Filed Pursuant to Rule 424(b)(1)
Registration No. 333-60248
Registration No. 333-60248-01
Registration No. 333-60248-02
PROSPECTUS
6,000,000 8% Trust Preferred Securities
(Liquidation Amount $25 per Trust Preferred Security)
AGL Capital Trust II
Fully and Unconditionally Guaranteed
to the Extent Set Forth Herein by
[Logo of AGL Resources appears here]
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THE TRUST PREFERRED SECURITIES:
. The Trust Preferred Securities represent undivided preferred beneficial
ownership interests in the assets of AGL Capital Trust II (the Trust). The
sole assets of the Trust will be the Junior Subordinated Debentures issued
by AGL Capital Corporation.
. The Trust will apply to have the Trust Preferred Securities trade on the New
York Stock Exchange starting within 30 days after the Trust Preferred
Securities are issued.
. AGL Resources Inc. will guarantee the Trust Preferred Securities to the
extent described in the prospectus.
. Anticipated Closing Date: May 21, 2001.
DISTRIBUTIONS ON THE TRUST PREFERRED SECURITIES:
. Each Trust Preferred Security pays a quarterly distribution at an annual
rate of 8% or $2.00 per Trust Preferred Security, if AGL Capital Corporation
pays interest on the Junior Subordinated Debentures.
. AGL Capital Corporation may defer interest payments on the Junior
Subordinated Debentures on one or more occasions for up to 20 consecutive
quarters. If AGL Capital Corporation does defer interest payments, the Trust
will also defer payment of distributions on the Trust Preferred Securities.
Deferred distributions will accumulate interest at an annual rate of 8%, to
the extent permitted by law.
. If AGL Capital Corporation redeems the Junior Subordinated Debentures held
by the Trust, the Trust will redeem the Trust Preferred Securities. The
prices and circumstances under which the Junior Subordinated Debentures can
be redeemed by AGL Capital Corporation and the amount you will receive upon
redemption of your Trust Preferred Securities are described in the
prospectus.
. If the Trust redeems the Trust Preferred Securities or is liquidated and AGL
Capital Corporation does not redeem its Junior Subordinated Debentures, you
will receive $25 principal amount of Junior Subordinated Debentures for each
Trust Preferred Security you own rather than cash.
Investing in the Trust Preferred Securities involves risks that are described
in "Risk Factors" beginning on Page 8 of this prospectus.
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Per Trust
Preferred Security Total
------------------ -----
Public offering price (1).................. $ 25 $150,000,000
Underwriters' commissions to be paid by AGL
Capital Corporation....................... $.7875 $ 4,725,000
Proceeds, before expenses, to AGL Capital
Trust II.................................. $ 25 $150,000,000
(1) Plus accumulated distributions from May 21, 2001 if settlement occurs
after that date
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
The Trust Preferred Securities will be ready for delivery in book-entry form
through The Depository Trust Company on or about May 21, 2001.
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Joint Book-Running Managers
Merrill Lynch & Co. Morgan Stanley Dean Witter
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Salomon Smith Barney
JPMorgan Robinson-Humphrey
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The date of this Prospectus is May 14, 2001.
TABLE OF CONTENTS
Page
----
About This Prospectus..................................................... 1
Where You Can Find More Information....................................... 1
Incorporation of Certain Documents by Reference........................... 2
Forward-Looking Statements................................................ 3
Summary Information--Questions and Answers................................ 4
Risk Factors.............................................................. 8
AGL Resources Inc......................................................... 10
Capitalization............................................................ 12
AGL Capital Trust II...................................................... 13
Financial Statements of the Trust and Accounting Treatment................ 14
Use of Proceeds........................................................... 14
Ratio of Earnings to Fixed Charges........................................ 14
Selected Financial Information............................................ 15
Description of Trust Preferred Securities................................. 16
Description of Junior Subordinated Debentures............................. 27
Description of Trust Preferred Guarantee.................................. 36
Description of Debenture Guarantee........................................ 38
Relationship Among the Trust Preferred Securities, the Junior Subordinated
Debentures, the Trust Preferred Guarantee and the Debenture Guarantee.... 38
Certain Federal Income Tax Consequences................................... 41
ERISA Considerations...................................................... 45
Underwriting.............................................................. 48
Legal Matters............................................................. 49
Experts................................................................... 49
ABOUT THIS PROSPECTUS
You should only rely on the information provided or incorporated by
reference in this prospectus. We have not authorized anyone else to provide you
with different information. We are not making an offer of the Trust Preferred
Securities to any person in any state where the offer is not permitted. You
should not assume that the information in this prospectus is accurate as of any
date other than the date on the front of this document.
As used in this prospectus, references to:
. "AGL Resources" or "Guarantor" means AGL Resources Inc.;
. "AGL Trust" or "Trust" means AGL Capital Trust II;
. "AGL Capital" or "Sponsor" means AGL Capital Corporation;
. References to "we," "us," "our" or similar references mean AGL
Resources Inc., together with its subsidiaries, including AGL
Capital Trust II and AGL Capital Corporation;
. "Common Securities" means the common stock of AGL Trust that will be
purchased by AGL Capital;
. "Debenture Guarantee" means AGL Resources' guarantee of the Junior
Subordinated Debentures;
. "Junior Subordinated Debentures" means the 8% Junior Subordinated
Deferrable Interest Debentures due May 15, 2041 of AGL Capital that
are deposited with AGL Trust;
. "Trust Preferred Guarantee" means AGL Resources' guarantee of the
Trust Preferred Securities; and
. "Trust Preferred Securities" means the 8% Trust Preferred Securities
being offered by AGL Trust through this prospectus.
You should read this prospectus and the additional information described
under the heading "Where You Can Find More Information" to learn more about AGL
Resources' business. You should also pay special attention to the "Risk
Factors" section to determine whether an investment in the Trust Preferred
Securities is appropriate for you.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement under the Securities
Act of 1933 that registers the offer and sale of the securities described in
this prospectus. The registration statement, including the attached exhibits
and schedules, contains additional relevant information about us. The rules and
regulations of the SEC allow us to omit from this prospectus certain
information included in the registration statement.
In addition, we file reports, proxy statements and other information with
the SEC under the Securities Exchange Act of 1934. You may read and copy this
information at the following locations of the SEC:
Public Reference Room Northeast Regional Office Midwest Regional Office
450 Fifth Street, N.W. 7 World Trade Center 550 West Madison Street
Room 1024 Suite 1300 Suite 1400
Washington, D.C. 20549 New York, New York 10048 Chicago, Illinois 60661-2511
You may also obtain copies of this information by mail from the Public
Reference Section of the SEC, 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549, at prescribed rates.
The SEC also maintains an Internet world wide web site that contains
reports, proxy statements and other information about issuers, like us, who
file electronically with the SEC. The address of that site is:
http://www.sec.gov
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You can also inspect reports, proxy statements and other information
about us at the offices of the New York Stock Exchange, 20 Broad Street, New
York, New York 10005.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to "incorporate by reference" information into this
prospectus. This means that we can disclose important information to you by
referring you to another document filed separately with the SEC. The
information incorporated by reference is considered to be part of this
prospectus, except for any information that is superseded by information that
is included directly in this document or in a more recent incorporated
document.
This prospectus incorporates by reference the documents listed below that
we have previously filed with the SEC. The documents contain important
information about us and our financial condition.
. Annual Report on Form 10-K for the fiscal year ended September 30,
2000 filed on December 18, 2000;
. Quarterly Report on Form 10-Q for the quarter ended March 31, 2001
filed on May 4, 2001;
. Quarterly Report on Form 10-Q for the quarter ended December 31, 2000
filed on February 9, 2001;
. Current Report on Form 8-K filed on April 27, 2001 (event date: April
26, 2001);
. Current Report on Form 8-K filed on March 1, 2001 (event date:
February 23, 2001);
. Current Report on Form 8-K filed on November 17, 2000 (event date:
November 17, 2000);
. Current Report on Form 8-K filed on October 18, 2000 (event date:
October 6, 2000), as amended by Form 8-K/A filed on December 20,
2000; and
. Proxy Statement filed December 18, 2000 relating to our 2001 Annual
Meeting of Shareholders.
We incorporate by reference additional documents that we may file with
the SEC between the date of this prospectus and the date we sell all of the
securities. These documents include periodic reports, such as Annual Reports on
Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, as
well as proxy statements.
You can obtain any of the documents incorporated by reference in this
prospectus from us, or from the SEC through the SEC's Internet world wide web
site at the address described above. Documents incorporated by reference are
available from us without charge, excluding any exhibits to those documents,
unless the exhibit is specifically incorporated by reference in this
prospectus. You can obtain documents incorporated by reference in this
prospectus by requesting them in writing or by telephone from us at the
following address:
Investor Relations
AGL Resources Inc.
P. O. Box 4569
Atlanta, Georgia 30302-4569
Telephone: (404) 584-9470
We have not authorized anyone to give any information or make any
representation about us that is different from, or in addition to, the
information and representations contained in this prospectus or in any of the
materials that we have incorporated into this prospectus. If anyone does give
you information of this sort, you should not rely on it. If you are in a
jurisdiction where offers to sell, or solicitations of offers to purchase, the
securities offered by this document are unlawful, or if you are a person to
whom it is unlawful to direct these activities, then the offer presented in
this document does not extend to you. The information contained in this
document speaks only as of the date of this document unless the information
specifically indicates that another date applies.
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FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 allows public
companies to provide cautionary remarks about forward-looking statements that
they make in documents that are filed with the SEC. Forward-looking statements
include, but are not limited to, statements about the following:
. Deregulation;
. State and Federal regulation;
. Business prospects;
. Industry trends;
. Concentration of credit risk;
. Environmental investigations and cleanups;
. Quantitative and qualitative disclosures about market risk;
. Virginia Natural Gas acquisition and integration;
. Propane operations; and
. Changes required by the Public Utility Holding Company Act of 1935.
Important factors that could cause our actual results to differ
substantially from those in the forward-looking statements include, but are not
limited to, the following:
. Industrial, commercial, and residential growth in our service
territories;
. Changes in price and demand for natural gas and related products;
. Impact of changes in state and federal legislation and regulation on
both the gas and electric industries;
. Effects and uncertainties of deregulation and competition,
particularly in markets where prices and providers historically have
been regulated, unknown risks related to nonregulated businesses, and
unknown issues such as the stability of certificated marketers;
. Concentration of credit risk in certificated marketers;
. Industry consolidation;
. Impact of acquisitions and divestitures;
. Changes in accounting policies and practices issued periodically by
accounting standard-setting bodies;
. Interest rate fluctuations, financial market conditions, and economic
conditions, generally;
. Uncertainties about environmental issues and the related impact of
such issues;
. Impact of changes in weather upon the temperature sensitive portions
of the business; and
. Other factors and the related impact of such factors.
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SUMMARY INFORMATION--QUESTIONS AND ANSWERS
This summary includes questions and answers that highlight selected
information from the prospectus to help you understand the Trust Preferred
Securities. This summary may not contain all the information that may be
important to you. You should carefully read this prospectus to fully understand
the terms of the Trust Preferred Securities, as well as the tax and other
considerations that should be important to you in making a decision about
whether to invest in the Trust Preferred Securities.
Q: WHO IS AGL TRUST?
A: AGL Trust is a business trust established under Delaware law that
exists for the sole purpose of issuing the Trust Preferred Securities
and Common Securities for cash. The proceeds from the sale of these
securities will be used by the Trust to purchase the Junior
Subordinated Debentures from AGL Capital.
Q: WHAT ARE THE TRUST PREFERRED SECURITIES?
A: Each Trust Preferred Security represents a preferred undivided
beneficial ownership interest in the assets of AGL Trust. The Common
Securities issued by the Trust are subordinate to the Trust Preferred
Securities with respect to distributions made by the Trust in the
event the Trust is liquidated or dissolved. AGL Capital, which is a
wholly-owned subsidiary of AGL Resources, will own all of the Common
Securities of AGL Trust. The sole assets of AGL Trust will be the
Junior Subordinated Debentures that will be purchased from AGL
Capital by AGL Trust.
Q: WHAT DISTRIBUTIONS WILL I RECEIVE ON THE TRUST PREFERRED SECURITIES?
A: The Trust Preferred Securities provide for quarterly cash
distributions at the annual rate of 8% or $.50 per quarter ($2.00 per
year) for each Trust Preferred Security you own. Distributions are
payable on each February 15, May 15, August 15 and November 15,
beginning August 15, 2001. Distributions will accumulate from the
settlement date of the Trust Preferred Securities, which is expected
to be May 21, 2001. Because the sole asset of AGL Trust will be the
Junior Subordinated Debentures issued by AGL Capital and guaranteed
as to principal and interest by AGL Resources on a junior
subordinated basis, AGL Trust's ability to pay distributions on the
Trust Preferred Securities is ultimately dependent upon interest
payments being made by AGL Capital or AGL Resources on those Junior
Subordinated Debentures. If AGL Capital exercises its right to defer
making an interest payment on its Junior Subordinated Debentures, AGL
Trust will not be able to pay distributions to you until AGL Capital
resumes making interest payments on those Junior Subordinated
Debentures.
Q: WHO IS AGL CAPITAL?
A: AGL Capital is a wholly-owned financing subsidiary of AGL Resources.
AGL Capital is a Nevada corporation and is the sponsor of the Trust.
AGL Capital's principal address is 2325-B Renaissance Drive, Las
Vegas, Nevada 89119. Its telephone number is (702) 740-4244.
Q: WHO IS AGL RESOURCES?
A: AGL Resources is a registered public utility holding company and,
with its subsidiaries, is the second largest natural gas distribution
company in the United States. AGL Resources is the guarantor of the
Trust Preferred Securities. Its principal executive offices are
located at 817 West Peachtree Street, N.W., Atlanta, Georgia 30308.
Its telephone number is (404) 584-9470. For information about us, see
"AGL Resources Inc." in this prospectus. You should also read the
other documents we have filed with the Securities and Exchange
Commission ("SEC"), which you can find by referring to the section
entitled "Where You Can Find More Information" in this prospectus.
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Q: WHAT ARE THE JUNIOR SUBORDINATED DEBENTURES?
A: The Junior Subordinated Debentures are unsecured debt obligations of
AGL Capital. They rank below any of AGL Capital's debt that is not
specifically subordinated. AGL Capital may exercise its right to
defer interest payments on the Junior Subordinated Debentures for a
period of not more than 20 consecutive quarters. AGL Capital cannot,
however, defer any payments on the Junior Subordinated Debentures
beyond their stated maturity which is May 15, 2041. In certain
circumstances AGL Capital can elect to liquidate AGL Trust and
distribute the Junior Subordinated Debentures to you. AGL Resources
will guarantee on a junior subordinated basis the payment of the
principal (and premium, if any) and interest on the Junior
Subordinated Debentures, except that no payment of interest will be
made under the Debenture Guarantee during any period during which AGL
Capital has exercised its right to defer interest payments on the
Junior Subordinated Debentures. The Debenture Guarantee will rank
below AGL Resources' debt which is not specifically subordinated.
Q: CAN THE TRUST PREFERRED SECURITIES BE REDEEMED?
A: The Trust must redeem the Trust Preferred Securities when the Junior
Subordinated Debentures are paid at maturity or if AGL Capital
redeems the Junior Subordinated Debentures early. AGL Capital can
redeem the Junior Subordinated Debentures in whole or in part from
time to time on or after May 21, 2006. Also, AGL Capital can redeem
the Junior Subordinated Debentures in whole but not in part at any
time if there is a Tax Event or Investment Company Event as described
in this prospectus. In the event of any redemption, you will be
entitled to receive $25 per Trust Preferred Security plus accrued and
unpaid distributions to the redemption date.
The trustees of AGL Trust can elect to liquidate AGL Trust and
distribute the Junior Subordinated Debentures to you at any time.
Neither the Junior Subordinated Debentures nor the Trust Preferred
Securities can be redeemed at any time at the option of their
holders.
Q: ARE THERE ANY RISKS ASSOCIATED WITH MY INVESTMENT?
A: Yes, an investment in the Trust Preferred Securities is subject to
risk. Please refer to the section entitled "Risk Factors" in this
prospectus for a description of these risks.
Q: WHAT HAPPENS IF AGL TRUST DOES NOT PAY DISTRIBUTIONS ON THE TRUST
PREFERRED SECURITIES?
A: If your distributions are deferred, you will still accumulate
distributions at the annual rate of 8% plus you will be entitled to
additional distributions at the same rate, compounded quarterly, on
any deferred distribution that remains unpaid.
If distributions are deferred, during that period until all scheduled
quarterly distributions which are due and owing are paid or set aside
for payment to you, neither AGL Resources nor AGL Capital Corporation
may, except in limited circumstances, declare or pay dividends on,
acquire, or make a liquidation payment with respect to, any of our
outstanding capital stock.
This limitation prevents AGL Resources and AGL Capital Corporation
from paying cash or other dividends to our shareholders if payments
are not being made on the Trust Preferred Securities, the Junior
Subordinated Debentures or the guarantee issued by us in connection
with the Trust Preferred Securities. However, these provisions will
not restrict:
. our ability to pay dividends or distributions on our capital stock
in shares of, or options, warrants or rights to subscribe for or
purchase shares of our capital stock;
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. our ability to convert or exchange our common stock or preferred
stock of one class into our common stock or preferred stock of
another class;
. our ability to redeem or purchase any rights under a rights
agreement applicable to our common stock or issue preferred stock
under those rights; and
. our ability to purchase our capital stock in the open market or in
private transactions for employee benefit or similar purposes.
Q: WHAT IS THE TRUST PREFERRED GUARANTEE?
A: AGL Resources will guarantee on a junior subordinated basis, to the
extent described in this prospectus and its guarantee of the Trust
Preferred Securities:
. distribution of quarterly payments on the Trust Preferred
Securities by AGL Trust to you to the extent AGL Trust receives
distributions on the Junior Subordinated Debentures;
. the redemption amount due to you if AGL Trust redeems the Trust
Preferred Securities; and
. the liquidation amount of the Trust Preferred Securities if AGL
Trust is liquidated.
Q: WHAT IS THE DEBENTURE GUARANTEE?
A: AGL Resources will guarantee on a junior subordinated basis the
payment of the principal (and premium, if any) and interest on the
Junior Subordinated Debentures, except that no payment of interest
will be made under the Debenture Guarantee for any period during
which AGL Capital has exercised its right to defer interest payments
on the Junior Subordinated Debentures.
Q: CAN AGL TRUST BE LIQUIDATED?
A: AGL Capital has the right to liquidate the Trust under certain
circumstances and cause cash or the Junior Subordinated Debentures to
be distributed to you as part of the Trust liquidation. If AGL Trust
is liquidated and cash is to be distributed, you will be entitled to
receive $25 plus any accumulated and unpaid distributions per Trust
Preferred Security before any payment is made for the Common
Securities. If AGL Trust is liquidated and the Junior Subordinated
Debentures are distributed, you will be entitled to receive $25
principal amount of Junior Subordinated Debentures plus accumulated
and unpaid distributions per Trust Preferred Security.
Q: DO I HAVE VOTING RIGHTS?
A: Except in limited circumstances you will not have any voting rights.
AGL Capital, as holder of the Common Securities, will have sole
voting power on most matters. The holders of a majority of the Trust
Preferred Securities, however, have the right to direct the time,
method and place of conducting any proceeding for any remedy
available to the property trustee, or direct the exercise of any
trust power conferred upon the property trustee.
Q: IN WHAT FORM WILL THE TRUST PREFERRED SECURITIES BE ISSUED?
A: The Trust Preferred Securities will be issued in the form of a global
certificate or certificates registered in the name of Cede & Co., as
nominee for The Depository Trust Company ("DTC"). This means you will
not receive a certificate for your Trust Preferred Securities. Your
interests in the Trust Preferred Securities will be evidenced by, and
transfers of the Trust Preferred Securities will be effected only
through, records maintained by the participants in DTC.
Q: WILL THE TRUST PREFERRED SECURITIES BE LISTED ON A STOCK EXCHANGE?
A: We intend to list the Trust Preferred Securities on the New York
Stock Exchange under the symbol "ATGPr". If approved for listing,
trading on the New York Stock Exchange will begin within 30 days
after the issuance of the Trust Preferred Securities. The listing of
the Trust Preferred Securities will not necessarily ensure that a
liquid trading market will be available for the Trust Preferred
Securities.
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Q: HOW WILL THE PROCEEDS BE USED?
A: The proceeds from the sale of the Trust Preferred Securities and the
Common Securities will be invested by the Trust in the Junior
Subordinated Debentures. We intend that the net proceeds from the
sale of the Trust Preferred Securities (estimated to be $144,733,700
after payment of fees and expenses in the offering) will be used to
reduce short-term debt and for general corporate purposes. The
precise amount and timing of the application of such net proceeds
used for such corporate purposes will depend on the funding
requirements and the availability of other funds. The net proceeds
may be temporarily invested in short-term interest bearing
securities.
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RISK FACTORS
Your investment in the Trust Preferred Securities will involve risks. You
should carefully consider the following information and review the information
contained elsewhere in this prospectus and the documents that are incorporated
by reference in this prospectus.
You Will Only Receive Distributions if Payments on the Junior Subordinated
Debentures are Made
AGL Trust's ability to pay distributions on the Trust Preferred
Securities to you is dependent upon its receipt of payments on the Junior
Subordinated Debentures it holds. AGL Capital may defer interest payments on
the Junior Subordinated Debentures for up to 20 consecutive quarters. If the
payment of interest or principal on the Junior Subordinated Debentures is not
made, the Trust will lack the funds necessary to pay distributions on the Trust
Preferred Securities. If AGL Trust does not make payments to you on the Trust
Preferred Securities, we will be restricted from, among other things, paying
cash or certain other dividends on our capital stock.
The Obligations of AGL Resources Under the Guarantees of the Trust Preferred
Securities and the Junior Subordinated Debentures are Subordinated
The obligations of AGL Resources under the Trust Preferred Guarantee and
the Debenture Guarantee will be unsecured and rank subordinate and junior in
right of payment to all senior indebtedness. In addition, in the case of a
bankruptcy or insolvency proceeding, AGL Resources' obligations under the
guarantees will also rank subordinate and junior in right of payment to all
liabilities (other than other guarantees) of AGL Resources. This means that our
obligations under the guarantees will not be paid unless we can satisfy in full
all of our other obligations ranking senior to the guarantees. As of March 31,
2001, AGL Resources had approximately $1,279.4 million of Senior Indebtedness
(as defined in the Indenture).
Because AGL Resources is a registered public utility holding company,
substantially all of its income is from operating subsidiaries. Required
payments on debt at the subsidiary level will be made before funds from those
subsidiaries are available to AGL Resources. The right of AGL Resources to
participate in any distribution of assets of any subsidiary upon such
subsidiary's liquidation or reorganization or otherwise (and thus the ability
of holders of the Trust Preferred Securities to benefit indirectly from such
distribution) is subject to the prior claims of creditors of that subsidiary,
except to the extent that AGL Resources may itself be recognized as a creditor
of that subsidiary. As of March 31, 2001, the subsidiaries of AGL Resources had
total liabilities (excluding liabilities owed to AGL Resources) of
approximately $2,013.5 million. Accordingly, since AGL Capital is funded by AGL
Resources, the Junior Subordinated Debentures will be effectively subordinated
to all existing and future liabilities of AGL Resources and its subsidiaries.
None of the Indenture, the Guarantee or the Trust Agreement places any
limitation on the amount of debt, including senior indebtedness, that may be
incurred by AGL Resources or by any subsidiary. The principal sources of AGL
Resources' income are dividends and fees from its subsidiaries.
The ability of the Trust to pay amounts due on the Trust Preferred
Securities is solely dependent upon AGL Capital or AGL Resources making
payments on the Junior Subordinated Debentures as and when required.
AGL Capital's Option to Extend Interest Payment Period and Certain Tax and
Market Considerations
AGL Capital has no current intention to exercise its right to defer
payments of interest on the Junior Subordinated Debentures. If, however, AGL
Capital exercises its right to defer payments of interest on the Junior
Subordinated Debentures, each holder of Trust Preferred Securities will be
required to accrue income (as original issue discount ("OID")) in respect of
the deferred stated interest allocable to its Trust Preferred Securities for
United States federal income tax purposes, which will be allocated but not
distributed to holders
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of Trust Preferred Securities. As a result, each such holder of Trust Preferred
Securities will recognize income for United States federal income tax purposes
in advance of the receipt of cash and will not receive the cash related to such
income from the Trust if the holder disposes of the Trust Preferred Securities
prior to the record date for the payment of Distributions thereafter. See
"Certain Federal Income Tax Consequences--Interest Income and Original Issue
Discount" and "--Sales of Trust Preferred Securities."
If AGL Capital elects to exercise its right to defer payments of interest
on the Junior Subordinated Debentures in the future, the market price of the
Trust Preferred Securities is likely to be affected. A holder that disposes of
the Trust Preferred Securities during an extension period, therefore, might not
receive the same return on investment as a holder that continues to hold the
Trust Preferred Securities. In addition, merely as a result of the existence of
AGL Capital's right to defer payments of interest on the Junior Subordinated
Debentures, the market price of the Trust Preferred Securities may be more
volatile than the market prices of other securities that are not subject to
such deferrals.
Tax and Market Risks of Redemption of Trust Preferred Securities for Junior
Subordinated Debentures
AGL Capital has the right at any time to dissolve, wind-up or terminate
the Trust and cause the Junior Subordinated Debentures to be distributed to the
holders of the Trust Securities in liquidation of the Trust. AGL Capital will
have the right, in certain circumstances, to redeem the Junior Subordinated
Debentures, in whole or in part, in lieu of a distribution of the Junior
Subordinated Debentures by the Trust, in which event the Trust will redeem the
Trust Preferred Securities on a pro rata basis to the same extent as the Junior
Subordinated Debentures are redeemed by AGL Capital.
Under current United States federal income tax law, a distribution of
Junior Subordinated Debentures upon the dissolution of the Trust would not be a
taxable event to holders of the Trust Preferred Securities. If, however, the
Trust is characterized as an association taxable as a corporation at the time
of the dissolution of the Trust, the distribution of the Junior Subordinated
Debentures may constitute a taxable event to holders of Trust Preferred
Securities. Upon the occurrence of a Tax Event, a dissolution of the Trust in
which holders of the Trust Preferred Securities receive cash may be a taxable
event to such holders. See "Certain Federal Income Tax Consequences--Receipt of
Junior Subordinated Debentures or Cash Upon Liquidation of the Trust."
There can be no assurance as to the market prices for the Trust Preferred
Securities or Junior Subordinated Debentures distributed to the holders of
Trust Preferred Securities if a termination of the Trust were to occur.
Accordingly, the Trust Preferred Securities or the Junior Subordinated
Debentures may trade at a discount from the price that the investor paid to
purchase the Trust Preferred Securities offered hereby. Because holders of
Trust Preferred Securities may receive Junior Subordinated Debentures in
liquidation of the Trust and because Distributions are otherwise limited to
payments on the Junior Subordinated Debentures, prospective purchasers of Trust
Preferred Securities are also making an investment decision with regard to the
Junior Subordinated Debentures and should carefully review all the information
regarding the Junior Subordinated Debentures contained herein. See "Description
of Junior Subordinated Debentures."
Rights Under the Trust Preferred Guarantee
The Bank of New York will act as Property Trustee under the Trust
Agreement and as Trustee under the Indenture. The Bank of New York (Delaware)
will act as Delaware Trustee under the Trust Agreement. The Guarantee will
guarantee you the following payments, to the extent not paid by the Trust:
. any accumulated and unpaid distributions required to be paid on the
Trust Preferred Securities, to the extent that the Trust has funds on
hand legally available at such time,
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. the applicable Redemption Price with respect to any Trust Preferred
Securities called for redemption, to the extent that the Trust has
funds on hand legally available therefor at such time, and
. upon a voluntary or involuntary termination and liquidation of the
Trust (unless the Junior Subordinated Debentures are distributed to
holders of the Trust Preferred Securities), the lesser of (a) the
aggregate of the liquidation amount and all accumulated and unpaid
distributions to the date of payment, to the extent that the Trust
has funds on hand legally available therefor at such time and (b) the
amount of assets of the Trust remaining available for distribution to
holders of the Trust Preferred Securities upon a termination and
liquidation of the Trust.
Additionally, AGL Resources will guarantee on a junior subordinated basis
the payment of the principal (and premium, if any) and interest on the Junior
Subordinated Debentures, except that no payment of interest will be made under
the Debenture Guarantee for any period during which AGL Capital has exercised
its right to defer interest payments on the Junior Subordinated Debentures.
You Have Limited Voting Rights
As a holder of the Trust Preferred Securities, you will have limited
voting rights and will not be entitled to vote to appoint, change or to
increase or decrease the number of trustees of AGL Trust appointed by AGL
Capital, except as to the Delaware Trustee and the Property Trustee, if an
Event of Default has occurred and is continuing. Since AGL Capital owns all of
AGL Trust's Common Securities, those rights belong exclusively to AGL Capital.
There is No Prior Market for the Trust Preferred Securities
This series of Trust Preferred Securities constitutes a new issue of
securities with no established trading market. AGL Trust intends to list the
Trust Preferred Securities on the New York Stock Exchange. There can be no
assurance that an active market for the Trust Preferred Securities will develop
or be sustained in the future on the New York Stock Exchange. There is no
assurance that a trading market for the Trust Preferred Securities will exist
and no assurance as to the liquidity of any trading market.
Potential Tax Law Changes
Certain tax law changes have been proposed from time to time which could
affect the deductibility of interest paid on the Junior Subordinated
Debentures. None of these proposals have become law. If they were to become
law, however, that event could result in the early redemption of the Trust
Preferred Securities.
AGL RESOURCES INC.
AGL Resources is the registered public utility holding company for:
. Atlanta Gas Light Company, a natural gas local distribution utility;
. Virginia Natural Gas, Inc., a natural gas local distribution utility
acquired effective October 1, 2000;
. Chattanooga Gas Company, a natural gas local distribution utility;
. AGL Energy Services, Inc., a wholesale energy services company;
. AGL Services Company, a service company established in accordance
with Public Utilities Holding Company Act of 1935;
. AGL Capital Corporation, a financing subsidiary; and
. Several other non-utility subsidiaries.
10
Atlanta Gas Light Company conducts its primary business, the distribution
of natural gas, in Georgia including Atlanta, Athens, Augusta, Brunswick,
Macon, Rome, Savannah and Valdosta. Chattanooga Gas Company distributes natural
gas in the Chattanooga and Cleveland areas of Tennessee. Virginia Natural Gas
distributes natural gas in the Hampton Roads region of Virginia. The Georgia
Public Service Commission regulates Atlanta Gas Light Company, the Tennessee
Regulatory Authority regulates Chattanooga Gas Company and the Virginia State
Corporation Commission regulates Virginia Natural Gas. AGL Energy Services
provides wholesale energy services for AGL Resources' regulated and unregulated
operations, as well as for unaffiliated retail gas marketers. Atlanta Gas Light
Company, Chattanooga Gas Company and Virginia Natural Gas comprise
substantially all of AGL Resources' assets, revenues and operating income.
AGL Resources owns or has an interest in the following non-utility
businesses:
. SouthStar Energy Services LLC, a joint venture among a subsidiary of
AGL Resources and subsidiaries of Dynegy Holdings, Inc. and Piedmont
Natural Gas Company. SouthStar markets natural gas and related
services to residential and small commercial customers in Georgia and
to industrial customers in the Southeast. SouthStar began marketing
natural gas to customers in Georgia during the first quarter of
fiscal 1999 under the trade name Georgia Natural Gas Services;
. AGL Investments, Inc., which directly or indirectly owns or manages
certain non-utility businesses including:
-- AGL Propane Services, Inc., which has a 22.36% ownership interest
in US Propane LLC. US Propane owns 34% of Heritage Propane
Partners, which engages in the sale of propane and related
products and services in 28 states;
-- AGL Networks, LLC, which will install, and lease to third-party
operators, conduit and fiber optic cable. AGL Networks was
incorporated on August 15, 2000 for the purpose of partnering with
telecommunication companies to serve Atlanta's rapidly growing
demand for high-speed network capacity. On April 17, 2001, the
GPSC voted unanimously to grant AGL Networks' Competitive Local
Exchange Carrier License, which grants AGL Networks the rights to
construct the last mile connectivity and provide dark fiber
network services in the State of Georgia.
. AGL Peaking Services, Inc., which owns a 50% interest in Etowah LNG
Company, LLC, a joint venture with Southern Natural Gas Company.
Etowah was formed for the purpose of constructing, owning and
operating a liquefied natural gas peaking facility; and
. AGL Capital Corporation, which was established to finance the
acquisition of Virginia Natural Gas, to refinance existing short-term
debt and to provide working capital to AGL Resources and its
subsidiaries through a commercial paper program, issuance of Senior
Notes and other financing mechanisms.
Effective March 2, 2001, AGL Resources sold substantially all of the
assets of Utilipro, Inc. to Alliance Data Systems Corporation for $17.7
million, resulting in a pre-tax gain of $10.9 million. AGL Resources recorded
the gain related to the sale of Utilipro as Other Income.
11
CAPITALIZATION
The following table sets forth the capitalization of AGL Resources Inc.
and its subsidiaries as of March 31, 2001. The pro forma column reflects our
capitalization as adjusted to give effect to the sale of $150 million of Trust
Preferred Securities as well as the application of the net proceeds of the
offering (estimated to be $144,733,700) to pay short-term debt obligations.
You should read this table along with our audited financial statements
contained in our most recent Annual Report on Form 10-K as well as the
information presented in our Quarterly Report on Form 10-Q for the quarter
ended March 31, 2001. See "Where You Can Find More Information" in this
prospectus.
Consolidated Capitalization
(Dollars in Millions)
As of March 31, 2001
----------------------------------
Actual Pro Forma
---------------- ----------------
Amount Percent Amount Percent
-------- ------- -------- -------
Long-Term Debt............................. $ 890.0 44.4% $ 890.0 44.4%
Short-Term Debt (1)........................ 366.3 18.3 221.6 11.1
Preferred Securities (1)................... 74.3 3.7 219.0 10.9
Common Stockholders' Equity (net of shares
held in treasury, at cost)................ 673.4 33.6 673.4 33.6
-------- ------ -------- -----
$2,004.0 100.0% $2,004.0 100.0%
======== ====== ======== =====
--------
(1) Proposed financing of $150,000,000 in Trust Preferred Securities to pay
$144,733,700 of short-term debt obligations.
12
AGL CAPITAL TRUST II
The Trust is a statutory business trust formed under Delaware law
pursuant to the Trust Agreement executed by AGL Capital, as Sponsor, The Bank
of New York (Delaware), as Delaware Trustee and the Administrative Trustees
named therein, and the filing of a Certificate of Trust with the Delaware
Secretary of State on March 23, 2001. The Trust Agreement will be amended and
restated among AGL Capital, as Sponsor, The Bank of New York, as Property
Trustee, The Bank of New York (Delaware), as Delaware Trustee, and the
Administrative Trustees. The Trust Agreement, as amended and restated, will be
qualified as an indenture under the Trust Indenture Act of 1939, as amended.
The Trust exists for the exclusive purposes of issuing and selling the Trust
Preferred Securities and Common Securities, using the proceeds from the sale of
these securities to acquire the Junior Subordinated Debentures and making
distributions, and except as otherwise limited by the Trust Agreement, engaging
in only those other activities necessary, advisable or incidental to the
purposes listed above. The Junior Subordinated Debentures will be the sole
assets of the Trust, and payments under the Junior Subordinated Debentures and
the Agreement on Expenses and Liabilities will be the sole revenues of the
Trust. All of the Common Securities will be owned by AGL Capital.
The Common Securities will rank equal in priority, and payments will be
made thereon pro rata, with the Trust Preferred Securities, except that upon
the occurrence and continuance of an event of default under the Trust
Agreement, the rights of AGL Capital as holder of the Common Securities to
payments in respect of distributions and payments upon liquidation, redemption
or otherwise will be subordinated to the rights of the holders of the Trust
Preferred Securities. See "Description of Trust Preferred Securities--
Subordination of Common Securities." AGL Capital will acquire Common Securities
in a liquidation amount equal to at least 3% of the total capital of the Trust.
The Trust has a term of 40 years, but may terminate earlier as provided in the
Trust Agreement. The Trust's business and affairs are conducted by its
trustees, each appointed by AGL Capital as holder of the Common Securities.
The trustees for the Trust will be The Bank of New York, as the Property
Trustee (the "Property Trustee"), The Bank of New York (Delaware), as the
Delaware Trustee (the "Delaware Trustee"), and two individual trustees (the
"Administrative Trustees") who are employees or officers of or affiliated with
AGL Capital (collectively, the "Trustees"). The Bank of New York, as Property
Trustee, will act as sole indenture trustee under the Trust Agreement. The Bank
of New York will also act as indenture trustee under the Indenture. See
"Description of Junior Subordinated Debentures." The holder of the Common
Securities of the Trust or, if an Event of Default under the Trust Agreement
has occurred and is continuing, the holders of a majority in liquidation amount
of the Trust Preferred Securities, will be entitled to appoint, remove or
replace the Property Trustee and/or the Delaware Trustee In no event will the
holders of the Trust Preferred Securities have the right to vote to appoint,
remove or replace the Administrative Trustees; such voting rights will be
vested exclusively in the holder of the Common Securities. The duties and
obligations of each Trustee are governed by the Trust Agreement and the
Delaware Business Trust Act. AGL Capital will pay all fees, expenses, debts and
obligations (other than the Trust Securities) related to the Trust and the
offering of the Trust Preferred Securities and will pay, directly or
indirectly, all ongoing costs, expenses and liabilities of the Trust. The
rights of the holders of the Trust Preferred Securities, including economic
rights, rights to information and voting rights, are as set forth in the
Declaration, the Delaware Business Trust Act (the "Delaware Trust Act") and the
Trust Indenture Act. See "Description of Trust Preferred Securities."
The Trust's registered office in the State of Delaware is c/o The Bank of
New York (Delaware), White Clay Center, Route 273, Newark, Delaware 19711. The
principal executive office of the Trust is c/o AGL Resources Inc., 817 West
Peachtree Street, N.W., Atlanta, Georgia 30308 (telephone number 404-584-9470).
13
FINANCIAL STATEMENTS OF THE TRUST AND ACCOUNTING TREATMENT
The financial statements of the Trust will be consolidated with AGL
Resources' financial statements, with the Trust Preferred Securities shown as
mandatorily redeemable preferred securities. There are no separate financial
statements of AGL Trust in this prospectus. We do not believe such financial
statements would be helpful because:
. The Trust is a wholly-owned subsidiary of AGL Resources, which files
consolidated financial information under the Exchange Act.
. The Trust does not have any independent operations other than issuing
the Trust Preferred Securities and Common Securities and purchasing
the Junior Subordinated Debentures.
. The obligations of AGL Capital and AGL Resources under the Junior
Subordinated Debentures, the Debenture Guarantee and the Trust
Preferred Securities Guarantee have the effect of providing a full,
irrevocable and unconditional guarantee of the Trust's obligations
under the Trust Preferred Securities. Holders of Trust Preferred
Securities may, under certain circumstances, enforce these obligations
directly against AGL Capital and AGL Resources.
The Trust is not, and will not become, subject to the information
reporting requirements of the Exchange Act.
USE OF PROCEEDS
The proceeds from the sale of the Trust Preferred Securities and the
Common Securities, $154,639,175, will be invested by the Trust in the Junior
Subordinated Debentures. We intend that the net proceeds from the sale of the
Trust Preferred Securities (estimated to be $144,733,700 after payment of fees
and expenses in the offering) will be used to reduce short-term debt and for
general corporate purposes. The precise amount and timing of the application
of such net proceeds used for such corporate purposes will depend on the
funding requirements and the availability of other funds. The net proceeds may
be temporarily invested in short-term interest bearing securities.
RATIO OF EARNINGS TO FIXED CHARGES
The following table shows our consolidated ratio of earnings to fixed
charges for the periods indicated:
Six Months Fiscal Year Ended
Ended September 30,
March 31, ------------------------
2001 2000 1999 1998 1997 1996
---------- ---- ---- ---- ---- ----
Ratio of Earnings to Fixed Charges... 3.09 2.61 2.72 2.77 2.90 3.08
14
SELECTED FINANCIAL INFORMATION
The following table sets forth selected consolidated financial
information as of and for the periods indicated below. We derived the
consolidated financial information below for each of the five years ended
September 30, 2000, from financial statements audited by Deloitte & Touche LLP,
independent auditors. The consolidated financial information as of and for the
six months ended March 31, 2001 and 2000 have not been audited. The following
information should be read in conjunction with our consolidated financial
statements, together with the related notes thereto.
Six Months Ended
March 31, Years Ended September 30,
----------------- --------------------------------------------
2001 2000 2000 1999 1998 1997 1996
-------- -------- -------- -------- -------- -------- --------
(in millions, except per share amounts)
Operating revenues...... $ 645.4 $ 342.4 $ 607.4 $1,070.7 $1,340.1 $1,287.6 $1,228.6
Net income.............. $ 74.8 $ 39.8 $ 71.1 $ 74.4 $ 80.6 $ 76.6 $ 75.6
Total assets............ $2,761.2 $1,949.5 $2,019.9 $1,970.4 $1,985.3 $1,925.5 $1,823.1
Earnings per common
shares
Basic................. $ 1.38 $ 0.71 $ 1.29 $ 1.30 $ 1.41 $ 1.37 $ 1.37
Diluted............... $ 1.37 $ 0.71 $ 1.29 $ 1.29 $ 1.41 $ 1.36 $ 1.36
Cash dividends paid per
share of common stock.. $ 0.54 $ 0.54 $ 1.08 $ 1.08 $ 1.08 $ 1.08 $ 1.06
15
DESCRIPTION OF TRUST PREFERRED SECURITIES
General
The Trust Preferred Securities will be issued pursuant to the terms of
the Trust Agreement and represent preferred undivided beneficial interests in
the assets of the Trust. The holders of the Trust Preferred Securities will be
entitled to a preference over the Common Securities in certain circumstances
with respect to Distributions and amounts payable on redemption of the Trust
Preferred Securities or liquidation of the Trust. See "--Subordination of
Common Securities." The Trust Agreement will be qualified under the Trust
Indenture Act. This summary of certain provisions of the Trust Preferred
Securities, the Common Securities and the Trust Agreement does not purport to
be complete and is subject to, and is qualified in its entirety by reference
to, all the provisions of the Trust Agreement, including the definitions
therein of certain terms, the Delaware Business Trust Act and the Trust
Indenture Act.
The Trust Agreement authorizes the Trustees, on behalf of the Trust, to
issue the Trust Preferred Securities, which represent preferred undivided
beneficial interests in the assets of the Trust, and the Common Securities,
which represent common undivided beneficial interests in the assets of the
Trust. All of the Common Securities will be owned by AGL Capital. The Trust
Preferred Securities will be limited to $150,000,000 aggregate Liquidation
Amount at any one time outstanding. The Trust Preferred Securities will rank
equal in priority, and payments will be made thereon pro rata, with the Common
Securities except as described under "--Subordination of Common Securities."
Legal title to the Junior Subordinated Debentures will be held by the Property
Trustee in trust for the benefit of the holders of the Trust Preferred
Securities and Common Securities. The Trust Preferred Guarantee will not
guarantee payment of Distributions or amounts payable on redemption of the
Trust Preferred Securities or liquidation of the Trust when the Trust does not
have funds on hand legally available for such payments. See "Description of the
Trust Preferred Guarantee."
Distributions
Distributions on the Trust Preferred Securities will be cumulative, will
accumulate from May 21, 2001 and will be payable quarterly on February 15, May
15, August 15 and November 15 of each year, commencing August 15, 2001, at the
annual rate of 8% of the Liquidation Amount to the holders on the applicable
record date. The amount of Distributions payable for any period will be
computed on the basis of a 360-day year of twelve 30-day months. In the event
that any date on which Distributions are payable on the Trust Preferred
Securities is not a Business Day (as defined below), payment of the
Distribution payable on such date will be made on the next succeeding day that
is a Business Day (and without any interest or other payment in respect to any
such delay), in each case with the same force and effect as if made on such
date (each date on which Distributions are payable in accordance with the
foregoing, a "Distribution Date"). A "Business Day" shall mean any day other
than a Saturday or a Sunday, or a day on which banking institutions in the City
of New York, New York or Atlanta, Georgia are authorized or required by law or
executive order to remain closed.
So long as no Debenture Event of Default shall have occurred and be
continuing, AGL Capital will have the right under the Indenture to defer the
payment of interest on the Junior Subordinated Debentures at any time or from
time to time for a period not exceeding 20 consecutive quarters with respect to
each Extended Interest Payment Period, provided that no Extended Interest
Payment Period may extend beyond the Stated Maturity Date. Upon any election,
quarterly Distributions on the Trust Preferred Securities will be deferred by
the Trust during the Extended Interest Payment Period. Distributions to which
holders of the Trust Preferred Securities are entitled during the Extended
Interest Payment Period will accumulate additional Distributions thereon at the
rate per annum of 8% thereof, compounded quarterly from the relevant
Distribution Date. The term "Distributions," as used herein, shall include any
such additional Distributions.
16
Prior to the termination of any Extended Interest Payment Period, AGL
Capital may further extend such Extended Interest Payment Period, provided that
such extension does not cause the Extended Interest Payment Period to exceed 20
consecutive quarters or to extend beyond the Stated Maturity Date. Upon the
termination of any Extended Interest Payment Period and the payment of all
amounts then due, and subject to the foregoing limitations, AGL Capital may
elect to begin a new Extended Interest Payment Period. AGL Capital must give
the Property Trustee, the Administrative Trustees and the Debenture Trustee
notice of its election of an Extended Interest Payment Period at least one
Business Day prior to the earlier of (i) the date the Distributions on the
Trust Preferred Securities would have been payable except for the election to
begin an Extended Interest Payment Period or (ii) the date the Administrative
Trustees are required to give notice to any securities exchange or quotation
system or to holders of such Trust Preferred Securities of the record date or
the date such Distributions are payable but in any event not less than one
Business Day prior to such record date. There is no limitation on the number of
times that AGL Capital may elect to begin an Extended Interest Payment Period.
See "Description of Junior Subordinated Debentures--Option to Extend Interest
Payment Date" and "Certain Federal Income Tax Consequences--Interest Income and
Original Issue Discount."
During any Extended Interest Payment Period, neither AGL Resources nor
AGL Capital may:
. declare or pay any dividends or distributions on, or redeem,
purchase, acquire, or make a liquidation payment with respect to, any
of its capital stock (which includes common and preferred stock);
. make any payment of principal, interest or premium, if any, on or
repay, repurchase or redeem any of its debt securities that rank
equal in priority with or junior in right of payment to, with respect
to AGL Capital, the Junior Subordinated Debentures or with respect to
AGL Resources, debt that is subordinated to its Senior Indebtedness;
or
. make any guarantee payments with respect to any guarantees of the
debt securities of any of their respective subsidiaries if such
guarantees rank equal in priority with or junior in right of payment
to, with respect to AGL Capital, the Junior Subordinated Debentures
or with respect to AGL Resources, debt that is subordinated to its
Senior Indebtedness (other than (a) dividends or distributions in
shares of, or options, warrants or rights to subscribe for or
purchase shares of, common stock, (b) any declaration of a dividend
in connection with the implementation of a stockholders' rights plan,
or the issuance of stock under any such plan in the future, or the
redemption or repurchase of any such rights pursuant thereto, (c)
payments under the guarantees, (d) the purchase of fractional shares
resulting from a reclassification of capital stock or the exchange or
conversion of one class, or series of capital stock for another class
or series of capital stock, and (e) the purchase of fractional
interests in shares of capital stock pursuant to the conversion or
exchange provisions of such capital stock or the security being
converted or exchanged).
Although AGL Capital may in the future exercise its option to defer
payments of interest on the Junior Subordinated Debentures, AGL Capital has no
such current intention.
The revenue of the Trust available for distribution to holders of the
Trust Preferred Securities and Common Securities will be limited to payments
under the Junior Subordinated Debentures in which the Trust will invest the
proceeds from the issuance and sale of the Trust Securities. See "Description
of Junior Subordinated Debentures--General." If AGL Capital does not make
interest payments on the Junior Subordinated Debentures, the Trust will not
have funds available to pay Distributions on the Trust Preferred Securities and
Common Securities. AGL Resources will guarantee on a junior subordinated basis
the payment of the principal (and premium, if any) and interest on the Junior
Subordinated Debentures, except that no payment of interest will be made under
the Debenture Guarantee for any period during which AGL Capital has exercised
its right to defer interest payments on the Junior Subordinated Debentures.
17
Redemption
Upon the repayment on the Stated Maturity Date or prepayment prior to the
Stated Maturity Date of the Junior Subordinated Debentures, the proceeds from
such repayment or prepayment shall be applied by the Property Trustee to redeem
a Like Amount (as defined below) of the Trust Securities, upon not less than 10
nor more than 60 days' notice of a date of redemption (the "Redemption Date"),
at the applicable Redemption Price, which shall be equal to:
. in the case of the repayment of the Junior Subordinated Debentures on
the Stated Maturity Date, the Maturity Redemption Price (equal to the
principal of, and accrued interest on, the Junior Subordinated
Debentures),
. in the case of the optional prepayment of the Junior Subordinated
Debentures prior to May 21, 2006 upon the occurrence and continuation
of a Tax Event or an Investment Company Act Event, the Special Event
Redemption Price (equal to the Special Event Prepayment Price in
respect of the Junior Subordinated Debentures), and
. in the case of the optional prepayment of the Junior Subordinated
Debentures on or after May 21, 2006, the Optional Redemption Price
(equal to the Optional Prepayment Price in respect of the Junior
Subordinated Debentures). See "Description of Junior Subordinated
Debentures--Optional Prepayment" and "--Special Event Prepayment."
"Like Amount" means:
. with respect to a redemption of the Trust Preferred Securities, Trust
Preferred Securities having a Liquidation Amount equal to the
principal amount of Junior Subordinated Debentures to be paid in
accordance with their terms and
. with respect to a distribution of Junior Subordinated Debentures upon
the liquidation of the Trust, Junior Subordinated Debentures having a
principal amount equal to the Liquidation Amount of the Trust
Preferred Securities of the holder to whom such Junior Subordinated
Debentures are distributed.
Redemption Procedures
If applicable, Trust Preferred Securities shall be redeemed at the
applicable Redemption Price with the proceeds from the contemporaneous
repayment or prepayment of the Junior Subordinated Debentures. Any redemption
of Trust Preferred Securities shall be made and the applicable Redemption Price
shall be payable on the Redemption Date only to the extent that the Trust has
funds legally available for the payment of such applicable Redemption Price.
If the Trust gives a notice of redemption in respect of the Trust
Preferred Securities, then, by 12:00 noon, New York City time, on the
Redemption Date, to the extent funds are legally available, with respect to the
Trust Preferred Securities held by DTC or its nominees, the Property Trustee
will deposit irrevocably with DTC funds sufficient to pay the applicable
Redemption Price. See "--Form, Denomination, Book-Entry Procedures and
Transfer." With respect to the Trust Preferred Securities held in certificated
form, the Property Trustee, to the extent funds are legally available, will
irrevocably deposit with the paying agent for the Trust Preferred Securities
funds sufficient to pay the applicable Redemption Price and will give such
paying agent irrevocable instructions and authority to pay the applicable
Redemption Price to the holders thereof upon surrender of their certificates
evidencing the Trust Preferred Securities. See "--Payment and Paying Agency."
Notwithstanding the foregoing, Distributions payable on or prior to the
Redemption Date shall be payable to the holders of such Trust Preferred
Securities on the relevant record dates for the related Distribution Dates. If
notice of redemption shall have been given and funds deposited as required,
then upon the date of such deposit, all rights of the holders of the Trust
Preferred Securities will cease, except the right of the holders of the Trust
18
Preferred Securities to receive the applicable Redemption Price, but without
interest on such Redemption Price, and the Trust Preferred Securities will
cease to be outstanding. In the event that any Redemption Date of Trust
Preferred Securities is not a Business Day, then the applicable Redemption
Price payable on such date will be paid on the next succeeding day that is a
Business Day (and without any interest or other payment in respect of any such
delay), except that, if such Business Day falls in the next calendar year, such
payment will be made on the immediately preceding Business Day. In the event
that payment of the applicable Redemption Price is improperly withheld or
refused and not paid either by the Trust or by AGL Resources pursuant to the
Trust Preferred Guarantee as described under "Description of Trust Preferred
Guarantee," Distributions on Trust Preferred Securities will continue to
accumulate at the then applicable rate, from the Redemption Date originally
established by the Trust to the date such applicable Redemption Price is
actually paid, in which case the actual payment date will be the Redemption
Date for purposes of calculating the applicable Redemption Price.
Subject to applicable law (including, without limitation, United States
federal securities law), we may at any time and from time to time purchase
outstanding Trust Preferred Securities by tender, in the open market or by
private agreement.
Notice of any redemption will be mailed at least 10 days but not more
than 60 days prior to the Redemption Date to each holder of Trust Preferred
Securities at its registered address. Unless AGL Resources defaults in payment
of the applicable Prepayment Price on, or in the repayment of, the Junior
Subordinated Debentures, on and after the Redemption Date Distributions will
cease to accrue on the Trust Preferred Securities called for redemption.
Liquidation of the Trust and Distribution of Junior Subordinated Debentures
AGL Capital will have the right at any time to terminate the Trust and
cause the Junior Subordinated Debentures to be distributed to the holders of
the Trust Preferred Securities in liquidation of the Trust. Such right is
subject to AGL Capital having received an opinion of counsel to the effect that
such distribution will not be a taxable event to holders of Trust Preferred
Securities.
The Trust shall automatically terminate upon the first to occur of:
. certain events of bankruptcy, dissolution or liquidation of AGL
Capital;
. the distribution of a Like Amount of the Junior Subordinated
Debentures to the holders of the Trust Preferred Securities, if AGL
Capital, as Sponsor, has given written direction to the Property
Trustee to terminate the Trust (which direction is optional and,
except as described above, wholly within the discretion of AGL
Capital, as Sponsor);
. redemption of all of the Trust Preferred Securities as described
under "--Redemption";
. expiration of the term of the Trust; and
. the entry of an order for the dissolution of the Trust by a court of
competent jurisdiction.
If a termination occurs as described in the first, second, fourth or
fifth bullet above, the Trust shall be liquidated by the Trustees as soon as
practicable after the receipt of any required regulatory approval by
distributing, after satisfaction of liabilities to creditors of the Trust as
provided by applicable law, to the holders of the Trust Preferred Securities a
Like Amount of the Junior Subordinated Debentures, unless such distribution is
determined by the Property Trustee not to be practicable, in which event such
holders will be entitled to receive out of the assets of the Trust legally
available for distribution to holders, after satisfaction of liabilities to
creditors of the Trust as provided by applicable law, cash in an amount equal
to the aggregate of the Liquidation Amount plus accumulated and unpaid
Distributions thereon to the date of payment (such amount being the
"Liquidation Distribution"). If such Liquidation Distribution can be paid only
in part because the
19
Trust has insufficient assets on hand legally available to pay in full the
aggregate Liquidation Distribution, then the amounts payable directly by the
Trust on the Trust Preferred Securities and the Common Securities shall be paid
on a pro rata basis, except that if a Debenture Event of Default has occurred
and is continuing, the Trust Preferred Securities shall have a priority over
the Common Securities. See "--Subordination of Common Securities."
After the liquidation date is fixed for any distribution of Junior
Subordinated Debentures to holders of the Trust Preferred Securities:
. the Trust Preferred Securities will no longer be deemed to be
outstanding;
. each registered global certificate, if any, representing Trust
Preferred Securities and held by DTC or its nominee will receive a
registered global certificate or certificates representing the Junior
Subordinated Debentures to be delivered upon such distribution and
. any certificates representing Trust Preferred Securities not held by
DTC or its nominee will be deemed to represent Junior Subordinated
Debentures having a principal amount equal to the Liquidation Amount
of such Trust Preferred Securities, and bearing accrued and unpaid
interest in an amount equal to the accumulated and unpaid
Distributions on such Trust Preferred Securities until such
certificates are presented to the Administrative Trustees or their
agent for cancellation, whereupon AGL Capital will issue to such
holder, and the Debenture Trustee will authenticate, a certificate
representing such Junior Subordinated Debentures.
There can be no assurance as to the market prices for the Trust Preferred
Securities or the Junior Subordinated Debentures that may be distributed in
exchange for the Trust Securities if a dissolution and liquidation of the Trust
were to occur. Accordingly, the Trust Preferred Securities that an investor may
purchase, or the Junior Subordinated Debentures that the investor may receive
on dissolution and liquidation of the Trust, may trade at a discount to the
price that the investor paid to purchase the Trust Preferred Securities offered
hereby.
Subordination of Common Securities
Payment of Distributions on, and the Redemption Price of, the Trust
Preferred Securities and Common Securities, as applicable, shall be made pro
rata based on the Liquidation Amount of the Trust Preferred Securities and
Common Securities; provided, however, that if on any Distribution Date or
Redemption Date an Event of Default shall have occurred and be continuing, no
payment of any Distribution on, or applicable Redemption Price of, any of the
Common Securities, and no other payment on account of the redemption,
liquidation or other acquisition of the Common Securities, shall be made unless
payment in full in cash of all accumulated and unpaid Distributions on all of
the outstanding Trust Preferred Securities for all Distribution periods
terminating on or prior thereto, or in the case of payment of the applicable
Redemption Price the full amount of such Redemption Price, shall have been made
or provided for, and all funds available to the Property Trustee shall first be
applied to the payment in full in cash of all Distributions on, or Redemption
Price of, the Trust Preferred Securities then due and payable.
In the case of any Event of Default, AGL Capital as holder of the Common
Securities will be deemed to have waived any right to act with respect to such
Event of Default until the effect of such Event of Default shall have been
cured, waived or otherwise eliminated. Until any such Event of Default has been
so cured, waived or otherwise eliminated, the Property Trustee shall act solely
on behalf of the holders of the Trust Preferred Securities and not on behalf of
AGL Capital as holder of the Common Securities, and only the holders of the
Trust Preferred Securities will have the right to direct the Property Trustee
to act on their behalf.
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Events of Default; Notice
The occurrence of a Debenture Event of Default (see "Description of
Junior Subordinated Debentures--Junior Subordinated Debenture Events of
Default") constitutes an "Event of Default" under the Trust Agreement. We refer
to such an event as a "Trust Enforcement Event." In addition, the following
constitutes an Event of Default under the Trust Agreement:
. default by the Trust or the Property Trustee in the payment of any
Distribution when it becomes due and payable, and continuation of
such default for a period of 30 days;
. default by the Trust or the Property Trustee in the payment of any
Redemption Price of any Trust Security when it becomes due and
payable; or
. default in the performance, or breach, in any material respect, of
any other covenant or warranty of the Trustees in the Declaration,
and continuation of such default or breach for a period of 90 days
after notice to the defaulting Trustee or Trustees.
Within 90 days after the occurrence of any Event of Default actually
known to the Property Trustee, the Property Trustee shall transmit notice of
such Event of Default to the holders of the Trust Preferred Securities, the
Administrative Trustees and AGL Capital, as Sponsor, unless such Event of
Default shall have been cured or waived.
If a Debenture Event of Default has occurred and is continuing, the Trust
Preferred Securities shall have a preference over the Common Securities as
described under "--Liquidation of the Trust and Distribution of Junior
Subordinated Debentures" and "--Subordination of Common Securities."
For more information on events of default under the Indenture, see
"Description of Junior Subordinated Debentures--Junior Subordinated Debentures
Events of Default." Upon the occurrence and continuance of a Trust Enforcement
Event, the Property Trustee, as the sole holder of the Junior Subordinated
Debentures, will have the right under the Indenture to declare the principal
amount of the Junior Subordinated Debentures due and payable.
If the Property Trustee fails to enforce its rights under the Junior
Subordinated Debentures, the holders of Trust Preferred Securities may, to the
extent permitted by applicable law, institute a legal proceeding against AGL
Capital to enforce the Property Trustee's rights under the Junior Subordinated
Debentures and the Indenture without first instituting legal proceedings
against the Property Trustee or any other person. In addition, if a Trust
Enforcement Event is due to AGL Capital's failure to pay interest or principal
on the Junior Subordinated Debentures when due, then the registered holder of
Trust Preferred Securities may institute a direct action on or after the due
date directly against AGL Capital for enforcement of payment to that holder of
the principal of or interest on the Junior Subordinated Debentures having a
principal amount equal to the total liquidation amount of that holder's Trust
Preferred Securities. In connection with such a direct action, we will have the
right to set off any payment made to that holder by us.
Removal of Trustees
Unless a Debenture Event of Default shall have occurred and be
continuing, any Trustee may be removed at any time by the holders of the Common
Securities. If a Debenture Event of Default has occurred and is continuing, the
Property Trustee and the Delaware Trustee may be removed at such time by the
holders of a majority in Liquidation Amount of the outstanding Trust Preferred
Securities. In no event will the holders of the Trust Preferred Securities have
the right to vote to appoint, remove or replace the Administrative Trustees,
which voting rights are vested exclusively in AGL Capital as the holder of the
Common Securities. No resignation or removal of a Property Trustee or a
Delaware Trustee and no appointment of a successor trustee shall be effective
until the acceptance of appointment by the successor trustee in accordance with
the provisions of the Trust Agreement.
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Merger or Consolidation of Trustees
Any corporation into which the Property Trustee or the Delaware Trustee
or any Administrative Trustee that is not a natural person, may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Delaware or Property
Trustee shall be a party, or any corporation succeeding to all or substantially
all the corporate trust business of such Delaware or Property Trustee, shall be
the successor of such Delaware or Property Trustee under the Trust Agreement,
provided such corporation shall be otherwise qualified and eligible.
Mergers, Consolidations, Amalgamations or Replacements of the Trust
The Trust may not merge with or into, consolidate, amalgamate, or be
replaced by, or convey, transfer or lease its properties and assets as an
entirety or substantially as an entirety to any corporation or other Person,
except as described below. The Trust may, at the request of AGL Capital, as
Sponsor, with the consent of the Administrative Trustees but without the
consent of the holders of the Trust Preferred Securities, merge with or into,
consolidate, amalgamate, or be replaced by or convey, transfer or lease its
properties and assets as an entirety or substantially as an entirety to, a
trust organized as such under the laws of any State; provided, that:
. such successor entity either (a) expressly assumes all of the
obligations of the Trust with respect to the Trust Securities or (b)
substitutes for the Trust Securities other securities having
substantially the same terms as the Trust Preferred Securities (the
"Successor Securities") so long as the Successor Securities rank the
same as the Trust Preferred Securities rank in priority with respect
to distributions and payments upon liquidation, redemption and
otherwise,
. AGL Capital expressly appoints a trustee of such successor entity
possessing the same powers and duties as the Property Trustee as the
holder of the Junior Subordinated Debentures,
. the Trust Preferred Securities or any Successor Securities are
listed, or any Successor Securities will be listed upon notification
of issuance, on any national securities exchange, quotation system or
other organization on which the Trust Preferred Securities are then
listed or quoted, if any,
. such merger, consolidation, amalgamation, replacement, conveyance,
transfer or lease does not cause the Trust Preferred Securities
(including any Successor Securities) to be downgraded by any
nationally recognized statistical rating organization,
. such merger, consolidation, amalgamation, replacement, conveyance,
transfer or lease does not adversely affect the rights, preferences
and privileges of the holders of the Trust Preferred Securities
(including any Successor Securities) in any material respect,
. such successor entity has a purpose identical to that of the Trust,
(vii) prior to such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease, AGL Capital has received an opinion
from independent counsel to the Trust experienced in such matters to
the effect that (a) such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease does not adversely affect
the rights, preferences and privileges of the holders of the Trust
Preferred Securities (including any Successor Securities) in any
material respect, and (b) following such merger, consolidation,
amalgamation, replacement, conveyance, transfer or lease, neither the
Trust nor such successor entity will be required to register as an
investment company under the Investment Company Act of 1940, as
amended (the "Investment Company Act"), and
. AGL Resources, AGL Capital or any permitted successor or assignee
owns all of the common securities of such successor entity and
guarantees the obligations of such successor entity under the
Successor Securities at least to the extent provided by the
Guarantee.
Notwithstanding the foregoing, the Trust shall not, except with the
consent of holders of 100% in Liquidation Amount of the Trust Securities,
consolidate, amalgamate, merge with or into, or be replaced by, or
22
convey, transfer or lease its properties and assets as an entirety or
substantially as an entirety to any other entity or permit any other entity to
consolidate, amalgamate, merge with or into, or replace it if such
consolidation, amalgamation, merger, replacement, conveyance, transfer or lease
would cause the Trust or the successor entity not to be classified as a grantor
trust for United States federal income tax purposes.
Voting Rights; Amendment of the Trust Agreement
Except as provided below and under "--Mergers, Consolidations,
Amalgamations or Replacements of the Trust" and "Description of Guarantee--
Amendments and Assignment" and as otherwise required by law and the Trust
Agreement, the holders of the Trust Preferred Securities will have no voting
rights.
The Trust Agreement may be amended from time to time by the Delaware
Trustee or the Property Trustee, if affected by such amendment, or by the
Administrative Trustees, without the consent of the holders of the Trust
Preferred Securities:
. to cure any ambiguity, correct or supplement any provisions in the
Trust Agreement that may be inconsistent with any other provision, or
to make any other provisions with respect to matters or questions
arising under the Trust Agreement, which shall not be inconsistent
with the other provisions of the Trust Agreement, or
. to modify, eliminate or add to any provisions of the Trust Agreement
to such extent as shall be necessary to ensure that the Trust will be
classified for United States federal income tax purposes as a grantor
trust at all times that any Trust Securities are outstanding or to
ensure that the Trust will not be required to register as an
"investment company" under the Investment Company Act provided,
however, that such action shall not adversely affect in any material
respect the interests of the holders of the Trust Securities, and any
amendments of the Trust Agreement shall become effective when notice
thereof is given to the holders of the Trust Securities.
The Trust Agreement may be amended by the Administrative Trustees and AGL
Capital:
. with the consent of holders representing a majority (based upon
Liquidation Amount) of the outstanding Trust Preferred Securities,
and
. upon receipt by the Administrative Trustees of an opinion of counsel
to the effect that such amendment or the exercise of any power
granted to the Administrative Trustees in accordance with such
amendment will not affect the Trust's status as a grantor trust for
United States federal income tax purposes or the Trust's exemption
from status as an "investment company" under the Investment Company
Act.
However, without the consent of each holder of Trust Preferred
Securities, the Trust Agreement may not be amended to:
. change the amount or timing of any Distribution on the Trust
Preferred Securities or otherwise adversely affect the amount of any
Distribution required to be made in respect of the Trust Preferred
Securities as of a specified date or
. restrict the right of a holder of Trust Preferred Securities to
institute suit for the enforcement of any such payment on or after
such date.
So long as any Junior Subordinated Debentures are held by the Property
Trustee, the Administrative Trustees shall not:
. direct the time, method and place of conducting any proceeding for
any remedy available to the Indenture Trustee, or executing any trust
or power conferred on such Property Trustee with respect to the
Junior Subordinated Debentures,
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. waive certain past defaults under the Indenture,
. exercise any right to rescind or annul a declaration of acceleration
of the maturity of the principal of the Junior Subordinated
Debentures or
. consent to any amendment, modification or termination of the
Indenture or the Junior Subordinated Debentures, where such consent
shall be required, without, in each case, obtaining the prior
approval of the holders of a majority in Liquidation Amount of all
outstanding Trust Preferred Securities provided, however, that where
a consent under the Indenture would require the consent of each
holder of Junior Subordinated Debentures affected thereby, no such
consent shall be given by the Property Trustee without the prior
approval of each holder of the Trust Preferred Securities.
The Administrative Trustees shall not revoke any action previously
authorized or approved by a vote of the holders of the Trust Preferred
Securities except by subsequent vote of such holders. The Property Trustee
shall notify each holder of Trust Preferred Securities of any notice of default
with respect to the Junior Subordinated Debentures. In addition to obtaining
the foregoing approvals of such holders of the Trust Preferred Securities,
prior to taking any of the foregoing actions, the Administrative Trustees shall
obtain an opinion of counsel experienced in such matters to the effect that the
Trust will not be classified as an association taxable as a corporation for
United States federal income tax purposes on account of such action.
Any required approval of holders of Trust Preferred Securities may be
given at a meeting of such holders convened for such purpose or pursuant to
written consent. The Property Trustee will cause a notice of any meeting at
which holders of Trust Preferred Securities are entitled to vote, or of any
matter upon which action by written consent of such holders is to be taken, to
be given to each holder of record of Trust Preferred Securities in the manner
set forth in the Trust Agreement.
No vote or consent of the holders of Trust Preferred Securities will be
required for the Trust to redeem and cancel the Trust Preferred Securities in
accordance with the Trust Agreement.
Notwithstanding that holders of the Trust Preferred Securities are
entitled to vote or consent under any of the circumstances described above, any
of the Trust Preferred Securities that are owned by AGL Resources, AGL Capital,
the Administrative Trustees or any affiliate of AGL Resources or any
Administrative Trustees, shall, for purposes of such vote or consent, be
treated as if they were not outstanding.
Form, Denomination, Book-Entry Procedures and Transfer
Depositary Procedures
The Depository Trust Company ("DTC") will act as securities depositary
for the Trust Preferred Securities. DTC has advised the Trust and AGL Capital
that DTC is a limited-purpose trust company created to hold securities for its
participating organizations (collectively, the "Participants") and to
facilitate the clearance and settlement of transactions in those securities
between Participants through electronic book-entry changes in accounts of its
Participants. The Participants include securities brokers and dealers
(including the Initial Purchasers), banks, trust companies, clearing
corporations and certain other organizations. Access to DTC's system is also
available to other entities such as banks, brokers, dealers and trust companies
that clear through or maintain a custodial relationship with a Participant,
either directly or indirectly (collectively, the "Indirect Participants").
Persons who are not Participants may beneficially own securities held by or on
behalf of DTC only through the Participants or the Indirect Participants. The
ownership interest and transfer of ownership interest of each actual purchaser
of each security held by or on behalf of DTC are recorded on the records of the
Participants and Indirect Participants.
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DTC is organized under the New York Banking Law, a "banking organization"
within the meaning of the New York Banking Law, a member of the Federal Reserve
System, a "clearing corporation" within the meaning of the New York Uniform
Commercial Code, and a "clearing agency" registered pursuant to the provisions
of Section 17A of the Exchange Act. DTC is owned by a number of participants
and by the New York Stock Exchange, the American Stock Exchange, Inc., and the
National Association of Securities Dealers, inc. The rules applicable to DTC
and its participants are on file with the Securities and Exchange Commission.
DTC has also advised the Trust and AGL Capital that, pursuant to
procedures established by it, (i) upon deposit of the Global Trust Preferred
Securities, DTC will credit the accounts of Participants designated by the
Initial Purchasers with portions of the Liquidation Amount of the Global Trust
Preferred Securities and (ii) ownership of such interests in the Global Trust
Preferred Securities will be shown on, and the transfer of ownership thereof
will be effected only through, records maintained by DTC (with respect to the
Participants) or by the Participants and the Indirect Participants (with
respect to other owners of beneficial interests in the Global Trust Preferred
Securities).
Investors in the Global Trust Preferred Securities may hold their
interests therein directly through DTC if they are Participants, or indirectly
through organizations which are Participants. All interests in a Global Trust
Preferred Security may be subject to the procedures and requirements of DTC.
The laws of some states require that certain persons take physical delivery in
certificated form of securities that they own. Consequently, the ability to
transfer beneficial interests in a Global Trust Preferred Security to such
persons will be limited to that extent. Because DTC can act only on behalf of
Participants, which in turn act on behalf of Indirect Participants and certain
banks, the ability of a person having beneficial interests in a Global Trust
Preferred Security to pledge such interests to persons or entities that do not
participate in the DTC system, or otherwise take actions in respect of such
interests, may be affected by the lack of a physical certificate evidencing
such interests. For certain other restrictions on the transferability of the
Trust Preferred Securities, see "--Exchange of Book-Entry Trust Preferred
Securities for Certificated Trust Preferred Securities" and "--Exchange of
Certificated Trust Preferred Securities for Book-Entry Trust Preferred
Securities."
Except as described below, owners of interests in the Global Trust
Preferred Securities will not have Trust Preferred Securities registered in
their name, will not receive physical delivery of Trust Preferred Securities in
certificated form and will not be considered the registered owners or holders
thereof under the Trust Agreement for any purpose.
The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of securities in definitive form. Such laws
may impair the ability to transfer beneficial interests in a Global Trust
Preferred Security.
Payments in respect of the Global Trust Preferred Security registered in
the name of DTC or its nominee will be payable by the Property Trustee to DTC
in its capacity as the registered holder under the Trust Agreement. Under the
terms of the Trust Agreement, the Property Trustee will treat the persons in
whose names the Trust Preferred Securities, including the Global Trust
Preferred Securities, are registered as the owners thereof for the purpose of
receiving such payments and for any and all other purposes whatsoever.
Consequently, neither the Property Trustee nor any agent thereof has or will
have any responsibility or liability for:
. any aspect of DTC's records or any Participant's or Indirect
Participant's records relating to or payments made on account of
beneficial ownership interests in the Global Trust Preferred
Securities, or for maintaining, supervising or reviewing any of DTC's
records or any Participant's or Indirect Participant's records
relating to the beneficial ownership interests in the Global Trust
Preferred Securities or
. any other matter relating to the actions and practices of DTC or any
of its Participants or Indirect Participants.
25
DTC has advised the Trust and AGL Capital that its current practice, upon
receipt of any payment in respect of securities such as the Trust Preferred
Securities, is to credit the accounts of the relevant Participants with the
payment on the payment date, in amounts proportionate to their respective
holdings in Liquidation Amount of beneficial interests in the relevant security
as shown on the records of DTC unless DTC has reason to believe it will not
receive payment on such payment date. Payments by the Participants and the
Indirect Participants to the beneficial owners of Trust Preferred Securities
will be governed by standing instructions and customary practices and will be
the responsibility of the Participants or the Indirect Participants and will
not be the responsibility of DTC, the Property Trustee, the Trust, AGL Capital
or AGL Resources. Neither the Trust, AGL Capital or AGL Resources nor the
Property Trustee will be liable for any delay by DTC or any of its Participants
in identifying the beneficial owners of the Trust Preferred Securities, and the
Trust or AGL Capital and the Property Trustee may conclusively rely on and will
be protected in relying on instructions from DTC or its nominee for all
purposes.
Secondary market trading activity in interests in the Global Trust
Preferred Securities will settle in immediately available funds, subject in all
cases to the rules and procedures of DTC and its participants. Transfers
between Participants in DTC will be effected in accordance with DTC's
procedures, and will be settled in same-day funds.
DTC has advised the Trust and AGL Capital that it will take any action
permitted to be taken by a holder of Trust Preferred Securities only at the
direction of one or more Participants to whose account with DTC interests in
the Global Trust Preferred Securities are credited and only in respect of such
portion of the Liquidation Amount of the Trust Preferred Securities as to which
such Participant or Participants has or have given such direction. However, if
there is an Event of Default under the Trust Agreement, DTC reserves the right
to exchange the Global Trust Preferred Securities for legended Trust Preferred
Securities in certificated form and to distribute such Trust Preferred
Securities to its Participants.
The information in this section concerning DTC and its book-entry systems
has been obtained from sources that the Trust and AGL Capital believe to be
reliable, but neither the Trust nor AGL Capital takes responsibility for the
accuracy thereof.
Although DTC has agreed to the foregoing procedures to facilitate
transfers of interest in the Global Trust Preferred Securities among
participants in DTC, they are under no obligation to perform or to continue to
perform such procedures, and such procedures may be discontinued at any time.
Neither the Trust or AGL Capital nor the Property Trustee will have any
responsibility for the performance by DTC or its participants or indirect
participants of their respective obligations under the rules and procedures
governing their operations.
Exchange of Book-Entry Trust Preferred Securities for Certificated Trust
Preferred Securities
A Global Trust Preferred Security is exchangeable for Trust Preferred
Securities in registered certificated form if:
. DTC notifies the Trust that it is unwilling or unable to continue as
Depositary for the Global Trust Preferred Security and the Trust
thereupon fails to appoint a successor Depositary within 90 days or
has ceased to be a clearing agency registered under the Exchange Act,
. AGL Capital in its sole discretion elects to cause the issuance of
the Trust Preferred Securities in certificated form or
. there shall have occurred and be continuing an Event of Default or
any event which after notice or lapse of time or both would be an
Event of Default under the Trust Agreement.
26
Payment and Paying Agency
Payments in respect of the Trust Preferred Securities held in global form
shall be made to the Depositary, which shall credit the relevant accounts at
the Depositary on the applicable Distribution Dates or in respect of the Trust
Preferred Securities that are not held by the Depositary, such payments shall
be made by check mailed to the address of the holder entitled thereto as such
address shall appear on the register. The paying agent (the "Paying Agent")
shall initially be the Property Trustee and any co-paying agent chosen by the
Property Trustee and acceptable to the Administrative Trustees and AGL Capital.
The Paying Agent shall be permitted to resign as Paying Agent upon 30 days'
written notice to the Property Trustee and AGL Capital. In the event that the
Property Trustee shall no longer be the Paying Agent, the Administrative
Trustees shall appoint a successor (which shall be a bank or trust company
acceptable to the Administrative Trustees and AGL Capital) to act as Paying
Agent.
Information Concerning the Property Trustee
The Property Trustee, other than during the occurrence and continuance of
an Event of Default, undertakes to perform only such duties as are specifically
set forth in the Trust Agreement and, after such Event of Default, must
exercise the same degree of care and skill as a prudent person would exercise
or use in the conduct of his or her own affairs. Subject to this provision, the
Property Trustee is under no obligation to exercise any of the powers vested in
it by the Trust Agreement at the request of any holder of Trust Preferred
Securities unless it is offered indemnity reasonably satisfactory to it against
the costs, expenses and liabilities that might be incurred thereby. If no Event
of Default has occurred and is continuing and the Property Trustee is required
to decide between alternative causes of action, construe ambiguous provisions
in the Trust Agreement or is unsure of the application of any provision of the
Trust Agreement, and the matter is not one on which holders of the Trust
Preferred Securities or the Common Securities are entitled under the Trust
Agreement to vote, then the Property Trustee shall take such action as is
directed by AGL Capital and if not so directed, shall take such action as it
deems advisable and in the best interests of the holders of the Trust Preferred
Securities and will have no liability except for its own bad faith, negligence
or willful misconduct.
Miscellaneous
The Administrative Trustees are authorized and directed to conduct the
affairs of and to operate the Trust in such a way that the Trust will not be
deemed to be an "investment company" required to be registered under the
Investment Company Act or classified as an association taxable as a corporation
for United States federal income tax purposes and so that the Junior
Subordinated Debentures will be treated as indebtedness for United States
federal income tax purposes. AGL Capital and the Administrative Trustees are
authorized to take any action, not inconsistent with applicable law, the
certificate of trust of the Trust or the Trust Agreement, that AGL Capital and
the Administrative Trustees determine in their discretion to be necessary or
desirable for such purposes, as long as such action does not materially
adversely affect the interests of the holders of the Trust Preferred
Securities.
Holders of the Trust Preferred Securities have no preemptive or similar
rights. The Trust may not borrow money, issue debt, execute mortgages or pledge
any of its assets.
Governing Law
The Trust Agreement will be governed by and construed in accordance with
the laws of the State of Delaware.
DESCRIPTION OF JUNIOR SUBORDINATED DEBENTURES
The Junior Subordinated Debentures are to be issued under an Indenture,
as supplemented from time to time (as so supplemented, the "Indenture"),
between AGL Capital and The Bank of New York, as trustee
27
(the "Debenture Trustee"). The Indenture will be qualified under the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"). This summary of
certain terms and provisions of the Junior Subordinated Debentures and the
Indenture does not purport to be complete, and where reference is made to
particular provisions of the Indenture, such provisions, including the
definitions of certain terms, some of which are not otherwise defined herein,
are qualified in their entirety by reference to all of the provisions of the
Indenture and those terms made a part of the Indenture by the Trust Indenture
Act.
General
Concurrently with the issuance of the Trust Preferred Securities, the
Trust will invest the proceeds thereof, together with the consideration paid by
AGL Capital for the Common Securities, in Junior Subordinated Debentures issued
by AGL Capital. The Junior Subordinated Debentures will bear interest at the
annual rate of 8% of the principal amount thereof, will accumulate from May 21,
2001 and will be payable quarterly in arrears on February 15, May 15, August 15
and November 15 of each year (each, an "Interest Payment Date"), commencing
August 15, 2001, to the person in whose name each Junior Subordinated Debenture
is registered, subject to certain exceptions, on the record date preceding the
relevant payment date. It is anticipated that, until the liquidation, if any,
of the Trust, each Junior Subordinated Debenture will be held in the name of
the Property Trustee in trust for the benefit of the holders of the Trust
Securities. The amount of interest payable for any period will be computed on
the basis of a 360-day year of twelve 30-day months. In the event that any date
on which interest is payable on the Junior Subordinated Debentures is not a
Business Day, then payment of the interest payable on such date will be made on
the next succeeding day that is a Business Day (and without any interest or
other payment in respect of any such delay) with the same force and effect as
if made on the date such payment was originally payable. The term "interest",
as used herein, shall include quarterly interest payments, interest on
quarterly payments not paid on the applicable Interest Payment Date and
Additional Sums (as defined below), as applicable.
The Junior Subordinated Debentures will be issued in denominations of
$25.00 and integral multiples thereof. The Junior Subordinated Debentures will
mature on May 15, 2041 (the "Stated Maturity Date").
The Junior Subordinated Debentures will rank equal in priority with all
Other Debentures and will be unsecured and subordinate and junior in right of
payment to the extent and in the manner set forth in the Indenture to all
Senior Indebtedness. See "--Subordination." AGL Resources will guarantee on a
junior subordinated basis the payment of the principal (and premium, if any)
and interest on the Junior Subordinated Debentures, except that no payment of
interest will be made under the Debenture Guarantee for any period during which
AGL Capital has exercised its right to defer interest payments on the Junior
Subordinated Debentures.. AGL Capital is a wholly-owned finance subsidiary of
AGL Resources. AGL Resources is a holding company and almost all of its
operating assets are owned by its subsidiaries. AGL Resources relies primarily
on dividends from such subsidiaries to meet its obligations. AGL Resources is a
legal entity separate and distinct from its subsidiaries. The principal sources
of AGL Resources' income are dividends and fees from its subsidiaries.
The right of AGL Resources and AGL Capital to participate in any
distribution of assets of any subsidiary upon such subsidiary's liquidation or
reorganization or otherwise, is subject to the prior claims of creditors of the
subsidiary, except to the extent AGL Resources and AGL Capital may be
recognized as a creditor of that subsidiary. Accordingly, the Junior
Subordinated Debentures will be effectively subordinated to all existing and
future liabilities of AGL Capital's subsidiaries, and holders of Junior
Subordinated Debentures should look only to the assets of AGL Capital for
payments on the Junior Subordinated Debentures. The Indenture does not limit
the incurrence or issuance of other secured or unsecured debt of AGL Resources
or AGL Capital, including Senior Indebtedness. See "--Subordination."
28
The Indenture does not contain provisions that afford holders of the
Junior Subordinated Debentures protection in the event of a highly leveraged
transaction or other similar transactions involving AGL Resources or AGL
Capital that may adversely affect such holders.
Form, Registration and Transfer
If the Junior Subordinated Debentures are distributed to the holders of
the Trust Preferred Securities, the Junior Subordinated Debentures may be
represented by one or more global certificates registered in the name of Cede &
Co. as the nominee of DTC. The depositary arrangements for such Junior
Subordinated Debentures are expected to be substantially similar to those in
effect for the Trust Preferred Securities. For a description of DTC and the
terms of the depositary arrangements relating to payments, transfers, voting
rights, redemptions and other notices and other matters, see "Description of
Trust Preferred Securities--Form, Denomination, Book-Entry Procedures and
Transfer" and "Depositary Procedures."
Payment and Paying Agents
Payment of principal of (and premium, if any) and any interest on Junior
Subordinated Debentures will be made at the office of the Debenture Trustee in
The City of New York or at the office of such Paying Agent or Paying Agents as
AGL Capital may designate from time to time, except that at the option of AGL
Capital payment of any interest may be made except in the case of Junior
Subordinated Debentures in global form, by:
. check mailed to the address of the Person entitled thereto as such
address shall appear in the register for Junior Subordinated
Debentures or
. by transfer to an account maintained by the Person entitled thereto
as specified in such register, provided that proper transfer
instructions have been received by the relevant Record Date.
Payment of any interest on any Junior Subordinated Debenture will be made
to the Person in whose name such Junior Subordinated Debenture is registered at
the close of business on the Record Date for such interest, except in the case
of defaulted interest. AGL Capital may at any time designate additional Paying
Agents or rescind the designation of any Paying Agent; however AGL Capital will
at all times be required to maintain a Paying Agent in each Place of Payment
for the Junior Subordinated Debentures.
Any moneys deposited with the Debenture Trustee or any Paying Agent, or
then held by AGL Capital in trust, for the payment of the principal of (and
premium, if any) or interest on any Junior Subordinated Debenture and remaining
unclaimed for two years after such principal (and premium, if any) or interest
has become due and payable shall, at the request of AGL Capital, be repaid to
AGL Capital and the holder of such Junior Subordinated Debenture shall
thereafter look, as a general unsecured creditor, only to AGL Capital for
payment thereof.
Option to Extend Interest Payment Date
So long as no Event of Default has occurred and is continuing, AGL
Capital will have the right under the Indenture at any time during the term of
the Junior Subordinated Debentures to defer the payment of interest at any time
or from time to time for a period not exceeding 20 consecutive quarters with
respect to each Extended Interest Payment Period, provided that no Extended
Interest Payment Period may extend beyond the Stated Maturity Date. At the end
of such Extended Interest Payment Period, AGL Capital must pay all interest
then accrued and unpaid (together with interest thereon at the annual rate of
8%, compounded quarterly, to the extent permitted by applicable law).
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During any such Extended Interest Payment Period, neither AGL Resources
nor AGL Capital may:
. declare or pay any dividends or distributions on, or redeem,
purchase, acquire, or make a liquidation payment with respect to, any
of its capital stock (which includes common and preferred stock); or
. make any payment of principal, interest or premium, if any, on or
repay, repurchase or redeem any of its debt securities that rank
equal in priority with or junior in right of payment to, with respect
to AGL Capital, the Junior Subordinated Debentures or with respect to
AGL Resources, debt that is subordinated to its Senior Indebtedness;
or
. make any guarantee payments with respect to any guarantee of the debt
securities of any of their respective subsidiaries if such guarantee
ranks equal in priority with or junior in right of payment to, with
respect to AGL Capital, the Junior Subordinated Debentures or with
respect to AGL Resources, debt that is subordinated to its Senior
Indebtedness (other than (a) dividends or distributions in shares of,
or options, warrants or rights to subscribe for or purchase shares
of, common stock, (b) any declaration of a dividend in connection
with the implementation of a stockholders' rights plan, or the
issuance of stock under any such plan in the future, or the
redemption or repurchase of any such rights pursuant thereto, (c)
payments under the Guarantee, (d) the purchase of fractional shares
resulting from a reclassification of capital stock or the exchange or
conversion of one class or series of capital stock for another class
or series of capital stock and (e) the purchase of fractional
interests in shares of capital stock pursuant to the conversion or
exchange provisions of such capital stock or the security being
converted or exchanged).
Prior to the termination of any such Extended Interest Payment Period,
AGL Capital may further extend such Extended Interest Payment Period, provided
that such extension does not cause such Extended Interest Payment Period to
exceed 20 consecutive periods including the first quarter during such Extended
Interest Payment Period, or to extend beyond the Stated Maturity Date. Upon
the termination of any such Extended Interest Payment Period and the payment
of all amounts then due on any Interest Payment Date, AGL Capital may elect to
begin a new Extended Interest Payment Period, subject to the above
requirements. No interest shall be due and payable during an Extended Interest
Payment Period, except at the end thereof, but AGL Capital may prepay at any
time all or any portion of the interest accrued during an Extended Interest
Payment Period. AGL Capital must give the Property Trustee, the Administrative
Trustees and the Debenture Trustee notice of its election of any Extended
Interest Payment Period (or an extension thereof) at least five Business Days
prior to the earlier of:
. the date the Distributions on the Trust Preferred Securities would
have been payable except for the election to begin or extend such
Extended Interest Payment Period or
. the date the Administrative Trustees are required to give notice to
any securities exchange or other quotation system or to holders of
Trust Preferred Securities of the record date or the date such
Distributions are payable, but in any event not less than one
Business Day prior to such record date. The Debenture Trustee shall
give notice of AGL Capital's election to begin or extend a new
Extended Interest Payment Period to the holders of the Trust
Preferred Securities. There is no limitation on the number of times
that AGL Capital may elect to begin an Extended Interest Payment
Period.
Optional Redemption
The Junior Subordinated Debentures will be prepayable, in whole or in
part, at the option of AGL Resources on or after May 21, 2006 (the "Initial
Optional Redemption Date"), at a redemption price (the "Optional Redemption
Price") equal to the percentage of the outstanding principal amount of the
Junior Subordinated Debentures plus accrued and unpaid interest thereon to the
date of prepayment.
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Special Event Redemption
If a Tax Event or an Investment Company Act Event shall occur and be
continuing, AGL Capital may, at its option, redeem the Junior Subordinated
Debentures in whole (but not in part) and thereby cause the mandatory
redemption of the Trust Preferred Securities and the Common Securities in whole
(but not in part) at any time and within 90 days following the occurrence of
such Tax Event or Investment Company Act Event at the Special Event Redemption
Price. Following a Tax Event or an Investment Company Act Event, AGL Capital
shall take such action as is necessary to promptly determine the Special Event
Redemption Price. The Special Event Redemption Price shall be paid prior to
12:00 noon, New York time, on the date of such redemption or such earlier time
as AGL Capital determines, provided that AGL Capital shall deposit with the
Trustee an amount sufficient to pay the Special Event Redemption Price by 10:00
a.m., New York time, on the date such Special Event Prepayment Price is to be
paid. The Company shall provide the Debenture Trustee with written notice of
the Special Event Redemption Price promptly after the calculation thereof.
A "Tax Event" means the receipt by AGL Capital and the Trust of an
opinion of counsel experienced in such matters to the effect that, as a result
of any amendment to, or change (including any announced prospective change) in,
the laws or any regulations thereunder of the United States or any political
subdivision or taxing authority thereof or therein, or as a result of any
official administrative pronouncement or judicial decision interpreting or
applying such laws or regulations, which amendment or change is effective or
such pronouncement or decision is announced or made effective on or after the
Issue Date, there is more than an insubstantial risk that:
. the Trust is, or will be within 90 days of the date of such opinion,
subject to United States federal income tax with respect to all or
part of the income received or accrued on the Junior Subordinated
Debentures or the Trust Preferred Securities,
. interest payable by AGL Capital on the Junior Subordinated Debentures
or the Trust Preferred Securities is not, or within 90 days of the
date of such opinion will not be, deductible by AGL Capital , in
whole or in part, for United States federal income tax purposes, or
. the Trust is, or will be within 90 days of the date of such opinion,
subject to more than a de minimis amount of other taxes, duties or
other governmental charges.
An "Investment Company Act Event" means the receipt by AGL Capital and
the Trust of an opinion of counsel experienced in such matters to the effect
that, as a result of the occurrence of a change in law or regulation or a
change in interpretation or application of law or regulation by any legislative
body, court, governmental agency or regulatory authority, there is more than an
insubstantial risk that the Trust is or will be considered an "investment
company" that is required to be registered under the Investment Company Act,
which change becomes effective on or after the Issue Date of the Trust
Preferred Securities.
Notice of any prepayment will be mailed at least 30 days but not more
than 60 days before the redemption date to each holder of Junior Subordinated
Debentures to be prepaid at its registered address. Unless AGL Capital defaults
in payment of the prepayment price, on and after the prepayment date interest
ceases to accrue on such Junior Subordinated Debentures called for prepayment.
Restrictions on Certain Payments
Neither AGL Capital nor AGL Resources may (i) declare or pay any
dividends or distributions on, or redeem, purchase, acquire, or make a
liquidation payment with respect to, any of its respective capital stock (which
includes common and preferred stock) or (ii) make any payment of principal,
interest or premium, if any, on or repay or repurchase or redeem any of its
debt securities that rank equal in priority with or junior in right of payment
to, with respect to AGL Capital, the Junior Subordinated Debentures or with
respect to AGL Resources, debt that is subordinated to its Senior Indebtedness
or (iii) make any guarantee payments with respect to any guarantees of the debt
securities of any of their respective subsidiaries if such guarantee ranks
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equal in priority or junior in right of payment to, with respect to AGL
Capital, the Junior Subordinated Debentures or with respect to AGL Resources,
debt that is subordinated to its Senior Indebtedness (other than (a) dividends
or distributions in shares of, or options, warrants or rights to subscribe for
or purchase shares of, common stock, (b) any declaration of a dividend in
connection with the implementation of a stockholder's rights plan, or the
issuance of stock under any such plan in the future, or the redemption or
repurchase of any such rights pursuant thereto, (c) payments under the
Guarantee, (d) the purchase of fractional shares resulting from a
reclassification capital stock or the exchange or conversion of one class or
series of capital stock for another class or series capital stock and (e) the
purchase of fractional interests in shares of capital stock pursuant to the
conversion or exchange provisions of such capital stock or the security being
converted or exchanged), if at such time (1) there shall have occurred and be
continuing a Trust Agreement Event of Default, (2) there shall have occurred
and be continuing a Debenture Event of Default, (3) there shall have occurred
and be continuing a payment default under the Trust Agreement or the Indenture,
(4) if such Junior Subordinated Debentures are held by the Trust, AGL Resources
shall be in default with respect to its payment of any obligations under the
Guarantee or (5) AGL Capital shall have given notice of its election of an
Extended Interest Payment Period as provided in the Indenture and shall not
have rescinded such notice, and such Extended Interest Payment Period, or any
extension thereof, shall have commenced.
Modification of Indenture
From time to time AGL Capital and the Debenture Trustee may, without the
consent of the holders of Junior Subordinated Debentures, amend, waive or
supplement the Indenture for specified purposes, including, among other things,
curing ambiguities, defects or inconsistencies (provided that any such action
does not materially adversely affect the interest of the holders of Junior
Subordinated Debentures) and qualifying, or maintaining the qualification of,
the Indenture under the Trust Indenture Act. The Indenture contains provisions
permitting AGL Capital and the Debenture Trustee, with the consent of the
holders of a majority in principal amount of Junior Subordinated Debentures, to
modify the Indenture in a manner affecting the rights of the holders of Junior
Subordinated Debentures; provided, that no such modification may, without the
consent of the holders of each outstanding Junior Subordinated Debenture so
affected:
. extend the Stated Maturity, or reduce the principal amount of the
Junior Subordinated Debentures or reduce the rate or extend the time
of payment of interest thereon, or reduce any amount payable on
redemption, or impair or affect the right of any holder of Junior
Subordinated Debentures to institute suit for payment or
. reduce the percentage of principal amount of Junior Subordinated
Debentures, the holders of which are required to consent to any such
modification of the Indenture.
Junior Subordinated Debenture Events of Default
The Indenture provides that any one or more of the following described
events with respect to the Junior Subordinated Debentures constitutes a
"Debenture Event of Default" (whatever the reason for such Debenture Event of
Default and whether it shall be voluntary or involuntary or be effected by
operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
. failure for 30 days to pay any interest on the Junior Subordinated
Debentures or any Other Debentures, when due (subject to the deferral
of any due date in the case of an Extended Interest Payment Period);
or
. failure to pay any principal or premium, if any, on the Junior
Subordinated Debentures or any Other Debentures within three Business
Days of when due whether at maturity, upon redemption, by declaration
of acceleration of maturity or otherwise; or
32
. failure to observe or perform in any material respect certain other
covenants or warranties contained in the Indenture for 90 days after
written notice to AGL Capital from the Debenture Trustee or the
holders of at least 25% in aggregate outstanding principal amount of
Junior Subordinated Debentures; or
. certain events of bankruptcy, insolvency or reorganization of AGL
Capital.
The Debenture Trustee or the holders of not less than 33% in aggregate
outstanding principal amount of the Junior Subordinated Debentures may declare
the principal due and payable immediately upon a Debenture Event of Default.
The holders of a majority in aggregate outstanding principal amount of the
Junior Subordinated Debentures may annul such declaration and waive the default
if the default (other than the non-payment of the principal of the Junior
Subordinated Debentures which has become due solely by such acceleration) has
been cured, waived or otherwise remedied and a sum sufficient to pay all
matured installments of interest and principal due otherwise than by
acceleration has been deposited with the Debenture Trustee.
The holders of a majority in aggregate outstanding principal amount of
the Junior Subordinated Debentures affected thereby may, on behalf of the
holders of all the Junior Subordinated Debentures, waive any past default,
except a default in the payment of principal (or premium, if any) on or
interest (unless such default has been cured and a sum sufficient to pay all
matured installments of interest (and premium, if any) and principal due
otherwise than by acceleration has been deposited with the Debenture Trustee)
or a default in respect of a covenant or provision which under the Indenture
cannot be modified or amended without the consent of the holder of each
outstanding Junior Subordinated Debenture.
Guarantee of Junior Subordinated Debenture Payments by AGL Resources
If a Debenture Event of Default shall have occurred and be continuing and
shall be attributable to the failure of AGL Capital to pay interest (or
premium, if any) on principal of the Junior Subordinated Debentures on the due
date, AGL Resources will guarantee on a junior subordinated basis the payment
of the principal (and premium, if any) and interest on the Junior Subordinated
Debentures, except that no payment of interest will be made under the Debenture
Guarantee for any period during which AGL Capital has exercised its right to
defer interest payments on the Junior Subordinated Debentures.
Consolidation, Merger, Sale of Assets and Other Transactions
The Indenture provides that AGL Capital shall not consolidate with or
merge into any other Person or convey, transfer or lease its properties and
assets as an entirety or substantially as an entirety to any Person, and no
Person shall consolidate with or merge into AGL Capital or convey, transfer or
lease its properties and assets as an entirety or substantially as an entirety
to AGL Capital, unless:
. in case AGL Capital consolidates with or merges into another Person
or conveys or transfers its properties and assets substantially as an
entirety to any Person, the successor Person is organized under the
laws of the United States or any State or the District of Columbia,
and such successor Person expressly assumes AGL Capital's obligations
on the Junior Subordinated Debentures;
. immediately after giving effect thereto, no Debenture Event of
Default, and no event which, after notice or lapse of time or both,
would become a Debenture Event of Default, shall have occurred and be
continuing; and
. certain other conditions as prescribed in the Indenture are met.
The general provisions of the Indenture do not afford holders of the
Junior Subordinated Debentures protection in the event of a highly leveraged or
other transaction involving AGL Capital's that may adversely affect holders of
the Junior Subordinated Debentures.
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Satisfaction and Discharge
The Indenture provides that when, among other things, all Junior
Subordinated Debentures not previously delivered to the Debenture Trustee for
cancellation:
. have become due and payable or
. will become due and payable at maturity within one year, and AGL
Capital deposits or causes to be deposited with the Debenture Trustee
funds, in trust, for the purpose and in an amount sufficient to pay
and discharge the entire indebtedness on the Junior Subordinated
Debentures not previously delivered to the Debenture Trustee for
cancellation, for the principal (and premium, if any) and interest to
the date of the deposit or to the Stated Maturity Date, as the case
may be, then the Indenture will cease to be of further effect (except
as to AGL Capital's obligations to pay all other sums due pursuant to
the Indenture and to provide the officers' certificates and opinions
of counsel described therein), and AGL Capital will be deemed to have
satisfied and discharged the Indenture.
Subordination
The Indenture provides that the Junior Subordinated Debentures issued
thereunder will be subordinate and junior in right of payment to all Senior
Indebtedness of AGL Capital. No payment of principal (including redemption
payments), premium, if any, or interest on the Junior Subordinated Debentures
may be made at any time when:
. any Senior Indebtedness of AGL Capital is not paid when due,
. any applicable grace period with respect to such default has ended
and such default has not been cured or waived or ceased to exist, or
. the maturity of any Senior Indebtedness of AGL Capital has been
accelerated because of a default.
Upon any distribution of assets to creditors upon any liquidation,
dissolution, winding up, reorganization, assignment for the benefit of
creditors, marshaling of assets or any bankruptcy, insolvency, debt
restructuring or similar proceedings in connection with any insolvency or
bankruptcy proceeding of AGL Capital, all Senior Indebtedness of AGL Capital
must be paid in full before the holders of the Junior Subordinated Debentures
are entitled to receive or retain any payment in respect thereof.
In the event of the acceleration of the maturity of Junior Subordinated
Debentures, the holders of all Senior Indebtedness of AGL Capital outstanding
at the time of such acceleration will first be entitled to receive payment in
full before the holders of Junior Subordinated Debentures will be entitled to
receive or retain any payment in respect of the Junior Subordinated Debentures.
"Senior Indebtedness" shall mean with respect to an obligor, (i) the
principal, premium, if any, and interest in respect of (A) indebtedness of such
obligor for money borrowed, and (B) indebtedness evidenced by securities,
debentures, bonds or other similar instruments issued by such obligor, (ii) all
capital lease obligations of such obligor, (iii) all obligations of such
obligor issued or assumed as the deferred purchase price of property, all
conditional sale obligations of such obligor and all obligations of such
obligor under any title retention agreement (but excluding trade accounts
payable arising in the ordinary course of business, (iv) all obligations of
such obligor for the reimbursement on any letter of credit, banker's
acceptance, security purchase facility or similar credit transaction, (v) all
obligations of the type referred to in clauses (i) through (v) above of other
persons secured by any lien on any property or asset of such obligor (whether
or not such obligation is assumed by such obligor), except for (1) any such
indebtedness that is by its terms subordinated to or ranks equal in priority
with the Trust Preferred Securities, and (2) all debt securities or guarantees
in respect of those
34
debt securities, issued to any other trust, or a trustee of such trust,
partnership or other entity affiliated with AGL Capital that is a financing
vehicle of AGL Capital (a "financing entity") in connection with the issuance
by such financing entity of equity securities or other securities guaranteed
by AGL Resources pursuant to an instrument that ranks equal in priority with
or junior in right of payment to the Trust Preferred Guarantee.
AGL Resources is a registered public utility holding company and almost
all of the operating assets of AGL Resources are owned by AGL Resources'
subsidiaries. AGL Resources relies primarily on dividends from such
subsidiaries to meet its obligations for payment of principal and interest on
its outstanding debt obligations and corporate expenses. AGL Resources is a
legal entity separate and distinct from its subsidiaries. The principal
sources of AGL Resources' income are dividends and fees from its subsidiaries.
AGL Capital is a wholly-owned financing subsidiary of AGL Resources. The right
of AGL Resources and AGL Capital to participate in any distribution of assets
of any subsidiary, upon such subsidiary's liquidation or reorganization or
otherwise, is subject to the prior claims of creditors of the subsidiary.
The Indenture places no limitation on the amount of additional Senior
Indebtedness that may be incurred by AGL Capital. AGL Capital expects from
time to time to incur additional indebtedness constituting Senior
Indebtedness.
Governing Law
The Indenture and the Junior Subordinated Debentures will be governed by
and construed in accordance with the laws of the State of New York without
regarding to principles of conflicts of law thereof.
Information Concerning the Indenture Trustee
The Indenture Trustee shall have and be subject to all the duties and
responsibilities specified with respect to an indenture trustee under the
Trust Indenture Act. Subject to such provisions, the Indenture Trustee is
under no obligation to exercise any of the powers vested in it by the
Indenture at the request of any holder of Junior Subordinated Debentures,
unless offered indemnity reasonably satisfactory to it by such holder against
the costs, expenses and liabilities which might be incurred thereby. The
Indenture Trustee is not required to expend or risk its own funds or otherwise
incur personal financial liability in the performance of its duties if the
Indenture Trustee reasonably believes that repayment or adequate indemnity is
not reasonably assured to it.
Miscellaneous
AGL Capital has agreed, pursuant to the Indenture, for so long as Trust
Securities remain outstanding:
. to maintain directly or indirectly 100% ownership of the Common
Securities of the Trust (provided that certain successors which are
permitted pursuant to the Indenture may succeed to AGL Capital's
ownership of the Common Securities);
. not to voluntarily terminate, wind up or liquidate the Trust, except
in connection with a distribution of Junior Subordinated Debentures to
the holders of the Trust Preferred Securities in liquidation of the
Trust; and
. to use its reasonable efforts, consistent with the terms and
provisions of the Trust Agreement to cause the Trust to remain
classified as (a) a business trust, except in connection with certain
mergers, consolidations or amalgamations permitted by the Trust
Agreement, and (b) a grantor trust and not as an association taxable
as a corporation for United States federal income tax purposes.
35
DESCRIPTION OF TRUST PREFERRED GUARANTEE
The Trust Preferred Guarantee will be executed and delivered by AGL
Resources concurrently with the issuance by the Trust of the Trust Preferred
Securities for the benefit of the holders of the Trust Preferred Securities.
The Bank of New York will act as indenture trustee ("Trust Preferred Guarantee
Trustee") under the Trust Preferred Guarantee. The Trust Preferred Guarantee
will be qualified under the Trust Indenture Act. This summary of certain
provisions of the Trust Preferred Guarantee does not purport to be complete and
is subject to, and qualified in its entirety by reference to, all of the
provisions of the Trust Preferred Guarantee, including the definitions therein
of certain terms, and the Trust Indenture Act. The Trust Preferred Guarantee
Trustee will hold the Trust Preferred Guarantee for the benefit of the holders
of the Trust Preferred Securities.
General
AGL Resources will irrevocably agree to pay in full on a subordinated
basis, to the extent set forth herein, the Trust Preferred Guarantee Payments
(as defined below) to the holders of the Trust Preferred Securities, as and
when due, regardless of any defense, right of set-off or counterclaim that the
Trust may have or assert other than the defense of payment. The following
payments with respect to the Trust Preferred Securities, to the extent not paid
by or on behalf of the Trust (the "Trust Preferred Guarantee Payments"), will
be subject to the Trust Preferred Guarantee:
. any accumulated and unpaid Distributions required to be paid on Trust
Preferred Securities, to the extent that the Trust has funds on hand
legally available therefor at such time,
. the applicable Redemption Price with respect to Trust Preferred
Securities called for redemption, to the extent that the Trust has
funds on hand legally available therefor at such time, or
. upon a voluntary or involuntary termination and liquidation of the
Trust, the lesser of (a) the Liquidation Distribution, to the extent
that the Trust has funds on hand legally available therefor, and (b)
the amount of assets of the Trust remaining available for
distribution to holders of Trust Preferred Securities. AGL Resources'
obligation to make a Trust Preferred Guarantee Payment may be
satisfied by direct payment of the required amounts by AGL Resources
to the holders of the Trust Preferred Securities or by causing the
Trust to pay such amounts to such holders.
The Trust Preferred Guarantee will rank subordinate and junior in right
of payment to all Senior Indebtedness of AGL Resources to the extent provided
therein. See "--Status of the Trust Preferred Guarantee." Because AGL Resources
is a holding company, the right of AGL Resources to participate in any
distribution of assets of any subsidiary upon such subsidiary's liquidation or
reorganization or otherwise, is subject to the prior claims of creditors of
that subsidiary, except to the extent AGL Resources may itself be recognized as
a creditor of that subsidiary. Accordingly, AGL Resources' obligations under
the Trust Preferred Guarantee will be effectively subordinated to all existing
and future liabilities of AGL Resources' subsidiaries, and claimants should
look only to the assets of AGL Resources for payments thereunder. See
"Description of the Junior Subordinated Debentures--General." The Trust
Preferred Guarantee does not limit the incurrence or issuance of other secured
or unsecured debt of AGL Resources, including Senior Indebtedness, whether
under the Indenture, any other indenture that AGL Resources may enter into in
the future or otherwise.
AGL Resources will, through the Trust Preferred Guarantee, fully,
irrevocably and unconditionally guarantee all of the Trust's obligations under
the Trust Preferred Securities but will not apply to any payment of
Distributions except to the extent the Trust has funds legally available
therefor. If AGL Capital does not make interest payments on the Junior
Subordinated Debentures held by the Trust, the Trust will not pay Distributions
on the Trust Preferred Securities and will not have funds legally available
therefor.
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Status of the Trust Preferred Guarantee
Generally, the Trust Preferred Guarantee will constitute an unsecured
obligation of AGL Resources and will rank subordinate and junior in right of
payment to all of its Senior Indebtedness in the same manner as Junior
Subordinated Debentures.
The Trust Preferred Guarantee will rank equal in priority with all Other
Guarantees issued by AGL Resources. The Trust Preferred Guarantee will
constitute a guarantee of payment and not of collection (i.e., the guaranteed
party may institute a legal proceeding directly against AGL Resources to
enforce its rights under the Trust Preferred Guarantee without first
instituting a legal proceeding against any other person or entity). The Trust
Preferred Guarantee will be held for the benefit of the holders of the Trust
Preferred Securities. The Trust Preferred Guarantee will not be discharged
except by payment of the Trust Preferred Guarantee Payments in full to the
extent not paid by the Trust or upon distribution to the holders of the Trust
Preferred Securities of the Junior Subordinated Debentures. The Trust Preferred
Guarantee does not place a limitation on the amount of additional Senior
Indebtedness that may be incurred by AGL Resources. AGL Resources expects from
time to time to incur additional indebtedness constituting Senior Indebtedness.
Amendments and Assignment
Except with respect to any changes that do not materially adversely
affect the rights of holders of the Trust Preferred Securities (in which case
no vote will be required), the Trust Preferred Guarantee may not be amended
without the prior approval of the holders of a majority of the Liquidation
Amount of such outstanding Trust Preferred Securities. The manner of obtaining
any such approval will be as set forth under "Description of the Trust
Preferred Securities--Voting Rights; Amendment of the Trust Agreement." All
guarantees and agreements contained in the Trust Preferred Guarantee Agreement
shall bind the successors, assigns, receivers, trustees and representatives of
AGL Resources and shall inure to the benefit of the holders of the Trust
Preferred Securities then outstanding.
Events of Default
An event of default under the Trust Preferred Guarantee will occur upon
the failure of AGL Resources to perform any of its payment or other obligations
thereunder. The holders of a majority in Liquidation Amount of the Trust
Preferred Securities will have the right to direct the time, method and place
of conducting any proceeding for any remedy available to the Trust Preferred
Guarantee Trustee in respect of the Trust Preferred Guarantee or to direct the
exercise of any trust or power conferred upon the Trust Preferred Guarantee
Trustee under the Trust Preferred Guarantee. The Trust Preferred Securities
Guarantee Trustee may decline to follow any such direction if it shall
determine that the action so directed would be unjustly prejudicial to the
holders not taking part in such direction or that the action or proceeding so
directed may not lawfully be taken or would involve the Trust Preferred
Securities Guarantee Trustee in personal liability.
Any holder of the Trust Preferred Securities may institute a legal
proceeding directly against AGL Resources to enforce its rights under the Trust
Preferred Guarantee without first instituting a legal proceeding against the
Trust, the Trust Preferred Guarantee Trustee or any other person or entity.
AGL Resources, as guarantor, will be required to file annually with the
Trust Preferred Guarantee Trustee a certificate as to whether or not AGL
Resources is in compliance with all the conditions and covenants applicable to
it under the Trust Preferred Guarantee.
Information Concerning the Trust Preferred Guarantee Trustee
The Trust Preferred Guarantee Trustee, other than during the occurrence
and continuance of an event of default by AGL Resources in performance of the
Trust Preferred Guarantee, shall undertake to perform only
37
such duties as are specifically set forth in the Trust Preferred Guarantee and,
after default with respect to the Trust Preferred Guarantee, must exercise the
same degree of care and skill as a prudent person would exercise or use in the
conduct of his or her own affairs. Subject to this provision, the Trust
Preferred Guarantee Trustee will be under no obligation to exercise any of the
powers vested in it by the Trust Preferred Guarantee at the request of any
holder of the Trust Preferred Securities unless it is offered indemnity
reasonably satisfactory to it against the costs, expenses and liabilities that
might be incurred thereby.
Termination of the Guarantee
The Trust Preferred Guarantee will terminate and be of no further force
and effect upon full payment of the applicable Redemption Price of the Trust
Preferred Securities, upon full payment of the Liquidation Amount payable upon
liquidation of the Trust, or upon distribution of Junior Subordinated
Debentures to the holders of the Trust Preferred Securities, or upon exchange
of all Trust Preferred Securities for other Trust Preferred Securities in the
Exchange Offer. The Trust Preferred Guarantee will continue to be effective or
will be reinstated, as the case may be, if at any time any holder of the Trust
Preferred Securities must restore payment of any sums paid under the Trust
Preferred Securities or the Trust Preferred Guarantee.
Governing Law
The Trust Preferred Guarantee will be governed by and construed in
accordance with the laws of the State of New York without giving effect to
principles of conflicts of law thereof.
DESCRIPTION OF DEBENTURE GUARANTEE
This summary of provisions of the Debenture Guarantee does not purport to
be complete and is subject to, and qualified in its entirety by reference to,
all of the provisions of the Debenture Guarantee as contained in the Indenture
and the Trust Indenture Act.
AGL Resources will guarantee on a junior subordinated basis the payment
of principal (and premium, if any) and interest on the Junior Subordinated
Debentures, except that no payment of interest will be made under the Debenture
Guarantee for any period during which AGL Capital has exercised its right to
defer interest payments on the Junior Subordinated Debentures.
The Debenture Guarantee will rank subordinate and junior in right of
payment to all Senior Indebtedness of AGL Resources to the extent provided in
the Indenture. The right of AGL Resources to participate in any distribution of
assets of any subsidiary upon such subsidiary's liquidation or reorganization
or otherwise, is subject to the prior claims of creditors of that subsidiary,
except to the extent AGL Resources may itself be recognized as a creditor of
that subsidiary. Accordingly, AGL Resources' obligations under the Debenture
Guarantee will be effectively subordinated to all existing and future
liabilities of AGL Resources' subsidiaries, and claimants should look only to
the assets of AGL Resources for payments thereunder. The Debenture Guarantee
does not limit the incurrence or issuance of other secured or unsecured debt of
AGL Resources, including Senior Indebtedness, whether under the Indenture, any
other indenture that AGL Resources may enter into in the future or otherwise.
RELATIONSHIP AMONG THE TRUST PREFERRED SECURITIES, THE
JUNIOR SUBORDINATED DEBENTURES, THE TRUST PREFERRED GUARANTEE
AND THE DEBENTURE GUARANTEE
Full and Unconditional Trust Preferred Guarantee
Payments of Distributions and other amounts due on the Trust Preferred
Securities (to the extent the Trust has funds on hand legally available for the
payment of such Distributions) will be irrevocably guaranteed
38
by AGL Resources as and to the extent set forth under "Description of Trust
Preferred Guarantee." Taken together, AGL Resources' and AGL Capital's
obligations under the Junior Subordinated Debentures, the Indenture, the Trust
Agreement, the Trust Preferred Guarantee and the Debenture Guarantee will
provide, in the aggregate, a full, irrevocable and unconditional guarantee of
payments of Distributions and other amounts due on the Trust Preferred
Securities. No single document standing alone or operating in conjunction with
fewer than all of the other documents constitutes such guarantee. It is only
the combined operation of these documents that has the effect of providing a
full, irrevocable and unconditional guarantee of the Trust's obligations under
the Trust Preferred Securities. If and to the extent that AGL Capital does not
make the required payments on the Junior Subordinated Debentures, the Trust
will not have sufficient funds to make the related payments, including
Distributions, on the Trust Preferred Securities. The Trust Preferred Guarantee
will not cover any such payment when the Trust does not have sufficient funds
on hand legally available therefor. However, through the Debenture Guarantee,
AGL Resources will guarantee on a junior subordinated basis the due and
punctual payment of the principal (and premium, if any) and interest on the
Junior Subordinated Debentures, except that no payment of interest will be made
under the Debenture Guarantee during any period during which AGL Capital has
exercised its right to defer interest payments on the Junior Subordinated
Debentures. The obligations of AGL Resources under the Trust Preferred
Guarantee and Debenture Guarantee will be subordinate and junior in right of
payment to all Senior Indebtedness.
Sufficiency of Payments
As long as payments of interest and other payments are made when due on
the Junior Subordinated Debentures, such payments will be sufficient to cover
Distributions and other payments due on the Trust Preferred Securities,
primarily because:
. the aggregate principal amount or Prepayment Price of the Junior
Subordinated Debentures will be equal to the sum of the Liquidation
Amount or Redemption Price, as applicable, of the Trust Preferred
Securities and Common Securities;
. the interest rate and interest and other payment dates on the Junior
Subordinated Debentures will match the interest rate and interest and
other payment dates for the Trust Securities;
. AGL Capital shall pay for all and any costs, expenses and liabilities
of the Trust except the Trust's obligations to holders of Trust
Preferred Securities under such Trust Preferred Securities; and
. the Trust Agreement will provide that the Trust is not authorized to
engage in any activity that is not consistent with the limited
purposes thereof.
Enforcement Rights of Holders of Trust Preferred Securities
A holder of any Trust Security may institute a legal proceeding directly
against AGL Resources to enforce its rights under the Guarantee without first
instituting a legal proceeding against the Guarantee Trustee, the Trust or any
other person or entity. A default or event of default under any Senior
Indebtedness would not constitute a default or Event of Default under the Trust
Agreement. However, in the event of payment defaults under, or acceleration of,
Senior Indebtedness, the subordination provisions of the Indenture will provide
that no payments may be made in respect of the Junior Subordinated Debentures
until such Senior Indebtedness has been paid in full or any payment default
thereunder has been cured or waived. Failure to make required payments on
Junior Subordinated Debentures would constitute an Event of Default under the
Trust Agreement.
If a Trust Enforcement Event occurs, the holders of Trust Preferred
Securities would rely on the enforcement by the Property Trustee of its rights
as registered holder of the Junior Subordinated Debentures against AGL Capital.
In addition, generally, the holders of a majority in liquidation amount of the
Trust Preferred Securities will have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Property
Trustee or to direct the exercise of any trust or power conferred upon the
39
Property Trustee under the Trust Agreement, including the right to direct the
Property Trustee to exercise the remedies available to it as the holder of the
Junior Subordinated Debentures. The Indenture provides that the Indenture
Trustee will give holders of Junior Subordinated Debentures notice of all
events of default within 90 days after their occurrence.
If the Property Trustee fails to enforce its rights under the Junior
Subordinated Debentures in respect of an event of default under the Indenture
after a holder of Trust Preferred Securities has made a written request, such
holder may, to the extent permitted by applicable law, institute a legal
proceeding against us to enforce the Property Trustee's rights under the Junior
Subordinated Debentures. In addition, if AGL Capital fails to pay interest or
principal on the Junior Subordinated Debentures, a holder of Trust Preferred
Securities may institute a proceeding directly against AGL Capital for
enforcement of payment to that holder of the principal of or interest on Junior
Subordinated Debentures having a principal amount equal to the total
liquidation amount of that holder's Trust Preferred Securities (which we refer
to as a "direct action"). In connection with such a direct action, we will have
the right to set off any payment made to such holder by AGL Capital.
Limited Purpose of the Trust
The Trust Preferred Securities will represent preferred undivided
beneficial interests in the assets of the Trust, and the Trust exists for the
sole purpose of issuing and selling the Trust Securities, using the proceeds
from the sale of the Trust Securities to acquire the Junior Subordinated
Debentures and engaging in only those other activities necessary, advisable or
incidental thereto.
Rights Upon Termination
Unless the Junior Subordinated Debentures are distributed to holders of
the Trust Securities, upon any voluntary or involuntary termination and
liquidation of the Trust, the holders of the Trust Securities will be entitled
to receive, out of assets held by the Trust, the Liquidation Distribution in
cash. See "Description of Trust Preferred Securities--Liquidation of the Trust
and Distribution of Junior Subordinated Debentures." Upon any voluntary or
involuntary liquidation or bankruptcy of AGL Capital, the Property Trustee, as
holder of the Junior Subordinated Debentures, would be a subordinated creditor
of AGL Capital, subordinated in right of payment to all Senior Indebtedness as
set forth in the Indenture, but entitled to receive payment in full of
principal (and premium, if any) and interest, before any stockholders of AGL
Capital receive payments or distributions.
40
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
General
The following is a summary of certain of the material United States
federal income tax consequences of the purchase, ownership and disposition of
Trust Preferred Securities held as capital assets by a holder who purchases the
Trust Preferred Securities upon initial issuance, and that is a citizen or
resident of the United States, a corporation, partnership or other entity
created or organized in or under the laws of the United States or any state
thereof or the District of Columbia or an estate or trust treated as a United
States person under Section 7701(a)(30) of the Internal Revenue Code of 1986,
as amended (the "Code"). This summary does not address tax consequences for
special classes of holders such as banks, thrifts, real estate investment
trusts, regulated investment companies, insurance companies, dealers in
securities or currencies, tax-exempt investors, or persons that will hold the
Trust Preferred Securities as a position in a "straddle," as part of a
"synthetic security" or "hedge," as part of a "conversion transaction" or other
integrated investment, or as other than a capital asset. This summary also does
not address the tax consequences to persons that have a functional currency
other than the U.S. dollar or the tax consequences to shareholders, partners or
beneficiaries of a holder of Trust Preferred Securities. If a partnership holds
our Trust Preferred Securities, the tax treatment of a partner will generally
depend upon the status of the partner and the activities of the partnership. If
you are a partner of a partnership holding our Trust Preferred Securities, you
should consult your tax advisors. This summary does not include any description
of any alternative minimum tax consequences or the tax laws of any state or
local government or of any foreign government that may be applicable to the
Trust Preferred Securities. This summary is based on the Code, Treasury
regulations thereunder, the administrative and judicial interpretations
thereof, as of the date of this prospectus, all of which are subject to change,
possibly on a retroactive basis. A purchaser of Trust Preferred Securities
should consult a tax advisor regarding the tax consequences of purchasing,
owning and selling Trust Preferred Securities.
Classification of the Junior Subordinated Debentures
In connection with the issuance of the Junior Subordinated Debentures,
Long Aldridge & Norman LLP will render its opinion generally to the effect
that, under then current law and assuming full compliance with the terms of the
Indenture (and certain other documents), and based on certain facts and
assumptions contained in such opinion, the Junior Subordinated Debentures will
be classified for United States federal income tax purposes as indebtedness.
We, along with the Trust and each holder (by acceptance of a beneficial
interest in Trust Preferred Securities) agree to treat the Junior Subordinated
Debentures as debt of AGL Capital and the Trust Preferred Securities as
evidence of a beneficial interest in the Trust. An opinion of tax counsel,
however, is not binding on the Internal Revenue Service or the courts.
Prospective investors should note that no rulings have been or are expected to
be sought with respect to any of these issues and no assurance can be given
that the Internal Revenue Service or the courts will not take contrary
positions. No assurance can be given that any of the opinions expressed herein
will not be challenged by the Internal Revenue Service or the courts or, if
challenged, that such a challenge would not be successful. The remainder of
this summary assumes that the Junior Subordinated Debentures will be classified
as indebtedness of AGL Capital for United States federal income tax purposes.
Classification of the Trust
In connection with the issuance of the Trust Preferred Securities, Long
Aldridge & Norman LLP will render its opinion generally to the effect that,
under then current law and assuming full compliance with the terms of the Trust
Agreement and the Indenture (and certain other documents), and based on certain
facts and assumptions contained in the opinion, the Trust will be classified
for United States federal income tax purposes as a "grantor trust" and not as
an association taxable as a corporation. Accordingly, for United States federal
income tax purposes, each holder of Trust Preferred Securities generally will
be considered the owner of an undivided beneficial interest in the assets of
the Trust, including the Junior Subordinated Debentures, and each
41
holder will be required to include in its gross income any interest (or OID
accrued) paid or accrued on the Junior Subordinated Debentures.
Interest Income and Original Issue Discount
Under Treasury regulations (the "Regulations") applicable to debt
instruments, a "remote" contingency that stated interest will not be timely
paid will be ignored in determining whether a debt instrument is issued with
OID. We believe that the likelihood of exercising the option to defer payments
of stated interest is "remote" since exercising that option would prevent AGL
Resources from declaring dividends on any class of its equity securities. As a
result, we intend to take the position, based on the advice of tax counsel,
that the Junior Subordinated Debentures will not be considered to be issued
with OID and, accordingly, stated interest on the Junior Subordinated
Debentures generally will be taxable to a holder as ordinary income at the time
it is paid or accrued in accordance with the holder's method of accounting.
Under the Regulations, if we were to exercise the option to defer the
payments of interest on the Junior Subordinated Debentures, the Junior
Subordinated Debentures would at that time be treated as retired and as
reissued with OID, and all stated interest on the Junior Subordinated
Debentures would thereafter be treated as OID as long as the Junior
Subordinated Debentures remain outstanding. In such event, all of a holder's
taxable interest income with respect to the Junior Subordinated Debentures
would thereafter be treated as OID and accounted for on an economic accrual
basis regardless of the holder's method of tax accounting over the remaining
term of the Junior Subordinated Debentures, and actual distributions of stated
interest would not be reported as taxable income. Consequently, a holder of
Trust Preferred Securities would be required to include in gross income OID
even though we did not make actual cash payments during an Extended Interest
Payment Period. Under the Regulations, if the option to defer the payment of
interest was determined not to be "remote," the Junior Subordinated Debentures
would be treated as having been originally issued with OID. In such event, all
of a holder's taxable interest income with respect to the Junior Subordinated
Debentures would be accounted for on an economic accrual basis regardless of
the holder's method of tax accounting, and actual distributions of stated
interest would not be reported as taxable income.
Income on the Trust Preferred Securities will constitute interest or OID.
As a result corporate holders of the Trust Preferred Securities will not be
entitled to a dividends-received deduction for any income recognized from the
Trust Preferred Securities.
Market Discount
A purchaser of a Trust Preferred Security at a discount from the
Liquidation Amount at maturity of such purchaser's pro rata share of the Junior
Subordinated Debentures acquires such Trust Preferred Security with "market
discount." However, market discount with respect to a Trust Preferred Security
will be considered to be zero if it is de minimis. Market discount will be de
minimis with respect to a Trust Preferred Security if it is less than the
product of (i) 0.25% of the adjusted issue price of the purchaser's pro rata
share of the Junior Subordinated Debentures multiplied by (ii) the number of
complete years to maturity of such Junior Subordinated Debentures after the
date of purchase. The purchaser of a Trust Preferred Security with more than a
de minimis amount of market discount generally will be required to treat any
gain on the sale, exchange, redemption or other disposition of all or part of
the Trust Preferred Securities (or related Junior Subordinated Debentures) as
ordinary income to the extent of accrued (but not previously taxed) market
discount. Market discount generally will accrue ratably during the period from
the date of purchase of such Trust Preferred Security to the maturity date of
the Junior Subordinated Debentures, unless the holder irrevocably elects to
accrue such market discount on the basis of a constant interest rate.
A holder who has acquired a Trust Preferred Security at a market discount
generally will be required to defer any deductions of interest expense
attributable to any indebtedness incurred or continued to purchase or carry the
Trust Preferred Security, to the extent such interest expense exceeds the
related interest income.
42
Any such deferred interest expense generally will be allowable as a deduction
not later than the year in which the related market discount income is
recognized. As an alternative to the inclusion of market discount in income
upon disposition of all or a portion of the Trust Preferred Securities, the
purchaser may make an election (which may not be revoked without the IRS's
consent) to include market discount in income as it accrues on all market
discount instruments acquired by the holder during or after the taxable year
for which the election is made. In that case, the preceding deferral rule for
interest expense will not apply.
In lieu of the foregoing treatment of market discount and interest
expense, a holder may elect to treat any market discount (including a de
minimis amount) as OID and accrue such discount on a constant-yield basis in
the same manner as the holder accrues OID.
Premium
A purchaser who acquires its Trust Preferred Securities at a price that
is greater than the principal payable at maturity (or, if the Junior
Subordinated Debentures are treated as having been issued or reissued with OID,
the adjusted issue price of such purchaser's share of Junior Subordinated
Debentures (which generally should approximate par plus any OID accrued with
respect to unpaid interest)), the purchaser will be deemed to have acquired its
interest in the Trust Preferred Securities with premium. Such purchaser may
elect to reduce the amount of interest payments (and will reduce the amount of
OID, if any) required to be included in income to reflect amortization of the
premium over the remaining term.
Receipt of Junior Subordinated Debentures or Cash Upon Liquidation of the Trust
We will have the right at any time to liquidate the Trust and cause the
Junior Subordinated Debentures to be distributed to the holders of the Trust
Preferred Securities. Under current law, such a distribution, for United States
federal income tax purposes, would be treated as a nontaxable event to each
holder, and each holder would receive an aggregate tax basis in the Junior
Subordinated Debentures equal to the holder's aggregate tax basis in its Trust
Preferred Securities. A holder's holding period in the Junior Subordinated
Debentures so received in liquidation of the Trust would include the period
during which the Trust Preferred Securities were held by such holder. If,
however, the Trust is characterized for United States federal income tax
purposes as an association taxable as a corporation at the time of its
dissolution, the distribution of the Junior Subordinated Debentures may
constitute a taxable event to holders of Trust Preferred Securities and a
holder's holding period in Junior Subordinated Debentures would begin on the
date such Junior Subordinated Debentures were received.
Under certain circumstances described herein (see "Description of Trust
Preferred Securities"), the Junior Subordinated Debentures may be redeemed for
cash and the proceeds of such redemption distributed to holders in redemption
of their Trust Preferred Securities. Under current law, such a redemption
would, for United States federal income tax purposes, constitute a taxable
disposition of the redeemed Trust Preferred Securities, and a holder could
recognize gain or loss as if the holder sold such redeemed Trust Preferred
Securities for cash. See "Sales of Trust Preferred Securities."
Sales of Trust Preferred Securities
A holder that sells Trust Preferred Securities will recognize gain or
loss equal to the difference between its adjusted tax basis in the Trust
Preferred Securities and the amount realized on the sale of such Trust
Preferred Securities (other than with respect to accrued and unpaid interest
which has not yet been included in income, which will be treated as ordinary
income). A holder's adjusted tax basis in the Trust Preferred Securities
generally will be its initial purchase price increased by OID and market
discount (if any) previously includable in such holder's gross income to the
date of disposition and decreased by payments (if any) received on the Trust
Preferred Securities in respect of OID and any premium that the holder has
taken into account. Subject to the market discount rules described above, such
gain or loss generally will be a capital
43
gain or loss and generally will be a long-term capital gain or loss if the
Trust Preferred Securities have been held for more than one year.
The Trust Preferred Securities may trade at a price that does not
accurately reflect the value of accrued but unpaid interest with respect to the
underlying Junior Subordinated Debentures. A holder who uses the accrual method
of accounting for tax purposes (and a cash method holder, if the Junior
Subordinated Debentures are deemed to have been issued with OID) who disposes
of the Trust Preferred Securities between record dates for payments of
distributions thereon will be required to include accrued but unpaid interest
on the Junior Subordinated Debentures through the date of disposition in income
as ordinary income (i.e., interest or, possibly, OID), and to add such amount
to the adjusted tax basis in the holder's pro rata share of the underlying
Junior Subordinated Debentures deemed disposed of. To the extent the selling
price is less than the holder's adjusted tax basis (which will include all
accrued but unpaid interest) a holder will recognize a capital loss. Subject to
certain limited exceptions, capital losses cannot be applied to offset ordinary
income for United States federal income tax purposes.
Possible Tax Legislation
Certain tax law changes have from time to time been proposed that would,
among other things, generally deny corporate issuers a deduction for interest
on debt obligations similar to the Junior Subordinated Debentures. Although
none of the proposals have been enacted into law, there can be no assurance
that any tax legislation will not be enacted in the future or that any such tax
legislation would not be retroactive. Nor can there be any assurance that other
legislation enacted after the date hereof will not otherwise adversely affect
our ability to deduct the interest payable on the Junior Subordinated
Debentures. There can be no assurance, therefore, that a Tax Event will not
occur. A Tax Event would permit us to cause a redemption of the Trust Preferred
Securities.
United States Alien Holders
For purposes of this discussion, a "United States Alien Holder" is any
corporation, individual, partnership, estate or trust that is not a U.S. Holder
for United States federal income tax purposes. A "U.S. Holder" is a holder of
Trust Preferred Securities who or which is a citizen or individual resident (or
is treated as a citizen or individual resident) of the United States for
federal income tax purposes, a corporation or partnership created or organized
(or treated as created or organized for federal income tax purposes) in or
under the laws of the United States or any political subdivision thereof, an
estate the income of which is includable in its gross income for federal income
tax purposes without regard to its source, or any trust that (i) is subject to
the supervision of a court within the United States and the control of one or
more United States persons or (ii) has a valid election in effect under
applicable United States Treasury regulations to be treated as a United States
person. Under present United States federal income tax laws: (i) payments by
the Trust or any of its paying agents to any holder of Trust Preferred
Securities who or which is a United States Alien Holder will not be subject to
United States federal withholding tax; provided that, (a) the beneficial owner
of the Trust Preferred Securities does not actually or constructively own 10
percent or more of the total combined voting power of all classes of stock of
AGL Resources entitled to vote, (b) the beneficial owner of the Trust Preferred
Securities is not a controlled foreign corporation that is related to AGL
Resources through stock ownership, (c) the beneficial owner is not a bank whose
receipt of interest on the Trust Preferred Securities (or Junior Subordinated
Debentures) is described in section 881(c)(3)(A) of the Code; and (d) the
beneficial owner of the Trust Preferred Securities provides their name and
address on an IRS Form W-8BEN (or successor form), and certifies, under penalty
of perjury, that they are not a United States person or the beneficial owner
satisfies the certification requirements of applicable United States Treasury
regulations if the Trust Preferred Securities (or Junior Subordinated
Debentures) are held through certain foreign intermediaries or certain foreign
partnerships. Special certification rules apply to certain United States Alien
Holders that are entities rather than individuals.
44
Information Reporting to Holders and Backup Withholding
Subject to the qualifications discussed below, income on the Trust
Preferred Securities will be reported to holders on Forms 1099, which forms
should be mailed to holders of Trust Preferred Securities by January 31
following each calendar year. Payments made on, and proceeds from the sale of,
the Trust Preferred Securities may be subject to a "backup" withholding tax of
31 percent unless the holder complies with certain identification or
certification requirements. Any withheld amounts will be allowed as a credit
against the holder's United States federal income tax, provided the required
information is provided to the IRS.
The Trust will be obligated to report annually to Cede & Co., as holder
of record of the Trust Preferred Securities, the interest (and OID, if any)
with respect to the Trust Preferred Securities that accrued during that year.
The Trust currently intends to report such information on Form 1099 prior to
January 31 following each calendar year even though the Trust is not legally
required to report to record Holders until April 15 following each calendar
year. The Initial Purchasers have indicated to the Trust that, to the extent
that they hold Trust Preferred Securities as nominees for beneficial holders,
they currently expect to report to such beneficial holders on Forms 1099 by
January 31 following each calendar year. Under current law, record holders of
Trust Preferred Securities who hold as nominees for beneficial holders will not
have any obligation to report information regarding the beneficial holders to
the Trust. The Trust, moreover, will not have any obligation to report to
beneficial holders who are not also record holders. Thus, beneficial holders of
Trust Preferred Securities who hold their Trust Preferred Securities through
another entity will receive Forms 1099 reflecting the income on their Trust
Preferred Securities from such nominee holders rather than the Trust.
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS
INCLUDED FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON
A HOLDER'S PARTICULAR SITUATION. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH
RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND
DISPOSITION OF THE TRUST PREFERRED SECURITIES, INCLUDING THE TAX CONSEQUENCES
UNDER STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF
CHANGES IN UNITED STATES FEDERAL OR OTHER TAX LAWS.
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended ("ERISA")
and the Internal Revenue Code of 1986, as amended ("Code") impose certain
duties on persons who are fiduciaries of a Plan subject to Title I of ERISA or
Section 4975 of the Code and prohibit certain transactions involving the assets
of a Plan and its fiduciaries or other interested parties. Under ERISA and the
Code, any person who exercises any discretionary authority or control over the
administration of such a Plan or the management or disposition of the assets of
such a Plan, or who renders investment advice for a fee or other compensation
to such a Plan, is generally considered to be a fiduciary of the Plan.
In considering an investment in the Trust Preferred Securities of a
portion of the assets of any Plan, a fiduciary should determine whether the
investment is in accordance with the documents and instruments governing the
Plan and the applicable provisions of ERISA, the Code or any other law relating
to a fiduciary's duties to the Plan including, without limitation, the
prudence, diversification, delegation of control and prohibited transaction
provisions of ERISA, the Code and any other applicable laws.
Any insurance company proposing to invest assets of its general account
in the Trust Preferred Securities should consider the extent that such
investment would be subject to the requirements of ERISA in light of the U.S.
Supreme Court's decision in John Hancock Mutual Life Insurance Co. v. Harris
Trust and Savings Bank and under any subsequent legislation or other guidance
that has or may become available relating to that decision, including the
enactment of Section 401(c) of ERISA by the Small Business Job Protection Act
of 1996 and the regulations promulgated thereunder.
45
Each of AGL Capital (the obligor with respect to the Junior Subordinated
Debentures held by the Trust) and its affiliates and the Property Trustee may
be considered a "party in interest" (within the meaning of ERISA) or a
"disqualified person" (within the meaning of Section 4975 of the Code) with
respect to many employee benefit plans ("Plans") that are subject to ERISA. Any
purchaser proposing to acquire Trust Preferred Securities with assets of any
Plan should consult with its counsel. The purchase and/or holding of Trust
Preferred Securities by a Plan that is subject to the fiduciary responsibility
provisions of ERISA or the prohibited transaction provisions of Section 4975 of
the Code (including individual retirement arrangements and other plans
described in Section 4975(e)(1) of the Code) and with respect to which AGL
Capital, the Property Trustee or any affiliate is a service provider (or
otherwise is a party in interest or a disqualified person) may constitute or
result in a prohibited transaction under ERISA or Section 4975 of the Code,
unless such Trust Preferred Securities are acquired pursuant to and in
accordance with an applicable exemption, such as Prohibited Transaction Class
Exemption ("PTCE") 84-14 (an exemption for certain transactions determined by
an independent qualified professional asset manager), PTCE 91-38 (an exemption
for certain transactions involving bank collective investment funds), PTCE 90-1
(an exemption for certain transactions involving insurance company pooled
separate accounts), PTCE 95-60 (an exemption for transactions involving certain
insurance company general accounts), or PTCE 96-23 (an exemption for certain
transactions determined by an in-house asset manager).
In addition, a Plan fiduciary considering the purchase of Trust Preferred
Securities should be aware that the assets of the Trust may be considered "plan
assets" for ERISA purposes. In such event, service providers with respect to
the assets of the Trust may become parties in interest or disqualified persons
with respect to investing Plans, and any discretionary authority exercised with
respect to the Junior Subordinated Debentures by such persons could be deemed
to constitute a prohibited transaction under ERISA or the Code. In order to
avoid such prohibited transactions, each investing Plan, by purchasing the
Trust Preferred Securities, will be deemed to have directed the Trust to invest
in the Junior Subordinated Debentures and to have appointed the Property
Trustee.
ERISA and the Code do not define "Plan Assets." However, the Department
of Labor has issued a regulation (29 C.F.R. section 2510.3-101) (the "Plan
Assets Regulation"), which generally provides that, as a general rule, the
underlying assets and properties of corporations, partnerships, trusts and
certain other entities in which a Plan makes an "equity" investment will be
deemed, for purposes of ERISA, to be assets of the investing Plan unless
certain exceptions apply.
Pursuant to an exception contained in the Plan Assets Regulations, the
assets of the Trust would not be deemed to be "plan assets" of investing Plans
if the equity interests acquired by employee benefit plans are "publicly-
offered securities"--that is, they are (1) widely held (i.e., owned by more
than 100 investors independent of the issuer and of each other), (2) freely
transferable and (3) sold as part of an offering pursuant to an effective
registration statement under the Securities Act and then timely registered
under Section 12(b) or 12(g) of the Exchange Act. It is expected that the Trust
Preferred Securities will meet the criteria of "publicly-offered securities"
above although no assurance can be given in this regard. The Initial Purchasers
expect that the Trust Preferred Securities will be held by at least 100
independent investors at the conclusion of the offering; there are no
restrictions imposed on the transfer of the Trust Preferred Securities and the
Trust Preferred Securities will be sold as part of an offering pursuant to an
effective registration statement under the Securities Act, and then will be
timely registered under the Exchange Act.
Although it is expected that the assets of the Trust should not be deemed
to be "plan assets" of an investing Plan, if AGL Capital or the Trust is a
party in interest with respect to the Plan, in the absence of an applicable
exemption, the Plan's purchase of the Trust Preferred Securities from the Trust
would likely constitute a prohibited transaction under Section 406(a)(1)(A) or
ERISA and Section 4975(c)(1)(A) of the Code. In addition, in the absence of an
applicable exemption, certain other transactions coincident to the Trust
Preferred Securities may involve a prohibited transaction, such as a
distribution of the Junior Subordinated Debentures from the Trust to a Plan
investor.
46
Any plans or other entities whose assets include plan assets subject to
ERISA or Section 4975 of the Code proposing to acquire Trust Preferred
Securities should consult with their own counsel to confirm that such
investment will not result in a prohibited transaction that is not subject to
an exemption and will satisfy any other applicable requirements of ERISA and
the Code. Each purchaser using assets of a Plan to acquire Trust Preferred
Securities will be deemed to have represented that its purchase and holding of
such Trust Preferred Securities will not result in a non-exempt prohibited
transaction under ERISA or the Code or will be covered by the exemptive relief
provided by PTCE 96-23, 95-60, 91-38, 90-1 or 84-14 or another applicable
exemption.
Governmental Plans, non-U.S. plans and certain church plans are not
subject to ERISA, and are also not subject to the prohibited transaction
provisions of Section 4975 of the Code. However, other federal, state, local,
non-U.S. or other laws or regulations governing the investment and management
of the assets of such plans may contain fiduciary and prohibited transaction
provisions similar to those under ERISA and the Code discussed above.
Accordingly, fiduciaries of governmental and church plans, in consultation with
their advisers, should consider the impact of their respective considerations
discussed above to the extent applicable.
47
UNDERWRITING
Under the terms and subject to the conditions contained in an
Underwriting Agreement dated the date of this prospectus, each of the
Underwriters named below has severally agreed to purchase and the Trust has
agreed to sell to each of the Underwriters, for whom Merrill Lynch, Pierce,
Fenner & Smith Incorporated and Morgan Stanley & Co. Incorporated are acting as
the representatives, severally, the number of Trust Preferred Securities listed
opposite its name below:
Number of
Trust
Preferred
Underwriter Securities
----------- ----------
Merrill Lynch, Pierce, Fenner & Smith
Incorporated................................................ 1,535,000
Morgan Stanley & Co. Incorporated................................ 1,535,000
Salomon Smith Barney Inc......................................... 1,530,000
J.P. Morgan Securities Inc....................................... 300,000
The Robinson-Humphrey Company, LLC............................... 300,000
Banc of America Securities LLC................................... 100,000
BB&T Capital Markets, a Division of Scott & Stringfellow......... 100,000
Dain Rauscher Wessels............................................ 100,000
First Union Securities, Inc...................................... 100,000
Quick & Reilly, Inc.............................................. 100,000
Legg Mason Wood Walker, Inc. .................................... 100,000
SunTrust Equitable Securities.................................... 100,000
Wachovia Securities, Inc. ....................................... 100,000
---------
Total....................................................... 6,000,000
=========
The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the Trust Preferred Securities
are subject to the approval of specified legal matters by their counsel and to
other conditions. In the Underwriting Agreement, the several Underwriters have
agreed, subject to the terms and conditions described in the Underwriting
Agreement, to purchase all the Trust Preferred Securities offered in this
issuance if any of the Trust Preferred Securities are purchased. In the event
of default by an Underwriter, the Underwriting Agreement provides that, in some
circumstances, the purchase commitments of the nondefaulting Underwriters may
be increased or the Underwriting Agreement may be terminated.
The Underwriters initially propose to offer the Trust Preferred
Securities directly to the public at the initial public offering price set
forth on the cover page of this prospectus and to dealers at the price less a
concession not in excess of $.50 per Trust Preferred Security. The Underwriters
may allow, and the dealers may reallow, a concession not in excess of $.25 per
Trust Preferred Security to other dealers. After the initial offering of the
Trust Preferred Securities, the public offering price, concession and other
selling terms may be charged.
Because the proceeds of the sale of the Trust Preferred Securities will
ultimately be used to purchase the Junior Subordinated Debentures of AGL
Capital, the Underwriting Agreement provides that AGL Capital will pay to the
Underwriters as compensation for their services $.7875 per Trust Preferred
Security, or $4,725,000 in the aggregate. AGL Capital will also pay other
expenses of the offering which it expects to be approximately $541,300.
AGL Capital and AGL Resources have agreed that, without the prior written
consent of the representatives, on behalf of the Underwriters, they will not,
during the period ending 30 days after the date of this prospectus directly or
indirectly, issue, sell, offer or contract to sell, grant any option for the
sale of, or otherwise transfer or dispose of, any securities of such entities
which are of the same class as the Trust Preferred Securities.
48
AGL Capital and AGL Resources have agreed that, without the prior written
consent of the representatives, on behalf of the Underwriters, they will not,
from the date of this prospectus through the Closing Date, directly or
indirectly, issue, sell, offer or contract to sell or grant any option for the
sale of, any debt securities with a maturity greater than one year or
guarantees of any such securities.
Prior to this offering, there has been no market for the Trust Preferred
Securities. The Trust plans to list the Trust Preferred Securities on the New
York Stock Exchange, and trading of the Trust Preferred Securities is expected
to begin within a 30 day period after the Trust Preferred Securities are first
issued. In order to meet all of the requirements for listing the Trust
Preferred Securities on the New York Stock Exchange, the Underwriters have
agreed to sell in lots of 100 or more the Trust Preferred Securities to a
minimum of 400 beneficial holders. The Underwriters have advised AGL Capital
that they intend to make a market in the Trust Preferred Securities but are not
obligated to do so and may discontinue market making at any time without
notice. No assurance can be given as to the liquidity of the trading market for
the Trust Preferred Securities.
In order to facilitate the offering of the Trust Preferred Securities,
the Underwriters may engage in transactions that stabilize, maintain, or
otherwise affect the price of the Trust Preferred Securities. Specifically, the
Underwriters may over-allot in connection with the offering, creating a short
position in the Trust Preferred Securities for their account. In addition, to
cover over-allotments or stabilize the price of the Trust Preferred Securities,
the Underwriters may bid for, and purchase, the Trust Preferred Securities in
the open market. Finally, the underwriting syndicate may reclaim selling
concessions allowed to an Underwriter or a dealer for distributing the Trust
Preferred Securities in the offering if the syndicate repurchases previously
distributed Trust Preferred Securities in transactions to cover syndicate short
positions, in stabilization transactions, or otherwise. Any of these activities
may stabilize or maintain the market price of the Trust Preferred Securities
above independent market levels. The Underwriters are not required to engage in
these activities, and may end any of these activities at any time.
AGL Capital, AGL Resources and the Trust have agreed to indemnify the
Underwriters against, or contribute to payments the Underwriters may be
required to make in respect of, certain liabilities, including liabilities
under the Securities Act.
Some of the Underwriters engage in transactions with, and from time to
time have performed services for, AGL Capital and its subsidiaries in the
ordinary course of business.
LEGAL MATTERS
Certain matters of Delaware law relating to the validity of the Trust
Preferred Securities and Common Securities will be passed upon by Richards,
Layton & Finger, P.A., Wilmington, Delaware, special Delaware counsel to AGL
Resources and the Trust. The validity of the Junior Subordinated Debentures and
certain matters relating thereto will be passed upon on behalf of AGL Capital
by Marshall Hill Cassas & de Lipkau, Reno, Nevada. The validity of the
Guarantee and certain matters relating thereto will be passed upon on behalf of
AGL Resources by Long Aldridge & Norman LLP, Atlanta, Georgia. Long Aldridge &
Norman LLP will also pass upon certain matters relating to United States
federal income tax consequences. Certain legal matters will be passed upon for
the Underwriters by Simpson Thacher & Bartlett, New York, New York. Counsel for
AGL Resources, AGL Capital, the Trust and the Underwriters will rely on the
opinion of Richards, Layton & Finger, P.A., as to matters of Delaware law.
EXPERTS
The consolidated financial statements and the related financial statement
schedule incorporated in this prospectus by reference from AGL Resources Inc.'s
Annual Report on Form 10-K for the year ended September 30, 2000 have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
report, which is incorporated herein by reference, and have been so
incorporated in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
49
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6,000,000 8% Trust Preferred Securities
(Liquidation Amount $25 Per Trust Preferred Security)
AGL Capital Trust II
Fully and unconditionally guaranteed by
AGL Resources Inc.
--------------------
PROSPECTUS
--------------------
Merrill Lynch & Co.
Morgan Stanley Dean Witter
Salomon Smith Barney
JPMorgan
Robinson-Humphrey
May 14, 2001
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