piedmont and Dynegy; and
WHEREAS, GNG, Piedmont and Dynegy wish to facilitate such credit arrangements on
the terms and conditions set forth herein.
NOW, THEREFORE FOR AND IN CONSIDERATION of the premises, the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, hereby agree as follows:
<PAGE>
1. GNG agrees to loan to SouthStar, from time to time upon the terms and
conditions set forth herein, up to Thirty-Seven Million Five Hundred
Thousand and no/100 Dollars (US$37,500,000.00). Piedmont agrees to loan to
SouthStar, from time to time upon the terms and conditions set forth herein,
up to Twenty-Two Million Five Hundred Thousand and no/100 Dollars
(US$22,500,000.00). Dynegy agrees to loan to SouthStar, from time to time
upon the terms and conditions set forth herein, up to Fifteen Million and
no/100 Dollars (US$15,000,000.00).
Whenever SouthStar shall desire to borrow funds pursuant to this Agreement
(each such borrowing being hereinafter referred to as a "Loan" and all such
borrowings requested or outstanding at any given time being hereinafter
referred to as "Loans"), SouthStar shall borrow 50% of the requested Loan
amount from GNG, 30% of the requested Loan amount from Piedmont and 20% of
the requested Loan amount from Dynegy.
Neither GNG, Piedmont nor Dynegy shall have any obligation to SouthStar
whatsoever to make any Loan pursuant to this Agreement if at the time of the
proposed funding thereof the aggregate principal amount of all Loans then
outstanding exceeds, or upon the funding of such proposed Loan would exceed,
$75,000,000.00. Similarly, (i) GNG shall have no obligation to SouthStar
whatsoever to make any Loan pursuant to this Agreement if at the time of the
proposed funding thereof the aggregate principal amount of all Loans then
outstanding from GNG to SouthStar exceeds, or upon the funding of such
proposed Loan would exceed, Thirty-Seven Million Five Hundred Thousand and
no/100 Dollars (US$37,500,000.00), (ii) Piedmont, shall have no obligation
to SouthStar
<PAGE>
whatsoever to make any Loan pursuant to this Agreement if at the time of the
proposed funding thereof the aggregate principal amount of all Loans then
outstanding exceeds, or upon the funding of such proposed Loan would exceed,
Twenty-Two Million Five Hundred Thousand and no/100 Dollars
(US$22,500,000.00), and (iii) Dynegy, shall have no obligation to SouthStar
whatsoever to make any Loan pursuant to this Agreement if at the time of the
proposed funding thereof the aggregate principal amount of all Loans then
outstanding exceeds, or upon the funding of such proposed Loan would exceed,
Fifteen Million and no/100 Dollars (US$15,000,000.00). In the event that any
one of the parties, GNG, Piedmont or Dynegy, shall fail to fund all or part
of their respective portions of a SouthStar requested Loan pursuant to a
Loan request made by SouthStar under this Agreement, neither of the other
parties shall have any obligation to make a loan pursuant to that SouthStar
request.
Any person listed in Appendix A is authorized to consummate Loans from GNG,
Piedmont and Dynegy under this Agreement on behalf of SouthStar. Each of
GNG, Piedmont and Dynegy shall designate in writing one contact person for
all matters concerning Loans to SouthStar which designee may be changed by
GNG, Piedmont or Dynegy, respectively, upon written notice to all parties
to this Agreement.
2. The Loans shall be made by GNG, Piedmont and Dynegy under this Agreement
from time to time upon telephonic request from any person listed in Appendix
A. At the time of each Loan, SouthStar will confirm the details of such Loan
by transmitting a written notice to GNG, Piedmont and Dynegy, substantially
in the form of Appendix B, detailing
<PAGE>
the borrowing including: (i) the date of the notice; (ii) the requested date
of the Loan; (iii) the aggregate principal amount of the Loan requested;
(iv) the bank account to which Loan funds are to be disbursed; and (v) that
the Loan is being requested pursuant to this Agreement. Further, such notice
shall contain an affirmative representation and warranty that each of GNG,
Piedmont and Dynegy are participating in the Loan pro rata based upon the
following percentages: 50% for GNG; 30% for Piedmont; and 20% for Dynegy.
3. Any and all payments (whether consisting of principal or interest) on an
outstanding Loan shall be made by SouthStar to GNG, Piedmont and Dynegy pro
rata based on the percentage of the Loan amount lent by each. In other
words, assuming all Loans outstanding at the time of the payment were made
by the Parties in percentages required in Paragraph 2 above, GNG, Piedmont
and Dynegy shall each receive the following percentage of any principal
payment or interest payment by SouthStar: 50% for GNG; 30% for Piedmont; and
20% for Dynegy. All payments by SouthStar to GNG, Piedmont and Dynegy shall
be applied first to accrued interest, then to principal. All payments shall
be applied to Loans in the order in which each Loan was made, such that
payments are applied first to repayment of interest and principal on the
Loan that has been outstanding for the longest period of time. The principal
balance of Loans outstanding to GNG, Piedmont and Dynegy may be prepaid, in
whole or in part, at any time without penalty (provided that prepayments are
applied in the order described in the immediately preceding sentence).
Principal amounts repaid to GNG, Piedmont and Dynegy may be re-borrowed by
SouthStar, provided that the aggregate outstanding principal balance of all
Loans does not at any time exceed Seventy-Five Million and no/100 Dollars
<PAGE>
(US$75,000,000.00) and provided further that all other terms and conditions
of this Agreement are complied with.
4. Interest will accrue on the outstanding principal balance of each Loan made
by GNG, Piedmont, and Dynegy at an annual fixed rate equal to LIBOR
(hereinafter defined), plus eighty-five basis points. Interest shall be
calculated based upon the actual number of days the principal amount in
question has been outstanding and based upon a year consisting of 360 days.
Payments of interest on the outstanding principal balance of Loans shall be
due and payable, in arrears, quarterly on September 30, 1999, December 31,
1999, March 31, 2000, and June 27, 2000. If the due date for an interest
payment is not a business day, then such payment shall be due on the next
succeeding business day.
Notwithstanding anything herein to the contrary, any Loan payments (whether
principal or interest) not made as and when due shall bear interest from the
date due until paid at a floating rate equal to the Prime Rate (hereinafter
defined) plus 200 basis points. Such interest shall be calculated on the
basis of a 360 day year for the actual number of days elapsed.
For purposes of this Agreement, LIBOR shall mean the London Interbank
Offered Rate for the Applicable Period (hereinafter defined) as published in
the "Money Rates" column of the Eastern Edition of the Wall Street Journal
on the effective date of the Loan
<PAGE>
in question, or if the Wall Street Journal is not published on such date,
then as published in the Wall Street Journal on the next preceding business
day.
For purposes of this Agreement, "Applicable Period" shall mean: (i) one year
for Loans with an effective date on or after June 30, 1999, but before
December 28, 1999; (ii) six months for Loans with an effective date on or
after December 28, 1999, but before March 28, 2000; (iii) three months for
Loans with an effective date on or after March 28, 2000, but before May 28,
2000; and (iv) one month for Loans with an effective date on or after May
28, 2000.
For purposes of the Agreement, "Prime Rate" shall mean the "Prime Rate" as
published in the "Money Rates" column of the Eastern Edition of the Wall
Street Journal on the date in question, or if the Wall Street Journal is not
published on such date, then as published in the Wall Street Journal on the
next preceding business day. Changes in the Prime Rate shall become
effective on the date on which they are published in the Wall Street
Journal.
5. The amount borrowed by SouthStar under each Loan shall be deposited in an
account specified by SouthStar in the confirmation notice specified in
Section 2 hereof. Notwithstanding anything to the contrary contained in this
Agreement or in any confirmation notice from SouthStar to GNG, Piedmont or
Dynegy, all Loans (principal and interest) from GNG, Piedmont and Dynegy to
SouthStar shall mature and shall be due and payable in full on June 27,
2000. Simultaneously with its execution of this
<PAGE>
Agreement, SouthStar shall execute Master Notes in favor of GNG, Piedmont
and Dynegy in the forms set forth in Exhibit A, Exhibit B and Exhibit C,
respectively.
6. From the date of this Agreement until the later of (i) June 27, 2000, or
(ii) the date on which all outstanding Loans have been paid in full, the
Company covenants and agrees that it will not, without the prior written
consent of each Lender, (a) pledge, sell, assign, or discount any of its
accounts receivable, other than the discount of such accounts in the
ordinary course of business for collection, or (b) pledge, sell or assign
any gas storage inventory.
7. This Agreement shall be governed by and construed under the laws of the
State of Georgia.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed
by their duly authorized officers or other duly authorized representatives as of
the day and year first written above.
SouthStar Energy Services, LLC
By: /s/ Stephen J. Gunther
------------------------
Title: President
----------------------
<PAGE>
Georgia Natural Gas Company
By: /s/ Stephen J. Gunther
---------------------------
Title: President
------------------------
Piedmont Energy Company
By: /s/ David J. Dzuricky
---------------------------
Title: Vice President
------------------------
Dynegy Hub Services, Inc.
By: /s/ Matthew K. Schatzman
---------------------------
Title: Executive Vice President
------------------------
<PAGE>
APPENDIX A
Authorized Employees
The following SouthStar employees are authorized under the Agreement to request
Loans from GNG, Piedmont and Dynegy on behalf of SouthStar:
Stephen Gunther
Mark Chesla
Peter Welch
<PAGE>
APPENDIX B
LOAN CONFIRMATION NOTICE
Pursuant to Section 2 of that certain Loan Agreement (the "Agreement") dated as
of June 30, 1999, by and among SouthStar Energy Services, LLC ("SouthStar"),
Georgia Natural Gas Company ("GNG"), Piedmont Energy Company ("Piedmont") and
Dynegy Hub Services, Inc. ("Dynegy"), the undersigned, on behalf of SouthStar,
hereby confirms to GNG, Piedmont and Dynegy the following:
1) The date of this Loan Confirmation Notice is _______________;
2) SouthStar has requested a Loan under the Agreement in the aggregate
principal amount of $_______________ (the "Requested Loan");
3) SouthStar has requested that the Requested Loan be funded on
____________'
4) The Requested Loan is to be funded by GNG, Piedmont and Dynegy as
follows:
GNG: $_______________
Piedmont: $_______________
Dynegy: $_______________
Total Amount of Requested Loan: $_______________
5) The undersigned hereby represents and warrants on behalf of SouthStar
that GNG, Piedmont and Dynegy are participating in the funding of the Requested
Loan as follows:
GNG: 50%
Piedmont: 30%
Dynegy: 20%
6) SouthStar hereby requests that GNG, Piedmont and Dynegy fund their
respective portions of the Requested Loan by wire transferring the applicable
amount to the following SouthStar account:
Financial Institution: _____________________________
ABA#:______________________________________
Account Number:__________________________________
By: ____________________________
Title: _________________________
<PAGE>
APPENDIX B
(continued)
SouthStar Energy Services LLC
Requested Loan Journal
Aggregate
Requested Loan Principal Amount Amount of Requested Loan Advanced by:
-------------------------------------
Funding Date of Requested Loan GNG Piedmont Dynegy
- ------------ ----------------- --- -------- ------
Total _______________ _________ __________ ____________
<PAGE>
EXHIBIT A
(GNG)
MASTER NOTE
Effective Date: June 30, 1999
For Value Received, SouthStar Energy Services, LLC (the "Company"), hereby
promises to pay to the order of Georgia Natural Gas Company (the "Lender") at
its office located at ______________________________ or such other place as
Lender may designate, the principal sum of Thirty Seven Million Five Hundred
Thousand and no/100 Dollars ($37,500,000.00) or the aggregate unpaid sum of all
advances which the Lender actually makes hereunder to the Company, whichever
amount is less, together with interest at a rate computed as set forth in that
certain Loan Agreement of even date herewith by and among Company, Lender,
Piedmont Energy Company and Dynegy Hub Services, Inc. (the "Loan Agreement").
The amount of advances hereunder, the interest rate applicable to each such
advance, and the maturity date for the payment of the principal amount of and
interest on each such advance shall be determined in accordance with the Loan
Agreement. The Company hereby agrees to pay all costs of collection hereof,
including, without limitation, reasonable attorneys' fees actually incurred in
the event amounts evidenced by this Master Note are collected by or through an
attorney-at-law. Failure or forbearance of Lender to exercise any right
hereunder or otherwise granted to it by law or another agreement shall not
constitute a waiver of such rights unless so stated by Lender in writing. Time
is of the essence in payment and performance of this Master Note.
SouthStar Energy Services, LLC
By: __________________________________
Title: ________________________________
<PAGE>
Exhibit B
(Piedmont)
MASTER NOTE
Effective Date: June 30, 1999
For Value Received, SouthStar Energy Services Inc. (the "Company"), hereby
promises to pay to the order of Piedmont Energy Company (the "Lender") at its
office located at ______________________________ or such other place as Lender
may designate, the principal sum of Twenty Two Million Five Hundred Thousand and
no/100 Dollars ($22,500,000.00) or the aggregate unpaid sum of all advances
which the Lender actually makes hereunder to the Company, whichever amount is
less, together with interest at a rate computed as set forth in that certain
Loan Agreement of even date herewith by and among Company, Lender, Georgia
Natural Gas Company and Dynegy Hub Services, Inc. (the "Loan Agreement"). The
amount of advances hereunder, the interest rate applicable to each such advance,
and the maturity date for the payment of the principal amount of and interest on
each such advance shall be determined in accordance with the Loan Agreement. The
Company hereby agrees to pay all costs of collection hereof, including, without
limitation, reasonable attorneys' fees actually incurred in the event amounts
evidenced by this Master Note are collected by or through an attorney-at-law.
Failure or forbearance of Lender to exercise any right hereunder or otherwise
granted to it by law or another agreement shall not constitute a waiver of such
rights unless so stated by Lender in writing. Time is of the essence in payment
and performance of this Master Note.
SouthStar Energy Services, LLC
By: __________________________________
Title: ________________________________
<PAGE>
EXHIBIT C
(Dynegy)
MASTER NOTE
Effective Date: June 30, 1999
For Value Received, SouthStar Energy Services, LLC (the "Company"), hereby
promises to pay to the order of Dynegy Hub Services, Inc. (the "Lender") at its
office located at ______________________________ or such other place as Lender
may designate, the principal sum of Fifteen Million and no/100 Dollars
($15,000,000.00) or the aggregate unpaid sum of all advances which the Lender
actually makes hereunder to the Company, whichever amount is less, together with
interest at a rate computed as set forth in that certain Loan Agreement of even
date herewith by and among Company, Lender, Piedmont Energy Company and Georgia
Natural Gas Company (the "Loan Agreement"). The amount of advances hereunder,
the interest rate applicable to each such advance, and the maturity date for the
payment of the principal amount of and interest on each such advance shall be
determined in accordance with the Loan Agreement. The Company hereby agrees to
pay all costs of collection hereof, including, without limitation, reasonable
attorneys' fees actually incurred in the event amounts evidenced by this Master
Note are collected by or through an attorney-at-law. Failure or forbearance of
Lender to exercise any right hereunder or otherwise granted to it by law or
another agreement shall not constitute a waiver of such rights unless so stated
by Lender in writing. Time is of the essence in payment and performance of this
Master Note.
SouthStar Energy Services, LLC
By: __________________________________
Title: ________________________________
<PAGE>
Exhibit 13
Portions of the AGL Resources Inc. 1999 Annual Report to Shareholders
<PAGE>
Management's Discussion and Analysis of Results of Operations and Financial
Condition
Forward-Looking Statements
The Private Securities Litigation Reform Act of 1995 allows public companies to
provide cautionary remarks about forward-looking statements that they make in
documents that are filed with the Securities and Exchange Commission. Forward-
looking statements in our Management's Discussion and Analysis include
statements about the following:
. Deregulation;
. Concentration of credit risk;
. Environmental investigations and cleanups;
. "Year 2000" readiness; and
. Qualitative and quantitative disclosures about market risk.
Important factors that could cause our actual results to differ substantially
from those in forward-looking statements include, but are not limited to, the
following:
. Changes in price and demand for natural gas and related products;
. Impact of changes in state and federal legislation and regulation on both the
gas and electric industries;
. Effects and uncertainties of deregulation and competition, particularly in
markets where prices and providers historically have been regulated, and
unknown issues such as the stability of certificated marketers;
. Concentration of credit risk in certificated marketers;
. Industry consolidation;
. Changes in accounting policies and practices;
. Interest rate fluctuations, financial market conditions, and economic
conditions, generally;
. Uncertainties about environmental issues and the related impact of such
issues; and
. Other factors discussed in the following section: Year 2000 Readiness
Disclosure -- Forward-Looking Statements.
Nature of Our Business
Organizational Structure
AGL Resources Inc. is the holding company for:
. Atlanta Gas Light Company ("AGLC") and its wholly-owned subsidiary,
Chattanooga Gas Company ("Chattanooga"), which are natural gas local
distribution utilities;
. AGL Energy Services, Inc. ("AGLE"), a gas supply services company; and
. Several non-utility subsidiaries.
AGL Resources Inc. and its subsidiaries are collectively referred to as "AGL
Resources."
AGLC conducts its primary business, the distribution of natural gas, in Georgia
including Atlanta, Athens, Augusta, Brunswick, Macon, Rome, Savannah, and
Valdosta. Chattanooga distributes natural gas in the Chattanooga and Cleveland
areas of Tennessee. The Georgia Public Service Commission ("GPSC") regulates
AGLC, and the Tennessee Regulatory Authority ("TRA") regulates Chattanooga. AGLE
is a nonregulated company that bought and sold the natural gas which was
supplied to AGLC's customers during the deregulation transition period to full
competition in Georgia. Currently, AGLE buys and sells natural gas for
Chattanooga's customers.
AGLC comprises substantially all of AGL Resources' assets, revenues, and
earnings. The operations and activities of AGLC, AGLE, and Chattanooga,
collectively, are referred to as the "utility." The utility's operations
expenses include costs allocated from AGL Resources Inc.
AGL Resources currently owns or has an interest in the following non-utility
businesses:
. SouthStar Energy Services LLC ("SouthStar"), a joint venture among a
subsidiary of AGL Resources Inc. and subsidiaries of Dynegy, Inc. and
Piedmont Natural Gas Company. SouthStar markets natural gas and related
services to residential and small commercial customers in Georgia and to
industrial customers in the Southeast. SouthStar began marketing natural gas
to customers in Georgia during the first quarter of fiscal 1999 under the
trade name "Georgia Natural Gas Services;"
. AGL Investments, Inc., which currently manages certain non-utility businesses
including:
. AGL Propane, Inc. ("Propane"), which engages in the sale of propane and
related products and services in Georgia, Alabama, Tennessee and North
Carolina;
. Trustees Investments, Inc., which owns Trustees Gardens, a residential
and retail development located in Savannah, Georgia; and
. Utilipro, Inc. ("Utilipro"), in which AGL Resources has an 85% ownership
interest and which engages in the sale of integrated customer care
solutions and billing services to energy marketers in the United States
and Canada;
. AGL Peaking Services, Inc., which owns a 50% interest in Etowah LNG
Company LLC ("Etowah"), a joint venture with Southern Natural Gas
Company. Etowah was formed for the purpose of constructing, owning, and
operating a liquefied natural gas peaking facility.
18
<PAGE>
Management's Discussion and Analysis of Results of Operations and Financial
Condition
Overview of the Transition from a Regulated to a Competitive Business
Environment
Pursuant to Georgia's 1997 Natural Gas Competition and Deregulation Act
("Deregulation Act"), AGLC unbundled various components of its services to end-
use customers. Historically, only large, interruptible commercial and
industrial customers had the option of purchasing natural gas from suppliers
other than AGLC and transporting such natural gas through AGLC's distribution
system for delivery. The Deregulation Act enabled AGLC to unbundle its delivery
service and other related services from the sale of natural gas for all
customers, thus allowing firm residential and small commercial customers to
purchase natural gas and other services from suppliers other than AGLC.
Effective October 1, 1999, virtually all of AGLC's 1.4 million customers were
purchasing natural gas from marketers who were approved and certificated by the
GPSC ("certificated marketers").
As a result of the transition to competition, numerous changes have occurred
with respect to the services being offered by AGLC and with respect to the
manner in which AGLC prices and accounts for those services. Consequently,
AGLC's future revenues and expenses will not follow the same pattern as they
have historically.
AGLC continues to provide intrastate delivery service through its existing
pipeline system to end-use customers in Georgia, but has exited the natural gas
sales function. AGLC's delivery of natural gas remains subject to the GPSC's
continued regulation of delivery rates, safety, access to AGLC's system, and
quality of service for all aspects of delivery service.
Since July 1, 1998, AGLC's charges for delivery service to end-use customers
have been based on a straight fixed variable ("SFV") rate design. Under SFV
rates, delivery service costs are recovered throughout the year consistent with
the way those costs are incurred. Prior to the implementation of SFV rates, AGLC
recovered the majority of its delivery service costs volumetrically based on the
amount of natural gas consumed by end-use customers. As a result, AGLC
historically recovered a disproportionately large share of its delivery costs in
the winter months and a disproportionately small share of its delivery costs in
the summer months. The effect of SFV rates is to spread evenly throughout the
year AGLC's recovery of its delivery service costs. Although, when compared to
corresponding quarters of prior years, the effect of SFV rates is to shift
utility delivery service revenues among quarters, AGLC's annual delivery service
revenues should remain relatively consistent with annual delivery service
revenues of prior years.
Certificated marketers, including AGL Resources' marketing affiliate, SouthStar,
compete to sell natural gas to end-use customers at market-based prices. AGLC
allocates delivery capacity to certificated marketers in proportion to the
number and size of residential and small commercial customers served by each
certificated marketer. Delivery capacity that is not used on any day to serve
residential and small commercial customers is made available to large,
interruptible commercial and industrial customers. Similarly, AGLC has allocated
to certificated marketers the majority of the pipeline storage services that it
has under contract, along with a corresponding amount of inventory.
On May 3, 1999, pursuant to the Deregulation Act, the GPSC issued an order
establishing a final 100 day period for customers who had not yet chosen a
certificated marketer to make a choice. Customers who did not choose a
certificated marketer were randomly assigned to a certificated marketer under
the rules issued by the GPSC.
Certificated marketers were randomly assigned customers in proportion to their
respective market share as of August 11, 1999, and began serving those customers
on October 1, 1999. As a result, AGLC has exited the natural gas sales business
and, except for isolated circumstances, is responsible only for delivery service
for residential and small commercial customers.
During the transition to competition, AGLC continued to provide gas sales
service to customers who had not yet switched to a certificated marketer. On
January 26, 1999, AGLC entered into a joint stipulation agreement with the GPSC
to resolve certain gas sales service issues. Among other requirements in the
joint stipulation agreement, AGLC implemented a rate structure for gas sales,
beginning with February 1999 bills, that more closely reflected customers'
actual gas usage and included a demand charge for fixed costs associated with
gas sales. This rate structure for gas sales service ensured AGLC's recovery of
its purchased gas costs incurred from October 6, 1998 through September 30,
1999, without creating any significant income or loss. The joint stipulation
agreement provided for a true-up for any profit or loss outside of a specified
range during fiscal 1999.
Also during the transition to competition, AGLC continued to bill end-use
customers who had not yet switched to certificated marketers for gas sales
service and for certain ancillary services. These ancillary services include
meter reading, billing, bill inquiry, payment processing, and collection
services. Once an end-use customer switched to a certificated marketer for gas
sales service, the Deregulation Act permitted AGLC to bill the marketer only for
the AGLC-provided ancillary services actually used by the marketer. AGLC was
unable, however,
19
<PAGE>
Management's Discussion and Analysis of Results of Operations and Financial
Condition
to eliminate all of the costs associated with the provision of ancillary
services as quickly as customers switched to certificated marketers for natural
gas sales, thereby creating an imbalance between revenues and expenses.
The Deregulation Act provides marketing standards and rules of business practice
to ensure that the benefits of a competitive natural gas market are available to
all customers on AGLC's system. It imposes on certificated marketers an
obligation to serve end-use customers, and creates a universal service fund.
The universal service fund provides a method to fund the recovery of
certificated marketers' uncollectible accounts and enables AGLC to expand its
facilities to serve the public interest.
For additional discussion, see Transition to Competition and State Regulatory
sections under Financial Condition, as well as Note 2. Impact of Deregulation.
Results of Operations
In this section, the results of operations for fiscal years 1999, 1998, and 1997
are compared. AGL Resources' fiscal year ends on September 30.
Fiscal 1999 Compared with Fiscal 1998
Operating Margin Analysis
(Dollars in Millions)
<TABLE>
<CAPTION>
September 30,
1999 1998 Favorable / (Unfavorable)
--------------------------------------------------
<S> <C> <C> <C> <C>
Operating Revenues
Utility $1,039.2 $1,274.8 $(235.6) 18.5%)
Non-utility 29.4 63.8 (34.4) 53.9%)
- ---------------------------------------------------------------------------
Total $1,068.6 $1,338.6 $(270.0) 20.2%)
===========================================================================
Cost of Sales
Utility $ 536.7 $ 747.6 $ 210.9 28.2%
Non-utility 8.0 48.4 40.4 83.5%
- ---------------------------------------------------------------------------
Total $ 544.7 $ 796.0 $ 251.3 31.6%
===========================================================================
Operating Margin
Utility $ 502.5 $ 527.2 $ (24.7) (4.7%)
Non-utility 21.4 15.4 6.0 39.0%
- ---------------------------------------------------------------------------
Total $ 523.9 $ 542.6 $ (18.7) (3.4%)
===========================================================================
</TABLE>
Operating Revenues
Operating revenues for fiscal 1999 decreased to $1,068.6 million from $1,338.6
million for fiscal 1998, a decrease of 20.2%.
Utility. Utility operating revenues decreased to $1,039.2 million for fiscal
1999 from $1,274.8 million for fiscal 1998. The decrease of $235.6 million was
primarily due to the following factors:
. Beginning November 1, 1998, customers began to switch from AGLC to
certificated marketers for natural gas purchases as a result of the
deregulation of natural gas commodity sales in Georgia. As of September 30,
1999, approximately 1.2 million customers (approximately 82% of AGLC's total
customers) had switched to a certificated marketer and, as a result, AGLC
sold less gas. The remaining customers are expected to switch during the
first quarter of fiscal 2000. The reduction in gas sold resulted in a
decrease of $210.9 million in the utility's sales service revenues and a
comparable decrease in the utility's gas costs. (See Utility section under
Cost of Sales for a breakdown of the key components of this amount.);
. A decrease of $38.6 million in delivery service revenue due to the loss of
ancillary service revenues and certain transition revenues. Transition
revenues decreased $15.8 million due to customer migration to certificated
marketers. The remaining decrease of $22.8 million was primarily due to the
timing of the implementation of the new SFV rate structure for AGLC delivery
service that became effective during the fourth quarter of fiscal 1998. (See
Overview of the Transition from a Regulated to a Competitive Business
Environment section under Nature of Our Business.); and
. A decrease of $6.4 million in revenue associated with AGLC's Integrated
Resource Plan ("IRP"), which was phased out during fiscal 1998. Previously,
AGLC passed through to its customers, which was reflected in revenue on a
dollar-for-dollar basis, IRP expenses incurred, which also were included in
operating expenses. Therefore, the phase-out of IRP had no effect on net
income.
These decreases were partially offset by:
. An increase in AGLC's late payment fee revenue from end-use customers of
$13.5 million. The increase was primarily due to the late payment fee
structure that became effective July 1, 1998 as part of the transition to
competition. The late payment fee revenue is not expected to continue at the
same level during fiscal 2000 since AGLC will no longer bill end-use
customers.
. AGLC recovered carrying costs related to storage gas inventories of $6.6
million in fiscal 1999 from its customers within the parameters of the
January 26, 1999 joint stipulation agreement with the GPSC and recorded these
recovered carrying costs in operating revenue. During fiscal 1998, the
recovered carrying costs from AGLC's customers of $5.4 million were recorded
as other income. (See Note 2. Impact of Deregulation.)
20
<PAGE>
Management's Discussion and Analysis of Results of Operations and Financial
Condition
Non-utility. Non-utility operating revenues decreased to $29.4 million for
fiscal 1999 from $63.8 million for fiscal 1998. The decrease of $34.4 million
was primarily due to the following factors:
. A decrease in revenues of $38.0 million primarily attributable to a change
from consolidation of a wholly-owned subsidiary to the equity method for AGL
Resources' joint venture interest in SouthStar. Prior to the formation of the
SouthStar joint venture in July 1998, AGL Resources was engaged in a similar
business through a wholly-owned subsidiary. Upon the formation of SouthStar,
the customers and operations of the former wholly-owned subsidiary became the
customers and operations of SouthStar. Prior to July 1998, the results of
operations of the former wholly-owned subsidiary were reported on a
consolidated basis. In contrast, the results attributable to AGL Resources'
joint venture interest in SouthStar were accounted for using the equity
method during fiscal 1999. AGL Resources' portion of SouthStar's results of
operations is included in Other Income (Loss) on the Statements of
Consolidated Income for the year ended September 30, 1999; and
. A decrease in Propane's operating revenue of $3.4 million due to lower sales
attributable to warmer than normal weather during the winter months.
The decrease in non-utility operating revenues was partially offset by increased
revenues from Utilipro. During fiscal 1999, Utilipro provided integrated
customer care solutions to three certificated marketers in Georgia. The rapid
customer growth experienced by Georgia's certificated marketers during fiscal
1999 resulted in significant revenue growth for Utilipro. Utilipro's revenues
increased to $9.7 million in fiscal 1999 from $0.7 million in fiscal 1998.
Cost of Sales
Cost of sales for fiscal 1999 decreased to $544.7 million for fiscal 1999 from
$796.0 million for fiscal 1998, a decrease of 31.6%.
Utility. The utility's cost of sales decreased to $536.7 million for fiscal 1999
from $747.6 million for fiscal 1998. The decrease of $210.9 million in the
utility's cost of sales was primarily due to the following factors:
. A decrease of $247.5 million in the cost of gas sold to end-use customers
resulting from customer migration to certificated marketers. AGLC recovered
its actual gas costs, including carrying costs related to storage gas
inventories, from its customers within the parameters of the January 26, 1999
joint stipulation agreement with the GPSC;
. A decrease of $13.2 million associated with reduced levels of gas sold
outside of the utility's distribution system; and
. A decrease of $12.7 million in cost of gas sold in Chattanooga as a result of
weather that was warmer than the prior year.
These decreases were partially offset by an increase of $62.4 million resulting
from sales of gas inventory to certificated marketers.
Non-utility. Non-utility cost of sales decreased to $8.0 million for fiscal 1999
from $48.4 million for fiscal 1998. The decrease of $40.4 million was primarily
due to the following factors:
. A decrease of $36.6 million attributable to the change in accounting from
consolidation of a wholly-owned subsidiary to the equity method for SouthStar
as described above. (See Non-utility section under Operating Revenues.); and
. A decrease in Propane's cost of gas of $3.3 million due to lower sales
attributable to warmer than normal weather during the winter months.
Operating Margin
Operating margin for fiscal 1999 decreased to $523.9 million from $542.6 million
for fiscal 1998, a decrease of 3.4%.
Utility. The utility's operating margin decreased to $502.5 million for fiscal
1999 from $527.2 million for fiscal 1998. The decrease of $24.7 million was
primarily due to the following factors as also discussed above in the Utility
section under Operating Revenues:
. A decrease of $38.6 million in delivery service revenue due to the loss of
ancillary service revenues and certain transition revenues. Transition
revenues decreased $15.8 million due to customer migration to certificated
marketers. The remaining decrease of $22.8 million was primarily due to the
timing of the implementation of the new SFV rate structure for AGLC delivery
service that became effective during the fourth quarter of fiscal 1998. (See
Overview of the Transition from a Regulated to a Competitive Business
Environment section under Nature of Our Business.); and
. A decrease of $6.4 million in revenue associated with AGLC's IRP that was
phased out during fiscal 1998. Previously, AGLC passed through to its
customers, which was reflected in revenue on a dollar-for-dollar basis, IRP
expenses incurred, which were also included in operating expenses. Therefore,
the phase-out of IRP had no effect on net income.
21
<PAGE>
Management's Discussion and Analysis of Results of Operations and Financial
Condition
These decreases were partially offset by:
. An increase in AGLC's late payment fee revenue from end-use customers of
$13.5 million. The increase was primarily due to the late payment fee
structure that became effective July 1, 1998 as part of the transition to
competition. The late payment fee revenue is not expected to continue at the
same level during fiscal 2000 since AGLC will no longer bill end-use
customers; and
. AGLC recovered carrying costs related to storage gas inventories of $6.6
million in fiscal 1999 from its customers within the parameters of the
January 26, 1999 joint stipulation agreement with the GPSC and recorded these
recovered carrying costs in operating revenue. During fiscal 1998, the
recovered carrying costs from AGLC's customers of $5.4 million were recorded
as other income. (See Note 2. Impact of Deregulation.)
Non-utility. Non-utility operating margin increased to $21.4 million for fiscal
1999 from $15.4 million for fiscal 1998, an increase of 39.0%. The increase is
primarily due to increased margins for Utilipro. Utilipro had increased revenues
of $9.0 million in fiscal 1999 as compared with fiscal 1998 due to the rapid
customer growth experienced by Georgia's certificated marketers. Because
Utilipro is a service company, its expenses are included in other operating
expenses. Therefore, the increase in operating revenues without a corresponding
increase in cost of sales resulted in the increase of operating margin for
fiscal 1999 as compared with fiscal 1998. The increase was partially offset by a
decrease of $1.4 million attributable to the change in accounting from
consolidation of a wholly-owned subsidiary to the equity method for SouthStar as
described above. (See Non-utility section under Operating Revenues.)
Total Other Operating Expenses
Total other operating expenses for fiscal 1999 decreased to $369.3 million from
$375.0 million for fiscal 1998, a decrease of 1.5%.
Total Other Operating Expenses Analysis
(Dollars in Millions)
<TABLE>
<CAPTION>
September 30,
1999 1998 Favorable / (Unfavorable)
---------------------------------------------------
<S> <C> <C> <C> <C>
Total Other Operating Expenses
Utility $343.3 $347.0 $3.7 1.1%
Non-utility 26.0 28.0 2.0 7.1%
- ------------------------------------------------------------------------------------
Total $369.3 $375.0 $5.7 1.5%
====================================================================================
</TABLE>
Utility. The utility's total other operating expenses for fiscal 1999 decreased
$3.7 million as compared with fiscal 1998 primarily due to the following
factors:
. A decrease of $6.7 million associated with non-cash, nonrecurring charges in
fiscal 1998 including the write-off of the IRP asset of $3.1 million due to
management's decision not to seek recovery for certain deferred expenses.
Additionally, a loss of $3.6 million was reported as a result of the
impairment of certain assets no longer useful primarily due to changes in the
utility's information technology systems strategy;
. A decrease of $6.4 million in expenses associated with AGLC's IRP, which was
phased out during fiscal 1998. Previously, AGLC passed through to its
customers, on a dollar-for-dollar basis, IRP expenses incurred, which were
included in operating expenses. Therefore, the phase-out of IRP had no effect
on net income; and
. A decrease of $3.1 million in taxes other than income taxes primarily due to
a decrease in assessed property values.
These decreases were partially offset by:
. An increase of $5.7 million in expenses primarily due to increased demand for
customer service associated with the more rapid than expected pace of
customer migration to certificated marketers;
. An increase of $3.7 million in depreciation and amortization expenses
primarily due to increased depreciable property and increased depreciation
rates for AGLC as ordered by the GPSC; and
. An increase of $2.6 million in maintenance expenses associated with AGLC's
accelerated pipeline replacement program. (See AGLC Pipeline Safety Program
section under State Regulatory Activity.)
Non-utility. Non-utility total other operating expenses for fiscal 1999
decreased $2.0 million as compared with fiscal 1998 primarily due to the
following factors:
. Nonrecurring charges of $7.2 million in fiscal 1998 associated with the
impairment of certain assets; and
. Decreased operation expenses of $5.7 million for SouthStar due to the change
in accounting from consolidation of a wholly-owned subsidiary to the equity
method for SouthStar as described above. (See Non-utility section under
Operating Revenues.)
22
<PAGE>
Management's Discussion and Analysis of Results of Operations and Financial
Condition
These decreases were partially offset by the following factors:
. Increased operation expenses of $12.0 million for fiscal 1999 as compared
to fiscal 1998 for Utilipro resulting from increased demand for services as
discussed above. (See Non-utility section under Operating Margin.); and
. Increased depreciation and amortization expenses of $4.0 million in fiscal
1999 due to increases in depreciable property and depreciation rates for
data processing equipment as ordered by the GPSC.
Other Income (Loss)
Other losses totaled $17.6 million for fiscal 1999 compared with other income of
$12.9 million for fiscal 1998. The decrease in other income of $30.5 million is
primarily due to:
. AGL Resources' portion of the loss for Sonat Marketing Company L.P. ("Sonat
Marketing"), a joint venture in which, until August 12, 1999, AGL Resources
owned a 35% interest. The loss by Sonat Marketing was the result of a
combination of weather that was significantly warmer than in the prior year
and charges recorded by Sonat Marketing throughout 1999. AGL Resources
recorded a pre-tax loss related to its interest in Sonat Marketing of
approximately $8.4 million for fiscal 1999, a decrease of $13.0 million as
compared with pre-tax income of approximately $4.6 million for fiscal 1998;
. AGL Resources' portion of SouthStar's losses increased by $13.0 million
primarily due to AGL Resources' portion of SouthStar's start-up costs of
approximately $14.2 million for fiscal 1999, as compared to $1.2 million
for fiscal 1998. The start-up costs are associated with establishing market
share in Georgia's deregulated natural gas market; and
. The recovery from AGLC's customers in fiscal 1998 of $5.4 million in
carrying costs related to storage gas inventories. During fiscal 1999, AGLC
recovered carrying costs related to storage gas inventories of $6.6 million
from its customers within the parameters of the January 26, 1999 joint
stipulation agreement with the GPSC and recorded these recovered carrying
costs in operating revenues.
Gain on Sales of Joint Venture Interests
During the fourth quarter of fiscal 1999, a pre-tax gain of $35.6 million was
recorded in connection with the sales of AGL Resources' joint venture interests
in Sonat Marketing and Sonat Power Marketing L.P. ("Sonat Power Marketing"). The
interests in Sonat Marketing and Sonat Power Marketing were sold for $40.0
million and $25.0 million, respectively.
Interest Expense
Interest expense decreased $1.4 million in fiscal 1999 compared with fiscal 1998
primarily due to decreased amounts of outstanding debt and decreased interest on
customer deposits of $0.6 million as a result of customer migration to
certificated marketers.
Dividends on Preferred Stock of Subsidiary
Dividends on preferred stock of subsidiary decreased $0.6 million in fiscal 1999
compared with fiscal 1998. The decrease was due to the redemption on December 1,
1997, of all of AGLC's 7.70% Series depositary preferred stock.
Income Taxes
Income taxes increased to $39.1 million for fiscal 1999 from $38.8 million for
fiscal 1998. The effective tax rate (income tax expense expressed as a
percentage of pre-tax income) for fiscal 1999 was 34.5% as compared to 32.5% for
fiscal 1998. The fiscal 1999 increases in income taxes and effective tax rate
were due primarily to the contribution of certain assets to a private charitable
foundation in fiscal 1998. This contribution resulted in a lower effective tax
rate for fiscal 1998. (See Note 3. Income Taxes.)
Net Income, Earnings per Common Share,
and Dividends per Common Share:
- ------------------------------------------------------------------------------
Basic Diluted
Earnings per Earnings per Dividends per
Common Common Common
Net Income Share Share Share
- ------------------------------------------------------------------------------
1999 $74.4 million $1.30 $1.29 $1.08
1998 $80.6 million $1.41 $1.41 $1.08
Net Income and Earnings per Common Share
Net income for fiscal 1999 was $74.4 million compared with $80.6 million in
fiscal 1998, a decrease of 7.7%. The decrease is primarily due to the following
factors:
. Decreased utility operating margin resulting from the migration of
customers to certificated marketers;
. Loss of ancillary service and transition revenues without a corresponding
reduction in operating costs;
. Decreased other income from operations resulting from AGL Resources' joint
venture interests in Sonat Marketing and Sonat Power Marketing; and
. Start-up costs of SouthStar and Utilipro.
23
<PAGE>
Management's Discussion and Analysis of Results of Operations and Financial
Condition
These decreases were partially offset by the gains recognized on the sales of
the joint venture interests in Sonat Marketing and Sonat Power Marketing.
Basic earnings per common share in fiscal 1999 were $1.30 compared with $1.41 in
fiscal 1998. The basic weighted average number of common shares outstanding
increased to 57.4 million from 57.0 million. Diluted earnings per common share
in fiscal 1999 were $1.29 compared with $1.41 in fiscal 1998. The diluted
weighted average number of common shares and common share equivalents
outstanding increased to 57.4 million from 57.1 million.
Fiscal 1998 Compared with Fiscal 1997
Operating Margin Analysis
(Dollars in Millions)
September 30,
1998 1997 Favorable / (Unfavorable)
-----------------------------------------------
Operating Revenues
Utility $1,274.8 $1,211.3 $ 63.5 5.2%
Non-utility 63.8 76.3 (12.5) (16.4%)
-----------------------------------------------
Total $1,338.6 $1,287.6 $ 51.0 4.0%
===============================================
Cost of Sales
Utility $ 747.6 $ 699.9 $ (47.7) (6.8%)
Non-utility 48.4 66.6 18.2 27.3%
-----------------------------------------------
Total $ 796.0 $ 766.5 $ (29.5) (3.8%)
===============================================
Operating Margin
Utility $ 527.2 $ 511.4 $ 15.8 3.1%
Non-utility 15.4 9.7 5.7 58.8%
-----------------------------------------------
Total $ 542.6 $ 521.1 $ 21.5 4.1%
===============================================
Operating Revenues
Operating revenues for fiscal 1998 increased to $1,338.6 million from $1,287.6
million for fiscal 1997, an increase of 4.0%.
Utility. Utility operating revenues increased to $1,274.8 million for fiscal
1998 compared to $1,211.3 million for fiscal 1997. The increase of $63.5 million
in utility operating revenues was primarily due to the following factors:
. An increase in revenues in the fourth quarter due to the timing of the
implementation of the new SFV rate structure that became effective July 1,
1998, for AGLC's gas distribution services. (See Overview of the Transition
from a Regulated to a Competitive Business Environment section under Nature
of Our Business.);
. An increase of $31.2 million from gas sold outside of the utility's
distribution system;
. An increase in gas sold due to an increase of approximately 35,000 in the
average number of customers served; and
. An increase in gas sold due to weather that was 28.1% colder in 1998 than
in 1997.
Non-utility. Non-utility operating revenues decreased to $63.8 million for
fiscal 1998 from $76.3 million for fiscal 1997. The decrease of $12.5 million
was primarily due to the change in accounting from consolidation of a wholly-
owned subsidiary to the equity method for AGL Resources' joint venture interest
in SouthStar. Prior to the formation of the SouthStar joint venture in July
1998, a wholly-owned subsidiary of AGL Resources was engaged in a similar
business. Upon the formation of SouthStar, the customers and operations of the
former wholly-owned subsidiary became the customers and operations of SouthStar.
The results of operations of the former wholly-owned subsidiary were reported on
a consolidated basis for the fiscal year ended September 30, 1997. In contrast,
the results attributable to AGL Resources' joint venture interest in SouthStar
were accounted for using the equity method during the fourth quarter of fiscal
1998. AGL Resources' portion of SouthStar's results of operations is included in
Other Income (Loss) on the Statements of Consolidated Income for the fourth
quarter of fiscal 1998.
Cost of Sales
Cost of sales for fiscal 1998 increased to $796.0 million from $766.5 million
for fiscal 1997, an increase of 3.8%.
Utility. The utility's cost of sales increased to $747.6 million for fiscal 1998
from $699.9 million for fiscal 1997. The increase of $47.7 million in the
utility's cost of sales was primarily due to the following factors:
. An increase in gas sold outside of the utility's distribution system;
. An increase in gas sold due to weather that was 28.1% colder in 1998 than
in 1997; and
. An increase in gas sold due to an increase of approximately 35,000 in the
average number of customers served.
Non-utility. Non-utility cost of sales decreased to $48.4 million for fiscal
1998 from $66.6 million for fiscal 1997. The decrease of $18.2 million was
primarily due to the change from consolidation of AGL Resources' wholly-owned
subsidiary to the equity method for AGL Resources' interest in SouthStar as
described above. (See Non-utility section under Operating Revenues.)
24
<PAGE>
Management's Discussion and Analysis of Results of Operations and Financial
Condition
Operating Margin
Operating margin for fiscal 1998 increased to $542.6 million from $521.1 million
for fiscal 1997, an increase of 4.1%.
Utility. The utility's operating margin increased to $527.2 million for fiscal
1998 from $511.4 million in fiscal 1997. The increase of $15.8 million was due
primarily to the following factors as described above in the Utility section
under Operating Revenues:
. Increased revenues in the fourth quarter of fiscal 1998 due to the timing
of the implementation of the new SFV rate structure that became effective
July 1, 1998, for AGLC's gas distribution service. (See Overview of the
Transition from a Regulated to a Competitive Business Environment section
under Nature of Our Business.);
. AGLE, which was formed in July 1996, produced a higher operating margin in
fiscal 1998 than in fiscal 1997; and
. An increase of approximately 35,000 in the average number of customers
served.
Non-utility. Non-utility operating margin increased to $15.4 million for fiscal
1998 from $9.7 million for fiscal 1997. The increase is primarily due to a
higher operating margin for Propane, reflecting a full twelve months' activity
for propane operations which were acquired during February and June, 1997.
Total Other Operating Expenses
Total other operating expenses for fiscal 1998 increased to $375.0 million from
$349.6 million for fiscal 1997, an increase of 7.3%.
Total Other Operating Expenses Analysis
(Dollars in Millions)
September 30,
1998 1997 Favorable / (Unfavorable)
----------------------------------------------
Total Other Operating Expenses
Utility $347.0 $338.0 $ (9.0) (2.7%)
Non-utility 28.0 11.6 (16.4) (141.4%)
----------------------------------------------
Total $375.0 $349.6 $ (25.4) (7.3%)
==============================================
Utility. The utility's total other operating expenses for fiscal 1998 increased
$9.0 million as compared with fiscal 1997 primarily due to the following
factors:
. An increase of $6.7 million associated with non-cash, nonrecurring charges
including the write-off of the IRP asset of $3.1 million due to
management's decision not to seek recovery for certain deferred expenses.
Additionally, a loss of $3.6 million was reported as a result of the
impairment of certain assets no longer useful primarily due to changes in
the utility's information technology systems strategy; and
. An increase of $2.6 million related to depreciation and amortization
expenses primarily due to an increase in depreciable property.
Non-utility. The non-utility's total other operating expenses increased $16.4
million for fiscal 1998 as compared with fiscal 1997 primarily due to the
following factors:
. Marketing expenses of $3.7 million for SouthStar incurred in fiscal 1998
prior to its formation;
. Increased operating expenses of $2.1 million for Propane reflecting a full
twelve months activity for propane operations which were acquired during
February and June, 1997; and
. Increased expenses of $7.2 million in fiscal 1998 associated with the
impairment of certain assets.
Other Income (Loss)
Other income increased $2.6 million in fiscal 1998 compared with fiscal 1997
primarily due to increased income from AGL Resources' joint venture interests in
Sonat Marketing and Sonat Power Marketing.
Interest Expense
Interest expense increased $2.2 million in fiscal 1998 compared with fiscal 1997
primarily due to higher levels of outstanding long-term debt during fiscal 1998.
The increase was partially offset by less short-term interest expense due to
lower levels of outstanding short-term debt.
25
<PAGE>
Management's Discussion and Analysis of Results of Operations and Financial
Condition
Dividends on Preferred Stock of Subsidiaries
Dividends on preferred stock of subsidiary increased $0.5 million in fiscal 1998
compared with fiscal 1997. The increase was due to dividend requirements for a
full twelve-month period on the 8.17% Subsidiary Obligated Mandatorily
Redeemable Preferred Securities ("Capital Securities") with a principal amount
of $75.0 million. The Capital Securities were issued in June 1997. (See Note 7.
Preferred Stock.)
Income Taxes
Income taxes decreased to $38.8 million for fiscal 1998 from $46.8 million for
fiscal 1997 primarily due to a favorable resolution of certain outstanding tax
issues. Income tax reserves related to those issues were reduced, thereby
reducing income tax expense. Additionally, tax benefits associated with the
contribution of certain assets to a private charitable foundation resulted in a
decrease in the effective tax rate for fiscal 1998. The effective tax rate
(income tax expense expressed as a percentage of pre-tax income) for fiscal 1998
was 32.5% as compared to 38.0% for fiscal 1997. (See Note 3. Income Taxes.)
Net Income, Earnings per Common Share,
and Dividends per Common Share:
- ----------------------------------------------------------------------------
Basic Diluted
Earnings per Earnings per Dividends per
Common Common Common
Net Income Share Share Share
- ----------------------------------------------------------------------------
1998 $80.6 million $1.41 $1.41 $1.08
1997 $76.6 million $1.37 $1.36 $1.08
Net Income and Earnings per Common Share
Net income for fiscal 1998 was $80.6 million compared with $76.6 million in
fiscal 1997, an increase of 5.2%. The increase is primarily due to increased
operating margin and decreased income taxes resulting from the following
factors:
. Increased operating margin due to the timing of the implementation of the
SFV rate structure that became effective July 1, 1998 for AGLC's gas
distribution service. (See Overview of the Transition from a Regulated to a
Competitive Business Environment section under Nature of Our Business.);
and
. Increased operating margin due to an increase of approximately 35,000 in
the average number of customers served during fiscal 1998.
These increases in operating margin were partly offset by higher operating
expenses resulting principally from charges associated with the impairment of
certain assets no longer useful primarily due to changes in AGL Resources'
information technology systems strategy. (See Note 1. Significant Accounting
Policies.)
Basic earnings per common share in fiscal 1998 were $1.41 compared with $1.37 in
fiscal 1997. The basic weighted average number of common shares outstanding
increased to 57.0 million from 56.1 million. Diluted earnings per common share
in fiscal 1998 were $1.41 compared with $1.36 in fiscal 1997. The diluted
weighted average number of common shares and common share equivalents
outstanding increased to 57.1 million from 56.2 million.
Financial Condition
Transition to Competition
The regulated rate structure under which AGLC has unbundled its gas sales and
delivery service assumed that AGLC's costs associated with providing customer
service decreased each time a customer switched to a certificated marketer for
gas sales service. Additionally, the regulated rate structure assumed that such
costs would be eliminated at the time the switch was made. This structure
therefore reduces the per customer revenue collected by AGLC in the month
following the transfer of a customer to a certificated marketer. However, AGLC's
experience has been that a significant portion of the costs associated with
customer service activities ("ancillary services"), including billing, bill
inquiry, payment processing and collection services, cannot be eliminated
immediately after a customer switch is made, as is assumed by the regulated rate
structure. Instead, a period of up to several months exists during which AGLC
continues to incur these expenses. As a result, a disparity now exists between
the speed at which AGLC is assumed for regulated rate design purposes to be
reducing costs and the speed at which AGLC actually is able to reduce costs.
During fiscal 1999, this disparity was exacerbated by the rapid pace at which
customers switched to certificated marketers.
The accelerated pace of customer migration to certificated marketers also has
required AGLC to incur additional customer service expenses, not originally
provided for in regulated rates, in order to maintain a high level of customer
service during the transition to competition. In particular, beginning in
October 1998, and continuing each month thereafter, the number of customer calls
handled by the call centers significantly exceeded the number of customer calls
handled by the call centers during the same months of the preceding year. The
call center volumes increased 26% in
26
<PAGE>
Management's Discussion and Analysis of Results of Operations and Financial
Condition
fiscal 1999 as compared to fiscal 1998. As a result, AGLC increased its staffing
of customer service representatives and increased other call center related
expenses rather than reducing them, despite the fact that at September 30, 1999,
AGLC had approximately 82% fewer gas sales service customers than at September
30, 1998.
Customers are switched to certificated marketers on the first day of the month
following the receipt of a switch request. At September 30, 1999, approximately
18% of the customers had not been switched to certificated marketers. Such
customers were switched on October 1, 1999, with the exception of approximately
15,000 customers who are expected to switch during the first quarter of fiscal
2000. Therefore, as of October 1, 1999, almost all of AGLC's remaining customers
were receiving service from certificated marketers. AGLC's annual delivery
service revenues for fiscal 1999 associated with providing ancillary services
and certain transition revenues were reduced by approximately $38.6 million as
compared to fiscal 1998; however, associated costs were not reduced by the same
amount, resulting in an adverse effect on net income. Transition revenues
decreased $15.8 million due to customer migration to certificated marketers. The
remaining decrease of $22.8 million was primarily due to the timing of the
implementation of the new SFV rate structure for AGLC delivery service that
became effective during the fourth quarter of fiscal 1998. The impact of the
revenue and cost imbalance related to the transition to competition is expected
to continue into fiscal 2000.
AGLC is pursuing solutions to this revenue and cost imbalance aggressively,
including reducing or eliminating costs as quickly as possible, consistent with
prudent business practices, and increasing employee productivity at customer
call centers. The Deregulation Act authorizes an electing distribution company,
like AGLC, to recover prudently incurred costs that are "stranded" as a result
of the transition to competition. On June 25, 1999, AGLC filed a request with
the GPSC for an accounting order (the "Order"), which would allow AGLC to defer
transition costs which are considered to be "stranded." The Order, which was
approved on October 19, 1999, allows AGLC to defer these costs if such costs are
incurred from October 1, 1999 to September 30, 2000, and recovery is necessary
in order for AGLC to earn the 11% return on common stockholders' equity approved
by the GPSC in AGLC's last rate case. In order to be deferred, the cost must
also be one that:
. AGLC is still incurring but, as a result of deregulation, is no longer
receiving revenue from the rate or rates which were set based on that cost;
. Is prudently incurred; and
. Cannot be mitigated.
Concentration of Credit Risk
AGLC has concentration of credit risk related to the provision of services to
certificated marketers. At September 30, 1998, AGLC billed approximately 1.4
million end-use customers for its services. In contrast, at September 30, 1999,
AGLC billed 15 certificated marketers in Georgia for services, that in turn bill
the 1.4 million end-use customers. As a result of deregulation, AGLC now bills
certificated marketers for intrastate delivery and other services and no longer
has recourse to end-use customers for collection.
As of September 30, 1999, 25.8% of AGL Resources' total gas receivables were due
from 7 of the 15 certificated and active marketers and 58.7% were due from end-
use customers in Georgia who migrated to certificated marketers late in the
fiscal year or who were randomly assigned. In fiscal 2000, only gas receivables
attributable to Chattanooga will be due from end-use customers. As a result, at
September 30, 2000, a significantly higher percentage of AGL Resources' total
gas receivables will be due from Georgia certificated marketers.
AGLC also faces potential credit risk in connection with assignments to
certificated marketers of interstate pipeline transportation and storage
capacity. Although AGLC has assigned this capacity to the certificated
marketers, in the event that the certificated marketers fail to pay the
interstate pipelines for the capacity, the interstate pipelines would in all
likelihood seek repayment from AGLC. This risk is mitigated somewhat by the fact
that the interstate pipelines require the certificated marketers to maintain
security for their obligations to the interstates arising out of the assigned
capacity.
On October 26, 1999, Peachtree Natural Gas, LLC ("Peachtree"), one of the five
largest certificated marketers in Georgia based on customer count, filed for
protection under Chapter 11 of the United States Bankruptcy Code. As of
September 30, 1999, AGL Resources' total gas receivables included approximately
$6.8 million attributable to Peachtree. As of September 30, 1999, AGLC held
financial surety bonds totaling $11 million as security for Peachtree's
obligations. As of the date of Peachtree's bankruptcy filing, Peachtree owed
AGLC approximately $14.2 million and AGLC continued to hold the $11 million of
surety bonds. The amount owed to AGLC does not include amounts owed by Peachtree
to interstate pipelines for assigned capacity. Based upon information filed by
Peachtree in its bankruptcy proceeding, as of the date of Peachtree's filing,
Peachtree owed interstate pipelines approximately $1.8 million for assigned
capacity. On November 17, 1999, Peachtree entered into an agreement to sell its
customers and storage gas inventories to another certificated marketer. This
sale is expected to close prior to December 31, 1999.
27
<PAGE>
Management's Discussion and Analysis of Results of Operations and Financial
Condition
Several factors mitigate the risks to AGL Resources of the increased
concentration of credit that has resulted from deregulation. First, in order to
obtain a certificate from the GPSC, a marketer must demonstrate to the GPSC,
among other things, that it possesses satisfactory financial and technical
capability to render the certificated service. Second, AGLC has instituted
certain practices and imposed certain requirements designed to reduce credit
risk. These include:
. Pursuant to AGLC's tariff, each certificated marketer is required to maintain
security for its obligations to AGLC in an amount equal to two times the
marketer's estimated maximum monthly bill and in the form of a cash deposit,
letter of credit, surety bond or guaranty from a creditworthy guarantor; and
. Intrastate delivery service is billed in advance rather than in arrears.
Management does not believe that AGLC's concentration of credit risk or that
Peachtree's bankruptcy filing will have a material adverse effect on AGL
Resources' results of operations or financial condition.
Financing Activity
Capital Securities
In June 1997, AGL Resources established AGL Capital Trust I (the "Trust"), a
Delaware business trust. The Trust issued two types of securities. Common voting
securities were issued to AGL Resources. In addition, the Trust issued and sold
$75.0 million principal amount of 8.17% Capital Securities to certain initial
investors. The Trust used the proceeds to purchase 8.17% Junior Subordinated
Deferrable Interest Debentures, which are due June 1, 2037, from AGL Resources.
The Capital Securities are subject to mandatory redemption at the time of the
repayment of the Junior Subordinated Debentures on June 1, 2037, or the optional
prepayment by AGL Resources after May 31, 2007.
AGL Resources fully and unconditionally guarantees all of the Trust's
obligations for the Capital Securities. AGL Resources used the net proceeds of
approximately $74.0 million from the sale of the Junior Subordinated Debentures
to repay short-term debt, to redeem some of AGLC's outstanding issues of
preferred stock, and for other corporate purposes.
AGLC Preferred Securities
On August 15, 1997, AGLC fully redeemed the following:
. 4.5% Cumulative Preferred Stock;
. 4.72% Cumulative Preferred Stock;
. 5.0% Cumulative Preferred Stock;
. 7.84% Cumulative Preferred Stock; and
. 8.32% Cumulative Preferred Stock.
The issues of preferred stock were redeemed, at the call price in effect for
each issue, for a total of $14.7 million.
On December 1, 1997, AGLC redeemed all of its outstanding 7.70% Series
depositary preferred stock.
Common Stock
The following shares of common stock have been issued:
. 677,411 shares in fiscal 1999;
. 739,380 shares in fiscal 1998; and
. 753,866 shares in fiscal 1997.
The shares of common stock were issued under ResourcesDirect, a direct stock
purchase and dividend reinvestment plan; the Retirement Savings Plus Plan; the
Long-Term Stock Incentive Plan; the Nonqualified Savings Plan; and the Non-
Employee Directors Equity Compensation Plan.
The issuances increased common stockholders' equity by the following amounts:
. $11.7 million in fiscal 1999;
. $12.9 million in fiscal 1998; and
. $13.8 million in fiscal 1997.
Subsequent to June 15, 1999, shares issued under the above plans have been
issued from shares held in treasury.
28
<PAGE>
Management's Discussion and Analysis of Results of Operations and Financial
Condition
Termination of LESOP
As a result of the termination of the Leveraged Employee Stock Ownership Plan
("LESOP"), AGL Resources distributed the value of participants' LESOP account
balances as of June 15, 1999. At the election of the participants, AGL Resources
distributed the value of each account in one of three forms:
. Direct rollover into the Retirement Savings Plus Plan ("401(k) Plan") or into
another tax-qualified retirement plan;
. Lump sum payment in the form of a certificate for shares of AGL Resources
common stock; or
. Lump sum cash payment of $18.50 per share.
As of June 15, 1999, 868,688 LESOP shares were repurchased by AGL Resources in
cash from the LESOP trustees in a non-brokered transaction at a purchase price
of $18.50 per share and are held as treasury shares. An additional 236,625
shares were transferred to participants' accounts under the 401(k) Plan from the
respective participants' accounts in the LESOP.
Ratios and Coverages:
<TABLE>
<CAPTION>
September 30,
1999 1998 1997
- -------------------------------------------------------------
<S> <C> <C> <C>
Weighted average
cost of long-term debt 7.5% 7.5% 7.5%
Weighted average
cost of preferred stock 8.2% 8.1% 8.0%
Return on average
common stockholders' equity 11.3% 12.6% 12.7%
Ratio of earnings to
combined fixed
charges and preferred
stock dividends/(1)/ 2.72 2.77 2.90
Ratio of earnings to
interest charges and
preferred stock dividends/(2)/ 2.90 2.94 3.10
Ratio of earnings to
interest charges/(2)/ 3.23 3.30 3.46
</TABLE>
_____________________________________________________________
(1) Fixed charges consist of interest on short-term and long-term debt, other
interest, and the estimated interest components of rentals.
(2) Interest charges exclude the debt portion of allowance for funds used
during construction.
Long-Term Debt
AGL Resources did not issue long-term debt during fiscal 1999 or 1998. The
current portion of long-term debt as of September 30, 1999 is $50.0 million of
Series A and Series B medium-term notes with interest rates ranging from 7.15%
to 9.10%.
Short-Term Debt
Short-term debt primarily is utilized to meet working capital requirements. In
addition, capital expenditures are funded temporarily with short-term debt.
Lines of credit with various banks provide for direct borrowings and are subject
to annual renewal. The current lines of credit vary from $180.0 million to
$260.0 million.
Short-term debt decreased $75.0 million to $1.5 million as of September 30,
1999, from $76.5 million as of September 30, 1998. The decrease in short-term
debt was primarily due to the assignment of natural gas inventories to
certificated marketers since AGLC no longer sells natural gas to end-use
customers. Additionally, AGL Resources expects to be less dependent on short-
term debt since it will have no need to replenish the natural gas inventories.
(See Inventory Assignment section under State Regulatory Activity and Note 9.
Short-Term Debt.)
Capital Requirements
Capital expenditures for construction of distribution facilities, purchase of
equipment, and other general improvements were $143.4 million during fiscal 1999
as compared to $117.3 million during fiscal 1998. The increase of $26.1 million
was primarily due to capital expenditures incurred in fiscal 1999 for the
pipeline replacement program. The increase was partially offset by decreased
capital expenditures for data processing equipment. The pipeline replacement
program costs will be recovered by AGLC pursuant to a regulatory mechanism
approved by the GPSC. (See AGLC Pipeline Safety Program section under State
Regulatory Activity.)
Typically, funding for capital expenditures is provided through a combination of
internal sources, the issuance of short-term and long-term debt, and the
issuance of equity securities. AGL Resources' estimated aggregate capital
requirement for the next three years, ending on September 30, 2002, is
approximately $471.8 million, of which approximately $154.8 million is
attributable to the pipeline replacement program approved by the GPSC.
29
<PAGE>
Management's Discussion and Analysis of Results of Operations and Financial
Condition
As of September 30, 1999, natural gas stored underground decreased $90.8 million
to $47.3 million from $138.1 million, primarily due to the assignment of natural
gas inventories to certificated marketers in accordance with the Deregulation
Act. As of October 1, 1999, AGLC's natural gas stored underground decreased
approximately $19.0 million, primarily due to the additional assignment of
natural gas inventories to certificated marketers. (See Inventory Assignment
section under State Regulatory Activity.)
Ratios and Coverages
As of September 30, 1999, AGL Resources' capitalization ratio consisted of:
. 45.3% long-term debt;
. 5.5% preferred securities; and
. 49.2% common equity.
The return on average common stockholders' equity decreased in fiscal 1999 from
fiscal 1998 as a result of the decrease in net income of $6.2 million.
The ratio of earnings to combined fixed charges and preferred stock dividends,
the ratio of earnings to interest charges and preferred stock dividends, and the
ratio of earnings to fixed charges decreased in fiscal 1999 compared to fiscal
1998 primarily due to lower earnings.
State Regulatory Activity
During fiscal 1999, AGLC unbundled, or separated, all services to its natural
gas customers in Georgia; allocated delivery capacity to certificated marketers
who sell the gas commodity to residential and small commercial customers; and
created a secondary market for large commercial and industrial transportation
capacity. (See Overview of the Transition from a Regulated to a Competitive
Business Environment section under Nature of Our Business.)
Daily Balancing Services; EBB. In September 1999, the GPSC approved the
application of daily balancing services and related charges to certificated
marketers serving retail customers on AGLC's system. This decision allows AGLC
to operate its delivery system in a reliable manner and provides for full
recovery of costs incurred for system imbalances. Along with the GPSC's order on
daily balancing, AGLC's Electronic Bulletin Board ("EBB") was declared fully
operational. This declaration was a requirement in order for daily balancing to
become effective.
Regulatory Accounting. AGL Resources has recorded regulatory assets and
liabilities in its Consolidated Balance Sheets in accordance with Statement of
Financial Accounting Standards No. 71, "Accounting for the Effects of Certain
Types of Regulation" ("SFAS 71").
In July 1997, the Emerging Issues Task Force ("EITF") concluded that once
legislation is passed to deregulate a segment of a utility and that legislation
includes sufficient detail for the enterprise to determine how the transition
plan will affect that segment, SFAS 71 should be discontinued for that segment
of the utility. The EITF consensus permits assets and liabilities of a
deregulated segment to be retained if they are recoverable through a segment
that remains regulated.
The Deregulation Act allows deregulation of natural gas sales and the separation
of some ancillary services of local natural gas distribution companies. However,
the rates that AGLC, as the local gas distribution company, charges to transport
natural gas through its intrastate pipeline system will continue to be regulated
by the GPSC. Therefore, the continued application of SFAS 71 is appropriate for
regulatory assets and liabilities related to AGLC's delivery services.
AGLC Pipeline Safety Program. On January 8, 1998, the GPSC issued procedures and
set a schedule for hearings about alleged pipeline safety violations. On July
21, 1998, the GPSC approved a settlement between AGLC and the Adversary Staff of
the GPSC that details a 10-year replacement program for approximately 2,300
miles of cast iron and bare steel pipe. Over that 10-year period, AGLC will
recover from customers, through billings to certificated marketers, the costs
related to the program net of any cost savings from the replacement program.
During fiscal 1999, approximately 247 miles of pipe was replaced pursuant to the
program. Also during fiscal 1999, AGLC's capital expenditures and operation and
maintenance expenses related to the pipeline replacement program were
approximately $43.2 million and $11.5 million, respectively. All such amounts
will be recovered through a combination of SFV rates and a regulatory mechanism.
Weather Normalization. The weather normalization adjustment rider ("WNAR")
authorized by the TRA to offset the impact of unusually cold or warm weather on
customer billings and operating margin remains in effect for Chattanooga. The
WNAR in effect for AGLC was discontinued for fiscal 1999 by the GPSC when the
SFV rate structure became effective. (See Note 1. Significant Accounting
Policies.)
30
<PAGE>
Management's Discussion and Analysis of Results of Operations and Financial
Condition
Inventory Assignment. Pursuant to the Deregulation Act, certificated marketers,
including AGLC's marketing affiliate, began selling natural gas to firm end-use
customers at market-based prices in November 1998. Part of the unbundling
process is the allocation of certain pipeline services that AGLC has under
contract, including interstate pipeline transportation and gas storage. In
particular, AGLC has allocated the majority of its pipeline storage services
that it has under contract to the certificated marketers along with a
corresponding amount of inventory based on the respective market share of the
certificated marketers. Following the rules of AGLC's tariff, the sale price was
the weighted-average cost of the storage inventory at the time of sale. AGLC
changed its inventory costing method for its gas inventories from first-in,
first-out to weighted average effective October 1, 1998. The weighted-average
cost-flow assumption provides for a more equitable pricing method for the sale
of gas inventories to certificated marketers.
As of September 30, 1999, AGLC had $43.0 million in gas storage. This amount
represents:
. Unassigned gas storage as of September 30, 1999, to serve unassigned
customers; and
. AGLC's retained storage, that represents the under ground storage capacity
retained by AGLC to balance temporary differences between marketer's expected
demand and actual demand.
Certain gas storage inventory was unassigned at September 30, 1999 because all
customers had not been assigned. Customers are switched to certificated
marketers on the first day of the month following the receipt of a switch
request. At September 30, 1999, approximately 18% of the customers had not been
switched to certificated marketers. Such customers were switched on October 1,
1999, with the exception of approximately 15,000 customers. The remaining
customers are expected to switch during the first quarter of fiscal 2000. The
resulting decrease in gas inventory on October 1, 1999 was approximately $19.0
million.
Gas Supply Contracts
In connection with AGLC's exit from natural gas sales service, AGLC terminated
24 long-term gas supply contracts. Certain of these contracts will require the
payment of an aggregate of approximately $2.0 million of reservation charges in
order to terminate the contracts. AGLC was permitted by the GPSC to utilize gas
cost credits to pay these reservation charges. (See Note 10. Commitments and
Contingencies.)
Federal Regulatory Activity
FERC Order 636: Transition Costs Settlement Agreements. The utility purchases
natural gas transportation and storage services from interstate pipeline
companies, and the Federal Energy Regulatory Commission ("FERC") regulates those
services and the rates the interstate pipeline companies charge the utility.
During the past decade, the FERC has dramatically transformed the natural gas
industry through a series of generic orders promoting competition in the
industry. As part of that transformation, the interstate pipelines that serve
the utility have been required to:
. Unbundle, or separate, their transportation and gas supply services; and
. Provide a separate transportation service on a nondiscriminatory basis for
the gas that is supplied by numerous gas producers or other third parties.
The FERC is considering further revisions to its rules, including the following:
. Its policies governing secondary market transactions for use of pipeline
capacity; and
. Revisions that would permit pipelines and their customers to establish
individually negotiated terms and conditions of service that depart from
generally applicable pipeline tariff rules.
The utility cannot predict whether revisions will be adopted or how they may
potentially affect operations.
The FERC has required the utility, as well as other interstate pipeline
customers, to pay transition costs associated with the separation of the
suppliers' transportation and gas supply services. Based on its pipeline
suppliers' filings with the FERC, the utility estimates the total portion of its
transition costs from all its pipeline suppliers will be approximately $107.9
million. As of September 30, 1999, approximately $105.8 million of those costs
had been incurred and were being recovered primarily from the utility's
customers under rates charged for gas sales. Going forward, AGLC's remaining
costs will be recovered from certificated marketers.
The largest portion of the transition costs the utility must pay consists of gas
supply realignment costs that Southern Natural Gas Company ("Southern") and
Tennessee Gas Pipeline Company ("Tennessee") bill the utility. The utility and
other parties have entered restructuring settlements with Southern and Tennessee
that resolve all transition cost issues for those pipelines.
31
<PAGE>
Management's Discussion and Analysis of Results of Operations and Financial
Condition
Under the Southern settlement, the utility's share of Southern's transition
costs is approximately $89.7 million, of which the utility incurred $87.6
million as of September 30, 1999. Under the Tennessee settlement, the utility's
share of Tennessee's transition costs was approximately $14.7 million, all of
which had been incurred by September 30, 1999.
Southern filed a general rate case on September 1, 1999. Its proposed rates
would represent a 10% increase (about $15 million per year) under AGLC's
existing contracts in firm interstate pipeline charges. These rates would become
effective March 1, 2000, subject to refund unless the FERC should accept an
offer of settlement between Southern and its customers. Such a settlement is
currently under discussion.
Environmental Matters
Before natural gas was widely available in the Southeast, AGLC manufactured gas
from coal and other fuels. Those manufacturing operations were known as
"manufactured gas plants," or "MGPs" which AGLC ceased operating in the 1950s.
Because of recent environmental concerns, AGLC is required to investigate
possible environmental contamination at those plants and, if necessary, clean up
any contamination.
AGLC has been associated with twelve MGP sites in Georgia and three in Florida.
Based on investigations to date, AGLC believes that some cleanup is likely at
most of the sites. In Georgia, the state Environmental Protection Division
supervises the investigation and cleanup of MGP sites. In Florida, the U.S.
Environmental Protection Agency has that responsibility.
For each of the MGP sites, AGLC has estimated its share of the likely costs of
investigation and cleanup. AGLC used the following process for the estimates:
First, AGLC eliminated the sites where it was believed that no cleanup or
further investigation was likely to be necessary. Second, AGLC estimated its
likely future cost of investigation and cleanup at each of the remaining sites.
Third, for some sites, AGLC estimated its likely "share" of the costs. AGLC
developed its estimate based on any agreements for cost sharing it has, the
legal principles for sharing costs, its evaluation of other entities' ability to
pay, and other similar factors.
Using the above process, AGLC currently estimates that its total future cost of
investigating and cleaning up MGP sites is between $102.4 million and $148.2
million. That range does not include other potential expenses, such as
unasserted property damage or personal injury claims or legal expenses for which
AGLC may be held liable but for which neither the existence nor the amount of
such liabilities can be reasonably forecast. Within that range, AGLC cannot
identify any single number as a "better" estimate of its likely future costs.
Consequently, AGLC has recorded the lower end of the range, or $102.4 million,
as a liability and a corresponding regulatory asset as of September 30, 1999.
AGLC does not believe that any single number within the range constitutes a
"better" estimate because its actual future investigation and cleanup costs will
be affected by a number of contingencies that cannot be quantified at this time.
During fiscal 1999, the asset increased $78.7 million and was reduced by
amortization of $6.1 million resulting in an asset of $150.2 million.
As of September 30, 1998, AGLC had recorded a liability of $47.0 million.
During fiscal 1999, the liability increased by $78.7 million and payments of
$23.3 million were made. The net increase in the liability was $55.4 million
resulting in a liability of $102.4 million as of September 30, 1999. The net
increase in the liability was based on revised estimates of future costs, which
resulted in a corresponding increase in the unrecovered environmental response
cost asset.
AGLC has two ways of recovering investigation and cleanup costs. First, the GPSC
has approved an "Environmental Response Cost Recovery Rider." It allows the
recovery of costs of investigation, testing, cleanup, and litigation. Because of
that rider, AGLC has recorded a regulatory asset in the same amount as the
recorded liability for investigation and cleanup. During fiscal 1999, AGLC
recovered $6.1 million through its environmental response recovery rider. (See
Note 12. Environmental Matters.)
The second way AGLC can recover costs is by exercising the legal rights AGLC
believes it has to recover a share of its costs from other potentially
responsible parties, typically former owners or operators of the MGP sites. AGLC
has been actively pursuing those recoveries. There were no material recoveries
during fiscal 1999 or 1998.
Accounting Developments
During fiscal 1999, AGL Resources adopted the Financial Accounting Standards
Board ("FASB") Statements No. 130, "Reporting Comprehensive Income", No. 131,
"Disclosure about Segments of an Enterprise and Related Information", and No.
132, " Employers' Disclosures about Pensions and Other Postretirement Benefits".
None of these statements had a material effect on the consolidated financial
statements.
In June 1998, the FASB issued Statement of Financial Accounting Standards No.
133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS
133"). SFAS 133 establishes accounting and reporting standards for
32
<PAGE>
Management's Discussion and Analysis of Results of Operations and Financial
Condition
derivative instruments, including certain derivative instruments embedded in
other contracts, and for hedging activities. AGL Resources will adopt SFAS 133
in fiscal 2001. The impact of SFAS 133 on AGL Resources' consolidated financial
statements is under review and is currently unknown.
Competition
Utility
The utility competes with alternative energy suppliers to distribute natural gas
to large commercial and industrial customers. Those customers can switch to
alternative fuels, including propane, fuel and waste oils, electricity and, in
some cases, combustible wood by-products. AGLC also competes to distribute gas
to large commercial and industrial customers who seek to bypass AGLC's
distribution system.
Pursuant to the GPSC's rate case order of June 30, 1998, AGLC has been able to
price distribution services to large commercial and industrial customers in one
of three ways:
. GPSC approved rates in AGLC's tariff;
. Negotiated rates if an existing rate is not priced competitively with a
customer's competitive alternative fuel; or
. Special contracts approved by the GPSC.
Additionally, interruptible customers have the option of purchasing delivery
service directly from certificated marketers, who are authorized to use capacity
on AGLC's distribution system that is allocated to the certificated marketers
for firm residential and small commercial customers, whenever such capacity is
not being used for firm customers.
Non-utility
AGL Resources engages in several competitive, energy-related businesses,
including gas supply services, wholesale and retail propane sales, customer care
services, and the sale of energy-related products and services for residential,
commercial, and industrial customers throughout the Southeast. (See
Organizational Structure section under Nature of Our Business.)
Unlike the utility, the non-utility businesses are not regulated. The non-
utility businesses typically face competition from other companies in the same
or similar businesses.
SouthStar competes with other energy marketers, including certificated marketers
in Georgia, to provide natural gas and related services to customers in Georgia
and the Southeast. SouthStar began marketing natural gas to all customers in
Georgia during the first quarter of fiscal 1999. Marketing efforts during the
transition to competition in Georgia consisted of advertising and promotional
campaigns. As of October 1, 1999, SouthStar had the largest market share among
approximately 15 certificated and active marketers in Georgia.
Utilipro competes with other customer care service providers throughout the
United States and Canada. Utilipro anticipates that the number of competitors
will increase as energy markets in the United States and Canada become
deregulated.
Year 2000 Readiness Disclosure
The widespread use by governments and businesses, including AGL Resources, of
computer software that relies on two digits, rather than four digits, to define
the applicable year may cause computers, computer-controlled systems, and
equipment with embedded software to malfunction or incorrectly process data as
AGL Resources approaches and enters the year 2000.
AGL Resources' Year 2000 Readiness Initiative
In view of the potential adverse impact of the "Year 2000" issue on its
business, operations, and financial condition, AGL Resources has established a
cross-functional team to coordinate, and to report to management on a regular
basis about, the assessment, remediation planning, and plan implementation
processes directed to the Year 2000 issue. AGL Resources has also engaged
independent consultants to assist in the assessment, remediation, planning, and
implementation phases of our Year 2000 initiative. AGL Resources' Year 2000
initiative is proceeding on a schedule that management believes will achieve
Year 2000 readiness in a timely manner.
The mission of AGL Resources' Year 2000 initiative is to define and provide a
continuing process for assessment, remediation planning, and plan implementation
to achieve a level of readiness that will meet the challenges presented by the
Year 2000 in a timely manner. Achieving Year 2000 readiness does not mean
correcting every Year 2000 limitation. Achieving Year 2000 readiness does mean
that critical systems, critical electronic assets, and relationships with key
business partners have been evaluated and are expected to be suitable for
continued use into and beyond the year 2000, and that contingency plans are in
place.
33
<PAGE>
Management's Discussion and Analysis of Results of Operations and Financial
Condition
AGL Resources' Year 2000 readiness initiative involves a three-phase process.
The initiative is a continuing process with all phases of the initiative
progressing concurrently with respect to information technology ("IT")
applications, infrastructure and non-information technology ("non-IT")
applications, as each of those terms is defined below, and key business
relationships. The three phases of AGL Resources' Year 2000 initiative are as
follows:
1. Assessment - Assessment involves identifying and inventorying business assets
and processes. It also involves determining the Year 2000 readiness status of
AGL Resources' assets and of key business partners. Key business partners are
those customers, suppliers and manufacturers who management believes may be
material to AGL Resources' business, results of operations, or financial
condition. In appropriate circumstances, pre-remediation testing is conducted
as a part of the assessment phase. The assessment phase of AGL Resources'
Year 2000 initiative includes assessment for Year 2000 readiness of
the following:
. IT applications - Computer software maintained by AGL Resources'
Information Systems ("IS") Department;
. Non-IT applications - Computer hardware, such as AGL Resources'
mainframe and PC's, microprocessors embedded in equipment, and software
maintained by business units other than AGL Resources' IS Department;
and
. Key business partners (customers, suppliers, and manufacturers).
2. Preparation of Remediation Plans - The purpose of this phase is to develop
plans which, when implemented, will enable assets and business relationships
to be Year 2000 ready. This phase involves implementation planning and
prioritizing the implementation of remediation plans.
3. Implementation - This step involves the implementation of remediation plans,
including post-remediation testing and contingency planning.
State of Readiness
AGL Resources continues to assess the impact of the Year 2000 issue throughout
its businesses and operations, including its customer and supplier base. The
scope of the Year 2000 initiative includes AGL Resources and its subsidiaries.
Set forth below is a description of the progress of AGL Resources' Year 2000
initiative in all business units that are within the scope of AGL Resources'
Year 2000 initiative, with the exception of SouthStar and of Utilipro. With
respect to SouthStar, the assessment, remediation planning, and plan
implementation phases have been completed. All of SouthStar's critical assets
are Year 2000 ready. An assessment of the readiness of SouthStar's two joint
venture partners is underway. Information or responses from all of SouthStar's
key suppliers and customers has been obtained. The assessment of SouthStar's key
suppliers reveals that all are Year 2000 ready, with the exception of one
supplier whom SouthStar expects will achieve Year 2000 readiness prior to
December 31, 1999. The preparation and review of contingency plans for SouthStar
have been completed. With respect to Utilipro, the Year 2000 initiative
commenced in January of 1999. The project plan and assessment phase, as well as
the remediation planning phase, for the Utilipro Year 2000 initiative have been
completed. Utilipro has engaged independent consultants to assist with its Year
2000 initiative. The mission and processes of the Year 2000 initiative for
Utilipro are essentially identical to those of AGL Resources' Year 2000
initiative. The majority of the remediation and testing for Utilipro is
complete. Management expects Utilipro's business and operations to achieve Year
2000 readiness.
IT Applications
Assessment of, and remediation planning for, IT applications is complete and
implementation is underway. During the assessment phase, an assessment of AGL
Resources' 81 IT applications was completed. Of the 81 applications, 14 are
deemed to be critical applications. The results of AGL Resources' Year 2000
initiative with respect to IT applications indicate that, to date:
. 55 applications now are ready for Year 2000, including all critical
applications;
. Nine applications have been eliminated;
. Sixteen applications have been replaced; and
. One application is scheduled for elimination by December 15, 1999.
34
<PAGE>
Management's Discussion and Analysis of Results of Operations and Financial
Condition
Infrastructure and Non-IT Applications
Assessment, remediation, and testing of infrastructure and non-IT applications
are complete. These processes involved:
. Identifying business processes;
. Identifying the assets that comprise the infrastructure and non-IT
applications category, and defining the business process or processes to
which such assets relate;
. Identifying the mission criticality of each such asset and business process;
. Documenting in a tracking database the existence, and the mission-
criticality, of each such asset and business process;
. Fixing, upgrading, replacing, eliminating, or developing alternate processes
for those assets that were deemed not to be Year 2000 ready; and
. Testing the mission-critical assets where possible. In those cases where
testing of those assets was not possible or was cost-prohibitive, the process
involved evaluating and accepting, where appropriate, the readiness
statements provided by the manufacturers of such assets.
Key Business Partners
AGL Resources has contacted key business partners, including suppliers,
manufacturers and customers to evaluate their Year 2000 readiness plans and
status of readiness. AGL Resources has contacted over 2,000 suppliers and
manufacturers by letter. This group includes suppliers and manufacturers that
AGL Resources considers key business partners as well as other selected
suppliers and manufacturers. AGL Resources has received responses from the
majority of suppliers and manufacturers who were contacted. To date, AGL
Resources has completed follow-up with 100% of those suppliers that are
considered critical suppliers. AGL Resources plans to continue to update its
assessment of the readiness of critical suppliers and manufacturers during the
remainder of calendar year 1999.
AGL Resources also initiated contact with more than 2,500 commercial and
industrial customers by personal or telephone interview or by fax survey. That
group of customers includes customers that AGL Resources considers key business
partners as well as other selected customers. AGL Resources expects to continue
to follow-up as needed throughout the remainder of calendar year 1999. In light
of deregulation, the expected focus of AGL Resources' follow-up effort will be
on certificated marketers in Georgia who are also AGLC's customers.
AGL Resources is assessing the state of readiness of key business partners who
have responded to requests for information and will continue to do so as
additional responses are received. As a general matter, AGL Resources, like
other businesses, is vulnerable to key business partners' inability to achieve
Year 2000 readiness. AGL Resources cannot predict the outcome of business
partners' readiness efforts. However, AGL Resources has developed contingency
plans to mitigate risks associated with the Year 2000 readiness of certain
business partners, including certain key business partners. AGL Resources'
review of key business partners' responses gives management no reason to believe
the Year 2000 readiness of key business partners is likely to have a material
impact on AGL Resources' business, results of operations, or financial
condition. AGL Resources will continue to assess key business partners
throughout the remainder of calendar year 1999.
Costs to Address Year 2000 Issues
AGL Resources intends to devote the resources necessary to achieve a level of
readiness that will meet its Year 2000 challenges in a timely manner. Through
September 30, 1999, cumulative expenses in connection with AGL Resources' Year
2000 assessment, remediation planning, and plan implementation processes were
approximately $6.7 million. Of this total, $2.7 million was spent in fiscal
years 1997 and 1998. Through September 30, 1999, an additional $8.6 million has
been spent for the replacement of AGL Resources' financial and human resources
information systems. The primary reason for replacing those systems was to
achieve increased efficiency and functionality. An added benefit of replacing
those systems was the avoidance of the costs of remediating Year 2000 problems
associated with AGL Resources' previous financial and human resources
information systems. The costs of the new financial and human resources
information systems have been capitalized, in accordance with AGL Resources'
accounting policies and with generally accepted accounting principles.
AGL Resources expects to spend $2.1 million for the Year 2000 initiative in
fiscal 2000. These estimates include costs associated with the use of outside
consultants as well as hardware and software costs. They also include direct
costs associated with employees of AGL Resources' IS Department who work on the
Year 2000 initiative. It does not include costs associated with employees of
other departments such as Legal and Internal Audit, and of other business units,
that are involved, on a limited basis, in the Year 2000 initiative.
35
<PAGE>
Management's Discussion and Analysis of Results of Operations and Financial
Condition
On June 30, 1998, the GPSC issued a rate case order in response to a filing by
AGLC. The GPSC provided for the deferral, amortization, and recovery of some
Year 2000 costs over a five-year period beginning July 1, 1998. The portion of
those costs that will be deferred in this way includes costs which would
normally be expensed in accordance with generally accepted accounting principles
and that are attributable to AGLC. Going forward, AGL Resources estimates that
approximately 83% of Year 2000 costs will be attributable to AGLC. At September
30, 1999, AGLC had deferred total costs of approximately $4.4 million, which are
being amortized and recovered over a five year period.
At present, the cost estimates associated with achieving Year 2000 readiness are
not expected to materially impact AGL Resources' consolidated financial
statements. AGL Resources will account for costs related to achieving Year 2000
readiness in accordance with its internal accounting policies, with regulatory
treatment, and with generally accepted accounting principles.
Risks of Year 2000 Issues
AGL Resources has finalized its estimate of the Year 2000 most reasonably likely
worst case scenarios. These scenarios contemplate intermittent disruptions of
important goods and services that AGL Resources obtains from third parties at
some locations. AGL Resources does not expect these disruptions to be long-term
nor does AGL Resources expect the disruptions to materially impact its
operations as a whole. However, the extent of such disruptions is uncertain, and
if the extent or longevity of the disruptions exceed AGL Resources' assumptions,
they could have a material adverse impact on AGL Resources' business, results of
operations, or financial condition.
Although AGL Resources has finalized its estimate of Year 2000 most reasonably
likely worst case scenarios, the process of refining AGL Resources' most
reasonably likely worst case scenarios will be an ongoing process. AGL Resources
expects to continue to develop and modify its most reasonably likely worst case
scenarios as AGL Resources obtains additional information regarding (a) internal
systems and equipment during the implementation phase of its Year 2000
initiative as well as during independent validation and verification of the Year
2000 readiness of such systems and equipment, and (b) the status, and the impact
on AGL Resources, of the Year 2000 readiness of others.
Business Continuity and Contingency Planning
AGL Resources has completed its Year 2000 contingency plans. Those plans, which
are intended to enable AGL Resources to deliver an acceptable level of service
despite Year 2000 failures, include performing certain processes manually,
changing suppliers, and reducing or suspending certain noncritical aspects of
AGL Resources' operations. AGL Resources' contingency planning effort focused on
the potential internal risks as well as potential risks associated with AGL
Resources' suppliers and customers. AGL Resources' most reasonably likely worst
case scenarios as described above define the boundaries of AGL Resources'
contingency planning effort. The contingency planning process also includes, but
is not limited to the following:
. Identifying the nature of Year 2000 risks in order to understand the business
impact of those risks;
. Identifying minimal acceptable service levels;
. Identifying alternative providers of goods and services;
. Identifying necessary investments in additional back-up equipment such as
generators and communications equipment; and
. Developing manual methods of performing critical functions currently
performed by electronic systems and equipment.
AGL Resources has completed initial testing of its contingency plans. During the
remainder of calendar year 1999, AGL Resources plans to update, refine, and
further test its contingency plans as needed, to reflect system and business
changes as they evolve.
Clean Management
Clean management describes the process of:
. Identifying AGL Resources' means of acquiring assets and of developing or
modifying systems;
. Verifying the Year 2000 readiness of assets prior to purchase; and
. Assuring that system modifications and new systems are Year 2000 ready at the
time of development or acquisition.
AGL Resources is using the clean management process on an on-going basis. Clean
management applies to IT applications, to infrastructure and non-IT
applications, and to key business partner relationships. AGL Resources expects
to obtain additional or updated information about the Year 2000
36
<PAGE>
Management's Discussion and Analysis of Results of Operations and Financial
Condition
readiness of assets and key business partners through the clean management
process. AGL Resources will address any additional Year 2000 issues discovered
as a result of the clean management process.
Validation and Verification
AGL Resources' Year 2000 initiative includes validation and verification of
assets by AGL Resources, by third parties, or by both. AGL Resources expects
validation and verification efforts, whether internal or independent, to result
in the discovery of additional Year 2000 issues and AGL Resources will address
those issues as they arise. AGL Resources expects the validation and
verification process to continue throughout calendar year 1999 and into calendar
year 2000.
Presently, AGL Resources believes that its assessment, remediation planning,
plan implementation and contingency planning processes will be effective to
achieve Year 2000 readiness in a timely manner.
Forward-Looking Statements
The preceding "Year 2000 Readiness Disclosure" discussion contains various
forward-looking statements that represent AGL Resources' beliefs or expectations
regarding future events. When used in the "Year 2000 Readiness Disclosure"
discussion, the words "believes", "intends", "expects", "estimates", "plans",
"goals" and similar expressions are intended to identify forward-looking
statements. Forward-looking statements include, without limitation, AGL
Resources' expectations as to when AGL Resources will complete the assessment,
remediation planning, and implementation phases of its Year 2000 initiative as
well as its Year 2000 contingency planning; AGL Resources' estimated cost of
achieving Year 2000 readiness; and AGL Resources' belief that its internal
systems and equipment will be Year 2000 ready in a timely and appropriate
manner. All forward-looking statements involve a number of risks and
uncertainties that could cause actual results to differ materially from
projected results. Factors that may cause those differences include availability
of information technology resources; customer demand for AGL Resources' products
and services; continued availability of materials, services, and data from AGL
Resources' suppliers; the ability to identify and remediate all date-sensitive
lines of computer code and to replace embedded computer chips in affected
systems and equipment; the failure of others to timely achieve appropriate Year
2000 readiness; and the actions or inaction of governmental agencies and others
with respect to Year 2000 problems.
Qualitative and Quantitative Disclosures about Market Risk
All financial instruments and positions held by AGL Resources described below
are held for purposes other than trading.
The fair value of AGL Resources' long-term debt and Capital Securities are
affected by changes in interest rates. The carrying value of AGL Resources'
long-term debt and capital securities has been the same for the past two fiscal
years. The following presents the sensitivity of the fair value of AGL
Resources' long-term debt and capital securities to a hypothetical 10% decrease
in interest rates as of September 30, 1999 and 1998, respectively:
<TABLE>
<CAPTION>
Hypothetical
Carrying Fair Increase in
Dollars in Millions Value Value(a) Fair Value(b)
- ----------------------------------------------------------------------
September 30, 1999
- ----------------------------------------------------------------------
<S> <C> <C> <C>
Long-term debt
including current portion $660.0 $640.8 $36.7
Capital Securities $ 74.3 $ 70.0 $ 7.4
September 30, 1998
- ----------------------------------------------------------------------
Long-term debt
including current portion $660.0 $714.6 $28.7
Capital Securities $ 74.3 $ 81.5 $ 3.7
</TABLE>
(a) Based on quoted market prices for these or similar issues.
(b) Calculated based on the change in discounted cash flow, assuming a 10%
decrease in interest rates as of September 30,1999 and 1998.
37
<PAGE>
Consolidated Balance Sheets - Assets
<TABLE>
<CAPTION>
For the years ended September 30,
In millions 1999 1998
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 32.9 $ 0.9
Receivables
Gas (less allowance for uncollectible accounts
of $2.4 in 1999 and $3.7 in 1998) 36.0 81.6
Other (less allowance for uncollectible accounts
of $1.9 in 1999 and $0.4 in 1998) 8.7 8.7
Unbilled revenues 6.0 31.4
Inventories
Natural gas stored underground 47.3 138.1
Liquefied natural gas 6.7 17.7
Materials and supplies 9.3 10.0
Other 3.6 4.6
Other 7.0 5.4
- ----------------------------------------------------------------------------------------------------------
Total current assets 157.5 298.4
- ----------------------------------------------------------------------------------------------------------
Property, Plant, and Equipment
Utility plant 2,274.3 2,133.5
Less accumulated depreciation 757.1 680.9
- ----------------------------------------------------------------------------------------------------------
Utility plant - net 1,517.2 1,452.6
- ----------------------------------------------------------------------------------------------------------
Non-utility property 116.7 105.6
Less accumulated depreciation 35.0 24.6
- ----------------------------------------------------------------------------------------------------------
Non-utility property - net 81.7 81.0
- ----------------------------------------------------------------------------------------------------------
Total property, plant and equipment - net 1,598.9 1,533.6
- ----------------------------------------------------------------------------------------------------------
Deferred Debts and Other Assets
Unrecovered environmental response costs 150.2 77.6
Investments in joint ventures 28.2 46.7
Unrecovered postretirement benefits costs 8.5 9.3
Other 26.0 19.7
- ----------------------------------------------------------------------------------------------------------
Total deferred debits and other assets 212.9 153.3
- ----------------------------------------------------------------------------------------------------------
Total Assets $1,969.3 $1,985.3
==========================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements.
38
<PAGE>
Consolidated Balance Sheets - Liabilities and Capitalization
<TABLE>
<CAPTION>
For the years ended September 30,
In millions 1999 1998
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Current Liabilities
Accounts payable - trade $ 31.3 $ 48.4
Current portion of long-term debt 50.0 -
Gas cost credits 37.9 -
Other accrued liabilities 32.1 12.1
Interest 26.0 32.8
Wages and salaries 10.5 14.8
Customer deposits 7.4 30.5
Short-term debt 1.5 76.5
Deferred purchased gas adjustment - 12.4
Other 26.2 26.0
- ---------------------------------------------------------------------------------------------------------------------------
Total current liabilities 222.9 253.5
- ---------------------------------------------------------------------------------------------------------------------------
Accumulated Deferred Income Taxes 211.3 203.0
- ---------------------------------------------------------------------------------------------------------------------------
Long-Term Liabilities
Accrued environmental response costs 102.4 47.0
Accrued postretirement benefits costs 32.4 33.4
Accrued pension costs 5.3 2.2
- ---------------------------------------------------------------------------------------------------------------------------
Total long-term liabilities 140.1 82.6
- ---------------------------------------------------------------------------------------------------------------------------
Deferred Credits
Unamortized investment tax credit 24.5 25.8
Regulatory tax liability 16.4 17.3
Other 8.3 14.7
- ---------------------------------------------------------------------------------------------------------------------------
Total deferred credits 49.2 57.8
- ---------------------------------------------------------------------------------------------------------------------------
Commitments and Contingencies (Notes 10, 12 and 17)
- ---------------------------------------------------------------------------------------------------------------------------
Capitalization
Long-term debt 610.0 660.0
Subsidiary obligated mandatorily redeemable
preferred securities 74.3 74.3
Common stockholders' equity (See accompanying
Statements of Consolidated Common Stockholders' Equity) 661.5 654.1
- ---------------------------------------------------------------------------------------------------------------------------
Total capitalization 1,345.8 1,388.4
- ---------------------------------------------------------------------------------------------------------------------------
Total Liabilities and Capitalization $ 1,969.3 $ 1,985.3
===========================================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements.
39
<PAGE>
Statements of Consolidated Income
<TABLE>
<CAPTION>
For the years ended September 30,
In millions, except per share amounts 1999 1998 1997
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Revenues $ 1,068.6 $ 1,338.6 $ 1,287.6
Cost of Sales 544.7 796.0 766.5
- -----------------------------------------------------------------------------------------------
Operating Margin 523.9 542.6 521.1
- -----------------------------------------------------------------------------------------------
Other Operating Expenses
Operation 225.5 238.1 226.2
Maintenance 40.6 38.4 30.8
Depreciation 78.8 71.1 66.6
Taxes other than income taxes 24.4 27.4 26.0
- -----------------------------------------------------------------------------------------------
Total other operating expenses 369.3 375.0 349.6
- -----------------------------------------------------------------------------------------------
Operating Income 154.6 167.6 171.5
- -----------------------------------------------------------------------------------------------
Other Income (Loss) (17.6) 12.9 10.3
- -----------------------------------------------------------------------------------------------
Gain on Sales of Joint Venture Interests 35.6 - -
- -----------------------------------------------------------------------------------------------
Interest Expense and Preferred Stock Dividends
Interest expense 53.0 54.4 52.2
Dividends on preferred stock of subsidiary 6.1 6.7 6.2
- -----------------------------------------------------------------------------------------------
Total interest expense and preferred stock dividends 59.1 61.1 58.4
- -----------------------------------------------------------------------------------------------
Income Before Income Taxes 113.5 119.4 123.4
- -----------------------------------------------------------------------------------------------
Income Taxes 39.1 38.8 46.8
- -----------------------------------------------------------------------------------------------
Net Income $ 74.4 $ 80.6 $ 76.6
- -----------------------------------------------------------------------------------------------
Earnings Per Common Share (Note 1)
Basic $ 1.30 $ 1.41 $ 1.37
Diluted $ 1.29 $ 1.41 $ 1.36
- -----------------------------------------------------------------------------------------------
Weighted Average Number of Common Shares
Outstanding (Note 1)
Basic 57.4 57.0 56.1
Diluted 57.4 57.1 56.2
- -----------------------------------------------------------------------------------------------
</TABLE>
See Notes to Consolidated Financial Statements.
40
<PAGE>
Statements of Consolidated Common Stockholders' Equity
<TABLE>
<CAPTION>
For the years ended September 30,
In millions except per share amounts 1999 1998 1997
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stock
$5 par value; authorized 100.0 shares;
issued, 57.8 in 1999, 57.3 in 1998, and 56.6 in 1997
Beginning of year $ 286.6 $ 283.1 $ 278.4
Benefit, stock compensation, dividend reinvestment,
and stock purchase plans 2.6 3.5 3.7
Acquisition of nonregulated operation - - 1.0
- ---------------------------------------------------------------------------------------------------------------------
End of year 289.2 286.6 283.1
- ---------------------------------------------------------------------------------------------------------------------
Premium on Common Stock
Beginning of year 193.0 183.6 170.6
Benefit, stock compensation, dividend reinvestment,
and stock purchase plans 7.0 9.4 10.1
Acquisition of nonregulated operation - - 2.9
- ---------------------------------------------------------------------------------------------------------------------
End of year 200.0 193.0 183.6
- ---------------------------------------------------------------------------------------------------------------------
Earnings Reinvested
Beginning of year 174.5 155.4 139.3
Net income 74.4 80.6 76.6
Loss on issuance of treasury stock (0.1) - -
Common stock dividends ($1.08 per share in 1999, 1998, and 1997) (62.1) (61.5) (60.5)
- ---------------------------------------------------------------------------------------------------------------------
End of year 186.7 174.5 155.4
- ---------------------------------------------------------------------------------------------------------------------
Shares held in Treasury
0.7 shares in 1999
Beginning of year - - -
Repurchase of shares (16.1) - -
Benefit, stock compensation, dividend reinvestment,
and stock purchase plans 1.7 - -
- ---------------------------------------------------------------------------------------------------------------------
End of year (14.4) - -
- ---------------------------------------------------------------------------------------------------------------------
Total Common Stockholders' Equity $ 661.5 $ 654.1 $ 622.1
=====================================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements
41
<PAGE>
Statements of Consolidated Cash Flows
<TABLE>
<CAPTION>
For the years ended September 30,
In millions 1999 1998 1997
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flows from Operating Activities
Net income $ 74.4 $ 80.6 $ 76.6
Adjustments to reconcile net income to net
cash flow from operating activities
Gain on sales of joint venture interests (35.6) - -
Depreciation and amortization 81.8 75.7 70.3
Deferred income taxes 9.0 11.3 18.5
Provision for write-down of assets - 13.9 -
Other (2.0) 2.0 0.3
- --------------------------------------------------------------------------------------------------------------------------------
127.6 183.5 165.7
Changes in certain assets and liabilities
Receivables 71.0 (29.6) 5.8
Inventories 103.5 13.1 (10.3)
Deferred purchase gas adjustment (11.7) 17.4 (3.8)
Gas cost credits 37.9 - -
Accounts payable (17.1) (13.8) (12.8)
Customer deposits (23.1) 1.3 1.4
Environmental response costs - net (17.2) (12.9) (10.1)
Other - net (3.9) 18.5 17.3
- --------------------------------------------------------------------------------------------------------------------------------
Net cash flow from operating activities 267.0 177.5 153.2
- --------------------------------------------------------------------------------------------------------------------------------
Cash Flows from Financing Activities
Net payments and borrowings of debt (75.0) 47.0 (124.0)
Sale of common stock, net of expenses and noncash dividends 1.2 0.9 1.7
Redemptions of preferred securities - (44.5) (14.7)
Purchase of treasury shares (16.1) - -
Sale of treasury shares 0.3 - -
Sale of preferred securities, net of expenses - - 74.3
Sale of long-term debt - - 105.5
Dividends paid on common stock (52.8) (51.6) (50.7)
- --------------------------------------------------------------------------------------------------------------------------------
Net cash used in financing activities (142.4) (48.2) (7.9)
- --------------------------------------------------------------------------------------------------------------------------------
Cash Flows from Investing Activities
Utility plant expenditures (124.8) (94.8) (123.5)
Non-utility property expenditures (18.6) (22.5) (23.3)
Cash received from sales of joint venture interests 65.0 - -
Investment in joint ventures (4.4) (12.9) (2.8)
Dividends received from joint ventures 1.8 3.0 2.0
Other (11.6) (6.0) (1.6)
- --------------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (92.6) (133.2) (149.2)
- --------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 32.0 (3.9) (3.9)
Cash and cash equivalents at beginning of period 0.9 4.8 8.7
- --------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 32.9 $ 0.9 $ 4.8
================================================================================================================================
Cash Paid During the Year for
Interest $ 60.5 $ 51.5 $ 48.8
Income taxes $ 17.0 $ 39.2 $ 28.2
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Consolidated Financial Statements.
42
<PAGE>
Notes to Consolidated Financial Statements
Note 1. Significant Accounting Policies
Nature of Our Business
AGL Resources Inc. is the holding company for:
. Atlanta Gas Light Company ("AGLC") and its wholly-owned subsidiary,
Chattanooga Gas Company ("Chattanooga"), which are natural gas local
distribution utilities;
. AGL Energy Services, Inc. ("AGLE"), a gas supply services company; and
. Several non-utility subsidiaries.
AGL Resources Inc. and its subsidiaries are collectively referred to as "AGL
Resources."
AGLC conducts its primary business, the distribution of natural gas, in Georgia
including Atlanta, Athens, Augusta, Brunswick, Macon, Rome, Savannah, and
Valdosta. Chattanooga distributes natural gas in the Chattanooga and Cleveland
areas of Tennessee. The Georgia Public Service Commission ("GPSC") regulates
AGLC, and the Tennessee Regulatory Authority ("TRA") regulates Chattanooga. AGLE
is a nonregulated company that bought and sold the natural gas which was
supplied to AGLC's customers during the deregulation transition period to full
competition in Georgia. Currently, AGLE buys and sells natural gas for
Chattanooga's customers.
AGLC comprises substantially all of AGL Resources' assets, revenues, and
earnings. The operations and activities of AGLC, AGLE, and Chattanooga,
collectively, are referred to as the "utility." The utility's operations
expenses include costs allocated from AGL Resources Inc.
AGL Resources currently owns or has an interest in the following non-utility
businesses:
. SouthStar Energy Services LLC ("SouthStar"), a joint venture among a
subsidiary of AGL Resources Inc. and subsidiaries of Dynegy, Inc. and
Piedmont Natural Gas Company. SouthStar markets natural gas and related
services to residential and small commercial customers in Georgia and to
industrial customers in the Southeast. SouthStar began marketing natural gas
to customers in Georgia during the first quarter of fiscal 1999 under the
trade name "Georgia Natural Gas Services";
. AGL Investments, Inc., which currently manages certain non-utility businesses
including:
. AGL Propane, Inc. ("Propane"), which engages in the sale of propane and
related products and services in Georgia, Alabama, Tennessee and North
Carolina;
. Trustees Investments, Inc., which owns Trustees Gardens, a residential and
retail development located in Savannah, Georgia; and
. Utilipro, Inc., ("Utilipro"), in which AGL Resources has an 85% ownership
interest and which engages in the sale of integrated customer care
solutions and billing services to energy marketers in the United States
and Canada;
. AGL Peaking Services, Inc., which owns a 50% interest in Etowah LNG Company
LLC ("Etowah"), a joint venture with Southern Natural Gas Company. Etowah was
formed for the purpose of constructing, owning, and operating a liquefied
natural gas peaking facility.
Regulation of the Utility Business
The GPSC and the TRA regulate the utility business with respect to rates,
maintenance of accounting records, and various other matters. Generally, the
same accounting policies and practices utilized by non-utility companies are
utilized by the utility for financial reporting under generally accepted
accounting principles. However, sometimes the GPSC and the TRA order an
accounting treatment different from that used by non-regulated companies to
determine the rates charged to the utility's customers. (See Note 4. Regulatory
Assets and Liabilities.)
Consolidation Policy
AGL Resources utilizes two different accounting methods to report its
investments in its subsidiaries and other companies: consolidation and the
equity method.
Consolidation. AGL Resources utilizes the consolidation method of accounting
when it owns a majority of the voting stock of the subsidiary or if it can
otherwise exercise control over the entity. This means that the accounts of AGL
Resources are combined with the subsidiaries' accounts. Additionally,
intercompany balances and transactions are eliminated when the accounts are
consolidated. AGL Resources' consolidated financial statements include the
accounts of the following subsidiaries:
. AGLC and its subsidiary, Chattanooga;
. AGLE;
. AGL Investments, Inc. and its subsidiaries.
43
<PAGE>
Notes to Consolidated Financial Statements
Utilipro's assets, liabilities, and earnings are included in the consolidated
financial statements. The outside investors' ownership interest is recorded as
minority interest. As of September 30, 1999 and 1998, the minority interest was
immaterial.
The Equity Method. The equity method is utilized to account for and report
corporate joint ventures where AGL Resources holds a 20% to 50% voting interest,
unless control can be exercised over the entity. Under the equity method, AGL
Resources' ownership interest in the entity is reported as an investment within
its Consolidated Balance Sheets. Additionally, AGL Resources' percentage
ownership in the joint venture's earnings or losses is reported in its
Statements of Consolidated Income.
AGL Resources utilizes the equity method to account for and report its
investments in the following:
. Sonat Power Marketing L.P. ("Sonat Power Marketing");
. Sonat Marketing Company L.P. ("Sonat Marketing");
. Etowah LNG Company LLC; and
. SouthStar.
During the fourth quarter of fiscal 1999, AGL Resources sold its interests in
Sonat Power Marketing and Sonat Marketing.
Utility Revenues
The utility's revenues are recorded in AGL Resources' Statements of
Consolidated Income when services are provided to customers. Those revenues
include estimated amounts for gas delivered, but not yet billed. Revenues from
the utility business are based on rates approved by the GPSC and the TRA.
On July 1, 1998, AGLC began billing customers under a new straight fixed
variable ("SFV") rate structure that recovers non-gas costs evenly throughout
the year consistent with the way the costs are incurred. In order to detect
potential marketer default at the earliest possible time and to protect
customers from marketer default, AGLC bills marketers on the seventh business
day of each month for all fixed charges during the current month. Such bills are
due ten days later. (See Note 2. Impact of Deregulation.)
The GPSC authorized a weather normalization adjustment rider ("WNAR") for AGLC,
which was in effect during fiscal 1997, and the first nine months of fiscal
1998. In addition, the TRA has authorized a WNAR for Chattanooga. These riders
are designed to offset the impact of unusually cold or warm weather on customer
billings and operating margin. On June 30, 1998, the WNAR for AGLC was
discontinued since the rate design mandated by the Georgia Natural Gas
Competition and Deregulation Act ("Deregulation Act") eliminated the effect of
weather-related volumetric variances on non-gas cost revenue collections. The
WNAR for Chattanooga remains in effect.
Cost of Sales
Historically, the utility has incurred costs for the natural gas that it
purchased and resold to customers. In fiscal 1998, AGLC and Chattanooga charged
their customers for the natural gas consumed using Purchased Gas Adjustment
("PGA") mechanisms set by the GPSC and the TRA. Under the PGA, AGLC and
Chattanooga deferred (included as a current asset or liability in the
Consolidated Balance Sheets and excluded from the Statements of Consolidated
Income) the difference between the utility's actual cost of gas and what it
collected from customers in a given period. Then, the utility either billed or
refunded its customers the deferred amount.
Effective October 6, 1998, AGLC discontinued the use of its PGA mechanism in
accordance with Georgia's deregulation plan. In January 1999, AGLC signed a
joint stipulation agreement with the GPSC limiting the profit and risk of loss
for the period from October 6, 1998 to September 30, 1999 related to the sale of
gas to $1.0 million and $3.3 million, respectively. Under the joint stipulation
agreement, AGLC deferred the difference between the utility's actual cost of gas
(including carrying charges on underground storage) and what it collected from
customers during the deregulation transition period.
For the year ended September 30, 1999, AGLC received revenues in excess of
purchased gas costs of $38.9 million. In accordance with the January 26, 1999
joint stipulation agreement entered into with the GPSC, profits of $1.0 million
have been recognized and a current liability of $37.9 million has been recorded
under the caption "Gas Cost Credits" in the Consolidated Balance Sheets. AGLC
expects to refund this liability net of any other uses approved by the GPSC
during fiscal 2000. (See Note 2. Impact of Deregulation.)
44
<PAGE>
Notes to Consolidated Financial Statements
Risk Management
Consistent with fiscal 1998, AGLC's Gas Supply Plan for fiscal 1999 included
limited gas supply hedging activities. During the first quarter of fiscal 1999,
AGLC entered into certain hedge agreements that continued until the end of
February 1999. As part of the joint stipulation agreement, option agreements
prior to the date of the joint stipulation agreement have been included in gas
costs which were recovered from AGLC's customers during fiscal 1999.
Income Taxes
The reporting of AGL Resources' assets and liabilities for financial accounting
purposes differs from the reporting for income tax purposes. The tax effects of
the differences in those items are reported as deferred income tax assets or
liabilities in AGL Resources' Consolidated Balance Sheets. The utility's
investment tax credits have been deferred and are being amortized as credits to
income over the estimated lives of the related properties in accordance with
regulatory treatment. (See Note 3. Income Taxes.)
Evaluation of Assets for Impairment
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of"
("SFAS 121") requires AGL Resources to review long-lived assets and certain
intangibles for impairment when events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable. Any impairment losses
are reported in the period in which the recognition criteria are first applied
based on the fair value of the asset. In accordance with SFAS 121, AGL Resources
has evaluated its long-lived assets for financial impairment. AGL Resources
recorded charges totaling $13.9 million during the fourth quarter of fiscal
1998. Those charges, recorded in total other operating expenses, included:
. A $10.8 million expense related to the impairment of certain assets no longer
useful primarily due to changes in its information technology systems
strategy; and
. A $3.1 million expense due to a decision by management not to seek recovery
for certain deferred expenses.
As of September 30, 1999, AGL Resources believes that no asset impairments
exist.
Utility Plant and Depreciation
Utility plant is the term utilized to describe the utility's business property
and equipment which is in use, being held for future use, and under
construction. Utility plant is reported at its original cost, which includes:
. Material and labor;
. Contractor costs;
. Construction overhead costs (where applicable); and
. An allowance for funds used during construction
(described later in this note).
Retired or otherwise-disposed-of utility plant is charged to accumulated
depreciation.
Depreciation Expense. The depreciation for the utility is computed by applying
composite, straight-line rates (approved by the GPSC and TRA) to the average
investment in classes of depreciable utility property. The composite straight-
line depreciation rates for depreciable utility property excluding
transportation equipment during fiscal years 1999, 1998, and 1997 were 3.1%,
3.0%, and 3.0%, respectively. Transportation equipment is depreciated on a
straight-line basis over a period of five to ten years.
Allowance for Funds Used During Construction ("AFUDC"). Construction projects
are financed with borrowed funds and equity funds. The GPSC allows AGLC to
record the cost of those funds as part of the cost of construction projects on
AGL Resources' Consolidated Balance Sheets and as AFUDC in the Statements of
Consolidated Income. AFUDC is calculated based upon a rate authorized by the
GPSC. Beginning July 1, 1998, the GPSC authorized a rate of 9.11% for AFUDC.
For the nine months ended June 30, 1998, and for fiscal 1997, the authorized
AFUDC rate was 9.32%.
Non-Utility Plant and Depreciation
Non-utility plant is the term utilized to describe AGL Resources' non-utility's
business property that is in use, being held for future use, and under
construction. AGL Resources reports its non-utility plant at its original cost.
Gains or losses from retired or otherwise-disposed-of non-utility plant are
recognized for the difference between cost and accumulated depreciation. Non-
utility depreciation is computed on a straight-line basis over the lives of
various classes of property.
45
<PAGE>
Notes to Consolidated Financial Statements
Statement of Cash Flows
For the reporting of cash flows, cash equivalents are defined as highly liquid
investments that mature in three months or less.
Non-cash investing and financing transactions include the following:
. The issuance of common stock for ResourcesDirect, a stock purchase and
dividend reinvestment plan; the Retirement Savings Plus Plan; the Long-Term
Stock Incentive Plan; the Nonqualified Savings Plan; and the Non-Employee
Directors Equity Compensation Plan of $10.2 million in fiscal 1999, $12.0
million in fiscal 1998, and $12.5 million in fiscal 1997; and
. The issuance of 200,000 shares of AGL Resources common stock in the amount of
$3.9 million for the acquisition of propane operations in June 1997.
During fiscal 1998, AGL Resources recorded non-cash charges of $13.9 million
related to the impairment of certain long-lived assets.
Earnings per Common Share
Earnings per common share for all periods have been computed under the
provisions of Statement of Financial Accounting Standards No. 128, "Earnings Per
Share," which was adopted October 1, 1997, and calls for the restatement of all
periods presented on a comparable basis. Basic earnings per common share
excludes dilution and is computed by dividing income available to common
stockholders by the weighted average number of common shares outstanding for the
period. Diluted earnings per common share reflects the potential dilution that
could occur when common share equivalents are added to common shares
outstanding. AGL Resources only common share equivalents are stock options whose
exercise price was less than the average market price of the common shares for
the respective periods.
During the fiscal years ended September 30, 1999, 1998, and 1997, AGL Resources
issued 677,411, 739,380 and 753,866 shares of common stock, respectively, under
ResourcesDirect, a direct stock purchase and dividend reinvestment plan; the
Retirement Savings Plus Plan; the Long-Term Stock Incentive Plan; the
Nonqualified Savings Plan; and the Non-Employee Directors Equity Compensation
Plan. Those issuances increased common stockholders' equity by $11.7 million,
$12.9 million and $13.8 million for fiscal 1999, 1998, and 1997, respectively.
During fiscal 1999, 868,688 shares of AGL Resources common stock were purchased
in connection with the termination of the Leveraged Employee Stock Ownership
Plan ("LESOP"). The shares were purchased at $18.50 per share, and are held by
AGL Resources in treasury.
The following weighted average common share and common share equivalent amounts
were used for the calculations of basic and diluted earnings per common share.
The common share equivalents relate to stock options under stock compensation
plans.
<TABLE>
<CAPTION>
Basic Weighted Diluted Weighted
Average Average Number of
Number of Common Shares and
Common Shares Common Share Equivalents
- -----------------------------------------------------------------------------------
<S> <C> <C>
1999 57.4 million 57.4 million
1998 57.0 million 57.1 million
1997 56.1 million 56.2 million
</TABLE>
Concentration of Credit Risk
AGLC has concentration of credit risk related to the provision of services to
certificated marketers. At September 30, 1998, AGLC billed approximately 1.4
million end-use customers for its services. At September 30, 1999, AGLC billed
15 certificated marketers in Georgia for services, that in turn bill the 1.4
million end-use customers. As a result of deregulation, AGLC now bills
certificated marketers for intrastate delivery and other services and no longer
has recourse to the end-use customer for collection. (See Note 10. Commitments
and Contingencies.)
As of September 30, 1999, 25.8% of AGL Resources' total gas receivables were due
from 7 of the 15 certificated and active marketers and 58.7% were due from end-
use customers in Georgia who migrated to certificated marketers late in the
fiscal year or who were randomly assigned. In fiscal 2000, only gas receivables
attributable to Chattanooga will be due from end-use customers. As a result, at
September 30, 2000, a significantly higher percentage of AGL Resources' total
gas receivables will be due from Georgia certificated marketers.
46
<PAGE>
Notes to Consolidated Financial Statements
Several factors mitigate the risks to AGL Resources of the increased
concentration of credit that has resulted from deregulation. First, in order to
obtain a certificate from the GPSC, a certificated marketer must demonstrate to
the GPSC, among other things, that it possesses satisfactory financial and
technical capability to render the certificated service. Second, AGLC has
instituted certain practices and imposed certain requirements designed to reduce
credit risk. These include:
. Pursuant to AGLC's tariff, each certificated marketer is required to maintain
security for its obligations to AGLC in an amount equal to two times the
marketer's estimated maximum monthly bill and in the form of a cash deposit,
letter of credit, surety bond or guaranty from a creditworthy guarantor; and
. Intrastate delivery service is billed in advance rather than in arrears.
Use of Accounting Estimates
Estimates and assumptions are made when preparing financial statements under
generally accepted accounting principles. Those estimates and assumptions affect
various matters:
. Reported amounts of assets and liabilities in AGL Resources' Consolidated
Balance Sheets at the dates of the financial statements;
. Disclosure of contingent assets and liabilities at the dates of the financial
statements; and
. Reported amounts of revenues and expenses in AGL Resources' Statements of
Consolidated Income during the reporting periods.
Those estimates involve judgments with respect to, among other things, future
economic factors that are difficult to predict and are beyond management's
control. Consequently, actual amounts could differ from estimates.
Inventory
In Georgia's new competitive environment, certificated marketers, including
AGLC's marketing affiliate, SouthStar, began selling natural gas to firm end-use
customers at market-based prices in November 1998. Part of the unbundling
process that provides for this competitive environment is the assignment to
certificated marketers certain pipeline services that AGLC has under contract.
AGLC has assigned the majority of its pipeline storage services that it has
under contract to the certificated marketers along with a corresponding amount
of inventory.
AGLC changed its inventory costing method for its gas inventories from first-in,
first-out to weighted-average effective October 1, 1998. In management's
opinion, the weighted-average inventory costing method provides for a better
matching of costs and revenue from the sale of gas. Because AGLC recovered all
of its gas costs through a PGA mechanism until October 6, 1998, there is no
cumulative effect resulting from the change in the inventory costing method. Gas
inventories are sold to marketers at the weighted-average cost.
Chattanooga's gas inventories are stated at cost using the last-in, first-out
method. Materials and supplies inventories are stated at lower of average cost
or market.
Recently Issued Accounting Pronouncements
During fiscal 1999, AGL Resources adopted the Financial Accounting Standards
Board ("FASB") Statement No. 130, "Reporting Comprehensive Income", Statement
No. 131, "Disclosure about Segments of an Enterprise and Related Information",
and Statement No. 132, "Employers' Disclosures about Pensions and Other
Postretirement Benefits". None of these statements had a material effect on the
consolidated financial statements.
In June 1998, the FASB issued Statement of Financial Accounting Standards No.
133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS
133"). SFAS 133 establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. AGL Resources will adopt SFAS 133 in
fiscal 2001. The impact of SFAS 133 on AGL Resources' consolidated financial
statements is under review and is currently unknown.
Other
Certain prior year amounts have been reclassified for comparative purposes.
Those reclassifications did not affect consolidated net income for the years
presented.
47
<PAGE>
Notes to Consolidated Financial Statements
Note 2. Impact of Deregulation
The regulated rate structure under which AGLC has unbundled its gas sales and
delivery service assumed that AGLC's costs associated with providing customer
service decreased each time a customer switched to a certificated marketer for
gas sales service. Additionally, the regulated rate structure assumed that such
costs would be eliminated at the time the switch was made. This structure
therefore reduces the per customer revenue collected by AGLC in the month
following the transfer of a customer to a certificated marketer. However, AGLC's
experience has been that a significant portion of the costs associated with
customer service activities, including billing, bill inquiry, payment processing
and collection services, cannot be eliminated immediately after a customer
switch is made as is assumed by the regulated rate structure. Instead, a period
of up to several months exists during which AGLC continues to incur these
expenses. As a result, a disparity now exists between the speed at which AGLC is
assumed for regulated rate design purposes to be reducing costs and the speed at
which AGLC actually is able to reduce costs. During fiscal 1999, this disparity
was exacerbated by the rapid pace at which customers switched to certificated
marketers.
The accelerated pace of customer migration to certificated marketers also has
required AGLC to incur additional customer service expenses, not originally
provided for in regulated rates, in order to maintain an adequate level of
customer service during the transition to competition. In particular, beginning
in October 1998, and continuing each month thereafter, the number of customer
calls handled by the call centers significantly exceeded the number of customer
calls handled by the call centers during the same months of the preceding year.
The call center volumes increased 26% in fiscal 1999 as compared to fiscal 1998.
As a result, AGLC increased its staffing of customer service representatives and
increased other call center related expenses rather than reducing them, despite
the fact that at September 30, 1999, AGLC had approximately 82% fewer gas sales
service customers than at September 30, 1998.
Customers are switched to certificated marketers on the first day of the month
following the receipt of a switch request. At September 30, 1999, approximately
18% of the customers had not been switched to certificated marketers. Such
customers were switched on October 1, 1999, with the exception of approximately
15,000 customers who are expected to switch during the first quarter of fiscal
2000. Therefore, as of October 1, 1999, almost all of AGLC's remaining customers
began receiving service from certificated marketers. At September 30, 1999,
AGLC's annual delivery service revenues for fiscal 1999 associated with
providing ancillary services and certain transition revenues were reduced as
compared to prior year by approximately $38.6 million; however, associated costs
were not reduced by the same amount, resulting in an adverse effect on net
income. Transition revenues decreased $15.8 million due to customer migration to
certificated marketers. The remaining decrease of $22.8 million was primarily
due to the timing of the implementation of the new SFV rate structure for AGLC
delivery service that became effective during the fourth quarter of fiscal 1998.
The impact of the revenue and cost imbalance related to the transition to
competition is expected to continue into fiscal 2000.
AGLC is pursuing solutions to this revenue and cost imbalance aggressively,
including reducing or eliminating costs as quickly as possible, consistent with
prudent business practices, and increasing employee productivity at customer
call centers. The Deregulation Act authorizes an electing distribution company,
like AGLC, to recover prudently incurred costs that are "stranded" as a result
of the transition to competition. On June 25, 1999, AGLC filed a request with
the GPSC for an accounting order (the "Order"), which would allow AGLC to defer
transition costs which are considered to be "stranded." The Order was approved
on October 19, 1999. The Order allows AGLC to defer these costs if incurred
from October 1, 1999 to September 30, 2000, and recovery is necessary in order
for AGLC to earn the 11% return on common equity approved by the GPSC in AGLC's
last rate case. In order to be deferred, the cost must also be one that:
. AGLC is still incurring but, as a result of deregulation, is no longer
receiving revenue from the rate or rates which were set based on that cost;
. Is prudently incurred; and
. Cannot be mitigated.
On January 26, 1999, AGLC entered into a joint stipulation agreement with the
GPSC to resolve certain gas sales service issues. Among other requirements in
the stipulation, AGLC implemented a rate structure for gas sales, beginning with
February 1999 bills, that was more closely aligned with the traditional
customers' actual gas usage and includes a demand charge for fixed costs
associated with gas sales that is entirely volumetric. The revised rates for gas
sales service is intended to ensure AGLC's recovery of its purchased gas costs
incurred from October 6, 1998 to September 30, 1999 without creating any
significant income or loss. The joint stipulation agreement provided for a true-
up of any profit or loss outside of a specified range during fiscal 1999.
48
<PAGE>
Notes to Consolidated Financial Statements
The allowed maximum profit for the period October 6, 1998 to September 30, 1999
was $1.0 million and the maximum risk of loss was $3.3 million. For the period
October 6, 1998 to September 30, 1999, AGLC received revenues in excess of costs
of $38.9 million. Through September 30, 1999, AGLC recognized profits of $1.0
million and has recorded a liability of $37.9 million under the caption "Gas
Cost Credits" on the Consolidated Balance Sheets. AGLC expects to refund these
over-recoveries net of any other uses authorized by the GPSC during fiscal 2000.
Note 3. Income Taxes
Income Tax Expense
AGL Resources has two categories of income taxes in its Statements of
Consolidated Income: current and deferred. AGL Resources' current income tax
expense consists of federal and state income tax less applicable tax credits.
AGL Resources' deferred income tax expense generally is equal to the changes in
the deferred income tax liability during the year.
Investment Tax Credits
AGL Resources has deferred investment tax credits associated with its utility as
a regulatory liability in its Consolidated Balance Sheets. Those investment tax
credits are being amortized as credits to income in accordance with regulatory
treatment over the estimated life of the related properties. AGL Resources
reduces income tax expense in its Statements of Consolidated Income for the
investment tax credits and other tax credits associated with its non-utility
subsidiaries. (See Note 4. Regulatory Assets and Liabilities.)
Deferred Income Tax Assets and Liabilities
AGL Resources reports some of its assets and liabilities differently for
financial accounting purposes than it does for income tax purposes. The tax
effects of the differences in those items are reported as deferred income tax
assets or liabilities in AGL Resources' Consolidated Balance Sheets. The assets
and liabilities are measured utilizing income tax rates that are currently in
effect. Because of the regulated nature of the utility's business, a regulatory
tax liability has been recorded in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes." The regulatory tax
liability is being amortized over approximately 30 years. (See Note 4.
Regulatory Assets and Liabilities.)
Components of income tax expense shown in the Statements of Consolidated Income
are as follows:
Millions of dollars 1999 1998 1997
- ----------------------------------------------------
Included in expenses:
Current income taxes
Federal $27.0 $25.3 $24.2
State 4.4 3.6 5.5
Deferred income taxes
Federal 7.3 9.7 16.7
State 1.7 1.6 1.8
Amortization of investment
tax credits (1.3) (1.4) (1.4)
- ---------------------------------------------------
Total income tax expense $39.1 $38.8 $46.8
===================================================
Reconciliation between the statutory federal income tax rate and the effective
rate is as follows:
Millions of dollars 1999
- ---------------------------------------------------------------
% of Pre-tax
Amount Income
Computed tax expense $39.7 35.0
State income tax, net of federal
income tax benefit 3.8 3.3
Amortization of investment tax credits (1.3) (1.1)
Adjustment of prior year's income taxes (2.2) (1.9)
Other - net (0.9) (0.8)
- ---------------------------------------------------------------
Total income tax expense $39.1 34.5
===============================================================
Millions of dollars 1998
- ---------------------------------------------------------------
% of Pre-tax
Amount Income
Computed tax expense $41.8 35.0
State income tax, net of federal
income tax benefit 3.5 2.9
Amortization of investment tax credits (1.4) (1.2)
Adjustment of prior year's income taxes (2.3) (1.9)
Other - net (2.8) (2.3)
- ---------------------------------------------------------------
Total income tax expense $38.8 32.5
===============================================================
49
<PAGE>
Notes to Consolidated Financial Statements
Millions of dollars 1997
- -----------------------------------------------------------------
% of Pre-tax
Amount Income
Computed tax expense $43.2 35.0
State income tax, net of federal
income tax benefit 4.5 3.7
Amortization of investment tax credits (1.4) (1.1)
Other - net 0.5 0.4
- -----------------------------------------------------------------
Total income tax expense $46.8 38.0
=================================================================
Components that give rise to the net deferred income tax liability as of
September 30 are as follows:
Millions of dollars 1999 1998
- --------------------------------------------------------------
Accumulated deferred income tax liabilities:
Property - accelerated depreciation
and other property-related items $236.2 $221.9
Other 28.1 19.1
- --------------------------------------------------------------
Total accumulated deferred
income tax liabilities 264.3 241.0
- --------------------------------------------------------------
Accumulated deferred income tax assets:
Deferred investment tax credits 9.4 10.0
Other 43.6 28.0
- --------------------------------------------------------------
Total accumulated deferred income tax assets 53.0 38.0
- --------------------------------------------------------------
Net accumulated deferred income tax liability $211.3 $203.0
==============================================================
Note 4. Regulatory Assets and Liabilities
The GPSC and the TRA regulate the utility business. AGL Resources generally uses
the same accounting policies and practices used by nonregulated companies for
financial reporting under generally accepted accounting principles. However,
sometimes the GPSC and the TRA order an accounting treatment different from that
used by nonregulated companies to determine the rates the utility charges its
customers. When that happens, certain utility expenses and income must be
deferred and reported in the Consolidated Balance Sheets as regulatory assets
and liabilities. These deferred items are then recognized in the Statements of
Consolidated Income through amortization when the items are included in the
rates charged the utility's customers.
AGL Resources has recorded assets and liabilities in its Consolidated Balance
Sheets in accordance with Statement of Financial Accounting Standards No. 71,
"Accounting for the Effects of Certain Types of Regulation" ("SFAS 71").
In July 1997, the Emerging Issues Task Force ("EITF") concluded that once
legislation is passed to deregulate a segment of a utility and that legislation
includes sufficient detail for the enterprise to determine how the transition
plan will affect that segment, SFAS 71 should be discontinued for that segment
of the utility. The EITF consensus permits assets and liabilities of a
deregulated segment to be retained if they are recoverable through a segment
that remains regulated.
Georgia has enacted legislation, the Deregulation Act, which allows deregulation
of natural gas sales and the separation of some ancillary services of local
natural gas distribution companies. However, the rates local gas distribution
companies charge to transport natural gas through their intrastate pipeline
system will continue to be regulated by the GPSC. Therefore, the continued
application of SFAS 71 is appropriate for regulatory assets and liabilities
related to AGLC and delivery services.
50
<PAGE>
Notes to Consolidated Financial Statements
AGL Resources' regulatory assets and liabilities are summarized in the following
table at September 30:
Dollars in Millions 1999 1998
- -----------------------------------------------------------------
Regulatory assets:
Unrecovered environmental response costs $150.2 $77.6
Unrecovered postretirement benefits costs 8.5 9.3
Other 16.6 11.4
- -----------------------------------------------------------------
Total regulatory assets $175.3 $98.3
=================================================================
Regulatory liabilities:
Unamortized investment tax credit $ 24.5 $25.8
Regulatory tax liability 16.4 17.3
Environmental response cost recoveries
from third parties - customer portion 7.1 9.5
Environmental response cost recoveries
from third parties - deferred company portion 1.9 4.8
Deferred purchased gas adjustment - 12.4
Other 1.9 2.2
- -----------------------------------------------------------------
Total regulatory liabilities $ 51.8 $72.0
=================================================================
Note 5. Employee Benefit Plans and Stock-Based Compensation Plans
Substantially all of AGL Resources' employees are eligible to participate in its
employee benefit plans.
Pension Benefits
AGL Resources sponsors a defined benefit retirement plan for its employees. A
defined benefit plan specifies the amount of benefits an eligible plan
participant eventually will receive using information about the participant. We
generally calculate the benefits under that plan based on age, years of service,
and pay. Our employees do not contribute to this plan. We fund the plan by
contributing annually the amount required by applicable regulations and as
recommended by our actuary. We calculate the amount of funding using an
actuarial method called the projected unit credit cost method. The plan's assets
consist primarily of marketable securities, corporate obligations, U.S.
government obligations, insurance contracts, mutual funds, and cash equivalents.
AGL Resources has an excess benefit plan that is unfunded and provides
supplemental benefits to some officers after retirement. In September 1994, we
established a voluntary early retirement plan for some AGL Resources officers
that is unfunded and provides supplemental pension benefits to participants who
elected early retirement. The annual expense and accumulated benefits of such
plans are not significant.
The following tables present details about AGL Resources' pension plans at
September 30:
Dollars in Millions 1999 1998
- --------------------------------------------------------------------------
Change in benefit obligation:
Benefit obligation at beginning of year $242.7 $223.8
Service cost 5.2 4.5
Interest cost 16.9 16.6
Actuarial (gain) loss (27.1) 12.5
Benefits paid (14.7) (14.7)
- --------------------------------------------------------------------------
Benefit obligation at end of year $223.0 $242.7
==========================================================================
Change in plan assets:
Fair value of plan assets at beginning of year $229.5 $212.1
Actual return on plan assets 17.6 32.0
Employer contribution 4.3 0.1
Benefits paid (14.7) (14.7)
- --------------------------------------------------------------------------
Fair value of plan assets at end of year $236.7 $229.5
==========================================================================
Funded status:
Plan assets greater (less) than benefit
obligation at end of year $ 13.7 $(13.2)
Unrecognized net asset (2.2) (3.0)
Unrecognized net (gain) loss (19.4) 10.9
Unrecognized prior service cost 2.6 3.1
- --------------------------------------------------------------------------
Accrued pension cost $ (5.3) $ (2.2)
==========================================================================
Dollars in Millions 1999 1998 1997
- --------------------------------------------------------------------------
Components of net
annual pension cost:
Service cost $ 5.2 $ 4.6 $ 4.0
Interest cost 16.9 16.6 16.2
Expected return on plan assets (16.9) (15.8) (13.7)
- --------------------------------------------------------------------------
Net annual pension cost 5.2 5.4 6.5
Curtailment loss 2.3 - -
- --------------------------------------------------------------------------
Net annual pension cost
after curtailments $ 7.5 $ 5.4 $ 6.5
==========================================================================
Weighted-average assumptions as of June 30:
Discount rate 7.8% 7.0% 7.5%
Expected return on plan assets 8.3% 8.3% 8.3%
Rate of compensation increase 4.3% 4.3% 4.5%
In fiscal 1999, AGL Resources recorded a curtailment loss of $2.3 million
related to the early retirement of certain employees.
51
<PAGE>
Notes to Consolidated Financial Statements
Employee Savings Plan Benefits
AGL Resources also sponsors the Retirement Savings Plus Plan, a defined
contribution benefit plan. In a defined contribution benefit plan, the benefits
a participant ultimately receives come from regular contributions to a
participant account. Under the Retirement Savings Plus Plan, AGL Resources made
matching contributions to participant accounts in the following amounts:
. $3.5 million in fiscal 1999;
. $3.5 million in fiscal 1998; and
. $3.3 million in fiscal 1997.
AGL Resources' Nonqualified Savings Plan, an unfunded, nonqualified plan similar
to the defined contribution savings plan described above, was established on
July 1, 1995. The Nonqualified Savings Plan provides an opportunity for eligible
employees to contribute for retirement savings. AGL Resources contributions to
the Nonqualified Savings Plan during fiscal 1999, 1998, and 1997 were not
significant.
Employee Stock Ownership Benefits
In January 1988, AGL Resources purchased 2.0 million shares of common stock at
$11.75 per share with the proceeds of a loan secured by the common stock. AGL
Resources did not guarantee the repayment of the loan. The loan was repaid from
regular cash dividends on AGL Resources common stock paid to the Leveraged
Employee Stock Ownership Plan ("LESOP") and from contributions to the LESOP, as
approved by the Board of Directors. Repayment of the loan was completed on
December 31, 1997. Contributions to the LESOP were as follows:
. $0 for fiscal 1999;
. $0.2 million for fiscal 1998; and
. $0.9 million for fiscal 1997.
AGL Resources terminated its LESOP in fiscal 1999 and distributed the value of
participants' LESOP account balances as of June 15, 1999. At the election of the
participants, the value of each account was distributed in one of three forms:
. Direct rollover into the Retirement Savings Plus Plan ("401(k) Plan") or into
another tax-qualified retirement plan;
. Lump sum payment in the form of a certificate for shares of AGL Resources
common stock; or
. Lump sum cash payment based on the market value of AGL Resources common stock
at the close of business on June 14, 1999, which was $18.50 per share.
During the year ended September 30, 1999, 868,688 LESOP shares were repurchased
in cash by AGL Resources from the LESOP trustee in a non-brokered transaction at
a purchase price of $18.50 per share, and are held by AGL Resources as treasury
shares. AGL Resources reissues these treasury shares for the Long-Term Incentive
Plan ("LTIP"), Long-Term Stock Incentive Plan ("LTSIP"), Dividend Reinvestment
Plan ("DRIP"), and the Non-Employee Directors Equity Compensation Plan
("Directors Plan"). An additional 236,625 shares were transferred to
participants' accounts under the Retirement Savings Plus Plan from the
respective participants' accounts in the LESOP.
Postretirement Benefits
AGL Resources sponsors defined benefit postretirement health care and life
insurance plans, which cover nearly all employees if they reach retirement age
while working for AGL Resources. The benefits under these plans are generally
calculated based on age and years of service.
Some retirees contribute a portion of health care plan costs. Retirees do not
contribute toward the cost of the life insurance plan.
Effective October 1, 1993, AGL Resources adopted Statement of Financial
Accounting Standards No. 106, "Employer's Accounting for Postretirement Benefits
Other Than Pensions," which requires accrual of postretirement benefits other
than pensions during the years an employee provides service. In 1993, the GPSC
approved a five-year phase-in that deferred a portion of other postretirement
benefits expense for future recovery, with an amortization period of 19 years. A
regulatory asset has been recorded for that amount. In 1993, the TRA approved
the recovery of other postretirement benefits expense that is funded through an
external trust.
52
<PAGE>
Notes to Consolidated Financial Statements
The following tables present details about AGL Resources' postretirement
benefits at September 30:
Dollars in Millions 1999 1998
- ------------------------------------------------------------------
Change in benefit obligation:
Benefit obligation at beginning of year $104.8 $103.4
Service cost 0.9 0.9
Interest cost 7.2 7.5
Actuarial gain (3.7) (0.4)
Benefits paid (6.5) (6.6)
- ------------------------------------------------------------------
Benefit obligation at end of year $102.7 $104.8
==================================================================
Change in plan assets:
Fair value of plan assets at beginning of year $ 23.6 $ 17.9
Actual return on plan assets 2.9 1.3
Employer contribution 8.8 11.0
Benefits paid (6.5) (6.6)
- ------------------------------------------------------------------
Fair value of plan assets at end of year $ 28.8 $ 23.6
==================================================================
Funded status:
Accumulated benefit obligation
in excess of plan assets $(73.9) $(81.2)
Unrecognized gain (15.7) (13.5)
Unrecognized transition amount 57.2 61.3
- ------------------------------------------------------------------
Accrued benefit cost $(32.4) $(33.4)
==================================================================
Weighted average assumptions: 1999 1998 1997
Discount rate 7.8% 7.0% 7.5%
Expected return on plan assets 8.3% 8.3% 8.3%
For purposes of measuring the accumulated postretirement benefit obligation, the
assumed health care inflation rate for pre-Medicare eligibility is as follows:
. 9.5% in 1999, decreasing 0.5% per year to 6.0% in the year 2006, decreasing
0.3% to 5.7% in 2007, and decreasing 0.5% to 5.2% in 2008.
The assumed health care inflation rate for post-Medicare eligibility is as
follows:
. 8.0% in 1999, decreasing 0.5% per year to 5.5% in the year 2004, decreasing
0.25% to 5.25% in 2005, and decreasing 0.25% to 5.0% in 2006.
Dollars in Millions 1999 1998 1997
- ------------------------------------------------------------
Components of net periodic
benefit cost:
Service cost $ 1.0 $ 0.9 $ 0.8
Interest cost 7.2 7.6 8.0
Expected return on plan assets (1.7) (1.5) (1.0)
Amortization of gain (0.5) (0.5) (0.3)
Amortization of transition amount 4.1 4.1 4.1
- ------------------------------------------------------------
Net periodic benefit cost $10.1 $10.6 $11.6
============================================================
Assumed health care cost trend rates have a significant effect on the amounts
reported for the health care plans. A one-percentage-point change in assumed
health care cost trend rates would have the following effects:
1-Percentage- 1-Percentage-
Dollars in Millions Point Increase Point Decrease
- ---------------------------------------------------------------------------
Effect on total of service and
interest cost components $ 1.2 $ (1.1)
Effect on postretirement
benefit obligation $14.0 $(12.5)
Net periodic postretirement benefits costs were recovered from utility customers
as follows:
. $10.9 million in fiscal 1999;
. $11.3 million in fiscal 1998; and
. $11.3 million in fiscal 1997.
The difference between AGL Resources' total net postretirement benefits costs
and the associated costs recovered from the utility's customers of $0.8 million
in fiscal 1999 and $0.7 million in fiscal 1998 represents the amortization of
the regulatory asset. The corresponding difference of $0.3 million in fiscal
1997 was deferred for future recovery through amortization and recognized as a
regulatory asset in the financial statements consistent with regulatory
decisions. (See Note 4. Regulatory Assets and Liabilities.)
53
<PAGE>
Notes to Consolidated Financial Statements
Stock-Based Compensation Plans
AGL Resources maintains the LTSIP that provides for grants of restricted stock
awards, incentive and nonqualified stock options, and stock appreciation rights
to key employees. The LTSIP currently authorizes the issuance of up to 3.2
million shares of AGL Resources common stock. AGL Resources also maintains the
LTIP that became effective January 1, 1999. The LTIP provides for grants of
restricted stock, performance units and incentive and nonqualified stock options
to key employees. The LTIP currently authorizes the issuance of up to 2.8
million shares of AGL Resources common stock. No LTIP awards were made in fiscal
1999. In addition, AGL Resources sponsors the Directors Plan in which all non-
employee directors participate. The Directors Plan provides for the issuance of
restricted stock and nonqualified stock options. The Directors Plan currently
authorizes the issuance of up to 200,000 shares of AGL Resources common stock.
Key employees and non-employee directors realize value from option grants only
to the extent that the fair market value of AGL Resources common stock on the
date of exercise of the option exceeds the fair market value of the common stock
on the date of grant.
LTSIP Stock Awards
Stock awards generally are subject to some vesting restrictions. AGL Resources
recognizes compensation expense for those stock awards over the related vesting
periods. AGL Resources awarded shares of stock to key employees in the
following amounts:
. 20,714 shares in fiscal 1999;
. 41,424 shares in fiscal 1998; and
. 31,863 shares in fiscal 1997.
At the date of the award, the weighted average fair value of the shares was as
follows:
. $20.610 in fiscal 1999;
. $19.890 in fiscal 1998; and
. $20.125 in fiscal 1997.
The compensation costs that have been charged against income, for the restricted
stock and other stock-based awards, were immaterial in fiscal 1999, 1998, and
1997.
LTSIP Incentive and Nonqualified Stock Options
Incentive and nonqualified stock options are granted at the fair market value on
the date of grant. The vesting of incentive options is subject to a statutory
limitation of $100,000 per year under Section 422A of the Internal Revenue Code.
Otherwise, nonqualified options generally become fully exercisable six months
after the date of grant and generally expire 10 years after that date.
A summary of activity related to grants of incentive and nonqualified stock
options follows:
Number of Weighted Average
Options Exercise Price
- ----------------------------------------------------------------------
Outstanding - Sept. 30, 1996 1,011,344 $ 17.77
Granted 510,119 $ 20.17
Exercised (104,520) $ 16.70
Forfeited (28,169) $ 19.76
- ----------------------------------------------------------------------
Outstanding - Sept. 30, 1997 1,388,774 $ 18.69
Granted 810,572 $ 19.90
Exercised (68,684) $ 16.95
Forfeited (51,867) $ 20.11
- ----------------------------------------------------------------------
Outstanding - Sept. 30, 1998 2,078,795 $ 19.19
Granted 664,420 $ 21.14
Exercised (91,945) $ 17.12
Forfeited (148,736) $ 20.51
- ----------------------------------------------------------------------
Outstanding - Sept. 30, 1999 2,502,534 $ 19.70
======================================================================
54
<PAGE>
Notes to Consolidated Financial Statements
Information about outstanding and exercisable as of September 30, 1999, follows:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
----------------------------------------------------------- ------------------------------------
Weighted Average
Remaining Weighted Weighted
Contractual Life Average Average
Range of Exercise Prices Number of Options (in years) Exercise Price Number of Options Exercise Price
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 13.75 to $ 17.44 249,978 4.2 $ 16.07 249,978 $ 16.07
$ 18.13 to $ 19.81 827,029 6.0 $ 19.22 785,316 $ 19.23
$ 20.00 to $ 23.19 1,425,527 7.8 $ 20.62 993,838 $ 20,33
- --------------------------------------------------------------------------------------------------------------------------------
$ 13.75 to $ 23.19 2,502,534 6.9 $ 19.70 2,029,132 $ 19.38
================================================================================================================================
</TABLE>
A summary of outstanding options that are fully exercisable follows:
Weighted
Number of Average
Options Exercise Price
- ----------------------------------------------------------------------
Exercisable - September 30, 1999 2,029,132 $ 19.38
Exercisable - September 30, 1998 2,008,581 $ 19.18
Exercisable - September 30, 1997 1,384,125 $ 18.69
AGL Resources applies Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees," and related interpretations in accounting for
its stock option plans. Accordingly, no compensation expense has been recognized
in connection with our LTSIP option grants. If AGL Resources had determined
compensation expense for the issuance of options based on the fair value method
described in SFAS No. 123, "Accounting for Stock-Based Compensation," net income
and earnings per common share would have been reduced to the pro forma amounts
presented below:
For the years ended Sept. 30, 1999 1998 1997
- ----------------------------------------------------------------------
Net income - as reported (millions) $74.4 $80.6 $76.6
Net income - pro forma (millions) $72.8 $79.4 $75.6
Basic earnings per common
share - as reported $1.30 $1.41 $1.37
Basic earnings per common
share - pro forma $1.27 $1.39 $1.35
Diluted earnings per common
share - as reported $1.29 $1.41 $1.36
Diluted earnings per common
share - pro forma $1.27 $1.39 $1.35
In accordance with the fair value method of determining compensation expense,
the weighted average grant date fair value per share of options granted was as
follows:
. $2.68 in fiscal 1999;
. $2.55 in fiscal 1998; and
. $2.93 in fiscal 1997.
AGL Resources used the Black-Scholes pricing model to estimate the fair value of
each option granted with the following weighted average assumptions:
For the years ended Sept. 30, 1999 1998 1997
- ----------------------------------------------------------------------
Expected life (years) 7 7 7
Interest rate 4.9% 5.5% 6.3%
Volatility 18.3% 17.8% 17.1%
Dividend yield 5.1% 5.5% 5.3%
Non-Employee Directors Equity Compensation Plan ("Directors Plan")
Under the Directors Plan, each non-employee director receives an annual grant
of:
. A stock award equal to the fair market value of the $16,000 annual retainer,
which is payable to each non-employee director; and
. A nonqualified stock option to purchase the same number of shares of common
stock as the annual stock award.
Nonqualified stock options are granted at the fair market value on the date of
grant. Options generally expire 10 years after the date of grant. Non-employee
directors were granted options to purchase an aggregate of the following:
. 7,437 shares in fiscal 1999;
. 7,980 shares in fiscal 1998; and
. 7,960 shares in fiscal 1997.
55
<PAGE>
Notes to Consolidated Financial Statements
Note 6. Common Stock
Shareholder Rights Plan
On March 6, 1996, AGL Resources' Board of Directors adopted a Shareholder Rights
Plan. The plan contains provisions to protect AGL Resources' shareholders in the
event of unsolicited offers to acquire AGL Resources or other takeover bids and
practices that could impair the ability of the Board of Directors to represent
shareholders' interests fully. As required by the Shareholder Rights Plan, the
Board of Directors declared a dividend of one preferred share purchase right (a
"Right") for each outstanding share of AGL Resources common stock, with
distribution made to shareholders of record on March 22, 1996.
The Rights, which will expire March 6, 2006, initially will be represented by
and traded together with, AGL Resources common stock. The Rights are not
currently exercisable and do not become exercisable unless some triggering
events occur. One of the triggering events is the acquisition of 10% or more of
AGL Resources common stock by a person or group of affiliated or associated
persons. Unless previously redeemed, upon the occurrence of one of the specified
triggering events, each Right will entitle its holder to purchase one one-
hundredth of a share of Class A Junior Participating Preferred Stock at a
purchase price of $60. Each preferred share will have 100 votes, voting together
with the common stock. Because of the nature of the preferred shares' dividend,
liquidation and voting rights, one one-hundredth of a share of preferred stock
is intended to have the value, rights, and preferences of one share of common
stock. As of September 30, 1999, 1.0 million shares of Class A Junior
Participating Preferred Stock were reserved for issuance under that plan.
Other
AGL Resources issued the following shares of common stock under ResourcesDirect,
a stock purchase and dividend reinvestment plan; the Retirement Savings Plus
Plan; the Long-Term Stock Incentive Plan; the Nonqualified Savings Plan; and the
Non-Employee Directors Equity Compensation Plan.
. 677,411 shares of common stock in fiscal 1999;
. 739,380 shares of common stock in fiscal 1998; and
. 753,866 shares of common stock in fiscal 1997.
As of September 30, 1999, 9,380,655 shares of common stock were reserved for
issuance pursuant to ResourcesDirect, the Retirement Savings Plus Plan, the
Long-Term Stock Incentive Plan, the Nonqualified Savings Plan, and the Non-
Employee Directors Equity Compensation Plan and the Long-Term Incentive Plan.
Note 7. Preferred Stock
Subsidiary Obligated Mandatorily Redeemable Preferred Securities ("Capital
Securities")
In June 1997, AGL Resources established AGL Capital Trust I (the "Trust"), a
Delaware business trust, and AGL Resources owns all the common voting
securities. The Trust issued and sold $75.0 million principal amount of 8.17%
Capital Securities (liquidation amount $1,000 per Capital Security) to certain
initial investors. The Trust used the proceeds to purchase 8.17% Junior
Subordinated Deferrable Interest Debentures, which are due June 1, 2037, from
AGL Resources.
The Capital Securities are subject to mandatory redemption at the time of the
repayment of the Junior Subordinated Debentures on June 1, 2037, or the optional
prepayment by AGL Resources after May 31, 2007. AGL Resources fully and
unconditionally guarantees all the Trust's obligations for the Capital
Securities.
Other Preferred Securities
As of September 30, 1999, AGL Resources had 10.0 million shares of authorized,
and unissued, Class A Junior Participating Preferred Stock, no par value; and
10.0 million shares of authorized, and unissued, preferred stock, no par value.
As of September 30, 1999, AGLC had 10.0 million shares of authorized, and
unissued, preferred stock, no par value.
56
<PAGE>
Notes to Consolidated Financial Statements
Note 8. Long-Term Debt
Long-term debt matures more than one year from the date of issuance. Medium-term
notes Series A, Series B, and Series C were issued under an Indenture dated
December 1, 1989. The notes are unsecured and rank on parity with all other
unsecured indebtedness. Net proceeds from the issuance of medium-term notes were
used to fund capital expenditures, repay short-term debt, and for other
corporate purposes. The annual maturities of long-term debt for the five-year
period ending September 30, 2004 are as follows:
. $50.0 million in fiscal 2000;
. $20.0 million in fiscal 2001;
. $45.0 million in fiscal 2002;
. $48.0 million in fiscal 2003; and
. $30.0 million in fiscal 2004.
The outstanding long-term debt as of September 30, net of current maturities, is
as follows:
Millions of dollars 1999 1998
- ------------------------------------------------------------------------
Medium-term notes
Series A/(1)/ $ 50.0 $ 60.0
Series B/(2)/ 260.0 300.0
Series C/(3)/ 300.0 300.0
- -------------------------------------------------------------------------
Total $610.0 $660.0
=========================================================================
(1) Interest rates from 8.90% to 9.10% with maturity dates from fiscal 2000 to
fiscal 2021. $10.0 million of Series A notes are current maturities.
(2) Interest rates from 7.15% to 8.70% with maturity dates from fiscal 2000 to
fiscal 2023. $40.0 million of series B notes are current maturities.
(3) Interest rates from 5.90% to 7.30% with maturity dates from fiscal 2003 to
fiscal 2027.
Note 9. Short-Term Debt
Short-term debt matures within one year from the date of issuance. Lines of
credit with various banks provide for direct borrowings and are subject to
annual renewal. The current lines of credit vary throughout the year from $180
million to $260 million. Certain of the lines are on a commitment-fee basis. As
of September 30, 1999, $260.0 million was available on lines of credit. Weighted
average interest rates on short-term debt outstanding were 5.6%, 5.8%, and 5.9%
as of September 30, 1999, 1998, and 1997, respectively.
Note 10. Commitments and Contingencies
Agreements for Firm Pipeline and Storage Capacity
In connection with its utility business, AGL Resources has agreements for firm
pipeline and storage capacity that expire at various dates through 2014. The
aggregate amount of required payments for AGLC under such agreements total
approximately $1.1 billion, with annual payments of $203 million in fiscal 2000,
$185 million in fiscal 2001, $163 million in fiscal 2002, $63 million in fiscal
2003, and $52 million in fiscal 2004. Total payments of fixed charges under all
agreements were $203 million in fiscal 1999, $220 million in fiscal 1998, and
$215 million in fiscal 1997.
As a result of the Deregulation Act, AGLC's rights to capacity under the
agreements are assigned to certificated marketers as they acquire firm
customers. For approximately 70% of such charges, certificated marketers are
responsible for payment of the charges associated with these assignments. AGLC
makes payments for the remaining 30% and then bills to and collects from
certificated marketers all such payments made. In case of certificated marketer
default, AGLC remains responsible for all payments as long as it is the holder
of these contracts. (See Note 17. Subsequent Events.)
The aggregate amount of required payments for Chattanooga under such agreements
totals approximately $45 million, with annual payments of $12 million in fiscal
2000, $12 million in fiscal 2001, $12 million in fiscal 2002, $4 million in
fiscal 2003, and $1 million in fiscal 2004. Total payments of fixed charges
under all agreements were $13 million in fiscal 1999, 1998, and 1997.
AGLC Gas Supply Contracts
In connection with its utility business, AGLC through AGLE had 24 long-term gas
supply contracts representing 240,000 Dekatherms per day ("Dt/d") of natural gas
for delivery to AGLC's customers. These agreements had various terms that
expired at various dates through 2014. Beginning in April 1999, AGLE began
exiting these agreements, typically by exercising the regulatory "out" clauses
in many of these contracts. As a result of this effort, 17 contracts were
terminated at no cost to AGLE, AGLC, certificated marketers, or consumers.
57
<PAGE>
Notes to Consolidated Financial Statements
AGLE expects to terminate the remaining contracts on November 1, 1999. AGLC was
permitted by the GPSC to utilize gas cost credits to buydown and buyout the
remaining $2.4 million of reservation charges. The aggregate amount for the
buydown and buyout which appears to be probable is approximately $2.0 million.
AGLE no longer has supply contracts for natural gas supply to AGLC.
Chattanooga Gas Supply Contracts
AGLE also purchases natural gas for Chattanooga. As of September 30, 1999, AGLE
held four gas supply contracts representing 35,000 Dt/d of longer-term gas
supply through the year 2003. The remainder of Chattanooga's gas supply is met
by AGLE purchasing gas on the spot market.
FERC Order 636:
Transition Costs Settlement Agreements
The utility purchases natural gas transportation and storage services from
interstate pipeline companies, and the Federal Energy Regulatory Commission
("FERC") regulates those services and the rates the interstate pipeline
companies charge for them. During the past decade, the FERC has transformed
dramatically the natural gas industry through a series of generic orders
promoting competition in the industry. As part of that transformation, the
interstate pipelines that serve the utility have been required to:
. Unbundle, or separate, their transportation and gas supply services; and
. Provide a separate transportation service on a nondiscriminatory basis for
the gas that is supplied by numerous gas producers or other third parties.
The FERC is considering further revisions to its rules, including the
following:
. Its policies governing secondary market transactions; and
. Revisions that would permit pipelines and their customers to establish
individually negotiated terms and conditions of service that depart from
generally applicable pipeline tariff rules.
The utility cannot predict whether those changes will be adopted or how they
potentially might affect it.
The FERC has required the utility, as well as other interstate pipeline
customers, to pay transition costs associated with the separation of the
suppliers' transportation and gas supply services. Based on its pipeline
suppliers' filings with the FERC, the utility estimates the total portion of its
transition costs from all its pipeline suppliers will be approximately $107.9
million. As of September 30, 1999, approximately $105.8 million of those costs
had been incurred and were being recovered primarily from the utility customers'
rates charged for gas sales. Going forward, AGLC's remaining costs will be
recovered from certificated marketers.
The largest portion of the transition costs the utility must pay consists of gas
supply realignment costs that Southern Natural Gas Company ("Southern") and
Tennessee Gas Pipeline Company ("Tennessee") bill the utility. The utility and
other parties have entered restructuring settlements with Southern and Tennessee
that resolve all transition cost issues for those pipelines.
Under the Southern settlement, the utility's share of Southern's transition
costs is about $89.7 million, of which the utility incurred $87.6 million as of
September 30, 1999. Under the Tennessee settlement, the utility's share of
Tennessee's transition costs is about $14.7 million, all of which had been
incurred by the utility as of September 30, 1999.
Southern filed a general rate case on September 1, 1999. Its proposed rates
would represent a 10% increase (about $15 million per year) under AGLC's
existing contracts in firm interstate pipeline charges. These rates would become
effective March 1, 2000, subject to refund unless the FERC should accept an
offer of settlement between Southern and its customers. Such a settlement is
currently under discussion.
Collective Bargaining Agreements
On September 30, 1999, AGL Resources and its subsidiaries had 2,892 employees.
Of that total, approximately 700 employees are covered under collective
bargaining agreements. Based on current pay levels, it is anticipated that the
majority of bargaining unit employees will not receive any base pay increases
until the year 2000. The collective bargaining agreements expire in September
2000 and 2001. Certain of those agreements will be renegotiated beginning in
January 2000.
58
<PAGE>
Notes to Consolidated Financial Statements
Rental Expense
Total rental expense for property and equipment was as follows:
. $8.5 million in fiscal 1999;
. $7.7 million in fiscal 1998; and
. $6.5 million in fiscal 1997.
Minimum annual rentals under non-cancelable operating leases are as follows:
. Fiscal 2000 - $11.7 million;
. Fiscal 2001 - $11.6 million;
. Fiscal 2002 - $11.8 million;
. Fiscal 2003 - $9.3 million;
. Fiscal 2004 - $8.7 million; and
. Thereafter - $7.2 million.
On October 14, 1998, AGL Resources entered into an arrangement to sublease
certain corporate office space, the term of which began on December 1, 1998, and
will expire on January 3, 2003. The original lease is an operating lease. Annual
sublease rental receipts are as follows:
. Fiscal 2000 - $1.5 million;
. Fiscal 2001 - $1.5 million;
. Fiscal 2002 - $1.5 million; and
. Fiscal 2003 - $0.4 million.
Litigation
AGL Resources is involved in litigation arising in the normal course of
business. Management believes the ultimate resolution of that litigation will
not have a material adverse effect on the consolidated financial statements.
(See Note 12. Environmental Matters.)
Related Party Guarantees
In the normal course of business, AGL Resources Inc., from time to time,
guarantees, or provides collateral for, the obligations of its subsidiaries and
affiliates.
Note 11. Suppliers' Refunds
The utility has received refunds from its interstate natural gas suppliers.
Those refunds are a result of FERC orders that adjust the price of various
pipeline services purchased by the utility from suppliers in prior periods.
Under purchased gas provisions of rate schedules approved by the TRA,
Chattanooga credits the refunds to customers. Under purchased gas provisions of
rate schedules approved by the GPSC, AGLC credited the refunds to customers
until June 30, 1998. Beginning July 1, 1998, and thereafter, the Deregulation
Act requires AGLC to credit refunds from interstate natural gas suppliers to a
universal service fund. The universal service fund provides a method to fund the
recovery of certificated marketers' uncollectible accounts, and it enables AGLC
to expand its facilities to serve the public interest.
Note 12. Environmental Matters
Before natural gas was widely available in the Southeast, AGLC manufactured gas
from coal and other fuels. Those manufacturing operations were known as
"manufactured gas plants," or "MGPs" which AGLC ceased operating in the 1950s.
Because of recent environmental concerns, AGLC is required to investigate
possible environmental contamination at those plants and, if necessary, clean up
any contamination.
AGLC has been associated with twelve MGP sites in Georgia and three in Florida.
Based on investigations to date, AGLC believes that some cleanup is likely at
most of the sites. In Georgia, the state Environmental Protection Division
supervises the investigation and cleanup of MGP sites. In Florida, the U.S.
Environmental Protection Agency has that responsibility.
For each of the MGP sites, AGLC has estimated its share of the likely costs of
investigation and cleanup. AGLC used the following process for the estimates:
First, AGLC eliminated the sites where it was believed that no cleanup or
further investigation was likely to be necessary. Second, AGLC estimated its
likely future cost of investigation and cleanup at each of the remaining sites.
Third, for some sites, AGLC estimated its likely "share" of the costs. AGLC
developed its estimate based on any agreements for cost sharing it has, the
legal principles for sharing costs, its evaluation of other entities' ability to
pay, and other similar factors.
Using the above process, AGLC currently estimates that its total future cost of
investigating and cleaning up its MGP sites is between $102.4 million and $148.2
million. That range does not include other potential expenses, such as
unasserted property damage or personal injury claims or legal expenses for which
AGLC may be held liable but for
59
<PAGE>
Notes to Consolidated Financial Statements
which neither the existence nor the amount of such liabilities can be reasonably
forecast. Within that range, AGLC cannot identify any single number as a
"better" estimate of its likely future costs. Consequently, AGLC has recorded
the lower end of the range, or $102.4 million, as a liability and a
corresponding regulatory asset as of September 30, 1999. AGLC does not believe
that any single number within the range constitutes a "better" estimate because
its actual future investigation and cleanup costs will be affected by a number
of contingencies that cannot be quantified at this time. During fiscal 1999, the
asset increased $78.7 million and was reduced by amortization of $6.1 million
resulting in an asset of $150.2 million.
As of September 30, 1998, AGLC had recorded a liability of $47.0 million. During
fiscal 1999, the liability increased $78.7 million and payments of $23.3 million
were made. The net increase in the liability was $55.4 million resulting in a
liability of $102.4 million as of September 30, 1999. The net increase in the
liability was based on revised estimates of future costs, which resulted in a
corresponding increase in the unrecovered environmental response cost asset.
AGLC has two ways of recovering investigation and cleanup costs. First, the GPSC
has approved an "Environmental Response Cost Recovery Rider." It allows the
recovery of costs of investigation, testing, cleanup, and litigation. Because of
that rider, AGLC has recorded a regulatory asset in the same amount as the
recorded liability for investigation and cleanup. During fiscal 1999, AGLC
recovered $6.1 million through its environmental response recovery rider.
The second way AGLC can recover costs is by exercising the legal rights AGLC
believes it has to recover a share of its costs from other potentially
responsible parties, typically former owners or operators of the MGP sites. AGLC
has been actively pursuing those recoveries. There were no material recoveries
during fiscal 1999 and 1998.
Note 13. Fair Value of Financial Instruments
In the following table, the carrying amounts and fair values of financial
instruments included in AGL Resources' Consolidated Balance Sheets as of
September 30, 1999, and 1998 are shown.
Carrying Estimated
Millions of dollars Amount Fair Value
- ---------------------------------------------------------------------------
1999
Long-term debt including current portion $ 660.0 $ 640.8
Capital Securities 74.3 70.0
1998
Long-term debt including current portion $ 660.0 $ 714.6
Capital Securities 74.3 81.5
The estimated fair values are determined based on the following:
. Long-term debt - interest rates that are currently available for issuance of
debt with similar terms and remaining maturities; and
. Capital Securities - quoted market price and dividend rates for preferred
stock with similar terms.
Considerable judgment is required to develop the fair value estimates;
therefore, the values are not necessarily indicative of the amounts that could
be realized in a current market exchange. The fair value estimates are based on
information available to management as of September 30, 1999. Management is not
aware of any subsequent factors that would affect significantly the estimated
fair value amounts.
Note 14. Joint Ventures and Non-utility Interests
SouthStar Energy Services LLC
SouthStar Energy Services LLC ("SouthStar") was established in July 1998 to
market natural gas and related services to residential and small commercial
customers in Georgia and to industrial customers in the Southeast. SouthStar is
a joint venture among a subsidiary of AGL Resources Inc. and subsidiaries of
Dynegy, Inc. and Piedmont Natural Gas Company. SouthStar began marketing natural
gas to customers in Georgia during the first quarter of fiscal 1999 under the
trade name "Georgia Natural Gas Services."
60
<PAGE>
Notes to Consolidated Financial Statements
Etowah LNG Company LLC
In December 1997, AGL Peaking Services, Inc. ("AGL Peaking Services"), a
subsidiary of AGL Resources, and Southern Natural Gas Company, formed a joint
venture known as Etowah LNG Company LLC ("Etowah"). AGL Peaking Services and
Southern Natural Gas Company each own 50% of the joint venture. Etowah was
formed for the purpose of constructing, owning, and operating a liquefied
natural gas peaking facility.
Cumberland Pipeline Company
In December 1997, AGL Interstate Pipeline Company, a subsidiary of AGL Resources
Inc., and Transcontinental Gas Pipe Line Corporation ("Transco") formed a joint
venture known as Cumberland Pipeline Company. AGL Interstate Pipeline Company
and Transco each own 50% of the joint venture. Cumberland Pipeline Company was
formed for the purpose of owning a new interstate pipeline, which was intended
to provide interstate pipeline services to customers in Georgia and Tennessee.
Management has decided not to proceed with the Cumberland pipeline project.
Sonat Marketing Company L.P. and Sonat Power Marketing L.P.
AGL Investments, Inc. through a subsidiary, invested $32.6 million for a 35%
ownership interest in Sonat Marketing, a joint venture with a subsidiary of
Sonat Inc. AGL Investments, Inc. through a subsidiary, invested $1.0 million for
a 35% ownership interest in Sonat Power Marketing, another joint venture with a
subsidiary of Sonat.
On July 29, 1999, AGL Investments, Inc. and Sonat entered into agreements,
pursuant to which Sonat agreed to purchase our interest in Sonat Marketing for
$40.0 million and our interest in Sonat Power Marketing for $25.0 million. The
sale of the ownership interest in Sonat Marketing was completed on August 12,
1999. The sale of the ownership interest in Sonat Power Marketing was completed
on September 29, 1999. Under the terms of the agreement, upon the completion of
each transaction, the applicable joint venture agreement was amended to provide
that AGL Investments, Inc. was not allocated any gain or loss from the joint
ventures for any period subsequent to June 30, 1999.
Note 15. Related Party Transactions
AGLC recognized revenue of $70.7 million in fiscal 1999 from SouthStar. The
utility sold gas totaling $5.6 million in fiscal 1999 to SouthStar, and had $0.7
million in accounts receivable from SouthStar as of September 30, 1999. The
utility sold gas totaling $1.9 million in fiscal 1998 to SouthStar, and had $1.5
million in accounts receivable from SouthStar as of September 30, 1998.
As of September 30, 1999, SouthStar had additional accounts payable balances of
$0.6 million to AGLE and $2.7 million to AGL Resources' subsidiary which has the
ownership interest in SouthStar. Additionally, AGL Resources' subsidiary which
has the ownership interest in SouthStar has $27.8 million in notes receivable
from SouthStar as of September 30, 1999.
Utilipro recognized revenue of $6.5 million on services provided to SouthStar
during fiscal 1999, and had $2.7 million in accounts receivable from SouthStar
as of September 30, 1999. Utilipro recognized revenue of $0.5 million on
services provided to SouthStar during fiscal 1998, and had accounts receivable
from SouthStar of $0.3 million as of September 30, 1998.
In the normal course of business, AGL Resources Inc., from time to time,
guarantees, or provides collateral for, the obligations of its subsidiaries and
affiliates.
AGL Resources' investment in SouthStar had a significant impact on AGL
Resources' financial position and results of operations for fiscal 1999.
Summarized financial information for SouthStar is shown below in millions:
At September 30, 1999
- ------------------------------------------------------------
. Total assets $ 62.9
. Total liabilities $ 77.6
For Twelve Months Ended September 30, 1999
- ------------------------------------------------------------
. Loss before tax ($ 28.5)
61
<PAGE>
Notes to Consolidated Financial Statements
Note 16. Segment Information
AGL Resources is organized into two operating segments: Utility and Non-utility.
Management evaluates segment performance based on net income, which includes the
effects of corporate expense allocations. There were no material inter-segment
sales in fiscal 1999, 1998, or 1997. Identifiable assets are those assets used
in each segment's operations.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Equity in the
Depreciation Net Income Income Tax Identi- Investments
Millions of Operating and Interest Interest (Loss) of Expense Net Income fiable in Joint Capital
Dollars Revenues Ammortization Expense Income Investees (Benefit) (Loss) Assets Ventures Expenditures
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1999
Utility $1,039.2 $ 66.6 $ 47.9 $ - $ - $ 37.8 $ 71.9 $1,798.6 $ 0.4 $ 124.8
Non-utility 29.4 12.2 5.1 0.4 (19.9) 1.3 2.5 142.5 27.8 18.6
- -----------------------------------------------------------------------------------------------------------------------------------
$1,068.6 $ 78.8 $ 53.0 $ 0.4 $ (19.9) $ 39.1 $ 74.4 $1,941.1 28.2 $ 143.4
===================================================================================================================================
1998
Utility $1,274.8 $ 62.9 $ 53.0 $ 1.0 $ - $ 44.2 $ 87.9 $1,838.9 $ 0.4 $ 94.8
Non-utility 63.8 8.2 1.4 0.2 4.6 (5.4) (7.3) 99.7 46.3 22.5
- -----------------------------------------------------------------------------------------------------------------------------------
$1,338.6 $ 71.1 $ 54.4 $ 1.2 $ 4.6 $ 38.8 $ 80.6 $1,938.6 $46.7 $ 117.3
===================================================================================================================================
1997
Utility $1,211.3 $ 60.3 $ 52.2 $ 1.2 $ - $ 47.7 $ 76.5 $1,785.1 $ 4.7 $ 123.5
Non-utility 76.3 6.3 - 0.1 1.0 (0.9) 0.1 105.9 29.8 23.3
- -----------------------------------------------------------------------------------------------------------------------------------
$1,287.6 $ 66.6 $ 52.2 $ 1.3 $ 1.0 $ 46.6 $ 76.6 $1,891.0 $34.5 $ 146.8
===================================================================================================================================
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Note 17. Subsequent Events
On October 5, 1999, the Board of Directors of AGL Resources authorized a plan to
repurchase up to 3.6 million shares (6.3% of total outstanding as of September
30, 1999) of AGL Resources common stock over a period ending no later than
September 30, 2001. A portion of the proceeds from AGL Resources recent sales of
its joint venture interests in Sonat Marketing and Sonat Power Marketing will be
used to fund the shares repurchase. Open market purchases of the shares may be
made from time to time, subject to availability, and the repurchased shares will
be held in treasury.
On October 26, 1999, Peachtree Natural Gas, LLC ("Peachtree"), one of the five
largest certificated marketers in Georgia based on customer count, filed for
protection under Chapter 11 of the United States Bankruptcy Code. As of
September 30, 1999, AGL Resources' total gas receivables included approximately
$6.8 million attributable to Peachtree. As of September 30, 1999, AGLC held
financial surety bonds totaling $11 million as security for Peachtree's
obligations. As of the date of Peachtree's bankruptcy filing, Peachtree owed
AGLC approximately $14.2 million and AGLC continued to hold the $11 million of
surety bonds. The amount owed to AGLC does not include amounts owed by Peachtree
to interstate pipelines for assigned capacity. Based upon information filed by
Peachtree in its bankruptcy proceeding, as of the date of Peachtree's filing,
Peachtree owed interstate pipelines approximately $1.8 million for assigned
capacity. Peachtree obtains a portion of its customer care solutions from
Utilipro. As of September 30, 1999, included in AGL Resources' other receivables
was $1.7 million due to Utilipro from Peachtree. As of the date of Peachtree's
bankruptcy filing, Peachtree owed Utilipro $2.1 million.
On November 17, 1999, Peachtree entered into an agreement to sell its customers
and storage gas inventories to another certificated marketer. This sale is
expected to close prior to December 31, 1999. Management does not believe that
Peachtree's bankruptcy will have a material adverse effect on AGL Resources'
consolidated financial statements.
<PAGE>
Notes to Consolidated Financial Statements
Note 18. Quarterly Financial Data (Unaudited)
During the fourth quarter of fiscal 1999, AGL Resources sold its interest in
Sonat Power Marketing and Sonat Marketing for a total after-tax gain of $22.3
million.
During the quarter ended September 30, 1998, AGL Resources recorded non-cash,
nonrecurring charges of $13.9 million associated with the impairment of certain
assets no longer useful primarily due to changes in our information technology
systems strategy. During the quarter ended September 30, 1998, AGL Resources
reduced its income tax liability for prior years by $2.3 million. (See Note 1.
Significant Accounting Policies.)
Quarterly financial data for fiscal 1999 and 1998 is summarized as follows (See
Note 2. Impact of Deregulation.):
Millions of dollars, except per share data
- ----------------------------------------------------------------------------
Operating Operating
Revenues Income
- ----------------------------------------------------------------------------
Fiscal 1999
December 31, 1998 $ 323.9 $ 47.7
March 31, 1999 375.1 52.4
June 30, 1999 185.9 29.5
September 30, 1999 183.7 25.0
Fiscal 1998
December 31, 1997 $ 399.1 $ 52.4
March 31, 1998 479.7 83.3
June 30, 1998 246.4 8.9
September 30, 1998 213.4 23.0
Basic Diluted
Earnings Earnings
Net (Loss) Per (Loss) Per
Income Common Common
Fiscal 1999 (Loss)(a) Share(a) Share(a)
- ----------------------------------------------------------------------------
December 31, 1998 $ 15.9 $ .28 $ .28
March 31, 1999 24.2 .42 .42
June 30, 1999 7.2 .12 .12
September 30, 1999 27.1 .48 .48
Fiscal 1998
December 31, 1997 $ 25.7 $ .45 $ .45
March 31, 1998 45.1 .79 .79
June 30, 1998 (1.2) (.02) (.02)
September 30, 1998 11.0 .19 .19
(a) The wide variance in quarterly earnings results from the highly seasonal
nature of AGL Resources' primary business. (See Note 2. Impact of
Deregulation.)
Basic and diluted earnings per common share are calculated based on the weighted
average number of common shares and common share equivalents outstanding during
the quarter. Those totals differ from the basic and diluted earnings per common
share, as shown on the Statements of Consolidated Income, which are based on the
weighted average number of common shares and common share equivalents
outstanding during the entire year.
63
<PAGE>
Independent Auditors' Report
To the Shareholders and Board of Directors
of AGL Resources Inc.:
We have audited the accompanying consolidated balance sheets of AGL Resources
Inc. and subsidiaries as of September 30, 1999 and 1998, and the related
statements of consolidated income, common stockholders' equity, and cash flows
for each of the three years in the period ended September 30, 1999. These
financial statements are the responsibility of AGL Resources' management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of AGL Resources Inc. and subsidiaries
as of September 30, 1999 and 1998, and the results of its operations and its
cash flows for each of the three years in the period ended September 30, 1999,
in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
Atlanta, Georgia
October 29, 1999
(November 17, 1999 as to Note 17)
Management's Responsibility for Financial Reporting
The consolidated financial statements and related information are the
responsibility of management. The financial statements have been prepared in
conformity with generally accepted accounting principles appropriate in the
circumstances. The financial information contained elsewhere in this Annual
Report is consistent with that in the financial statements.
AGL Resources Inc. maintains a system of internal accounting controls designed
to provide reasonable assurance that assets are safeguarded from loss and that
transactions are executed and recorded in accordance with established
procedures. The concept of reasonable assurance is based on the recognition that
the cost of maintaining a system of internal accounting controls should not
exceed related benefits. The system of internal accounting controls is supported
by written policies and guidelines.
The financial statements have been audited by Deloitte & Touche LLP, independent
auditors. Their audits were made in accordance with generally accepted auditing
standards, as indicated in the Independent Auditors' Report, and included a
review of the system of internal accounting controls and tests of transactions
to the extent they considered necessary to carry out their responsibilities.
The Board of Directors pursues its responsibility for reported financial
information through its Audit Committee. The Audit Committee meets periodically
with management and the independent auditors to assure that they are carrying
out their responsibilities and to discuss internal accounting controls, auditing
and financial reporting matters.
/s/ Walter M. Higgins
- ---------------------
Walter M. Higgins
Chairman and Chief Executive Officer
October 29, 1999
/s/ Victor H. Pena
- ------------------
Victor H. Pena
Vice President
Financial Systems and Controller
October 29, 1999
64
<PAGE>
Selected Financial Data
<TABLE>
<CAPTION>
For the years ended September 30
in millions, except per share amounts 1999 1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Income Statement Data(1)
Operating Revenues $1,068.6 $1,338.6 $1,287.6 $1,228.6 $1,068.5 $1,199.9
Cost of Sales 544.7 796.0 766.5 725.5 574.1 736.8
- ------------------------------------------------------------------------------------------------------------------------
Operating Margin 523.9 542.6 521.1 503.1 494.4 463.1
- ------------------------------------------------------------------------------------------------------------------------
Other Operating Expenses
Operation 225.5 238.1 226.2 221.8 215.5 207.0
Restructuring costs - - - - 70.3 -
Maintenance 40.6 38.4 30.8 29.5 30.4 32.8
Depreciation 78.8 71.1 66.6 63.3 59.0 55.4
Taxes other than income taxes 24.4 27.4 26.0 25.0 25.7 26.0
- ------------------------------------------------------------------------------------------------------------------------
Total Other Operating Expenses 369.3 375.0 349.6 339.6 400.9 321.2
- ------------------------------------------------------------------------------------------------------------------------
Operating Income 154.6 167.6 171.5 163.5 93.5 141.9
- ------------------------------------------------------------------------------------------------------------------------
Other Income 18.0 12.9 10.3 13.1 1.5 5.2
- ------------------------------------------------------------------------------------------------------------------------
Interest Expense and Preferred Stock Dividends 59.1 61.1 58.4 53.5 51.9 52.1
- ------------------------------------------------------------------------------------------------------------------------
Income Before Income Taxes 113.5 119.4 123.4 123.1 43.1 95.0
- ------------------------------------------------------------------------------------------------------------------------
Income Taxes 39.1 38.8 46.8 47.5 16.7 36.3
- ------------------------------------------------------------------------------------------------------------------------
Net Income 74.4 80.6 76.6 75.6 26.4 58.7
- ------------------------------------------------------------------------------------------------------------------------
Common Stock Dividends Paid 62.1 61.5 60.5 58.6 54.2 52.2
- ------------------------------------------------------------------------------------------------------------------------
Earnings Reinvested $ 12.3 $ 19.1 $ 16.1 $ 17.0 $ (27.8) $ 6.5
========================================================================================================================
Common Stock Data(2)
Weighted-Average Shares Outstanding - Basic 57.4 57.0 56.1 55.3 52.4 50.2
Weighted-Average Shares Outstanding - Diluted 57.4 57.1 56.2 55.4 52.5 50.3
Earnings per Share - Basic $ 1.30 $ 1.41 $ 1.37 $ 1.37 $ 0.50 $ 1.17
Earnings per Share - Diluted $ 1.29 $ 1.41 $ 1.36 $ 1.36 $ 0.50 $ 1.17
Dividends Paid per Share $ 1.08 $ 1.08 $ 1.08 $ 1.06 $ 1.04 $ 1.04
Dividend Payout Ratio 83.1% 76.6% 78.8% 77.4% 208.0% 88.9%
Book Value per Share(3) $ 11.58 $ 11.42 $ 10.99 $ 10.56 $ 10.15 $ 10.20
Market Value per Share(4) $ 16.25 $ 19.38 $ 18.94 $ 19.13 $ 19.31 $ 15.31
========================================================================================================================
Balance Sheet Data(3)
Total Assets $1,969.3 $1,985.3 $1,925.5 $1,823.1 $1,674.6 $1,642.9
- ------------------------------------------------------------------------------------------------------------------------
Long-Term Liabilities
Accrued Environmental Response Costs $ 102.4 $ 47.0 $ 37.3 $ 30.4 $ 28.6 $ 24.3
Accrued Pension Costs $ 5.3 $ 2.2 $ - $ 4.9 $ 10.3 $ -
Accrued Postretirement Benefits Costs $ 32.4 $ 33.4 $ 34.3 $ 36.2 $ 30.1 $ 3.6
Deferred Credits $ 49.2 $ 57.8 $ 62.4 $ 60.9 $ 65.6 $ 66.6
- ------------------------------------------------------------------------------------------------------------------------
Capitalization
Long-Term Debt (excluding current portion) $ 610.0 $ 660.0 $ 660.0 $ 554.5 $ 554.5 554.5
Preferred Stock of Subsidiary - - - 58.5 58.5 58.5
Subsidiary Obligated Mandatorily
Redeemable Preferred Securities 74.3 74.3 74.3 - - -
Common Stockholders' Equity 661.5 654.1 622.1 588.3 557.3 518.5
- ------------------------------------------------------------------------------------------------------------------------
Total Capitalization $1,345.8 $1,388.4 $1,356.4 $1,201.3 $1,170.3 $1,131.5
========================================================================================================================
Financial Ratios(3)
Capitalization
Long-Term Debt 45.3% 47.5% 48.6% 46.1% 47.4% 49.0%
Preferred Stock of Subsidiary - - - 4.9 5.0 5.2
Subsidiary Obligated Mandatorily
Redeemable Preferred Securities 5.5 5.4 5.5 - - -
Common Stockholders' Equity 49.2 47.1 45.9 49.0 47.6 45.8
- ------------------------------------------------------------------------------------------------------------------------
Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
- ------------------------------------------------------------------------------------------------------------------------
Return on Average Common Stockholders' Equity 11.3% 12.6% 12.7% 13.2% 4.9% 11.6%
- ------------------------------------------------------------------------------------------------------------------------
Ratio of Earnings to:(5)
Interest Charges 3.23 3.30 3.46 3.58 1.99 3.08
Interest Charges and
Preferred Stock Dividends 2.90 2.94 3.10 3.28 1.80 2.82
Combined Fixed Charges and
Preferred Stock Dividends(6) 2.72 2.77 2.90 3.08 1.75 2.66
========================================================================================================================
</TABLE>
(1) See Note 2 to the Consolidated Financial Statements regarding the impact of
deregulation on the comparability of operating revenues and cost of sales.
(2) Adjusted for two-for-one stock split paid in the form of 100% stock
dividends on December 1, 1995.
(3) Year-end.
(4) September 30 closing market price.
(5) Interest charges exclude the debt portion of allowance for funds used during
construction.
(6) Fixed charges consist of interest on short and long-term debt, other
interest and the estimated interest component of rentals.
65
<PAGE>
Shareholder Information
Shareholder Services
Our transfer agent, EquiServe, can help you with a variety of stock-related
matters:
. Change of address
. Direct stock purchase
. Dividend reinvestment
. Direct deposit of cash dividends
. Transfer of ownership
Mailing Address
AGL Resources Shareholder Services
c/o EquiServe Trust Company, N.A.
Blue Hills Office Park
150 Royall Street
Canton, MA 02021
Telephone:
1-800-633-4236
Information Sources
Publications
Additional copies of this report, Form 10-K, and Form 10-Q are available at no
charge to you through the following methods:
. Visit our web site at www.aglresources.com
. Call toll free 1-877-ATG-NYSE (1-877-284-6973)
. Write Shareholder Relations, AGL Resources Inc., Post Office Box 4569,
Atlanta, GA 30302-4569.
Internet Site
Our web site, www.aglresources.com, provides financial information for investors
and the financial community, and it offers information on other topics such as
the company's community involvement.
Toll-Free Telephone Connection
By calling toll free 1-877-ATG-NYSE (1-877-284-6973) you may obtain earnings and
news releases, faxed financial reports, or request company information via
mail. You also may transfer directly to the Investor Relations Department or our
transfer agent, EquiServe.
Investor Relations
Financial analysts and professional investment managers are invited to contact
Investor Relations: Melanie M. Platt at 404-584-3420 or Joseph P. Heffron at
404-584-3427. Written requests should be addressed as follows: Post Office Box
4569, Atlanta, GA 30302-4569. Requests also may be faxed to 404-584-3419.
Stock Information
. Ticker symbol: ATG
. Newspaper listing: AGL Res
. Common stock listed and traded:
New York Stock Exchange
. Shareholders of record at year-end and their location:
15,878 in 50 states, the District of Columbia, and 15 foreign countries
2000 Annual Meeting
February 4, 2000
The Biltmore
817 West Peachtree Street
Atlanta, Georgia
The Board of Directors is soliciting proxies for the annual meeting. The
following materials were mailed with the 1999 Annual Report: a formal notice of
the meeting, proxy statement, and proxy card.
ResourcesDirect
ResourcesDirect provides potential investors and existing shareholders with an
economical and convenient method for purchasing initial or additional shares of
common stock directly from AGL Resources without paying any brokerage fees or
service charges. Dividends reinvested through the plan are used to purchase
shares of common stock directly from the company. Call toll free 1-800-633-4236
or 1-877-ATG-NYSE, or visit our web site at www.aglresources.com, for a plan
prospectus and enrollment application.
Dividends
AGL Resources normally pays dividends four times a year, usually on March 1,
June 1, September 1, and December 1. The following table reflects the quarterly
dividend paid per share during fiscal 1999 and 1998.
Quarter Fiscal 1999 Fiscal 1998
- -------------------------------------------------------------------------------
First $ .27 $ .27
Second .27 .27
Third .27 .27
Fourth .27 .27
- -------------------------------------------------------------------------------
Annual $ 1.08 $ 1.08
===============================================================================
Stock Prices
Below are the New York Stock Exchange high and low closing prices for AGL
Resources' common stock for the last day of each quarter of fiscal 1999 and
1998. The closing stock price on November 15, 1999, was $18.88.
Quarter 1999 1998
------------------------ ------------------------
High Low High Low
First $ 23.19 $ 19.31 $ 20.94 $ 18.00
Second 23.06 17.56 21.50 19.25
Third 19.25 16.94 22.06 19.25
Fourth 20.56 15.94 20.56 18.06
<PAGE>
Exhibit 21
Subsidiaries of AGL Resources Inc. *
Following is a listing of the first tier subsidiaries and their related second
tier subsidiaries:
Name of Subsidiary Jurisdiction of Incorporation
------------------ -----------------------------
AGL Energy Services, Inc. Georgia
Georgia Gas Company Georgia
AGL Interstate Pipeline Company Georgia
AGL Investments, Inc. Georgia
AGL Gas Marketing, Inc. Georgia
AGL Power Services, Inc. Georgia
AGL Propane, Inc. Georgia
Trustees Investments, Inc. Georgia
Utilipro, Inc. Georgia
AGL Peaking Services, Inc. Georgia
AGL Resources Services Company Georgia
(voluntarily dissolved October 1, 1999)
Atlanta Gas Light Company Georgia
Chattanooga Gas Company Tennessee
Atlanta Gas Light Services, Inc. Georgia
(formerly known as Georgia Natural Gas Company)
Georgia Natural Gas Company Georgia
(formerly known as Atlanta Gas Light Services,
Inc., and formerly known as
The Energy Spring, Inc.)
- ------------
* The names of certain subsidiaries have been omitted because, considered in
the aggregate as a single subsidiary, they would not constitute a significant
subsidiary.
<PAGE>
Exhibit 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement Nos.
33-31674, 33-50301, 33-62155, 333-01519, 333-02353, 333-26961, 333-26963, 333-
22867, 333-86983, 333-86985 and 333-86987 on Form S-8 and Registration
Statement No. 333-22867 on Form S-3 of our reports dated October 29, 1999
(November 17, 1999 as to Note 17) appearing and incorporated by reference in
this Annual Report on Form 10-K of AGL Resources Inc. for the year ended
September 30, 1999.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Atlanta, Georgia
December 29, 1999
<TABLE> <S> <C>
<PAGE>
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<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE AGL
RESOURCES INC. FORM 10-K ANNUAL REPORT FOR THE FISCAL YEAR ENDED SEPTEMBER 30,
1999, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
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<LONG-TERM-DEBT-NET> 610
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