Document:

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                                                                    EXHIBIT 10.2

                              AGL RESOURCES INC.

                             OFFICER INCENTIVE PLAN

                                AGL RESOURCES INC.
                            OFFICER INCENTIVE PLAN

                                   Section 1

                                PLAN INFORMATION

     1.1  Purpose.  AGL Resources Inc. (the "Company") has established the AGL
          -------
Resources Inc. Officer Incentive Plan (the "OIP") to further the growth and
development of the Company.  The OIP provides the Company and its Related
Companies a plan under which to offer a proprietary interest in the Company's
Common Stock as a material inducement to certain officer level individuals to
enter employment with the Company and its Related Companies.

     1.2  Awards Available Under the OIP.  The OIP permits Awards of
          ------------------------------
Nonqualified Stock Options ("NQSOs") and Restricted Stock .  NQSOs are options
that do not qualify as incentive stock options under Code (S)422 and are subject
to taxation under Code (S)83.  Awards of Restricted Stock are also subject to
taxation under Code (S)83.

     1.3  Effective Date and Term of the OIP.   The Board of Directors of the
          ----------------------------------
Company adopted the OIP on March 20, 2001.  The OIP is effective as of April 1,
2001 (the "Effective Date").  Unless terminated by the Company, the OIP will
remain in effect until the tenth anniversary of the date the Board adopted the
OIP.   If the OIP is terminated earlier, then it will remain in effect as long
as any Awards are outstanding.

     1.4  Shareholder Approval and Code Section 162(m).  The OIP is intended as
          --------------------------------------------
a plan under which grants and awards may be made to persons not previously
employed by the Company and its Related Companies as an inducement essential to
such persons entering into employment with the Company and/or its Related
Companies.  As such, the Company is not required to obtain shareholder approval
of the OIP under the rules of the New York Stock Exchange.   If the Company does
not obtain shareholder approval of the OIP, any grant or award made under the
OIP will not be eligible for the performance-based exemptions under Code Section
162(m)(4)(C).

     1.5  Operation, Administration and Definitions.  The operation and
          -----------------------------------------
administration of the OIP is subject to the provisions of this plan document.
Capitalized terms used in the OIP are defined in Section 2 below or may be
defined within the OIP.

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                                   Section 2

                                PLAN DEFINITIONS

     For purposes of the OIP, 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.
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     2.3  "Agreement" means a 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 OIP, including, without limitation, the grant of Stock Options and the award
of Restricted Stock.

     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
<PAGE>

     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.
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     2.10 "Effective Date" means April 1, 2001.
           --------------

     2.11 "Eligible Employee" means any individual hired at an officer level of
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the Company  or a Related Company whose offer of employment included a promise
of a grant or award of stock options or restricted stock as a signing incentive
and who is actively employed at the time Awards are made.

     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 "OIP" means this AGL Resources Inc. Officer Incentive Plan.
           ---

     2.15 "Nonqualified Stock Option" or "NQSO" means an option which is not an
           -------------------------      ----
incentive stock option within the meaning of Code (S)422(b).

     2.16 "Optionee" means an Eligible Employee who is granted a Stock Option.
           --------

     2.17 "Participant" means an Optionee or a Recipient.
           -----------

     2.18 "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).

     2.19 "Recipient" means an Eligible Employee who is awarded Restricted
           ---------
Stock.

     2.20 "Related Company" means any member within the Company's controlled
           ---------------
group of corporations, as that term is defined in Code (S)1563(a).

     2.21 "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 OIP.
<PAGE>

     2.22 "Reporting Person" means an Eligible Employee who is subject to the
           ----------------
reporting requirements of Section 16 of the 1934 Act.

     2.23 "Restricted Stock" means an Award of Common Stock subject to such
           ----------------
conditions, restrictions and contingencies as the Committee determines.

     2.24 "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.

     2.25 "Stock Option" means an NQSO or Reload Option, as applicable, granted
           ------------
to an Eligible Employee under the OIP.

     2.26 "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 OIP.

          (a) The Committee may make one or more Awards under the OIP to an
     Eligible Employee, who will become a Participant in the OIP.   In addition,
     the Committee may make one or more Awards 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 to be rendered by the Eligible Employee, the
     Eligible Employee's 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 OIP, the Committee will decide
     whether and to what extent Awards under the OIP 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
<PAGE>

     definition, 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 OIP, establish and rescind any
     rules and regulations relating to the OIP, decide the terms and provisions
     of any Agreements made under the OIP, and determine how to administer the
     OIP.  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 OIP 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.

     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 OIP 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.

                                   Section 4

                           STOCK SUBJECT TO THE PLAN

     4.1  Stock Subject to Awards.
          -----------------------

     Stock subject to Awards and other provisions of the OIP will consist of
shares of Common Stock purchased by the Company in the open market.
<PAGE>

     4.2  Shares of Common Stock Subject to Awards.
          ----------------------------------------

          (a) Maximum Number of Shares.   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 OIP will be 600,000 shares of Common
     Stock.

          (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 OIP.

                                   Section 5

                                 STOCK OPTIONS

     5.1  Stock Option Agreement.  When the Committee grants a Stock Option
          ----------------------
under the OIP, 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;

          (d) the date as of which the Committee granted the Stock Option;

          (e) the requirements that must be met for the Stock Option to first
     become exercisable;

          (f) 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

          (g) the expiration date of the Stock Option.

     5.2  Maximum Award Per Year.  Subject to adjustment in accordance with
          ----------------------
Section 9 of the OIP, no more than 500,000 shares of Common Stock may be made
subject to Stock Options granted during a calendar year to any one Optionee.

     5.3  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.
<PAGE>

          (b) Notwithstanding any other provision of the OIP 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.

     5.4  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 OIP.

          (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

              (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.

     5.5  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 OIP begins on the date of grant
     and ends ten years after the date of grant.

          (b) Accelerated Expiration Date.  Unless the Committee specifies
              ---------------------------
     otherwise in the Stock Option Agreement, a Stock Option granted under the
     OIP 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;
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              (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);
<PAGE>

              (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; 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.

     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.

     5.6  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.

     5.7  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.

     5.8  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
<PAGE>

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 such Reload Option, and (ii) the Reload Option will become fully
exercisable six months after its date of grant.

     5.9  Transferability.  Unless the Committee specifies otherwise in the
          ---------------
Stock Option Agreement, an Optionee may transfer Stock Options under the OIP
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.

     5.10 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 6

                               RESTRICTED STOCK

     6.1  Restricted Stock Agreement.  When the Committee awards Restricted
          --------------------------
Stock under the OIP, 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.

     6.2  Maximum Award Per Year.  Subject to adjustment in accordance with
          ----------------------
Section 9 of the OIP, no more than 50,000 shares of Restricted Stock may be
awarded during a calendar year to any one Eligible Employee.

     6.3  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 OIP, whether
<PAGE>

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 OIP.

     6.4  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.

     6.5  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.

     6.6  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 OIP while such shares are still subject to restriction.

     6.7  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 7

                                 PLAN OPERATION

     7.1  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:

              (i)    the Committee will take action to adjust the number and
                     kind of shares of Common Stock that are issuable under the
                     OIP;

              (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
<PAGE>

              (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 OIP 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.
     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 OIP, 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 OIP
                     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 OIP
                     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 OIP
                     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 hereunder will become
                     immediately fully vested and nonforfeitable.

          (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 OIP.  The grant of Awards under the OIP 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 OIP will be conclusive.
<PAGE>

     7.2  Compliance with Other Laws and Regulations.  Distribution of shares of
          ------------------------------------------
Common Stock under the OIP will be subject to the following:

          (a) Notwithstanding any other provision of the OIP, the Company will
     not be required to issue any shares of Common Stock under the OIP 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 OIP and all
     transactions under the OIP comply with all applicable conditions of Rule
     16b-3 under the 1934 Act.  If any provision of the OIP, 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 OIP 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.

     7.3  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 OIP.  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.

     7.4  Limitation of Implied Rights.  The OIP is not a contract of
          ----------------------------
employment.  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 OIP, unless such right or claim has specifically accrued under the terms of
the OIP.

     7.5  Conditions of Participation in the OIP.  When the Committee makes an
          --------------------------------------
Award, it 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 OIP, as the Committee may, in its sole discretion, prescribe.
If there is a conflict between any provision of an Agreement and the OIP, the
OIP will control.

     7.6  Evidence.  Anyone required to give evidence under the OIP 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.

     7.7  Amendment and Termination of the OIP and Agreements.  The Board may
          ---------------------------------------------------
amend or terminate the OIP at any time.  No such amendment or termination will
adversely affect, in
<PAGE>

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 OIP if the amended
Agreement is signed by the Company and the applicable Participant.

     7.8  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.

     7.9  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 OIP are for convenience of
reference.  Headings are not a part of the OIP and will not be considered in the
construction of the OIP.

     7.10 Legal References.  Any reference in this OIP 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.

     7.11 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.

     7.12 Governing Law.  The OIP is governed by and will be construed in
          -------------
accordance with the laws of the State of Georgia.

                ADOPTED BY BOARD OF DIRECTORS ON MARCH 20, 2001

           THIS PLAN HAS NOT BEEN SUBMITTED FOR SHAREHOLDER APPROVAL.<PAGE>

                                                                    EXHIBIT 10.3

ANNUAL TEAM PERFORMANCE INCENTIVE (ATPI) PLAN -- Fiscal Year 2001
--------------------------------------------------------------------------------

TOTAL REWARDS

                                   [GRAPHIC]

                 Annual Team Performance Incentive (ATPI) Plan
                               Fiscal Year 2001
                     October 1, 2000 -- September 30, 2001

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<PAGE>

ANNUAL TEAM PERFORMANCE INCENTIVE (ATPI) PLAN -- Fiscal Year 2001      [GRAPHIC]
-----------------------------------------------------------------------

PURPOSE
To achieve corporate financial goals that add shareholder value as well as
increase and improve corporate, and/or business unit operating efficiencies, and
customer service. If established corporate and individual performance objectives
(IPOs) are met, this plan will provide participants with the opportunity to earn
incentive compensation. Payments under this plan are entirely at the discretion
of the CEO based on the overall financial results of the fiscal year. Awards
under this plan should not be viewed as an entitlement or guarantee of
employment. The corporate performance goal must be met in order for any payment
to be made, irrespective of the level of individual performance objective
achievement.

ATPI PLAN YEAR
The Plan year is the Company's fiscal year, which is October 1, 2000 to
September 30, 2001.

ELIGIBILITY
1.   Must be a full-time employee of AGL Resources Inc. (AGLR) or its
     subsidiaries (AGL Services Company, Atlanta Gas Light Company, Chattanooga
     Gas Company, and Virginia Natural Gas, Inc.) (collectively, the "Company")
2.   Must be employed prior to August 1 of the ATPI plan year
3.   Employee must be employed by the Company when checks are issued
4.   Employee must sign his or her Individual Performance Objectives (IPOs)
5.   Seasonal, part-time, co-op, and contract employees are not eligible to
     participate

TIER I PARTICIPANTS
All exempt employees

TIER II PARTICIPANTS
Non-exempt bargaining unit and non-exempt non-bargaining unit employees

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ANNUAL TEAM PERFORMANCE INCENTIVE (ATPI) PLAN -- Fiscal Year 2001      [GRAPHIC]
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TARGET AWARDS
While all positions in the Company are critical to the Company's success, some
positions have the opportunity to have a greater impact on the success of the
Company than others. For example, some positions can have tremendous influence
over the expenditure of dollars or generation of revenues. Other positions
contribute to the success of the Company by performing their daily
responsibilities as efficiently as possible and controlling costs. Therefore,
target awards are based on level of responsibility.

--------------------------------------------------------------------------------
       Position                                          Target Award
                                                        (% of Base Pay)
--------------------------------------------------------------------------------
Tier I Participants
     E10 and above                                   Individually determined
     E9                                                        18%
     E8                                                        15%
     E7                                                        12%
     E6                                                        10%
     E1-E5                                                      6%
--------------------------------------------------------------------------------
Tier II Participants
     Non-exempt non-bargaining unit                             4%
     and non-exempt bargaining unit                             4%

--------------------------------------------------------------------------------

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ANNUAL TEAM PERFORMANCE INCENTIVE (ATPI) PLAN -- Fiscal Year 2001      [GRAPHIC]
-----------------------------------------------------------------------

AWARD PERFORMANCE COMPONENTS
The amount of awards, if any, is contingent on achieving certain performance
measures, which measures also serve as components of individual awards.

DEFINITION OF COMPONENTS
Corporate Performance Goal -- The President and CEO will set the Corporate
Performance Goal, which is a target level of corporate earnings for Fiscal Year
2001. The Corporate Performance Goal must be met in order for any payment to be
made. In other words, no payments will be made under this plan unless the
Company meets the earnings target set by the President and CEO. The Corporate
Performance Goal is a component of all awards.

Individual Performance Objectives (IPOs) -- Participants have the opportunity to
contribute to the Company's success through cost control, improving
efficiencies, etc. Therefore, employees will be measured on how their
performance contributed to or added value to the financial bottom line. The
purpose of IPOs is to encourage innovation and inspire the motivation to stretch
beyond business as usual. IPO achievement is a component of awards for Tier I
participants.

WEIGHT OF COMPONENTS OF AWARDS BY POSITION AND TIER

TIER I
E10 and above -- For these participants, the extent to which the Corporate
Performance Goal Component and the IPO Component make up any award shall be
determined on an individual basis for each participant. The participants will
receive an individual package describing the weight each component shall have in
making up any award.

E1-E9 -- For these participants, the Corporate Performance Goal Component shall
make up 50 percent of any award and the IPO Component shall make up 50 percent
of any award.

TIER II
Non-exempt non-bargaining unit and non-exempt bargaining unit -- For these
participants, the Corporate Performance Goal Component shall make up 100 percent
of any award.

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ANNUAL TEAM PERFORMANCE INCENTIVE (ATPI) PLAN -- Fiscal Year 2001      [GRAPHIC]
-----------------------------------------------------------------------

COMPONENT MULTIPLIER BASED ON LEVEL OF ACHIEVEMENT

Corporate Performance Goal Component -- The Company's level of achievement can
affect the percentage at which this component is paid. Based on the level at
which the Company meets or exceeds the Corporate Performance Goal, this
component will be multiplied by 100% to 150%.

IPO Component -- Each individual's level of achievement can affect the
percentage at which this component is paid. Based on the employee's performance
during the fiscal year and contribution to the Company's meeting or exceeding
its performance objectives, this component will be multiplied by 0% to 150%
depending on the employee's performance rating and according to the following
schedule:

     .    Performance Leader -- 126% to 150% of the IPO Component
     .    Fully Satisfactory -- 86% to 125% of the IPO Component
     .    Needs Development -- 0% to 85% of the IPO Component
     .    Unsatisfactory -- 0% of the IPO Component

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<PAGE>

ANNUAL TEAM PERFORMANCE INCENTIVE (ATPI) PLAN -- Fiscal Year 2001      [GRAPHIC]
-----------------------------------------------------------------------

AWARD CALCULATION
The actual award for each component is calculated and totaled using the
following formula:

Corporate Performance Goal Component
    Base Pay X Target Award X Component Weight X Component Multiplier =
    Component Total
Plus
IPO Component
    Base Pay X Target Award X Component Weight X Component Multiplier =
    Component Total

--------------------------------------------------------------------------------

                                    EXAMPLE 1

Tier I (E1 -- E5) employee with $30,000 base pay; Corporate Performance Goal
met;
100% Corporate Performance Goal multiplier; Fully Satisfactory performance
rating on
IPOs; 125% multiplier for IPO performance.

   Corporate Performance Goal Component:  $30,000 X 6% X 50% X 100% = $  900.00
   IPO Component:                         $30,000 X 6% X 50% X 125% = $1,125.00

   Total Award:                                                       $2,025.00

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

                                    EXAMPLE 2

Tier I or Tier II employee. Corporate Performance Goal is not met; Fully
Satisfactory performance rating on IPOs; 100% multiplier for IPO performance, if
applicable.

   No calculation is necessary. Meeting Corporate Performance Goal is a
   condition to any payment under this plan.

   Total Award:                                                       $0

--------------------------------------------------------------------------------

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ANNUAL TEAM PERFORMANCE INCENTIVE (ATPI) PLAN -- Fiscal Year 2001      [GRAPHIC]
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TIMING OF AWARDS
The ATPI Plan's performance year will coincide with the Company's fiscal year --
October 1 through September 30.

Payment of awards will occur, if at all, as soon as administratively practical
following the Board of Directors' meeting in the first quarter during which the
previous year's financial results are reviewed.

PRORATED AWARDS / CHANGE IN STATUS DURING YEAR
New Hire -- Must be employed prior to August 1 of the plan year to be eligible
to participate. Awards for employees who are hired after the end of the second
quarter of fiscal year 2001 (March 31) will be prorated based on the number the
months in the fiscal year that he or she was an employee.

Transfer or Promotion -- Awards for an employee promoted during the plan year to
a qualifying or higher qualifying position August 1 or after will be prorated
based on the employee's grade level and base salary before and after the
transfer or promotion.

Resignation or Discharge -- An employee who resigns or is discharged on or prior
to the date when any awards are paid (i.e., the date checks are issued) will not
be eligible for payment of an award, even if his or her severance, if any,
extends past that date.

Leaves of Absence -- Awards for employees who take approved leaves of absences
during the plan year will be prorated based on the number of months of active
service during the plan year. The employee will be eligible to receive the
pro-rated portion of the award upon their return to active status if the return
occurs before the end of the second quarter of fiscal year 2001 (March 31).

RIGHT TO AMEND OR TERMINATE ATPI PLAN
The Company reserves the right to amend or terminate the ATPI plan at any time
and at its discretion. Additionally, nothing in this plan shall be construed as
a contract of employment or a right of entitlement.

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<PAGE>

      Provisions of Annual Team Performance Incentive Plan Applicable to
      ------------------------------------------------------------------
                               Certain Officers
                               ----------------

Certain officers of the Company are eligible for an annual incentive award of up
to 200% of their individually determined target award under the Annual Team
Performance Incentive Plan, based upon accomplishment of performance objectives
that are beyond those established for other plan participants.

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