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