Continuity Agreement - R. Eric Martinez


    
      

      

    

     

    EXHIBIT
      10.4

     


    
      
         

        


        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    TIER
      1

     

    CONTINUITY
      AGREEMENT

     

    This
      Continuity Agreement ("Agreement") is entered into as of the 1st day of January,
      2006, by and between AGL RESOURCES INC. (the "Company"), on behalf of itself
      and
      AGL Services Company (its wholly owned subsidiary and the Executive's employer),
      and R. Eric Martinez (the "Executive").

     

    WHEREAS,
      Executive is presently employed by the Company or one of its subsidiaries in
      a
      key management capacity; and

     

    WHEREAS,
      the Company's Board of Directors desires to assure, and has determined that
      it
      is appropriate and in the best interests of the Company and its shareholders
      to
      reinforce and assure, the continued attention and dedication of certain key
      executives of the Company and its subsidiaries to their duties of employment
      without personal distraction or conflict of interest as a result of the
      possibility or occurrence of a change in control of the Company;
      and

     

    WHEREAS,
      the Company's Board of Directors has authorized the Company to enter into
      continuity agreements with those key executives of the Company and its
      subsidiaries designated by the Compensation Committee of the Company's Board
      of
      Directors (the "Committee"); and

     

    WHEREAS,
      the Executive is a key executive of the Company or one of its subsidiaries
      and
      has been designated by the Committee as an executive to be offered such a
      continuity agreement with the Company.

     

    NOW
      THEREFORE, in consideration of the foregoing, and of the mutual covenants and
      agreements of the parties set forth in this Agreement, and of other good and
      valuable consideration including, but not limited to, Executive's continuing
      employment with the Company or one of its subsidiaries, the receipt and
      sufficiency of which are hereby acknowledged, the parties hereto, intending
      to
      be legally bound, agree as follows:

     

    SECTION
      1  

    
 

     

    Definitions

     

    1.1.  "Accrued
      Benefits"
      shall
      mean the Executive's earned but unpaid base salary, Earned and Unused Vacation
      Pay, unreimbursed business expenses and all other amounts earned by (but not
      paid to) or owed to Executive through and including the date of the Qualifying
      Termination.

     

    1.2.  "Announcement"
      shall
      mean a press release issued by the Company announcing the intention to engage
      in
      a transaction or event that is expected to result in a Change in Control of
      the
      Company as defined hereunder.

     

    1.3.  "Annual
      Bonus Amount"
      shall
      mean the product of (a) times (b), where (a) is a percentage equal to the
      greatest percentage of the Executive's annual rate of base salary upon which
      an
      annual incentive payment was paid to the Executive under the Company's annual
      incentive program during the three calendar years prior to the calendar year
      of
      the Qualifying Termination (by way of example, if the highest annual incentive
      payment, expressed as a percentage of Executive's base salary, paid to Executive
      during said three year period was 100% of Executive's base salary, then (a)
      would equal 100%), and (b) is the greater of the Executive's annual rate of
      base
      salary in effect upon the date of the Qualifying Termination, or the Executive's
      annual rate of base salary in effect as of the earliest of the date of the
      Announcement, the date of a Change in Control or the date of the Consummation
      of
      a Change in Control Transaction.

     

    1.4.  "Board"
      shall
      mean the Board of Directors of the Company.

     

    1.5.  "Cause"
      shall
      mean:

     

    (a)  willful
      fraud, dishonesty or malfeasance by the Executive in connection with the
      Executive's employment with the Company or one of its subsidiaries which results
      in material harm to the Company or one of its subsidiaries;

     

    (b)  the
      Executive's continued failure to substantially perform the duties and
      responsibilities of the Executive's position after written notice from the
      Company setting forth the particulars of such failure and a reasonable
      opportunity of not less than thirty (30) business days to cure such failure;
      or

     

    (c)  the
      Executive's plea of guilty or nolo contendere to, or conviction of, a
      felony.

     

    Cause
      shall be determined by two-thirds of the members of the Board (excluding for
      this purpose the Executive if a member of the Board) at a meeting at which
      the
      Executive may appear and present his or her position. No act or failure to
      act
      on the part of the Executive shall be considered "willful" unless it is done
      by
      the Executive in bad faith or without reasonable belief that the Executive's
      action or omission was in the best interests of the Company or one of its
      subsidiaries. Any act or failure to act that is based upon authority given
      pursuant to a resolution duly adopted by the Board, or the advice of counsel
      for
      the Company or one of its subsidiaries, shall be conclusively presumed to be
      done, or omitted to be done, by the Executive in good faith and in the best
      interests of the Company.

     

    1.6.  "Change
      in Control"
      shall
      be deemed to have occurred when:

     

    (a)  any
      "person" as defined in Section 3(a)(9) of the Securities Exchange Act of 1934,
      as amended (the "Exchange Act"), and as used in Section 13(d) and 14(d) thereof,
      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 determined pursuant to Rule 13d-3 under the Exchange Act), of
      securities of the Company representing 35% or more of the combined voting power
      of the Company's then outstanding securities (unless the event causing the
      35%
      threshold to be crossed is an acquisition of securities directly from the
      Company); or

     

    (b)  the
      shareholders of the Company shall approve (i) any merger, share exchange,
      reorganization, or other business combination of the Company, (ii) any sale
      of
      50% or more of the Company's assets, or (iii) any 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 own
      at
      least 80% of the voting power, directly or indirectly, of (A) the surviving
      corporation to any such merger, share exchange, reorganization, or other
      business combination, (B) the purchaser of the Company's assets, (C) both the
      surviving corporation and the purchaser in the event of any combination of
      Transactions, or (D) 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)  A
      majority of members of the Board is replaced during any 24-month period by
      directors whose appointment or election is not endorsed by a majority of members
      of the Board prior to the date of their appointment or election.

     

    1.7.  "Code"
      shall
      mean the Internal Revenue Code of 1986, as amended.

     

    1.8.  "Company"
      shall
      mean AGL Resources Inc., or a successor.

     

    1.9.  "Consummation
      of a Change in Control Transaction"
      shall
      mean the earlier of the date on which a person first becomes the beneficial
      owner of the requisite number of securities of the Company described in Section
      1.6(a), the date on which a transaction described in Section 1.6(b) is
      actually closed (not the date on which the shareholders' approval is obtained),
      or the date on which the Incumbent Directors cease to constitute a majority
      of
      the Board as described in Section 1.6(c).

     

    1.10.  "Coverage
      Period"
      shall
      mean the period beginning on the earlier of (a) the date of an Announcement,
      (b)
      the date of a Change in Control, or (c) the date of the Consummation of a Change
      in Control Transaction, and ending on the earlier of (i) the second anniversary
      of the date of the Consummation of a Change in Control Transaction, (ii) if
      applicable, the date the Company publicly announces it is abandoning the
      transaction or event that was the subject of an Announcement or (iii) if
      applicable, the date the Company publicly announces it is abandoning the
      transaction that constituted a Change in Control pursuant to Section
      1.6(b).

     

    1.11.  "Disability"
      shall
      mean, for purposes of this Agreement, the Executive's absence from the full-time
      performance of the Executive's duties pursuant to a determination made in
      accordance with the procedures established by the Company in connection with
      the
      Company's long-term disability benefits plan (as in effect as of the earliest
      of
      the date of the Announcement, the date of a Change in Control or the date of
      the
      Consummation of a Change in Control Transaction) that the Executive is disabled
      as a result of incapacity due to physical or mental illness.

     

    1.12.  "Earned
      and Unused Vacation"
      shall
      mean the difference between (a) Earned Vacation (as hereinafter defined) and
      (b) the actual number of hours of vacation taken by the Executive from
      January 1 of the calendar year in which the Qualifying Termination occurs
      through and including the date of the Qualifying Termination; provided that
      if
      the difference between (a) and (b) is a negative number, then Executive's Earned
      and Unused Vacation shall be deemed to be zero.

     

    1.13.  "Earned
      and Unused Vacation Pay"
      shall
      mean the product of (a) the Executive's annual rate of base salary in effect
      on
      the date of the Qualifying Termination divided by 2080, and (b) the hours of
      Executive's Earned and Unused Vacation.

     

    1.14.  "Earned
      Vacation"
      shall
      mean the product of (a) the aggregate number of hours of vacation which
      Executive is entitled to take during the calendar year in which the Qualifying
      Termination occurs, and (b) the quotient obtained by dividing (i) the number
      of
      calendar days from January 1 of the year in which the Qualifying Termination
      occurs through and including the date of the Qualifying Termination, by (ii)
      365.

     

    1.15.  "Effective
      Date"
      shall
      mean January 1, 2006.

     

    1.16.  "Good
      Reason"
      shall
      mean the occurrence of one or more of the following without the Executive's
      express written consent:

     

    (a)  any
      material diminution in the Executive's position, duties or responsibilities
      with
      the Company or one of its subsidiaries or any change that would constitute
      a
      material adverse alteration in the Executive's duties, responsibilities or
      other
      conditions of employment, from those in effect as of the earliest of the date
      of
      the Announcement, the date of a Change in Control or the date of the
      Consummation of a Change in Control Transaction; provided, that, for this
      purpose, it shall be a material diminution of Executive's position if the
      Executive does not report directly to the Company's Chief Executive
      Officer;

     

    (b)  any
      adverse change in the Executive's rate of annual base salary or annual incentive
      compensation opportunity (i.e., annual cash bonus opportunity under the Annual
      Incentive Plan or a successor plan) from the rate of annual base salary and
      annual incentive compensation opportunity in effect as of the earliest of the
      date of the Announcement, the date of a Change in Control or the date of the
      Consummation of a Change in Control Transaction;

     

    (c)  any
      failure by the Company either to continue in effect, or to provide in the
      aggregate, reasonably similar retirement and welfare benefit plans or coverages
      and any other similar benefits, policies or programs in which the Executive
      was
      a participant as of the earliest of the date of the Announcement, the date
      of a
      Change in Control or the date of the Consummation of a Change in Control
      Transaction (unless such failure or discontinuance of benefits is applicable
      to
      all senior executives of the Company and its subsidiaries); or

     

    (d)  any
      failure of the Company to obtain from any successor to the Company an agreement
      reasonably satisfactory to the Executive to assume this Agreement and to agree
      to perform the Company's obligations hereunder.

     

    1.17.  "Prorated
      Annual Bonus"
      shall
      mean a payment equal to the product of (a) times (b), where (a) is the Annual
      Bonus Amount and (b) is a fraction, the numerator of which is the number of
      days
      in the calendar year in which the Qualifying Termination occurs that the
      Executive was employed by the Company or one of its subsidiaries, and the
      denominator of which is 365.

     

    1.18.  "Qualifying
      Termination"
      shall
      mean the occurrence of any one or more of the following events:

     

    (a)  the
      termination of Executive's employment by the Company or its subsidiary, as
      applicable, without Cause; or

     

    (b)  Executive's
      termination of his or her employment with the Company or its subsidiary, as
      applicable, for Good Reason.

     

    A
      Qualifying Termination shall not include a termination of Executive's employment
      by reason of the Executive's death, the Executive's Disability, the Executive's
      termination of his or her employment without Good Reason, or the termination
      of
      the Executive's employment for Cause.

     

    SECTION
      2  

     

    


     

    Term
      of Agreement

     

    2.1.  Term.
      Subject
      to Section 2.2, this Agreement shall commence on the Effective Date and shall
      continue in effect through November 30, 2007. 

     

    2.2.  Modification
      of Term.
      In the
      event that an Announcement or a Change in Control occurs during the Term, the
      term of this Agreement shall automatically and irrevocably become a term ending
      on the later of the last day of the Term or the second anniversary of the date
      of Consummation of a Change in Control Transaction. This Agreement shall be
      assigned to, and shall be assumed by, any successor to the Company upon
      Consummation of a Change in Control Transaction. During the modified term
      pursuant to this section, this Agreement shall not be terminated or amended,
      altered or nullified by the Company or its successor without the Executive's
      written consent.

     

    2.3.  No
      Assurances.
      Executive acknowledges and agrees that, except as is otherwise expressly
      provided in Section 2.2, (i) there is no assurance that, upon the expiration
      of
      the Term of this Agreement, this Agreement will be renewed or extended, (ii)
      the
      Company has no obligation to renew or extend this Agreement, and (iii) Executive
      has no right to any such renewal or extension. Executive acknowledges and agrees
      further that in the event the Company, in its sole discretion, elects to offer
      Executive a renewal or extension of this Agreement or a new agreement following
      the expiration of the Term of this Agreement, except for an extension pursuant
      to Section 2.2, there can be no assurance as to the terms of any such renewal,
      extension or new agreement, the Company has made no representations to Executive
      with respect thereto and nothing contained in this Agreement shall be relevant,
      or of any precedential value whatsoever, in determining the terms of any
      renewal, extension or new agreement.

     

    SECTION
      3  

     

    


     

    Change
      in Control Benefits

     

    3.1.  Qualifying
      Termination Payments and Benefits.
      Subject
      to Section 4 hereof, the Company shall provide to the Executive the payments
      and
      benefits described below if the Executive has a Qualifying Termination during
      the Coverage Period.

     

    (a)  Accrued
      Benefits and Prorated Annual Bonus.
      As soon
      as practicable (but no later than fifteen (15) business days or, if applicable,
      the date specified in Section 4.1(b) hereof) following the Qualifying
      Termination, the Company shall pay to the Executive a lump sum cash payment
      equal to Executive's (i) Accrued Benefits, and (ii) Prorated Annual Bonus.
      Payments made under this subparagraph (a) shall constitute full satisfaction
      to
      the Executive for the accrued pay and benefits described in this
      subparagraph.

     

    (b)  Severance
      Benefit.
      As soon
      as practicable (but no later than fifteen (15) business days or, if applicable,
      the date specified in Section 4.1(b) hereof) following the Qualifying
      Termination, the Company shall pay to the Executive a lump sum cash payment
      equal to three (3) multiplied by the sum of (i) and (ii), where (i) equals
      the
      greater of the Executive's annual rate of base salary in effect upon the date
      of
      the Qualifying Termination, or the Executive's annual rate of base salary in
      effect as of the earliest of the date of the Announcement, the date of a Change
      in Control or the date of the Consummation of a Change in Control Transaction,
      and (ii) equals the Annual Bonus Amount.

     

    (c)  Supplemental
      Retirement Benefits.
      As soon
      as practicable (but no later than fifteen (15) business days or, if applicable,
      the date specified in Section 4.1(b) hereof) following the Qualifying
      Termination, the Company shall pay to the Executive a lump sum cash payment
      equal to

     

    (i)  the
      excess of (A) the present value (determined as of the date of the Qualifying
      Termination) of the lump-sum actuarial equivalent of the benefit the Executive
      would have received, giving the Executive credit for three (3) additional years
      of age and service (for all purposes, including, but not limited to, vesting
      and
      accrual of benefits) (such three (3) additional years, referred to hereinafter
      as the "Severance Period"), under (1) the AGL Resources Inc. Retirement Plan,
      as
      amended (the "Retirement Plan") and (2) the AGL Resources Inc. Excess Benefit
      Plan (the "Excess Plan"), in each case utilizing actuarial assumptions
      (including the discount rate used in the present value calculation) no less
      favorable to the Executive than those in effect under the Retirement Plan
      immediately prior to the earliest of the date of the Announcement, the date
      of a
      Change in Control or the date of the Consummation of a Change in Control
      Transaction, and assuming that, for purposes of determining benefits under
      the
      Retirement Plan and the Excess Plan, the benefits would have commenced at the
      end of the Severance Period (or, if later, the earliest date distribution of
      the
      Executive's benefits could commence under the plans) and the Executive's covered
      annual compensation ("Covered Compensation") during the Severance Period would
      have been equal to the Executive's annual rate of Covered Compensation at the
      time of the Qualifying Termination or, if greater, at the earliest of the date
      of the Announcement, the date of a Change in Control or the date of the
      Consummation of a Change in Control Transaction, over (B) the present value
      (determined as of the date of the Qualifying Termination) of the lump-sum
      actuarial equivalent of the Executive's actual benefits accrued as of the date
      of the Qualifying Termination, if any, under the Retirement Plan and the Excess
      Plan (assuming the benefits would have commenced at the end of the Severance
      Period (or, if later, the earliest date distribution of the Executive's benefits
      could commence under the plans), and utilizing the same actuarial assumptions
      as
      used above in subsection (A) of this Section 3.1(c)(i)); and

     

    (ii)  an
      amount
      equal to the sum of the additional contributions (other than before tax and
      after tax contributions by the Executive) that would have been made or credited
      (but, due to the Qualifying Termination, will not otherwise be made or credited)
      during the Severance Period (as defined in Section 3.1(c)(i) above) by the
      Company or a subsidiary to the Executive's account(s) under the AGL Resources
      Inc. Retirement Savings Plus Plan, as amended (the "Savings Plan"), and/or
      the
      AGL Resources Inc. Nonqualified Savings Plan, as amended, determined by assuming
      that,

     

    (A)  the
      Executive's employment had continued through the Severance Period;

     

    (B)  the
      Executive's compensation recognized by each such plan (with respect to the
      Savings Plan, subject to any Code limitations on covered compensation under
      qualified plans) would, during the Severance Period, have been equal to (1)
      the
      Executive's annual rate of base salary at the time of the Qualifying Termination
      or, if greater, at the earliest of the date of the Announcement, the date of
      a
      Change in Control or the date of the Consummation of a Change in Control
      Transaction, and (2) the Annual Bonus Amount; and

     

    (C)  with
      respect to matching and/or discretionary contributions, the Executive's amount
      of pre-tax deferral contributions and the Company's matching contribution,
      in
      each year during the Severance Period, would have been equal to the maximum
      amount allowed under the applicable plan at the time of the Qualifying
      Termination or, if greater, at the earliest of the date of the Announcement,
      the
      date of a Change in Control or the date of the Consummation of a Change in
      Control Transaction.

     

    (d)  Stock
      Options, Restricted Stock and Performance-Based Stock Awards.
      Subject
      to Section 4 hereof, in the event of a Qualifying Termination during the
      Coverage Period, any outstanding stock options, restricted stock, performance
      share, performance unit or other similar long-term incentive awards of the
      Executive shall become vested and/or exercisable in accordance with the terms
      of
      the plan and/or award agreements under which such grants and awards were made
      as
      if a change in control (as defined in each applicable plan or award agreement)
      had occurred immediately prior to, and on the same day as, the Qualifying
      Termination. Upon the occurrence of a change in control (as defined in each
      applicable plan or award agreement), all grants and awards shall be subject
      to
      the provisions of the plan and award agreements under which they were made.
      With
      regard to any outstanding stock options, the Executive shall have a period
      of
      one (1) year (subject to the expiration of the original term of the option)
      following the date of the Qualifying Termination in which to exercise such
      options; provided, that if the plan or option agreement under which such options
      were granted provides a longer period of exercise for which the Executive would
      be eligible, then such longer period shall be available to the
      Executive.

     

    (e)  Welfare
      Benefits.
      The
      Company shall provide the Executive and, as applicable, the Executive's eligible
      dependents with continued welfare benefits coverage, including, but not limited
      to, medical, dental, life insurance, and disability insurance coverage
      (provided, however, that long-term disability insurance coverage shall not
      be
      provided if, following the Executive's termination of employment, the Executive
      is not eligible to receive coverage under the Company's group long-term
      disability insurance policy because the Executive is no longer an employee),
      on
      the same basis (including premium) as active employees until the earlier of
      (i)
      thirty-six (36) months after the Executive's Qualifying Termination, or (ii)
      the
      commencement of comparable coverage with a subsequent employer; provided,
      however, that such continued coverage shall not count against any COBRA
      continuation coverage required by law.

     

    (f)  Outplacement
      Benefits.
      If so
      requested by the Executive, outplacement services shall be provided for up
      to
      one (1) year following the Qualifying Termination by a professional outplacement
      provider; provided, that, such outplacement services shall be provided at a
      cost
      to the Company of not more than 25% of the Executive's base salary in effect
      as
      of the date of the Announcement.

     

    SECTION
      4  

     

    


     

    Limitations
      on Payments and Excise Tax

     

    4.1.  Limitation
      on Payments and Benefits.
      

     

    (a)  If
      any of
      the payments and benefits provided under this Agreement and/or under any other
      agreement with, or plan of, the Company or one of its subsidiaries (the "Total
      Payment") (a) constitute a "parachute payment" as defined in Code Section 280G
      and exceed three (3) times the Executive's "base amount" as defined under Code
      Section 280G(b)(3) by less than ten percent (10%) of three (3) times the
      Executive's base amount, and (b) would, but for this Section 4.1, be subject
      to
      the excise tax imposed by Code Section 4999, then the Executive's payments
      and
      benefits under this Agreement shall be reduced and payable only as to the
      maximum amount which would result in no portion of such Total Payment being
      subject to excise tax under Code Section 4999. 

     

    (b)  If
      a
      reduction of the Total Payment is necessary under this section, the Executive
      shall be entitled to select which payments and/or benefits will be reduced
      and
      the manner and method of any such reduction. Within ten (10) days after the
      amount of any required reduction in payments and benefits is finally determined
      under Section 4.3, the Executive shall notify the Company in writing regarding
      which payments and benefits are to be reduced. If no notification is given
      by
      the Executive, the Company will determine which payments and/or benefits to
      reduce. If the Company is required to determine which payments and/or benefits
      to reduce, it shall make such determination as soon as practicable, but no
      later
      than the fifteenth (15th) day after the amount of any required reduction in
      payments and benefits is finally determined under Section 4.3. If, as a result
      of any reduction required by this section, amounts previously paid or benefits
      previously provided to the Executive exceed the amount to which the Executive
      is
      entitled, the Executive will promptly return the excess amount to the
      Company.

     

    4.2.  Gross
      Up Payments for Excise Tax.
      If the
      Total Payment constitutes a "parachute payment" as defined in Code Section
      280G
      and exceeds three (3) times the Executive's "base amount" as defined under
      Code
      Section 280G(b)(3) by at least ten percent (10%) of three (3) times the
      Executive's base amount, the Company shall provide to Executive, in cash, an
      additional payment in an amount to cover the full excise tax due under Code
      Section 4999 (including any interest and/or penalties), plus the Executive's
      city, state and federal income and employment taxes on this additional payment
      (the "Gross-Up Payment"). Any amount payable under this Section 4.2 shall be
      paid as soon as possible following the date of the Executive's Qualifying
      Termination, but in no event later than thirty (30) calendar days after such
      date.

     

    4.3.  Accounting
      Firm.
      All
      determinations required to be made under this Section 4, including whether
      reductions are necessary or whether a Gross-Up Payment is required, the amount
      of any such reduction or Gross-Up Payment and the assumptions to be used in
      determining such reduction or payment, shall be made by the accounting firm
      selected by the Company (the "Accounting Firm"). The Accounting Firm shall
      provide detailed supporting calculations both to the Company and to Executive
      within fifteen (15) business days of the receipt of a notice from the Company
      or
      Executive that there has been a Qualifying Termination or another event that
      could result in parachute payments under Code Section 280G, or such earlier
      time
      as is requested by the Company. The Company shall not select as the Accounting
      Firm for this purpose any accountant or auditor for the individual, entity,
      or
      group effecting the Change in Control transaction (other than the Company)
      or
      any accountant or auditor that is precluded from providing the services required
      by this Section 4. All fees and expenses of the Accounting Firm shall be borne
      solely by the Company.

     

    4.4.  Subsequent
      Recalculation.
      If
      Executive is entitled to a Gross-Up Payment under Section 4.2 and the Internal
      Revenue Service subsequently increases the excise tax owed by the Executive,
      the
      Company shall reimburse the Executive for the full amount necessary to make
      the
      Executive whole on an after-tax basis (less any amounts received by the
      Executive that the Executive would not have received had the computations
      initially been computed as subsequently adjusted), taking into consideration
      the
      amount of any underpaid excise tax, and any related interest and/or penalties
      owed to the Internal Revenue Service.

     

    SECTION
      5  

     

    


     

    Successors
      and Assignment

     

    5.1.  Successors.
      The
      Company shall require any successor (whether pursuant to a Change in Control
      transaction, direct or indirect, by purchase, merger, consolidation, or
      otherwise) to all or substantially all of the business and/or assets of the
      Company to expressly assume and agree to perform the Company's obligations
      under
      this Agreement, in the same manner and to the same extent that the Company
      would
      be required to perform them if no such succession had taken place. Failure
      of
      the Company to obtain such assumption and agreement prior to the effectiveness
      of any such succession shall constitute a material breach of the Agreement
      and
      shall entitle the Executive to terminate the Executive's employment with Good
      Reason immediately prior to or at any time after such succession. Any successor
      to the Company shall be deemed to be the Company for all purposes of this
      Agreement.

     

    5.2.  Assignment
      by Executive.
      This
      Agreement shall inure to the benefit of and be enforceable by the Executive's
      executor and/or administrators, heirs, devisees, and legatees. If the Executive
      should die while any amount would be payable to Executive hereunder had the
      Executive continued to live, all such amounts, unless otherwise provided herein,
      shall be paid in accordance with the terms of this Agreement to the Executive's
      estate. Executive's rights hereunder shall not otherwise be
      assignable.

     

    SECTION
      6  

     

    


     

    Confidentiality;
      Non-Disparagement; Non-Solicitation; Trade Secrets

     

    Without
      the prior written consent of the Company, Executive agrees hereby not to
      disclose or use, directly or indirectly (except as may be required for the
      performance of duties assigned by the Company or one of its subsidiaries or
      as
      may be required by a court of competent jurisdiction), any trade secret or
      other
      confidential information pertaining to the conduct of the Company's business,
      unless and until such trade secret or confidential information is in the public
      domain. The Company's business, as that term is used herein, includes, but
      is
      not limited to, the Company's and any of its subsidiaries' records, processes,
      methods, data, reports, information, documents, equipment, training manuals,
      customer lists and business secrets. Executive further agrees that, during
      the
      twenty-four (24) month period following a Qualifying Termination, Executive
      shall not initiate contact with employees of the Company or any of its
      subsidiaries for employment outside the Company or one of its subsidiaries,
      including those employees who were employed by the Company or one of its
      subsidiaries up to and including the date of the Qualifying Termination;
      provided, however, that nothing contained herein shall prevent Executive from
      responding to contacts initiated by such employees. Except as may be compelled
      by a court of competent jurisdiction or as may otherwise be required by law,
      Executive shall take no action (including without limitation the making of
      any
      oral or written statement) which damages the reputation of the Company or any
      of
      its subsidiaries.

     

    SECTION
      7  

     

    


     

    Miscellaneous

     

    7.1.  Contractual
      Rights to Benefits.
      Except
      as expressly stated herein, nothing herein contained shall require or be deemed
      to require the Company to segregate, earmark, or otherwise set aside any funds
      or other assets, in trust or otherwise, to provide for any payments to be made
      or required hereunder; provided, however, that the Company may segregate,
      earmark, or otherwise set aside any funds or other assets, in trust or otherwise
      as it deems appropriate.

     

    7.2.  Obligation
      Absolute; No Effect on Other Rights.
      Except
      for amounts that may be owed to the Company pursuant to Section 7.3 hereof,
      the
      obligations of the Company to make the payments and provide the benefits to
      the
      Executive and the Executive's dependents, and to make the arrangements provided
      for herein shall be absolute and unconditional and shall not be reduced by
      any
      circumstances, including, without limitation, any set-off, counterclaim,
      recoupment, defense or other right which the Company may have against the
      Executive or a third party at any time, nor shall the amount of any payment
      or
      benefit hereunder (except as provided for in Section 3.1(e)(ii) hereof) be
      reduced by any compensation earned by Executive as a result of employment by
      another employer. Except as provided in Section 3.1(a) with respect to Accrued
      Benefits and the Prorated Annual Bonus, and except as otherwise provided in
      Section 7.8, the provisions of this Agreement, and any payment provided for
      herein, shall not supercede or in any way limit the rights, benefits, duties
      or
      obligations which the Executive may have now or in the future under any benefit,
      incentive or other plan or arrangement of the Company or a subsidiary or any
      other agreement with the Company or a subsidiary.

     

    7.3.  Legal
      Fees and Expenses.
      In
      addition to all other amounts payable to the Executive under this Agreement,
      the
      Company shall pay the Executive's legal fees and expenses (including, without
      limitation, any and all court costs and attorneys' fees and expenses), as
      incurred by the Executive in connection with or as a result of any claim, action
      or proceeding brought by the Company or the Executive with respect to or arising
      out of this Agreement or any provision hereof; provided, however, in the case
      of
      an action brought by the Executive, if it is determined by an arbitrator or
      by a
      court of competent jurisdiction that such action was frivolous or without merit,
      any remaining unpaid legal fees or expenses shall not be paid and the Executive
      shall repay to the Company all amounts previously paid by the Company under
      this
      Section 7.3.

     

    7.4.  Dispute
      Resolution.
      Notice
      of any dispute or controversy arising under this Agreement shall be provided
      in
      writing to the other party. If such dispute is not resolved by mutual agreement
      of the parties within 60 calendar days of the provision of such notice,
      Executive shall have the right and option to elect (in lieu of litigation)
      to
      have any such dispute or controversy settled by binding arbitration. Such
      arbitration shall be conducted before a panel of three (3) arbitrators sitting
      in a location selected by Executive in the metropolitan area nearest to, and
      in
      the same county as, the Executive's place of residence, in accordance with
      the
      rules of the American Arbitration Association then in effect. Executive's
      election to arbitrate, as herein provided, and the decision of the arbitrators
      in that proceeding, shall be binding on the Company and Executive. The Company
      may elect to have a dispute or controversy settled by binding arbitration only
      if such dispute or controversy arises under Section 6 of this
      Agreement.

     

    7.5.  Notices.
      Any
      notice required to be delivered to the Company or the Committee by Executive
      hereunder shall be properly delivered to the Company when personally delivered
      to, or received through the U.S. mail, postage prepaid, by:

     

    AGL
      Resources Inc.

    Attn:
      General Counsel

    10
      Peachtree Place, 19th Floor

    Atlanta,
      GA 30309

     

    Any
      notice required to be delivered to Executive by the Company or the Committee
      hereunder shall be properly delivered to Executive when personally delivered
      to,
      or actually received through the U.S. mail, postage prepaid, by,
      Executive.

     

    7.6.  Amendment.
      Except
      as otherwise provided in Sections 2.2 and 2.3 hereof, no provision of this
      Agreement may be amended, altered, modified, waived or discharged unless such
      amendment, alteration, modification, waiver or discharge is agreed to in a
      writing signed by both the Executive and such officer of the Company as is
      specifically designated by the Committee or the Board. No waiver by either
      party, at any time, of any breach by the other party of, or of compliance by
      the
      other party with, any condition or provision of this Agreement to be performed
      or complied with by such other party shall be deemed a waiver of any similar
      or
      dissimilar provision or condition of this Agreement or any other breach or
      failure to comply with the same condition or provision at any prior or
      subsequent time.

     

    7.7.  Employment
      Status.
      Nothing
      herein contained shall be deemed to create an employment agreement between
      the
      Company and Executive providing for the employment of Executive by the Company
      for any fixed period of time. Subject to the terms of any other agreement
      between the Company or a subsidiary and the Executive, if any, Executive's
      employment with the Company or a subsidiary is terminable at will by the Company
      or a subsidiary or Executive and each shall have the right to terminate
      Executive's employment with the Company or a subsidiary at any time, with or
      without Cause and with or without Good Reason, subject to the Company's
      obligation to provide any payments or benefits required hereunder.

     

    7.8.  Entire
      Agreement.
      Except
      as expressly provided herein, no agreements or representations, oral or
      otherwise, express or implied, with respect to the subject matter hereof have
      been made by either party. This Agreement represents the entire agreement
      between the parties with respect to the subject matter hereof, and supersedes
      all prior discussions, negotiations, and agreements concerning the subject
      matter hereof, including, but not limited to, any prior severance agreement
      made
      between Executive and the Company or any of its subsidiaries; provided, however,
      that nothing contained herein shall prevent the Executive from receiving any
      severance benefits to which he or she is entitled under the terms of a Company
      or subsidiary provided severance plan if the Executive's termination of
      employment does not qualify as a Qualifying Termination within the Coverage
      Period; provided, further, that nothing contained herein shall prevent the
      Executive from receiving benefits to which he or she may be entitled under
      any
      employee or retiree benefit or incentive plan maintained or contributed to
      by
      the Company or one of its subsidiaries, including, without limitation, the
      AGL
      Resources Inc. Executive Post Employment Medical Benefit Plan or the AGL
      Resources Inc. retiree medical plan.

     

    7.9.  Tax
      Withholding.
      The
      Company shall withhold from any amounts payable under this Agreement all
      federal, state, city, payroll or other taxes legally required to be
      withheld.

     

    7.10.  Severability.
      In the
      event any provision of the Agreement shall be held illegal or invalid for any
      reason, the illegality or invalidity shall not affect the remaining parts of
      the
      Agreement, and the Agreement shall be construed and enforced as if the illegal
      or invalid provision had not been included.

     

    7.11.  Applicable
      Law.
      To the
      extent not preempted by the laws of the United States, the law of the State
      of
      Georgia shall be the controlling law in all matters relating to this
      Agreement.

     

    7.12.  Counterparts.
      This
      Agreement may be executed in two or more counterparts, each of which shall
      be an
      original and all of which shall be deemed to constitute one and the same
      instrument.

     

    IN
      WITNESS WHEREOF, the Company and Executive have executed this Agreement, to
      be
      effective as of the day and year first written above.

     

    COMPANY:

     

    AGL
      RESOURCES INC.

     

    By: /s/
      Paul R. Shlanta    

     

    Title: Executive
      Vice President, General Counsel 

     

    and
      Chief Ethics and Compliance Officer 

     

    EXECUTIVE:

     

    /s/
      R.
      Eric Martinez    

    Signature

     

    


     

    [THIS
      DOCUMENT HAS BEEN EXECUTED IN DUPLICATE.]