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EXHIBIT H-2
AGL SERVICES AGREEMENT
This AGL Services Agreement (the "Agreement") is entered into as of the
__________ day of __________, 2000, by and between [insert name of associate
Company], a __________ corporation (the "Company"), and AGL Services Company, a
Georgia corporation, ("AGSC").
WHEREAS, each of the Company and AGSC is an associate company of AGL
Resources Inc. ("AGLR");
WHEREAS, AGSC has been formed for the purpose of providing administrative,
management and other services to associate companies; and
WHEREAS, the Company believes that it is in the interest of the Company to
provide for an arrangement whereby the Company may, from time to time and at the
option of the Company, agree to purchase certain administrative, management and
other services from AGSC;
NOW, THEREFORE, in consideration of the mutual covenants contained herein
and other valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto, intending to be legally bound, hereby
agree as follows:
I. SERVICES OFFERED. Exhibit I hereto lists and describes all of the
services that are available from AGSC. AGSC hereby offers to supply those
services to Company and to other associate companies. Such services are and will
be provided to the Company only at the request of the Company.
II. SERVICES SELECTED.
A. Initial Selection of Services. Exhibit II lists the services each
Company hereby agrees to receive from AGSC.
B. Annual Selection of Services. AGSC shall send an annual service
proposal form to the Company on or about July 1 listing services proposed for
the next fiscal year. By July 31, the Company shall notify AGSC of the services
it has elected to receive during the next fiscal year.
III. PERSONNEL. AGSC will provide services by utilizing the services of
such executives, accountants, financial advisers, technical advisers, attorneys,
engineers and other persons as have the necessary qualifications.
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If necessary, AGSC, after consultation with the Company, may also arrange
for the services of affiliated or unaffiliated experts, consultants, attorneys
and others in connection with the performance of any of the services supplied
under this Agreement. AGSC also may serve as administrative agent, arranging and
monitoring services provided by third parties to Company, whether such services
are billed directly to Company or through AGSC.
During a transition period from October 6, 2000 (closing date) through
December 31, 2000, AGSC may also lease or otherwise acquire the services of
certain employees of associate companies, including AGLR, for the purpose of
staffing its service operations. The leasing or other arrangements will comply
with the applicable provisions under the Public Utility Holding Company Act of
1935, as amended ("1935 Act"), including the provisions of Rule 90 thereunder
requiring the performance of services on the basis of cost.
IV. COMPENSATION AND ALLOCATION. As and to the extent required by law,
AGSC will provide such services at cost. The attached Exhibit I contains AGSC's
Policies and Procedures Manual which describes the rules for determining and
allocating costs for AGSC.
V. BILLING. Bills will be rendered during the first week of each month
covering amounts due for the month calculated using the actual expenses incurred
to the extent possible during the previous month. Any amount remaining unpaid
after thirty days following receipt of the bill shall bear interest thereon from
the date of the bill at an annual rate of 2% above the interest rate on 30 day
commercial paper as listed on the last working day of that month in the Wall
Street Journal.
VI. TERMINATION AND MODIFICATION.
A. Modification of Services. The Company may modify its selection of
services at any time during the fiscal year by giving AGSC written notice sixty
(60) days in advance for the additional services it wishes to receive, and/or
the services it no longer wishes to receive, from AGSC.
B. Modification of Other Terms and Conditions. No other amendment, change
or modification of this Agreement shall be valid, unless made in writing and
signed by all parties hereto.
C. Termination of this Agreement. The Company may terminate this
Agreement with AGSC by providing sixty (60) days advance written notice of such
termination to AGSC. AGSC may terminate this Agreement as to the Company by
providing sixty (60) days advance written notice of such termination to the
Company.
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This Agreement is subject to termination or modification at any time to the
extent its performance may conflict with the provisions of the 1935 Act, or with
any rule, regulation or order of the Securities and Exchange Commission ("SEC")
adopted before or after the making of this Agreement. This Agreement shall be
subject to the approval of any state commission or other state regulatory body
whose approval is, by the laws of said state, a legal prerequisite to the
execution and delivery or the performance of this Agreement.
VII. NOTICE. Where written notice is required by this Agreement, said
notice shall be deemed given when mailed by United States registered or
certified mail, postage prepaid, return receipt requested, addressed as follows:
a. To the Company:
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b. To AGL Services Company:
817 West Peachtree St. N.W. 10th Floor
Atlanta, Ga. 30308
Attention: Paul R. Shlanta, President
Facsimile: (404) 584-3419
VIII. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Georgia, without regard to their
respective conflict of law provisions.
IX. ENTIRE AGREEMENT. This Agreement, together with its exhibits,
constitutes the entire understanding and agreement of the parties with respect
to its subject matter, and effective upon the execution of this Agreement by the
respective parties hereof and thereto, any and all prior agreements,
understandings or representations with respect to this subject matter are hereby
terminated and cancelled in their entirety and of no further force or effect.
X. WAIVER. No waiver by any party hereto of a breach of any provision of
this Agreement shall constitute a waiver of any preceding or succeeding breach
of the same or any other provision hereof.
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XI. ASSIGNMENT. This Agreement shall inure to the benefit of and shall
be binding upon the parties and their respective successors and assigns. No
assignment of this Agreement or any party's rights, interests or obligations
hereunder may be made without the other party's consent, which shall not be
unreasonably withheld, delayed or conditioned.
XII. SEVERABILITY. If any provision or provisions of this Agreement shall
be held to be invalid, illegal, or unenforceable, the validity, legality, and
enforceability of the remaining provisions shall in no way be affected or
impaired thereby.
XIII. EFFECTIVE DATE. This Agreement is effective as of January 1, 2001.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first above mentioned.
Attest: By Company:
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Attest: By AGL Services Company:
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EXHIBIT I. POLICIES AND PROCEDURES MANUAL
Cost Accumulation and Assignment, Allocation Methods, and Description of
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Services Offered by AGL Services Company
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This document sets forth the methodologies used to accumulate the costs of
services performed by AGL Services Company ("AGSC") and to assign or allocate
such costs to other subsidiaries and business units within the AGL Resources
Inc. ("AGLR") system. The subsidiaries and business units of AGLR are referred
to as the "AGLR System Companies".
Cost of Services Performed
--------------------------
AGSC maintains an accounting system that enables costs to be identified by Cost
Center, Account Number or Capital Project ("Account Codes"). The primary inputs
to the accounting system are payroll records for AGSC's employees, accounts
payable transactions and journal entries. Charges for labor are made at the
employees' effective hourly rate, including the cost of pensions, other employee
benefits and payroll taxes. To the extent practicable, costs of services are
directly charged to the appropriate AGLR System Company and the applicable
Account Codes. The full cost of providing services also includes certain
indirect costs, e.g., departmental overheads, administrative and general costs,
and taxes. Indirect costs are associated with the services performed in
proportion to the directly assigned or distributed costs of the services or
other relevant cost allocations.
Cost Assignment and Allocation
------------------------------
AGSC's costs will be directly charged, assigned, distributed or allocated to
AGLR System Companies in the manner described below:
1. Costs accumulated in Account Codes for services specifically performed for
a single AGLR System Company will be directly charged to such AGLR System
Company;
2. Costs accumulated in Account Codes for services specifically performed for
two or more AGLR System Companies will be assigned or distributed among and
charged to such AGLR System Companies using methods determined on a case-
by-case basis consistent with the nature of the work performed and based on
one of the distribution or allocation methods described below; and
3. Costs accumulated in Account Codes for services of a general nature which
are applicable to all AGLR System Companies or to a class or classes of
AGLR System Companies will be allocated among or charged to such AGLR
System Companies by application of one or more of the allocation methods
described below.
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Distribution and Allocation Methods
-----------------------------------
The following methods will be applied, as indicated in the Description of
Services section that follows, to distribute or allocate costs.
1. Number of End-Use Customers Ratio - A ratio based on the number of end-
use customers. This ratio will be determined annually based on the actual
number of end-use customers at the end of the previous fiscal year and
may be adjusted for any known and reasonably quantifiable events, or at
such time as may be required due to significant changes.
2. Total Assets Ratio - A ratio based on the total assets. This ratio will
be determined annually based on the actual total assets at the end of the
previous fiscal year and may be adjusted for any known and reasonably
quantifiable events, or at such time as may be required due to
significant changes.
3. Number of Employees Ratio - A ratio based on the number of employees
benefiting from the performance of a service. This ratio will be
determined annually based on actual counts of applicable employees at the
end of the previous fiscal year and may be adjusted for any known and
reasonably quantifiable events, or at such time as may be required due to
significant changes.
4. Number of Stores Issues Ratio - A ratio based on the actual withdrawals
from materials and supplies inventory. This ratio will be determined
annually based on actual withdrawals from materials and supplies
inventory at the end of the previous fiscal year and may be adjusted for
any known and reasonably quantifiable events, or at such time as may be
required due to significant changes.
5. Square Footage - This factor will be determined based on actual square
footage used by the applicable AGLR System Companies. This factor will be
determined annually based on square footage utilized at the end of the
previous fiscal year and may be adjusted for any known and reasonably
quantifiable events, or at such time as may be required due to
significant changes.
6. Rate Per Vehicle - This factor will be based on the actual number of
vehicles used by the applicable AGLR System Company. This factor will be
determined annually based on actual number of vehicles utilized at the
end of the previous fiscal year and may be adjusted for any known and
reasonably quantifiable events, or at such time as may be required due to
significant changes.
7. Operating Expense Ratio - A ratio based on total operating expense. This
ratio will be determined annually based on the actual total operating
expense at the end of the previous fiscal year and may be adjusted for
any known and reasonably quantifiable events, or at such time as may be
required due to significant changes.
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8. Operating Margin Ratio - A ratio based on operating margin defined as
revenue less cost of goods. This ratio will be determined annually based
on the operating margin at the end of the previous fiscal year and may be
adjusted for any known and reasonably quantifiable events, or at such
time as may be required due to significant changes.
9. Composite Ratio - This ratio is an average of the above four ratios of:
Number of Employees, Total Assets, Operating Expenses and Operating
Margin. This ratio will be determined annually based on the number of
employees, total assets, operating expenses and operating margin at the
end of the previous fiscal year and may be adjusted for any known and
reasonably quantifiable events, or at such time as may be required due to
significant changes.
10. Hours Worked Ratio - This ratio is based on the total hours an employee
works on behalf of an AGLR System Company as compared to total hours for
their department. This ratio will be determined monthly based on time
recorded on time sheets by AGSC employees.
11. Rate Per User - This rate is used by Information Systems and Technology
and is based on a cost per user or per computer. This rate will be
determined monthly based on the actual cost to maintain electronic data
processing and telecommunications equipment in the AGLR System Companies.
12. Rate Per Employee - This rate is used by Information Systems and
Technology and is based on a cost per hour to maintain electronic data
processing and telecommunications systems in the AGLR System Companies.
Description of Services
-----------------------
A description of each of the services performed by AGSC, which may be modified
from time to time, is presented below. As discussed above, where identifiable,
costs will be directly charged, assigned or distributed to AGLR System
Companies. For costs accumulated in Account Codes which are for services of a
general nature that cannot be directly charged, assigned or distributed, the
method or methods of allocation are also set forth. Substitution or changes may
be made in the methods of allocation hereinafter specified, as may be
appropriate and to the extent permitted under the SEC 60-day letter procedure,
and will be provided to state regulatory agencies and to each affected AGLR
System Company.
1. Rates and Regulatory.
AGSC assists the AGLR System Companies in the analysis of their rate
structures and in the formulation of rate policies and advises and assists
AGLR System Companies in proceedings before regulatory bodies involving the
rates and operations of AGLR System Companies and of other competitors where
such rates and
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operations directly or indirectly affect the AGLR System Companies. Costs will
be assigned to AGLR System Companies using the Hours Worked Ratio. Any
remaining costs will be distributed using the Number of End-Use Customers
Ratio.
2. Internal Auditing.
AGSC conducts periodic audits of administration and accounting processes.
Audits would include examinations of AGLR System Companies' service
agreements, accounting systems, source documents, allocation methods and
billings to assure proper authorization and accounting for services. Costs
will be assigned to AGLR System Companies using the Hours Worked Ratio. Any
remaining costs will be allocated using the Composite Ratio.
3. Strategic Planning.
AGSC advises and assists AGLR System Companies with the preparation of
strategic business plans and corporate strategies. Costs will be assigned to
AGLR System Companies using the Hours Worked Ratio. Any remaining costs will
be allocated using the Composite Ratio.
4. External Relations.
AGSC maintains relationships with government policy makers, conducts lobbying
activities and provides community relations support. Costs will be assigned to
AGLR System Companies using the Hours Worked Ratio. Any remaining costs will
be allocated using the Composite Ratio.
5. Gas Supply and Capacity Management.
AGSC assists Virginia Natural Gas, Inc. ("VNG") and Chattanooga Gas Company
("Chattanooga") in coordinating the management of their gas supply and assists
VNG, Chattanooga and Atlanta Gas Light Company ("AGLC") in coordinating gas
transmission and storage services to ensure the most efficient use of services
and to capture economies of scale as a larger purchaser in the market.
Individually, VNG, Chattanooga and AGLC may, however, remain as the contract
party under any agreement. Non-regulated marketing subsidiaries such as AGL
Energy Services, Inc. ("AGLE") may also use AGSC for certain transportation
and storage capacity management services. Costs will be assigned to AGLR
System Companies using the Hours Worked Ratio. Any remaining costs will be
distributed using the Number of End-Use Customers Ratio.
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6. Legal Services and Risk Management.
AGSC provides various legal services and general legal oversight. In addition,
AGSC provides insurance, claims, security, environmental and safety related
services. Costs will be assigned to AGLR System Companies using the Hours
Worked Ratio. Any remaining costs will be allocated using the Composite Ratio.
7. Marketing.
AGSC assists AGLR System Companies to develop marketing strategies for product
and brand name promotion. Individually, AGLR System Companies may maintain
independent marketing personnel to handle the day-to-day details of marketing
campaigns. Costs will be assigned to AGLR System Companies using the Hours
Worked Ratio. Any remaining costs will be distributed using the Number of End-
Use Customers Ratio.
8. Financial Services.
AGSC provides various services to AGLR System Companies including corporate
tax, treasury, corporate accounting and reporting, general ledger maintenance
and all accounting recordkeeping, processing certain accounts such as accounts
payable, cash management, and others as may be deemed necessary, hedging
policy and oversight, financial planning and rates (for VNG, Chattanooga and
AGLC and other AGLR System Companies that interact with regulators or
regulated companies). Each AGLR System Company may also maintain its own
corporate and accounting group and engage AGSC to provide advice and
assistance on accounting matters, including the development of accounting
practices, procedures and controls, the preparation and analysis of financial
reports and the filing of financial reports with regulatory bodies, on a
system-wide basis. Costs will be assigned to AGLR System Companies using the
Hours Worked Ratio. Any remaining costs will be allocated using the Composite
Ratio.
9. Information Systems and Technology.
AGSC provides the AGLR System Companies with electronic data processing and
telecommunication network services. Costs will be directly charged to AGL
System Companies primarily using a Rate per User for maintenance costs and a
Rate per Hour for development costs. Any remaining costs will be assigned
using the Hours Worked Ratio and allocated using the Composite Ratio.
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10. Executive.
AGSC utilizes the executive staff of AGLR in order to assist the AGLR System
Companies in formulating and executing general plans and policies, including
operations, issuances of securities, appointment of executive personnel,
budgets and financing plans, expansion of services, acquisitions and
dispositions of property, public relationships and other related matters.
Costs will be assigned to AGLR System Companies using the Hours Worked Ratio.
Any remaining costs will be allocated using the Composite Ratio.
11. Investor Relations.
AGSC maintains relationships with the financial community, provides
shareholder services, and performs corporate secretarial functions for the
benefit of AGLR System Companies. Costs will be assigned to AGLR System
Companies using the Hours Worked Ratio. Any remaining costs will be allocated
using the Composite Ratio.
12. Customer Services.
AGSC provides billing, mailing, remittance processing, call center and
customer communication services for customers. Costs will be assigned to AGLR
System Companies using the Hours Worked Ratio. Any remaining costs will be
distributed using the Number of End-Use Customers Ratio.
13. Employee Services.
AGSC assists AGLR System Companies in developing employee relations policies
and programs, and training personnel in a coordinated manner throughout the
AGLR System Companies. Each AGLR System Company may maintain a human resources
group to handle the individualized application of policies and programs. AGSC
also provides payroll services, management of the employee benefit plans,
employee communications and mail services. Benefit costs will be directly
charged and assigned using Number of Employees Ratio and Hours Worked Ratio,
respectively. Any remaining costs will be distributed using the Number of
Employees Ratio.
14. Engineering.
AGSC provides engineering services for the AGLR System Companies. These
services include infrastructure expansion and improvements, corrosion control,
right-of-way maintenance and acquisition, leak surveys, mapping, laboratory,
and environmental services. Costs will be assigned to AGLR System Companies
using the Hours Worked Ratio. Any remaining costs will be distributed using
the Number of End-Use Customers Ratio.
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15. Business Support.
i. Purchasing.
AGSC provides procurement services to AGLR System Companies. Costs will
be directly charged primarily using the Number of Stores Issues Ratio and
secondarily assigned using the Hours Worked Ratio. Any remaining costs
will be distributed using the Number of Stores Issues Ratio.
ii. Facilities Management.
AGSC provides facilities management services for offices owned by AGLR
System Companies. Costs will be directly charged primarily using the
Square Footage Factor and secondarily assigned using the Hours Worked
Ratio. Any remaining costs will be distributed using the Square Footage
Factor.
iii. Fleet.
AGSC provides fleet management services for vehicles owned or leased by
AGLR System Companies. Costs will be directly charged primarily using a
Rate Per Vehicle Ratio and secondarily assigned using the Hours Worked
Ratio. Any remaining costs will be distributed using the Number of
Vehicles.
16. Other.
AGSC provides other services, such as business development, as identified in
this document or requested by the AGLR System Companies. Costs will be
assigned to AGLR System Companies using the Hours Worked Ratio. Any remaining
costs will be allocated using the Composite Ratio.
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EXHIBIT II
AGREED UPON SERVICES TO BE RECEIVED FROM AGL SERVICES COMPANY
SERVICES YES NO
1. Rates and Regulatory __ __
2. Internal Auditing __ __
3. Strategic Planning __ __
4. External Relations __ __
5. Gas Supply and Capacity Management __ __
6. Legal Services and Risk Management __ __
7. Marketing __ __
8. Financial Services __ __
9. Information Systems and Technology __ __
10. Executive __ __
11. Investor Relations __ __
12. Customer Services __ __
13. Employee Services __ __
14. Engineering __ __
15. Business Support __ __
i. Purchasing __ __
ii. Facilities Management __ __
iii. Fleet __ __
16. Other __ __
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