Exhibit 10.1


    

      March
        2,
        2006

      


      John
        W.
        Somerhalder II

      [via
        hand
        delivery]

       

      


      Dear
        John:

      


      It
        is our
        pleasure to provide the details of the offer extended to you by our Board
        of
        Directors for the position of President and Chief Executive Officer of AGL
        Resources Inc. This letter outlines your compensation and benefits package
        and
        also explains the terms of this employment offer.

      


      Your
        Compensation and Benefits

      The
        compensation and benefits package you will receive in this position includes
        the
        following, subject to your continued employment with the Company:

      


      
        	
                Base
                  Salary

              	
                Your
                  monthly base salary will be $58,333.33 ($700,000 annually). Your
                  paycheck
                  will be directly deposited in the bank account of your
                  choice.

                 

              
	
                Annual
                  Incentives

              	
                Your
                  annual incentive target will be 75% of your earned base salary
                  and
                  administered under the terms of the Executive Performance Incentive
                  Program (EPIP), or successor plan, for the portion (75%) attributed
                  to
                  corporate performance and the Annual Incentive Plan, or successor
                  plan,
                  for the portion (25%) related to your individual performance. For
                  2006,
                  your annual incentive will be guaranteed at a total not less than
                  a full
                  year’s participation at target level performance - $700,000 x 75% =
                  $525,000 - provided that you remain employed by the Company through
                  December 31, 2006.

                 

              
	
                Long-Term
                  Incentives

              	
                Effective
                  with your start date, you will be granted (the “Start Date Equity
                  Grants”):

                 

                ·  200,000
                  non-qualified stock options (the “Start Date Options”) having a term of
                  ten years and a cliff vesting requirement of five years. The exercise
                  price per share of the Start Date Options will be the closing price
                  of the
                  Company’s stock on March 2, 2006.

                ·  40,000
                  shares of restricted stock (the “Start Date Restricted Stock”) also having
                  a cliff vesting requirement of five years and issued pursuant to
                  the
                  LTIP.

                 

                All
                  other terms and conditions of the Start Date Equity Grants will
                  be
                  substantially similar to the terms and conditions of equity grants
                  most
                  recently granted to the Company’s other senior executives pursuant to the
                  terms of the Company’s Long Term Incentive Plan (1999) (“LTIP”). Beginning
                  in 2007, you will be eligible to participate in the annual long
                  term
                  incentive program for executives at the level and forms of incentive
                  to be
                  determined by the Compensation and Management Development Committee
                  of the
                  Board of Directors when it regularly considers such matters for
                  other AGL
                  Resources executives.

                 

                Your
                  base salary, annual incentive target and long-term incentive target
                  (and
                  forms of long-term incentives) will be subject to review from time
                  to time
                  by the Compensation and Management Development Committee of the
                  Company’s
                  Board of Directors.

                 

              
	
                Sign-on
                  Bonus

              	
                As
                  soon as practicable following your start date, you will receive
                  a cash
                  payment of $150,000.

                 

              


      

       

      
        
          

        

      

       

      
        	 	 
	
                Change
                  in Control Agreement

              	
                You
                  will be covered by AGL Resources’ current form of Change in Control
                  Agreement for Tier 1 Officers providing certain payments and benefits
                  following a change in your employment status resulting from a change
                  in
                  control of AGL Resources Inc.

                 

              
	
                Company-Paid
                  Benefits

              	
                You
                  are eligible for coverage under the AGL Resources Benefits Program
                  on your
                  31st
                  day of employment. AGL Resources offers a number of Company-paid
                  benefits
                  to its employees which include:

                ·  Retirement
                  program which provides a lifetime annuity based on your career
                  average
                  earnings and length of service

                ·  $60,000
                  basic life insurance

                ·  $60,000
                  basic AD&D coverage

                ·  Business
                  Travel Insurance

                ·  Short
                  Term Disability paid at 70% of base salary

                ·  Long
                  Term Disability paid at 40% of base salary

                ·  40
                  hours of Wellness Leave for doctor and dentist appointments for
                  you or if
                  you are the caregiver of an immediate family member

                ·  Educational
                  Assistance / Tuition Reimbursement program

                ·  Employee
                  Assistance Program

                ·  8
                  paid holidays (6 for the remainder of 2006), plus 3 floating
                  holidays.

                 

                Your
                  participation in these benefits will be in accordance with the
                  terms of
                  the respective programs as in effect from time to time. Nothing
                  herein
                  will restrict the Company’s right to amend or terminate such programs in
                  accordance with their terms.

              
	
                Contributory
                  Benefits

              	
                You
                  will also be eligible to participate in these benefits which require
                  contributions from you for ongoing participation: 

                ·  Company
                  match of 65% on eligible income deferral contributions to the Retirement
                  Savings Plus (RSP) Plan (401(k)), subject to limits for highly
                  compensated
                  employees

                ·  Company
                  match of 65% on up to 8% of eligible income deferral contributions
                  to the
                  Nonqualified Savings Plan (NSP) and RSP. The NSP generally permits
                  deferrals of up to 50% of compensation and 100% of annual
                  bonus.

                ·  Coverage
                  for medical, dental, and group insurance 

                ·  Supplemental
                  insurance programs for additional life insurance, spousal and dependent
                  life insurance

                ·  Additional
                  AD&D for you and your family

                ·  A
                  buy-up program for additional LTD

                ·  Flexible
                  Spending Accounts for Health Care and Dependent Care Reimbursement
                  Accounts

                ·  15%
                  discount for Company stock purchased through the Employee Stock
                  Purchase
                  Program

                ·  Up
                  to 5 additional vacation days

                 

                Your
                  participation in these benefits will be in accordance with the
                  terms of
                  the respective programs as in effect from time to time. Nothing
                  herein
                  will restrict the Company’s right to amend or terminate such programs in
                  accordance with their terms.

              
	
                Vacation:

              	
                You
                  will be eligible for four (4) weeks of paid vacation in
                  2006.

              
	
                Relocation: 

              	
                You
                  will be eligible for AGL Resources’ Executive Relocation Program which
                  will provide for the purchase of your home and moving your family
                  and
                  household goods to Atlanta. This program also provides for necessary
                  visits for your spouse to travel to Atlanta for purposes of house-hunting
                  and selection and temporary living arrangements should you need
                  them.

              


      

       

      
         

        
          
          

          
            

          

        

         

        After
          you
          begin work at AGL Resources, you will receive an Employee Handbook which
          contains further details about the benefits that are available to you as
          well as
          our policies and procedures.

      

       

      
        Termination
          of Employment

      

      Except
        in
        the case of a termination of employment pursuant to which you are eligible
        for
        severance under the Change in Control Agreement for Tier I Officers as described
        above, should your employment be terminated by the Company without cause
        on or
        prior to December 31, 2007, you will be entitled, subject to your execution
        and
        non-revocation of an agreement containing (a) a release in the form generally
        used by the Company (which release will include a non-disparagement and
        cooperation with litigation provision) and (b) covenants not to compete and
        not
        to solicit employees of the Company for employment with durations of eighteen
        months and in the form generally used by the Company:

      


      	(1)  	
              to
                a termination allowance equal to 18 months’ base salary and 1.5 times
                annual bonus (the annual bonus amount for this purpose will be the
                higher
                of your 2006 target bonus amount or the amount of the actual bonus,
                if
                any, paid to you (or payable to you but deferred) in 2007 and attributable
                to 2006 performance (the “Annual Bonus Amount”)), calculated at the date
                of termination. The termination allowance will be paid as salary
                continuance over the 18 month period commencing as of your date of
                termination or, to the extent required in order to comply with Section
                409A of the Internal Revenue Code of 1986, as amended (“Section 409A”), on
                the first business day following the six month anniversary of your
                “separation from service” within the meaning of Section 409A;
                and

            


      


      	(2)  	
              during
                the 18 months following your termination of employment, subject to
                the
                terms of the applicable plan, continued participation in the Company’s
                health plans at the rates you paid as an active employee of the Company
                or, if higher, the rates imposed on similarly situated executives
                of the
                Company following your date of termination. Such health coverage
                would be
                deemed COBRA coverage and will be paid by the Company;
                and

            


      


      	(3)  	
              to
                vesting of (a) the Start Date Equity Grants as follows: (x) if termination
                occurs during calendar year 2006, one-fifth of the Start Date Options
                and
                one-fifth of the Start Date Restricted Stock will vest at the date
                of
                termination and the remainder will be forfeited and (y) if termination
                occurs during calendar year 2007, two-fifths of the Start Date Options
                and
                two-fifths of the Start Date Restricted Stock will vest at the date
                of
                termination and the remainder will be forfeited; and (b) all other
                long-term incentives to the extent provided in the plans and agreements
                evidencing their grant in accordance with their terms;
                and

            


      


      	(4)  	
              to
                a lump sum cash payment within ten days of the date of termination
                or, to
                the extent required in order to comply with Section 409A, on the
                first
                business day following the six month anniversary of your “separation from
                service” within the meaning of Section 409A, equal to a pro rata (to the
                date of termination) portion of the Annual Bonus Amount (the “Pro Rata
                Bonus”).

            


      


      Except
        as
        described above, no long-term incentive awards or other compensation and/or
        benefits will be paid during the salary continuation period. All payments
        will
        be subject to applicable laws and regulations and applicable withholding
        and, if
        you are eligible to receive the payments and benefits hereunder, you will
        not be
        entitled or eligible to receive any other salary, bonus or separation or
        termination pay from the Company or any of its affiliates.

      


      In
        the
        event that your employment is terminated by the Company for cause, you shall
        not
        be entitled to any severance or similar benefits (including any Pro Rata
        Bonus
        for the year in which the termination occurs) under this Agreement or otherwise
        and all unvested long-term incentive awards will be forfeited.

      


      In
        the
        event that your employment terminates by reason of your death or disability
        (within the meaning of the long-term disability plan applicable to you),
        your
        rights and benefits under the Company’s various compensation and benefit plans
        will be as set forth under such plans and the Company shall have no further
        obligations under this Agreement.

      



      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      Additional
        Retirement Benefit

      Subject
        to your having been employed by the Company through December 31, 2010, you
        will
        be eligible to receive a lump sum payment at the earlier of the time of your
        termination of employment or the time of your retirement in accordance with
        the
        terms of the Company’s pension plan (or a successor plan).  The amount of
        the payment will be equal to the “actuarial equivalent” of the additional
        benefit you would have been entitled to receive under the Company’s pension plan
        and excess benefit plan (or the successors to such plans) at normal retirement
        age (as defined in the pension plan) and in the form of a single life annuity,
        if for each year of your service with the Company (up to a maximum of five
        years), you had earned one additional year of service under such plans or
        the
        successors to such plans. For these purposes, actuarial equivalence will
        be
        based on the assumptions used by the Company for disclosure purposes, for
        the
        fiscal year immediately preceding the year in which the payment occurs. 
The timing of this payment will be subject to the regulations under Section
        409A. The foregoing benefit is in addition to any similar benefit to which
        you
        may be entitled under the Change in Control Agreement for Tier I Officers
        described above.

      


      Code
        of Conduct

      We
        are
        enclosing a copy of our Code of Conduct. Please take the time to read this
        important document.

      


      The
        Terms of This Employment Offer

      This
        letter provides the details of the offer of employment. It does not constitute
        an employment contract. It does not guarantee employment through any specific
        date. By accepting this offer, your employment with AGLR will be “at will” and
        may be terminated by either you or AGLR at any time without notice.


      


      Acceptance
        of This Offer

      If
        the
        terms of this employment offer are satisfactory to you, please sign the
        acceptance below and return this original letter to me. 

      


      Note
        that
        by accepting this offer, you:

      


      	·  	
              Certify
                that you have received and will comply with all of the provisions
                of the
                Commitment to Integrity and Ethics, our Code of Business Conduct.
                

            


       

      	·  	
              Represent
                and warrant to AGL Resources that you are not bound by any other
                agreement—written or oral—that would keep you from entering into
                employment with AGL Resources. If a breach of this provision by you
                results in costs or damage to AGL Resources, you agree to indemnify
                and
                hold AGL Resources harmless with respect to such costs or
                damage.

            


      


      If
        you
        would like further details about any of the information that is outlined
        above,
        please feel free to contact me.

      


      We’re
        looking forward to you leading the AGL Resources team!

      


      Very
        truly yours,

      


      /s/
        Arthur E. Johnson

      


      Arthur
        E.
        Johnson

      Chairman

      Compensation
        & Management Development Committee

      AGL
        Resources Inc. Board of Directors

      


      


      The
        above
        offer is ACCEPTED on the 2nd
        day of
        March, 2006.

      


      


      /s/
        John W. Somerhalder II 

      John
        W.
        Somerhalder II