Document:

Exhibit 10.1

Exhibit 10.1

 

January 7, 2008

 

To:       Patrick Johnson

 

Per the Pro-Dex Board of Director’s compensation committee’s
approval on December 4, 2007, your employment agreement of October 16, 2006 is amended
by increasing the bi-weekly salary to $8,076.92, which equals $210,000 per year
as of the first payroll period in 2008, to be paid on or about January 17,
2008.

 

 

/s/ Mark Murphy           

Mark Murphy

Chief Executive Officer 

Pro-DexExhibit 10.2

Exhibit 10.2

 

January 7, 2008

 

To Jeffrey J. Ritchey

 

Per the Pro-Dex Board of Director’s compensation committee’s
approval on December 4, 2007:

 

	
	Your bi-weekly salary is increased to $6,346.15, which
     equals $165,000 per year as of the first payroll period in 2008, to be
     paid on or about January 17, 2008.

 

	
	In the event that you are terminated involuntarily by the
     Company without “cause” as defined below, the Company shall pay to you a severance
     payment equal to (4) four times your then current monthly base salary less
     applicable withholding as required by law.  Such payment shall be made in
     equal incremental payments, consistent with the Company’s usual payroll
     payment periods, over a period of (4) four months immediately following
     your last day of employment with the Company.  As used herein, the term
     “cause” means (i) your willful breach or gross neglect of the duties and
     obligations required of you either expressly or implied; or (ii) your
     commission of fraud, embezzlement, or misappropriation, involving the
     Company whether or not a criminal of civil charge is filed in connection
     with such activity.

 

 

 

/s/ Mark Murphy                       

Mark Murphy

Chief Executive Officer 

Pro-Dexexhibit_10-1a.htm

    
      
        

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      

      EXHIBIT
        10.1.a

       

      CONTINUITY
        AGREEMENT

      

      

       

      This
        Continuity Agreement ("Agreement") is entered into as of December 1, 2007,
        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
        John W. Somerhalder II (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 mean the earliest of the following to occur:

       

      (a)           The
        date any one person, or more that one person acting as a group (as determined
        under Treasury Regulation 1.409A-3(i)(5)(v)(B), a "Group"), acquires ownership
        of stock of the Company that, together with stock held by such person or
        Group,
        constitutes more than fifty percent (50%) of the total fair market value
        or
        total voting power of the stock of the Company.  If any one person or
        Group is considered to own more than 50% of the total fair market value or
        total
        voting power of the Company, the acquisition of additional control of the
        Company by the same person or Group is not considered to cause a Change in
        Control of the Company;

       

      (b)           The
        date any one person or Group acquires (or has acquired during the 12-month
        period ending on the date of the most recent acquisition by such person or
        persons) ownership of stock of the Company possessing thirty-five percent
        (35%)
        or more of the total voting power of the stock of the Company;

       

      (c)           The
        date a majority of the members of the Board is replaced during any twelve
        (12)
        month period by directors whose appointment or election is not endorsed by
        a
        majority of the members of the Board before the date of their appointment
        or
        election; or

       

      (d)           The
        date that any one person or Group, acquires (or has acquired during the twelve
        (12) month period ending on the date of the most recent acquisition by such
        person or persons) assets from the Company that have a total gross fair market
        value equal to or more than fifty percent (50%) of the total gross fair market
        value of all assets of the Company immediately before such acquisition or
        acquisitions.  For this purpose, gross fair market value means the
        value of the assets of the Company, or the assets being disposed of, determined
        without regard to any liabilities associated with such assets.

       

       

      It
        is
        intended that there will be a Change in Control under this Agreement only
        to the
        extent such event or transaction would constitute a "change in control event"
        as
        such term is defined in Treasury Regulation Section 1.409A-3(i)(5) and thus
        the
        provisions of the definition of Change in Control shall be applied and
        interpreted consistent with the provisions of such Treasury Regulation, as
        amended from time to time; recognizing however, that the definition of Change
        in
        Control in this Agreement may be more restrictive in certain respects than
        the
        definition contained in Treasury Regulation Section 1.409A-3(i)(5).

      

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

       

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

       

      1.9.           "Consummation
        of a Change in Control Transaction" shall mean the earlier of the date on
        which a person or Group first becomes the beneficial owner of the requisite
        number of securities of the Company described in Sections 1.6(a) or (b),
        the
        date as of which a majority of the Board has been replaced, as described
        in
        Section 1.6(c), or the date on which the person or Group acquires the requisite
        percentage of Company assets, as described in Section 1.6(d).

       

      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 December 1, 2007.

       

      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 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, it will be deemed that this purpose it would
        be a
        material diminution in the Executive's position, duties or responsibilities
        with
        the Company if the Executive retains the same title or position with the
        Company
        but the Company was not a public company and the Executive did not have the
        same
        title or position at the ultimate public parent of the Company;

       

      (b)           any
        material diminution 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
        material diminution in the
        authority, duties, or responsibilities of the supervisor to whom the Executive
        is required to report, including a requirement that the Executive report
        to a
        corporate officer or employee instead of [this provision only for CEO-reporting
        directly to the Board] [and for CFO and GC-reporting directly to the CEO
        or the
        Board];

       

      (d)           any
        action or inaction that constitutes a material breach by the Company of any
        agreement under which the Executive provides services to the Company;
        or

       

      (e)           any
        material change in the geographic location at which the Executive must perform
        services for the Company, which the Company has determined is a change in
        the
        Executive's primary employment location to a location which is in excess
        of
        fifty (50) miles from the Executive's primary employment location 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.

       

      1.17.           "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 anyone 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.  To qualify as a termination for
        Good Reason, the Executive must provide notice to the Company within ninety
        (90)
        days of the initial existence of the condition constituting Good Reason and
        give
        the Company thirty (30) days to remedy such condition.

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      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 until November 30, 2009 (the "Term").

       

      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 two (2) 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 two (2) additional years
        of
        age and service (for all purposes, including, but not limited to, vesting
        and
        accrual of benefits) (such two (2) 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, Performance-Based Stock and Other Long-Term Incentive
        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 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 such
        extension of the period to exercise shall not extend the exercise period
        beyond
        the earlier of (i) the latest date upon which the option could have expired
        by
        its terms, or (ii) the tenth (10th) anniversary
        of
        the original date of grant; and further 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.

       

      (i)  The
        Company shall
        provide the Executive with continued 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) twenty four (24) months after the Executive's Qualifying
        Termination, or (ii) the commencement of comparable coverage with a subsequent
        employer.

       

      (ii)  In
        addition, as long
        as the Executive pays a monthly premium equal to the amount which is the
        COBRA
        premium for such coverage, the Company shall provide the Executive and, as
        applicable, the Executive's eligible dependents with continued medical and
        dental coverage, on the same basis (excluding premiums) as provided to the
        Company's active executives and their dependents, as applicable, until the
        earlier of (i) twenty four (24) months after the Executive's Qualifying
        Termination, or (ii) the date the Executive is first eligible for comparable
        coverage with a subsequent employer.  As a separate payment under this
        Agreement, each month coverage continues under this clause (ii), the Company
        shall pay to the Executive an amount equal to the excess of the COBRA premium
        for such coverage over the active employee cost for such medical coverage,
        each
        as determined on the date of the Executive’s Qualifying
        Termination.

       

      (iii)  The
        medical coverage
        provided under this section 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.  In no instance shall the reductions provided in this Section
        4.1 cause the payments required by Sections 3.1(a), (b) or (c) be made any
        later
        than two and one-half (21⁄2) months after the end of the year in which the
        Executive terminates employment with the Company and its
        Subsidiaries.

       

      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 the end of the Executive's taxable year next
        following the Executive's taxable year in which the related taxes are remitted
        to the taxing authority.

       

      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.  This reimbursement for the Gross-Up Payment increase shall
        be made in no event later than the end of the Executive's taxable year next
        following the Executive's taxable year in which the related taxes are remitted
        to the taxing authority.

       

      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 action 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.  No
        payment or reimbursement under this Section 7.3 shall be requested or made,
        after the end of the calendar year following the calendar year in which the
        expense was incurred.

       

      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, any of its affiliates or
        the
        Committee by Executive hereunder shall be properly delivered to the Company,
        any
        of its affiliates or the Committee 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, its affiliates
        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
        any party to this Agreement, at any time, of any breach by the other of,
        or of
        compliance by 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 to this
        Agreement.  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.           Specified
        Employee.  If the Executive is considered a "specified employee"
        (as that term is defined in Treasury Regulations Section 1.409A-1(i)), as
        of the
        date of the Executive's separation from service, payments of amounts under
        this
        Agreement which are considered "deferred compensation" under Code Section
        409A
        and paid based upon a separation from service may not be made or otherwise
        begin
        until the date that is six months after the date of separation from service
        (or,
        if earlier than the end of the six-month period, the date of death of the
        specified employee) to the extent such is required pursuant to Code Section
        409A.

       

      7.13.           409A.  It
        is the intent of the parties to this Agreement that this Agreement comply
        with
        Code Section 409A and the regulations issued pursuant thereto and the provisions
        of this Agreement shall be interpreted to be consistent therewith.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      7.14.           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/
        Arthur E. Johnson

      

      Title:           Chairman,
        Compensation and Management

      Development
        Committee

      

      

      EXECUTIVE:

      

      

      /s/
        John W. Somerhalder
        II

                    
        Signature

      

      

      

      

      

      [THIS
        DOCUMENT HAS BEEN EXECUTED IN DUPLICATE]

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