8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): December 7, 2011
AGL RESOURCES INC.
(Exact name of registrant as specified in its charter)
Georgia	1-14174	58-2210952
(State or other jurisdiction of incorporation)	(Commission File No.)	(I.R.S. Employer Identification No.)
Ten Peachtree Place NE, Atlanta, Georgia 30309
(Address and zip code of principal executive offices)
404-584-4000
(Registrant's telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 5.03.    Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.

On December 6, 2010, AGL Resources Inc. (“AGL Resources” or the “Company”) and Nicor Inc. (“Nicor”) entered into an Agreement and Plan of Merger, a copy of which was filed with the Securities and Exchange Commission (“SEC”) on December 7, 2010, that provides for the merger of a wholly owned subsidiary of AGL Resources into Nicor. 

On December 9, 2011, in connection with the closing of the merger and as previously approved by the Company’s shareholders at a special meeting of the shareholders of the Company held on June 14, 2011, the Company adopted and filed Articles of Amendment to the Company’s Amended and Restated Articles of Incorporation (Articles of Amendment) to increase the number of directors who may serve on the Company's Board of Directors ("Board") from 15 to 16, each of whom will serve one-year terms upon their election or reelection at the annual meeting of shareholders.  Effective the same date, the Company amended its Bylaws to increase the number of directors who may serve on the Board from 15 to 16 and to delete the Board membership criteria requiring directors of the Company to own at least 100 shares of Company common stock.These amendments reflect changes contemplated or necessitated by the Merger Agreement, which are described in the Company’s Registration Statement on Form S-4 filed with the SEC on February 4, 2011, as amended.

The Articles of Amendment and amended Bylaws are effective as of December 9, 2011.  A copy of the Articles of Amendment and amended Bylaws are attached hereto as Exhibit 3.1 and Exhibit 3.2, respectively, and are incorporated herein by reference.

Item 8.01.   Other Events.

As previously disclosed, on December 6, 2010, the Company and Nicor entered into the Merger Agreement, which  provides for the merger of a wholly owned subsidiary of AGL Resources into Nicor.  On December 7, 2011, AGL Resources and Nicor jointly announced that the companies received regulatory approval from the Illinois Commerce Commission for the merger in accordance with Section 7-204 of the Illinois Public Utilities Act.  A copy of the press release is attached hereto as Exhibit 99.1. Additionally, on December 9, 2011, AGL Resources announced that it had completed its merger with Nicor.

Item 9.01.   Financial Statements and Exhibits.

(a)   Financial Statements of Businesses Acquired.

The historical audited consolidated balance sheets of Nicor as of December 31, 2010 and 2009, and the audited consolidated statements of income, cash flows, common equity, and comprehensive income for each of the three years in the period ended December 31, 2010 are attached as Exhibit 99.2. The historical unaudited condensed consolidated financial statements, and explanatory notes, of Nicor as of September 30, 2011 and 2010 are attached as Exhibit 99.3.

(b)   Pro Forma Financial Information.

The unaudited pro forma condensed combined consolidated financial statements and explanatory notes relating to AGL Resources Inc.’s acquisition of Nicor are attached as Exhibit 99.4. The unaudited pro forma condensed combined consolidated statements of income for the nine months ended September 30, 2011, and the year ended December 31, 2010, give effect to the merger as if it were completed on January 1, 2010. The unaudited pro forma condensed combined statement of financial position as of September 30, 2011, gives effect to the merger as if it were completed on September 30, 2011.

(d) Exhibits.

Exhibit No.	Description
3.1	Amended and Restated Articles of Incorporation of AGL Resources Inc., filed December 9, 2011 with the Secretary of State of the state of Georgia.
3.2	Bylaws of AGL Resources Inc., as amended on December 9, 2011.
23.1	Consent of Deloitte & Touche LLP, independent registered public accounting firm.
99.1	Press release dated December 7, 2011.
99.2	Audited consolidated balance sheets of Nicor Inc. as of December 31, 2010 and 2009, and the audited consolidated statements of income, cash flows, common equity, and comprehensive income for each of the three years in the period ended December 31, 2010.
99.3	Unaudited condensed consolidated financial statements, and explanatory notes, of Nicor Inc. as of September 30, 2011 and 2010.
99.4	Unaudited pro forma condensed combined consolidated financial statements and explanatory notes.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	AGL RESOURCES INC.
	(Registrant)
Date: December 13, 2011	/s/Andrew W. Evans
	Andrew W. Evans Executive Vice President and Chief Financial Officer

Exhibit Index

Exhibit No.	Description
3.1	Amended and Restated Articles of Incorporation of AGL Resources Inc., filed December 9, 2011 with the Secretary of State of the state of Georgia.
3.2	Bylaws of AGL Resources Inc., as amended on December 9, 2011.
23.1	Consent of Deloitte & Touche LLP, independent registered public accounting firm.
99.1	Press release dated December 7, 2011.
99.2	Audited consolidated balance sheets of Nicor Inc. as of December 31, 2010 and 2009, and the audited consolidated statements of income, cash flows, common equity, and comprehensive income for each of the three years in the period ended December 31, 2010.
99.3	Unaudited condensed consolidated financial statements, and explanatory notes, of Nicor Inc. as of September 30, 2011 and 2010.
99.4	Unaudited pro forma condensed combined consolidated financial statements and explanatory notes.

EX-3.1

Exhibit 3.1

CERTIFICATE OF RESTATEMENT

OF

AGL RESOURCES INC.

Pursuant to the provisions of Section 14-2-1007 of the Georgia Business Corporation Code (the “Code”), AGL Resources Inc., a Georgia corporation (the “Corporation”), certifies as follows:

1. The attached Amended and Restated Articles of Incorporation of the Corporation contain

an amendment of Section 3.01 of the Amended and Restated Articles of Incorporation of the Corporation, as amended (the “Amendment”), which amendment was adopted by the Board of Directors of the Corporation on December 6, 2010.

2. The Amendment was duly approved by the shareholders of the Corporation on June 14, 2011 in accordance with the provisions of Section 14-2-1003 of the Code.

3. The attached Amended and Restated Articles of Incorporation of the Corporation supersede the previously existing Amended and Restated Articles of Incorporation of the Corporation, as amended.

IN WITNESS WHEREOF, the undersigned executes this Certificate of Restatement this 9th day of December, 2011.

AGL RESOURCES INC.

By: /s/ Myra C. Bierria

Myra C. Bierria

       Corporate Secretary

AMENDED AND RESTATED

ARTICLES OF INCORPORATION

OF

AGL RESOURCES INC.

I.

CORPORATE NAME

The name of the Corporation is AGL Resources Inc. (hereinafter, the "Corporation").

II.

AUTHORIZED SHARES

Section 2.01.Common Stock:  The Corporation shall have authority to issue not more than Seven Hundred Fifty Million (750,000,000) shares of Common Stock, par value $5.00 per share (the "Common Stock"), which shall have unlimited voting rights and be entitled to receive the net assets of the Corporation upon dissolution.

Section 2.02.  Preferred Stock:  The Corporation shall have authority to issue Ten Million (10,000,000) shares of Preferred Stock, with or without par value, which may be of one or more series, with such voting power, preferences, designations, rights, qualifications, limitations, or restrictions, and subject to application dependent upon determination of facts ascertainable outside the Articles of Incorporation, as the Board of Directors may from time to time determine in the resolution and statement filed with the Secretary of State of Georgia as an amendment to these Articles of Incorporation.

Section 2.03.  Class A Junior Participating Preferred Stock:  The Corporation shall have authority to issue Ten Million (10,000,000) shares of Class A Junior Participating Preferred Stock (the "Class A Preferred Stock"), with such voting power, preferences, designations, rights, qualifications, limitations, or restrictions as set forth below.

(1)  Dividends:  Subject to the rights of the holders of any shares of any class or series of Preferred Stock of the Corporation (the "Preferred Stock") ranking prior and superior to the Class A Preferred Stock with respect to dividends, the holders of the Class A Preferred Stock, in preference to the holders of Common Stock and of any other stock of the Corporation ranking junior to the Class A Preferred Stock, shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, quarterly, dividends payable in cash on the last day of January, April, July, and October in each year (each such date being referred to herein as a "Dividend Payment Date"), commencing on the first Dividend Payment Date after the first issuance of a share or fraction of a share of Class A Preferred Stock, in an amount per share (rounded to the nearest cent) equal to the greater of (a) One Dollar ($1.00) or (b) subject to the provision for adjustment hereinafter set forth, 100 times the aggregate per share amount of all cash dividends and 100 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions other than a dividend payable in shares of Common Stock, declared on the Common Stock since the immediately preceding Dividend Payment Date or, with respect to the first Dividend Payment Date, since the first issuance of any share or fraction of a share of Class A Preferred Stock.  In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount to which holders of shares of Class A Preferred Stock were entitled immediately prior to such event under clause (b) of the preceding sentence shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.

(2)  Declaration of Dividends:  The Corporation shall declare a dividend or distribution on the Class A Preferred Stock as provided in paragraph (1) of this Section immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock) provided that, in the event no dividend or distribution shall have been declared on the Common Stock during the period between any Dividend Payment Date and the next subsequent Dividend Payment Date, a dividend of One Dollar ($1.00) per share on the Class A Preferred Stock shall nevertheless be payable, when, as and if declared, on such subsequent Dividend Payment Date.

(3)  Dividends to be Cumulative:  Dividends shall begin to accrue and be cumulative, whether or not earned or declared, on outstanding shares of Class A Preferred Stock from the Dividend Payment Date next preceding the date of issue of such shares, unless the date of issue of such shares is prior to the record date for the first Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Dividend Payment Date or is a date after the record date for the determination of holders of shares of Class A Preferred Stock entitled to receive a quarterly dividend and before such Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Dividend Payment Date.  Accrued but unpaid dividends shall not bear interest.  Dividends paid on the shares of Class A Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding.  The Board of Directors may fix a record date for the determination of holders of shares of Class A Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be not more than 60 days prior to the date fixed for the payment thereof.

(4)  Voting Rights:  The holders of shares of Class A Preferred Stock shall have the following voting rights:

(a)  Subject to the provision for adjustment hereafter set forth and except as otherwise provided in this Article or required by law, each share of Class A Preferred Stock shall entitle the holder thereof to 100 votes on all matters upon which the holders of the Common Stock of the Corporation are entitled to vote.  In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the number of votes per share to which holders of shares of Class A Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.

(b)  Except as otherwise provided herein, in this Article or in any Articles of Amendment of the Articles of Incorporation creating a class or series of Preferred Stock or any similar stock, and except as otherwise provided by law, the holders of shares of Class A Preferred Stock and any other capital stock of the Corporation having general voting rights shall vote together as one class on all matters submitted to a vote of shareholders of the Corporation.

(c)  Except as set forth herein, or as otherwise provided by law, holders of Class A Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for taking any corporate action.

(5)Certain Restrictions:  (a)  Whenever quarterly dividends or other dividends or distributions payable on the Class A Preferred Stock as provided in subsection (2) are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not earned or declared, on shares of Class A Preferred Stock outstanding shall have been paid in full, the Corporation shall not:

(i)  declare or pay dividends, or make any other distributions, on any class or series of stock ranking junior (as to dividends) to the Class A Preferred Stock;

(ii)  declare or pay dividends, or make any other distributions, on any shares of stock ranking on a parity (as to dividends) with the Class A Preferred Stock, except dividends paid ratably on the Class A Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled;

(iii)  redeem or purchase or otherwise acquire for consideration shares of any stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Class A Preferred Stock, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such junior stock in exchange for shares of any stock of the Corporation ranking junior (as to dividends and upon dissolution, liquidation, or winding up) to the Class A Preferred Stock or rights, warrants or options to acquire such junior stock; or

(iv)  redeem or purchase or otherwise acquire for consideration any shares of Class A Preferred Stock, or any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Class A Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes.

(b)  The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration, any shares of stock of the Corporation, unless the Corporation could, under paragraph (a) of this Section 2.03(5), purchase or otherwise acquire such shares at such time and in such manner.

(6)  Reacquired Shares:  Any shares of Class A Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and canceled promptly after the acquisition thereof.

(7)  Liquidation, Dissolution or Winding Up:  Upon any liquidation, dissolution or winding up of the Corporation, no distribution shall be made (i) to the holders of the Common Stock or of shares of any other stock of the Corporation ranking junior, upon liquidation, dissolution or winding up, to the Class A Preferred Stock unless, prior thereto, the holders of shares of Class A Preferred Stock shall have received One Hundred Dollars ($100) per share, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not earned or declared, to the date of such payment, provided that the holders of shares of Class A Preferred Stock shall be entitled to receive an aggregate amount per share, subject to the provisions for adjustment hereinafter set forth, equal to 100 times the aggregate amount to be distributed per share to holders of shares of Common Stock, or (ii) to the holders of shares of stock ranking on a parity upon liquidation, dissolution or winding up with the Class A Preferred Stock, except distributions made ratably on the Class A Preferred Stock and all such parity stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up.  In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the number of votes per share to which holders of shares of Class A Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.

(8)  Consolidation, Merger, or Other Business Combinations:  In case the Corporation shall enter into any consolidation, merger, combination, share exchange or other transaction in which the shares of Common Stock are converted into, exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case each share of Class A Preferred Stock shall at the same time be similarly converted into, exchanged for or changed into an amount per share (subject to the provision for adjustment hereinafter set forth) equal to 100 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is converted or exchanged.  In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the number of votes per share to which holders of shares of Class A Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.

(9)  No Redemption:  The shares of Class A Preferred Stock shall not be redeemable from any holder.

(10)  Rank:  The Class A Preferred Stock shall rank, with respect to the payment of dividends and the distribution of assets upon liquidation, dissolution or winding up of the Corporation, junior to all other classes and series of Preferred Stock and senior to the Common Stock.

(11)  Amendment:  If any proposed amendment to these Articles of Incorporation would alter, change or repeal any of the preferences, powers or special rights given to the Class A Preferred Stock so as to affect the Class A Preferred Stock in any manner specified in Section 14-2-1004 of the Georgia Business Corporation Code (the “Code”), as now in effect or hereafter amended, then the holders of the Class A Preferred Stock shall be entitled to vote separately as a group upon such amendment, and the affirmative vote of two-thirds of the outstanding shares of the Class A Preferred Stock shall be necessary for the adoption thereof, in addition to such other vote as may be required by the Code.

III.

DIRECTORS

Section 3.01.  Size of Board:  The business of the Corporation shall be managed by or under the authority of a Board of Directors of not less than five (5) nor more than sixteen (16) Directors, as may from time to time be fixed solely by the Board of Directors.

Section 3.02.Beginning with the 2010 annual meeting of shareholders, and at each annual meeting of shareholders thereafter, all directors elected at the annual meeting of shareholders shall be elected for a one-year term expiring at the next annual meeting of shareholders. Each director who is serving as a director immediately following the 2010 annual meeting of shareholders, or is thereafter elected a director, shall hold office until the expiration of the term for which he or she was elected, and until his or her successor shall be elected and shall qualify, or until his or her earlier death, resignation, retirement, removal or disqualification from office. During the intervals between annual meetings of shareholders, any vacancy occurring in the Board of Directors caused by resignation, removal, death or other incapacity, and any newly created Directorships resulting from an increase in the number of Directors, shall be filled by a majority vote of the Directors then in office, whether or not a quorum.  Directors may be elected by shareholders only at an annual meeting of shareholders.  Each Director chosen to fill a vacancy shall hold office for the unexpired term in respect of which such vacancy occurred.  Each Director chosen to fill a newly created Directorship shall hold office until the election and qualification of his or her successor at the next election of Directors by the shareholders.

IV.

CONSIDERATIONS AVAILABLE TO THE BOARD OF DIRECTORS

In discharging the duties of their respective positions and in determining what is believed to be in the best interests of the Corporation, the Board of Directors, committees of the Board of Directors, and individual Directors, in addition to considering the effects of any action on the Corporation or its shareholders, may consider the interests of the employees, customers, suppliers and creditors of the Corporation and its subsidiaries, the communities in which offices or other establishments of the Corporation and its subsidiaries are located, and all other factors the Directors consider pertinent.

V.

LIMITATIONS ON DIRECTOR LIABILITY

No Director of the Corporation shall be personally liable to the Corporation or its shareholders for monetary damages for breach of duty of care or other duty as a Director, except for liability (1) for any appropriation, in violation of his duties, of any business opportunity of the Corporation; (2) for acts or omissions which involve intentional misconduct or a knowing violation of the law; (3) for the types of liability set forth in Section 14-2-832 of the Code; or (4) for any transaction from which the Director received an improper personal benefit.  If the Code is amended after the effective date of this Article to authorize corporate action further limiting the personal liability of Directors, then the liability of a Director of the Corporation shall be limited to the fullest extent permitted by the Code, as so amended.  Any repeal or modification of the foregoing paragraph by the shareholders of the Corporation shall not adversely affect any right or protection of a Director of the Corporation existing at the time of such repeal or modification.

VI.

REPURCHASED SHARES

Shares of stock of the Corporation acquired by the Corporation shall constitute treasury shares, unless the Board of Directors by resolution otherwise provides.

VII.

INDEMNIFICATION OF DIRECTORS

Section 7.01.  Right to Indemnification:  Each person who was or is made a party or is threatened to be made a party to or is otherwise involved in any threatened, pending or completed action, suit or proceeding, whether civil, derivative, criminal, administrative or investigative (hereinafter a "proceeding"), by reason of the fact he or she, or a person of whom he or she is a legal representative, is or was a Director shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the Code, as the same exists or may hereafter be amended (but in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than the Code permitted the Corporation to provide prior to such amendment), against all expenses, liability and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or penalties, and amounts paid or to be paid in settlement) actually and reasonably incurred or suffered by such Director in connection with any such proceeding.  Such indemnification shall continue as to a Director who has ceased to be a Director and shall inure to the benefit of the Director's heirs, executors and administrators.  Except with respect to proceedings to enforce rights to indemnification by a Director, the Corporation shall indemnify any such Director in connection with a proceeding (or part thereof) initiated by such Director only if such proceeding (or part thereof) was authorized by the Board of Directors of the Corporation.  The right to indemnification conferred in this Article shall be a contract right.

Section 7.02.  Advance for Expenses:  The Corporation shall pay for or reimburse the actual and reasonable expenses incurred by a Director who is a party to a proceeding in advance of final disposition of the proceeding if the Director furnishes the Corporation:  (1) a written affirmation of his or her good faith belief that  his or her conduct does not constitute behavior of the kind set forth in Section 14-2-856(b) of the Code; and (2) a written undertaking, executed personally or on his or her behalf, to repay any advances if it is ultimately determined that he or she is not entitled to indemnification for such expenses under this Article or otherwise.  The undertaking must be an unlimited general obligation of the Director but need not be secured and may be accepted without reference to the Director's financial ability to make repayment.

Section 7.03.  Enforcement:  The rights to indemnification provided by this Article shall apply to all proceedings described in Section 7.01 of this Article, regardless of whether any provision of this Article has been amended or repealed subsequent to such acts or omissions.  If a claim for indemnification under this Article is not paid in full by the Corporation within 60 days after a written claim has been received by the Corporation, except in the case of a claim for an advancement of expenses, in which case the applicable period shall be 20 days, the Director may apply for indemnification or advancement of expenses to a court of competent jurisdiction pursuant to Section 14-2-854 of the Code.  If successful in whole or in part in any such suit, or in a suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the Director also shall be entitled to be paid the expenses of prosecuting or defending such suit.  For purposes of this Article, references to the "Corporation" shall include, in addition to the Corporation, any merging or consolidating corporation (including any merging or consolidating corporation of a merging or consolidating corporation) absorbed in a merger or consolidation with the Corporation, so that any person who is or was a Director of such merging or consolidating corporation or who is or was serving at the request of such merging or consolidating corporation as a Director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under this Article with respect to the Corporation as he would if he had served the Corporation in the same capacity.

VIII.

SPECIAL MEETINGS OF SHAREHOLDERS

At any time in the interval between annual meetings of shareholders, special meetings of the shareholders may be called by the Chairman of the Board of Directors, the President, the Board of Directors or the Executive Committee by vote at a meeting, by a majority of the Directors in writing without a meeting, or by the holders of not less than 100% of the shares of Common Stock then outstanding and entitled to vote.

IX.

SHAREHOLDERS' RIGHT TO DISSENT

Section 9.01.  Dissenters' Rights:  A record shareholder of the Corporation is entitled to dissent from, and to obtain payment of the fair value of his shares in the event of the occurrence of, any of the events described in Section 11.01(4) of these Articles of Incorporation with an "Interested Shareholder" as defined in Section 9.02 of these Articles of Incorporation unless the transaction is approved by the Board of Directors in the manner described in Section 11.05 of these Articles of Incorporation.

Section 9.02.  "Interested Shareholder:"  For purposes of this Article, an "Interested Shareholder" shall mean any person, other than the Corporation or its subsidiaries, that:

(1)  Is the beneficial owner of 10% or more of the voting power of the outstanding voting shares of the Corporation; or

(2)  Is a person that directly, or indirectly through one or more intermediaries, controls or is controlled by or is under common control with the Corporation and, at any time within the two-year period immediately prior to the date in question, was the beneficial owner of 10% or more of the voting power of the then outstanding voting shares of the Corporation (an "Affiliate").

For the purpose of determining whether a person is an Interested Shareholder, the number of voting shares deemed to be outstanding shall not include any unissued voting shares which may be issuable pursuant to any agreement, arrangement, or understanding.

Section 9.03.  "Record Shareholder:"  For purposes of this Article, a "record shareholder" shall mean any person in whose name shares are registered in the records of the Corporation or the beneficial owner of shares to the extent of the rights granted by a nominee certificate on file with the Corporation.

X.

AMENDMENT OF BYLAWS

Section 10.01.  Amendment of Bylaws:  No action shall be taken by the shareholders with respect to altering, amending or repealing the Bylaws of the Corporation, unless such action has been recommended by the Board of Directors, except by the affirmative vote of the holders of at least two-thirds (66-2/3%) of all of the outstanding shares entitled to vote.  Such affirmative vote shall be in addition to any shareholder vote that would be required without reference to this Article.

Section 10.02.  Amendment of Article X:  The affirmative vote of shareholders required to alter, amend or repeal this Article, or to alter, amend or repeal any other provision of the Articles of Incorporation of the Corporation in any respect which would or might have the effect, directly or indirectly, of modifying, permitting any action inconsistent with, or permitting circumvention of, this Article shall be at least two-thirds (66-2/3%) of all of the outstanding shares entitled to vote, excluding from the number of shares deemed to be outstanding shares for purposes of such vote to amend, alter or repeal this Article, all shares beneficially owned by an "Interested Shareholder" as that term is defined in Section 9.02 of these Articles of Incorporation; provided, however, that if such proposed alteration, amendment or repeal is approved by a majority of the "Continuing Directors" as that term is defined in Section 11.01(5) of these Articles of Incorporation, provided at the time of such approval the Continuing Directors constitute at least a majority of the Board of Directors, then such proposed alteration, amendment or repeal shall require for approval only such affirmative vote as is required by law and by any other provision of these Articles of Incorporation or the Bylaws.  The two-thirds (66-2/3%) affirmative vote provided for herein shall be in addition to any shareholder vote that would be required without reference to this Article.

XI.

BUSINESS COMBINATIONS WITH RELATED PERSONS

Section 11.01.  Definitions:

The following definitions shall apply for purposes of this Article XI:

(1)  Affiliate:  An "Affiliate" of, or Person "affiliated with," a specified Person is a Person that directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a specified Person.  The term "control" (including the terms "controlling," "controlled by" and "under common control with") means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract, or otherwise and the beneficial ownership of shares representing 10% or more of the votes entitled to be cast by the Corporation's voting shares shall create an irrebuttable presumption of control.

(2)  Associate:  The term "Associate," when used to indicate a relationship with any Person, means (a) any Person (other than the Corporation or a subsidiary of the Corporation) of which such Person is an officer, director or partner or is the Beneficial Owner of 10% or more of any class of equity securities, (b) any trust or other estate in which such Person has a beneficial interest of 10% or more or as to which such Person serves as a trustee or in a similar fiduciary capacity, and (c) any relative or spouse of such Person, or any relative of such spouse who has the same home as such Person.

(3)  Beneficial Owner:  A Person shall be considered to be the "Beneficial Owner" of any equity securities of the Corporation:

(a)  which such Person or any of such Person's Affiliates or Associates owns, directly or indirectly;

(b)  which such Person or any of such Person's Affiliates or Associates, directly or indirectly, has (i) the right to acquire, whether such right is exercisable immediately or only after the passage of time, by agreement, arrangement, or understanding or upon the exercise of conversion rights, exchange rights, warrants or options or otherwise; or (ii) the right to vote pursuant to any agreement, arrangement, or understanding; or

(c)  which are owned, directly or indirectly, by any other Person  with which such Person or any of its Affiliates or Associates has any agreement, arrangement, or understanding for the purpose of acquiring, holding, voting, or disposing of equity securities of the Corporation.

(4)  Business Combination:  The term "Business Combination" shall mean:

(a)  a merger or consolidation of the Corporation or any Subsidiary with or into any other Person, or of such other Person with or into the Corporation or any Subsidiary;

(b)  any sale, exchange, lease, mortgage, pledge, transfer or other disposition, in one transaction or a series of transactions, of the assets of the Corporation or any Subsidiary having an aggregate book value as of the end of the Corporation's most recently ended fiscal quarter of 10% or more of the net assets of the Corporation to any other Person;

(c)  any sale, exchange, lease, mortgage, pledge, transfer or other disposition for value by any other Person of any assets to the Corporation or any Subsidiary in exchange for Outstanding Shares, or outstanding shares of any Subsidiary, where the result of such transaction is that such other Person is the Beneficial Owner of a majority of the Outstanding Shares;

(d)  the liquidation or dissolution of the Corporation or any Subsidiary proposed by or on behalf of a Related Person;

(e)  any share exchange in which the shares of Common Stock of the Corporation or of any Subsidiary having an aggregate book value as of the end of the Corporation's most recently ended fiscal quarter of 10% or more of the net assets of the Corporation are exchanged for shares, other securities, cash or other property; or

(f)  any amendment of these Articles of Incorporation which would effect a reclassification of any securities of the Corporation (including a reverse stock split or the equivalent thereof) or any merger of the Corporation with any of its Subsidiaries, which has the effect, directly or indirectly, of increasing the proportionate share of any class of the Outstanding Shares of the Corporation or any Subsidiary beneficially owned by a Related Person.

(5)  Continuing Director:  The term "Continuing Director" shall mean any member of the Board of Directors who is not a Related Person or an Affiliate or Associate of a Related Person or of any such Affiliate or Associate, or a representative of a Related Person or of any such Affiliate or Associate, and was a Director of the Corporation prior to the time a Related Person became such, and any successor to such Continuing Director who is not an Affiliate or Associate of a Related Person and was recommended by a majority of the Continuing Directors then on the Board of Directors, provided that at the time of such recommendation, Continuing Directors comprise a majority of the Board.  If there is no Related Person, all members of the Board of Directors shall be deemed to be "Continuing Directors."

(6)  Date of Determination:  The term "Date of Determination" shall mean (a) the date on which a binding agreement (except for the fulfillment of conditions precedent, including, without limitation, votes of shareholders to approve such transaction) is entered into by the Corporation, as authorized by the Board of Directors, and another Person providing for any Business Combination, or (b) if such an agreement as referred to in (a) above is amended so as to make it less favorable to the Corporation or its shareholders, the date on which such amendment is entered into by the Corporation, as authorized by the Board of Directors, or (c) in cases where neither (a) nor (b) shall be applicable, the record date for the determination of shareholders of the Corporation entitled to notice of and to vote upon the transaction in question.  The Board of Directors shall have the power and duty to determine pursuant to the foregoing the Date of Determination as to any transaction for purposes of this Article XI.  Any such determination made by the Board of Directors in good faith shall be conclusive and binding for all purposes of Article XI.

(7)  Fair Market Value:  The term "Fair Market Value" shall mean, as of any date:  (a) in the case of stock, either (i) the median of the averages of the daily high and low sale prices during the 30-day period immediately preceding such date of a share of such stock on the Composite Tape for New York Stock Exchange-Listed Stocks, or, if such stock is not quoted on the Composite Tape, on the New York Stock Exchange, or, if such stock is not listed on such Exchange, on the principal United States securities exchange registered under the Securities Exchange Act of 1934 on which such stock is listed; or (ii) if such stock is not listed on any such exchange, the median of the averages of the daily closing bid and closing asked quotations on the National Association of Securities Dealers Automated Quotations System ("NASDAQ") (or any successor system then in use), or the median of the averages of the daily high and low sales prices on the NASDAQ National Market System, if applicable, for such stock during the 30-day period preceding such date, or if no such quotations are then available, the fair market value as determined in good faith by a majority of the Continuing Directors; and (b) in the case of property other than cash or stock, the fair market value of such property on such date as determined in good faith by a majority of the Continuing Directors.

(8)  Outstanding Shares:  The term "Outstanding Shares" shall mean any issued shares of capital stock of the Corporation with the right generally to vote for the election of Directors, but shall not include any shares (prior to issue) which may be issuable pursuant to any agreement or upon exercise of conversion rights, warrants, options or otherwise.

(9)  Person:  The term "Person" shall mean any individual, partnership, corporation, group or other entity (other than the Corporation, any Subsidiary of the Corporation or a trustee holding stock for the benefit of employees of the Corporation or its Subsidiaries, or any one of them, pursuant to one or more employee benefit plans or arrangements).  When two or more Persons act as a partnership, limited partnership, syndicate, association or other group for the purposes of acquiring, holding, voting or disposing of the Outstanding Shares, such partnership, syndicate,  association, or group shall be deemed a "Person."

(10)  Related Person:  The term "Related Person" shall mean any Person which, together with the Affiliates and Associates of such Person, is the Beneficial Owner as of the Date of Determination or immediately prior to the consummation of a Business Combination, or both, of at least that number of shares of stock of the Corporation equal to 20% of all of the Outstanding Shares, but does not include any one or a group of more than one Continuing Director.  The term "Related Person" shall include the Affiliates and Associates of such Related Person.

(11)  Subsidiary:  The term "Subsidiary" shall mean any corporation of which a majority of any class of equity security is owned, directly or indirectly, by the Corporation.

Section 11.02.  Determination of Application of Article XI:The Board of Directors shall have the power and the duty to determine for the purposes of Article XI, on the basis of the information known to the Board of Directors, any fact determinable under Article XI and the applicability of all definitions to transactions contemplated by Article XI, including but not limited to the following:

1)  the number of shares of stock of the Corporation owned by a Person;

(2)  whether a Person is an Affiliate or Associate of another; and

(3)  the fair market value, to be determined pursuant to the definition of "Fair Market Value" contained in Section 11.01, of consideration other than cash received or to be received for Outstanding Shares.

Any such determination shall be conclusive and binding for all purposes of Article XI, provided that such determination is approved by a majority of the Continuing Directors then in office.

Section 11.03.  Voting Requirements for Business Combinations with Related Persons:Except as set forth in Sections 11.04 and 11.05 of this Article XI, if as of the Date of Determination with respect to any Business Combination, any Person that is a party to such Business Combination is a Related Person, the affirmative vote or consent of the holders of at least 75% of all Outstanding Shares shall be required to approve such Business Combination.  Such affirmative vote shall be required notwithstanding the fact that no vote may be required, or that a lesser percentage may be specified, by law or in any agreement with any national securities exchange or otherwise, and shall be in addition to any shareholder vote which would be required without reference to this Article XI.

Section 11.04.  Nonapplicability of Special Voting Requirements:The provisions of Section 11.03 shall not apply if all of the following conditions shall have been met, provided, however, that nothing contained in this Article XI shall be construed to relieve any Related Person from any fiduciary obligation imposed by law:

(1)  The consideration to be received by the Corporation or per share by holders of Outstanding Shares shall be in cash or in the same form as the consideration given by the Related Person in acquiring Outstanding Shares at any time during the period commencing on the date of the first acquisition by such Related Person of any Outstanding Shares and ending on and including the date upon which the Related Person became a Related Person.  If the Related Person paid for Outstanding Shares with varying forms of consideration, the form of consideration to be received by the Corporation or per share by holders of Outstanding Shares shall be either cash or the form of consideration used to acquire the largest number of Outstanding Shares acquired by the Related Person during such two-year period.

(2)  The Fair Market Value of the consideration received in such Business Combination by the Corporation (analyzed on a per share basis) or per share by holders of Outstanding Shares is not less than the highest per share price (including brokerage commissions, transfer taxes and soliciting dealers' fees) paid by such Related Person in acquiring any of its holdings of Outstanding Shares.

(3)  The ratio of:

(a) the Fair Market Value of the consideration to be received in such Business Combination by the Corporation (analyzed on a per share basis) or per share by holders of Outstanding Shares to

(b) the per share market price of Outstanding Shares immediately prior to the announcement of the Business Combination is at least as great as the ratio of

(c) the highest per share price (including brokerage commissions, transfer taxes and soliciting dealers' fees) which such Related Person has paid for any of the Outstanding Shares acquired by it prior to the Date of Determination to

(d) the per share market price of Outstanding Shares immediately prior to the initial acquisition by such Related Person of any Outstanding Shares.

(4)  If the Related Person is a corporation, the Fair Market Value of the consideration to be received in such Business Combination by the Corporation (analyzed on a per share basis) or per share by holders of Outstanding Shares shall be not less than the earnings per share of Outstanding Shares during the four full consecutive fiscal quarters immediately preceding the Date of Determination for solicitation of votes on such Business Combination multiplied by the then price/earnings multiple (if any) of such Related Person as customarily computed and reported in the financial community.

(5)  The Fair Market Value of consideration to be received in such Business Combination by the Corporation (analyzed on a per share basis) or per share by holders of Outstanding Shares shall be not less than the sum of:

(a)  the higher of (i) the highest gross per share price paid or agreed to be paid by the Related Person to acquire any of the Outstanding Shares of the Corporation beneficially owned by such Related Person or (ii) the highest per share market price for such Outstanding Shares since the Related Person became a Related Person, plus

(b)  an amount equal to the highest price/earnings multiple of the Corporation, as customarily computed and reported in the financial community, attained by the Corporation during the five fiscal years immediately preceding the Date of Determination multiplied by the aggregate amount, if any, by which 10% of such higher per share price determined under (a) above exceeds the smallest quarterly common stock dividend per share (annualized) paid in cash since the date on which such Related Person became a Related Person.

(6)  The Fair Market Value of the consideration to be received in such Business Combination by the Corporation (analyzed on a per share basis) or per share by holders of Outstanding Shares shall not be less than the per share book value of Outstanding Shares at the end of the most recent fiscal year preceding the Date of Determination, calculated in accordance with generally accepted accounting methods.

(7)  After such Related Person has become a Related Person and prior to the consummation of such Business Combination:  (a)  except as approved by two-thirds of the Continuing Directors, there shall have been no failure to declare and pay at the regular date therefor any dividends (whether or not cumulative) on any outstanding Preferred Stock of the Corporation; and (b) there shall have been (i) no reduction in the annual dividend from that most recently paid on Outstanding Shares (except as necessary to reflect any subdivision of the Outstanding Shares through stock dividend, stock split, or otherwise), except as approved by two-thirds of the Continuing Directors, and (ii) an increase in such annual dividend as necessary to reflect any reclassification (including a reverse stock split), recapitalization, reorganization or any similar transaction which has the effect of reducing the number of Outstanding Shares, unless the failure so to increase such annual dividend is approved by two-thirds of the Continuing Directors.

(8)  After such Related Person has become a Related Person, such Related Person shall not have received the benefit, directly or indirectly (except proportionately as a shareholder of the Corporation) of any loans, advances, guarantees, pledges or other financial assistance or any tax credits or other tax advantages provided by the Corporation, whether in anticipation of or in connection with such Business Combination or otherwise.

Section 11.05.  Approval by Continuing Directors:The provisions of Sections 11.03 and 11.04 shall not be applicable to any particular Business Combination or other event covered thereby, and such Business Combination or other event covered thereby shall require only such affirmative vote as is required by law and by any other provision of these Articles of Incorporation, if both of the following conditions with respect to such Business Combination or other event shall have been satisfied:  (1)  the Business Combination or other event shall have been approved by two-thirds of the Continuing Directors; and (2) at the time of such approval, Continuing Directors comprised at least a majority of the Board of Directors.

Section 11.06.  Amendment:The affirmative vote of shareholders required to alter, amend or repeal this Article XI, or to alter, amend, or repeal any other provision of the Articles of Incorporation of the Corporation in any respect which would or might have the effect, directly or indirectly, of modifying, permitting any action inconsistent with, or permitting circumvention of, this Article XI (including, but not limited to, any amendment of the Articles of Incorporation which would effect a reclassification of any securities of the Corporation which has the effect, directly or indirectly, of increasing the proportionate share of Outstanding Shares, or outstanding shares of any Subsidiary, beneficially owned by a Related Person) shall be at least 75% of all of the Outstanding Shares; provided, however, that if such proposed alteration, amendment or repeal is approved by two-thirds of the Continuing Directors and at the time of such approval Continuing Directors comprise at least a majority of the Board of Directors, then such proposed alteration, amendment or repeal shall require for approval only such affirmative vote as is required by law and by any other provision of these Articles of Incorporation.  The 75% affirmative vote provided for above shall be in addition to any shareholder vote which would be required without reference to this Article XI.

EX-3.2

Exhibit 3.2

AGL RESOURCES INC.

(as amended December 9, 2011)

BYLAWS

TABLE OF CONTENTS

Page

ARTICLE I		SHAREHOLDERS	1
	SECTION 1.1.	Date, Time and Place of Meetings	1
	SECTION 1.2.	Annual Meetings	1
	SECTION 1.3.	Special Meetings	2
	SECTION 1.4.	Determination of Validity of Notice of Shareholder
		Proposal for Business	3
	SECTION 1.5.	Notice of Meetings	3
	SECTION 1.6.	Record Date	3
	SECTION 1.7.	Shareholders' List for Meeting	4
	SECTION 1.8.	Quorum	4
	SECTION 1.9.	Adjournment of Meetings	4
	SECTION 1.10.	Vote Required	4
	SECTION 1.11.	Voting Entitlement of Shares; Proxies	4
	SECTION 1.12.	Inspectors of Election	5
ARTICLE II		BOARD OF DIRECTORS	5
	SECTION 2.1.	General Powers	5
	SECTION 2.2.	Number and Tenure	5
	SECTION 2.3.	Qualifications of Directors	6
	SECTION 2.3.1.	Vote Required in Uncontested Elections	6
	SECTION 2.3.2.	Re election after Termination of Principal Employment	7
	SECTION 2.3.3.	Terminating Events	7
	SECTION 2.4.	Vacancies	8
	SECTION 2.5.	Meetings	8
	SECTION 2.6.	Quorum and Voting	8
	SECTION 2.7.	Action Without Meeting	9
	SECTION 2.8.	Remote Participation in a Meeting	9
	SECTION 2.9.	Compensation of Directors	9
	SECTION 2.10.	Removal of Directors by Shareholders	9
	SECTION 2.11.	Nomination of Directors	9
	SECTION 2.15.	Indemnification	10
	SECTION 2.15.1.	Determination of Eligibility for Indemnification	10
	SECTION 2.15.2.	Rights Not Exclusive	10
	SECTION 2.15.3.	Insurance	11
	SECTION 2.15.4.	Reports to Shareholders	11
ARTICLE III		COMMITTEES	11
	SECTION 3.1.	Committees	11
	SECTION 3.2.	Meetings of Committees	12
ARTICLE IV		NOTICES	12
	SECTION 4.1.	Notice	12
	SECTION 4.2.	Waiver of Notice	13

ARTICLE V		OFFICERS	13
	SECTION 5.1.	Appointment	13
	SECTION 5.2.	Resignation and Removal of Officers	14
	SECTION 5.3.	Vacancies	14
	SECTION 5.4.	Powers and Duties	14
	SECTION 5.4.1.	Chairman of the Board of Directors	14
	SECTION 5.4.2.	Chief Executive Officer	14
	SECTION 5.4.3.	President	15
	SECTION 5.4.4.	Vice Presidents	15
	SECTION 5.4.5	Chief Financial Officer	15
	SECTION 5.4.6.	Chief Operating Officer	15
	SECTION 5.4.7.	Corporate Secretary	15
	SECTION 5.4.8.	Treasurer	16
	SECTION 5.4.9.	Controller	16
	SECTION 5.4.10.	Assistant Vice President, Assistant Corporate Secretary and Assistant Treasurer	16
	SECTION 5.4.11.	Other Officers	17
	SECTION 5.5.	Officers Holding More Than One Office	17
	SECTION 5.6.	Compensation	17
ARTICLE VI		CAPITAL STOCK	17
	SECTION 6.1.	Share Certificates	17
	SECTION 6.2.	Record of Shareholders	17
	SECTION 6.3.	Lost Certificates	18
	SECTION 6.4.	Transfers of Shares	18
	SECTION 6.5.	Transfer Agents and Registrars	18
ARTICLE VII		GENERAL PROVISIONS	18
	SECTION 7.1.	Indemnification of Officers, Employees and Agents	18
	SECTION 7.2.	Seal	19
	SECTION 7.3.	Voting Shares in Other Corporations	19
	SECTION 7.4.	Amendment of Bylaws	19
	SECTION 7.5.	Execution of Bonds, Debentures, Evidences of Indebtedness, Checks, Drafts and Other Obligations and Orders for Payment	19
	SECTION 7.6.	Business Combinations	20
ARTICLE VIII		EMERGENCY BYLAWS	20
	SECTION 8.1.	Emergency Bylaws	20
	SECTION 8.2.	Meetings	20
	SECTION 8.3	Quorum	20
	SECTION 8.4.	Bylaws	20
	SECTION 8.5.	Liability	20
	SECTION 8.6.	Repeal or Change	20

  ii

ARTICLE I

SHAREHOLDERS

SECTION 1.1.                                Date, Time and Place of Meetings.  Annual and special meetings of the shareholders shall be held on such date and at such time and place, within or without the State of Georgia, as may be stated in the notice of the meeting, or in a duly executed waiver of notice thereof.  If no designation is made, the place of the meeting shall be the principal executive offices of the Company.

SECTION 1.2.                                Annual Meetings.  The annual meeting of the shareholders of the Company shall be held each year for the purposes of electing Directors and of transacting such other business as properly may be brought before the meeting.  To be properly brought before the meeting, business must be brought before the meeting (i) by or at the direction of the Board of Directors or (ii) by any shareholder of the Company entitled to vote at the meeting who complies with the procedures set forth in Section 1.2 of this Article; provided, in each case, that such business proposed to be conducted is, under the law, an appropriate subject for shareholder action.

For business to be properly brought before an annual meeting by a shareholder, the shareholder must give timely notice thereof in writing to the Corporate Secretary of the Company.  To be timely, a shareholder's notice must be received by the Corporate Secretary at the principal executive offices of the Company at least 120 calendar days before the first anniversary of the date that the Company's proxy statement was released to shareholders in connection with the previous year's annual meeting of shareholders.  However, if no annual meeting of shareholders was held in the previous year or if the date of the annual meeting of shareholders has been changed by more than 30 calendar days from the date contemplated at the time of the previous year's proxy statement, the notice shall be received by the Corporate Secretary at the principal executive offices of the Company not fewer than the later of (i) 150 calendar days prior to the date of the contemplated annual meeting or (ii) the date which is 10 calendar days after the date of the first public announcement or other notification to the shareholders of the date of the contemplated annual meeting.

Such shareholder's notice to the Corporate Secretary shall set forth with respect to any proposal such shareholder proposes to bring before the annual meeting (i) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting; (ii) the name and address, as they appear on the Company's books, of the shareholder proposing such business; (iii) the class and number of shares of the Company which are beneficially owned by such shareholder; (iv) the dates upon which the shareholder acquired such shares; (v) documentary support for any claim of beneficial ownership; (vi) any material interest of such shareholder in such business; (vii) a statement in support of the matter and, for proposals sought to be included in the Company's proxy statement, any other information required by Securities and Exchange Commission Rule 14a-8; and (viii) as to each person whom the shareholder proposes to nominate for election or re-election as Director all information relating to such person that is required to be disclosed in solicitations of proxies for election of Directors in an election contest, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended  (including such person’s written consent to being named in the proxy statement as a nominee and to serving as a Director if elected, and evidence satisfactory to the Company that such nominee has no interests that would limit their ability to fulfill their duties of office).

In addition, if the shareholder intends to solicit proxies from the shareholders of the Company, such shareholder shall notify the Company of this intent in accordance with Securities and Exchange Commission Rule 14a-4 and/or Rule 14a-8.

1 

SECTION 1.3.                                Special Meetings.  The Company shall hold a special meeting of shareholders on call of the Board of Directors or the Executive Committee, the Chairman of the Board of Directors, the President, or, upon delivery to the Company's Corporate Secretary of a signed and dated written demand for the meeting describing the purpose or purposes for the meeting, on call of the holders of 100% of the votes entitled to be cast on any issue proposed to be considered at the proposed special meeting.  Only business within the purpose or purposes described in the notice of special meeting required by Section 1.5 below may be conducted at a special meeting of the shareholders.

For business to be properly brought before a special meeting by a shareholder, the shareholder must give timely notice thereof in writing to the Corporate Secretary of the Company. To be timely, a shareholder's notice must be received by the Corporate Secretary at the principal executive offices of the Company at least 120 calendar days prior to the date of the special meeting.

Such shareholder's notice to the Corporate Secretary shall set forth with respect to any proposal such shareholder proposes to bring before the special meeting (i) a brief description of the business desired to be brought before the special meeting and the reasons for conducting such business at the special meeting; (ii) the name and address, as they appear on the Company's books, of the shareholder proposing such business; (iii) the class and number of shares of the Company which are beneficially owned by such shareholder; (iv) the dates upon which the shareholder acquired such shares; (v) documentary support for any claim of beneficial ownership; (vi) any material interest of such shareholder in such business; (vii) a statement in support of the matter and, for proposals sought to be included in the Company's proxy statement, any other information required by Securities and Exchange Commission Rule 14a-8; and (viii) if the shareholder requesting the special meeting proposes to nominate one or more persons for election or reelection as Director, all information relating to such person that is required to be disclosed in solicitations of proxies for election of Directors in an election contest, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (including such person’s written consent to being named in the proxy statement as a nominee and to serving as a Director if elected, and evidence reasonably satisfactory to the Company that such nominee has no interests that would limit their ability to fulfill their duties of office).

2

In addition, if the shareholder intends to solicit proxies from the shareholders of the Company, such shareholder shall notify the Company of this intent in accordance with Securities and Exchange Commission Rule 14a-4 and/Rule or 14a-8.

SECTION 1.4.                                Determination of Validity of Notice of Shareholder Proposal for Business.  The chairman of a meeting may, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting in accordance with the provisions of Sections 1.2 and 1.3 of this Article, and, if the chairman should so determine, shall so declare to the meeting and any such business so determined to be not properly brought before the meeting shall not be transacted, or in the case of persons so nominated, not be eligible for election.

SECTION 1.5.                                Notice of Meetings.  The Corporate Secretary or an Assistant Corporate Secretary shall deliver, either personally or by mailing it, postage prepaid, a written notice of the place, day, and time of all meetings of the shareholders not less than ten (10) nor more than sixty (60) days before the meeting date to each shareholder of record entitled to vote at such meeting.  Unless otherwise required or permitted by law, written notice is effective when mailed, if mailed with postage prepaid and correctly addressed to the shareholder's address shown in the Company's current record of shareholders.  It shall not be necessary that notice of an annual meeting include a description of the purpose or purposes for which the meeting is called.  In the case of a special meeting, the purpose or purposes for which the meeting is called shall be included in the notice of the special meeting.  If an annual or special shareholders' meeting is adjourned to a different date, time, or place, notice of the new date, time, or place need not be given if the new date, time, or place is announced at the meeting before adjournment.  However, if a new record date for the adjourned meeting is or must be fixed under Section 1.9 herein, notice of the adjourned meeting must be given to persons who are shareholders as of the new record date.

SECTION 1.6.                                Record Date.  The Board of Directors, in order to determine the shareholders entitled to notice of or to vote at any meeting of the shareholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or to receive payment of any dividend or other distribution or allotment of any rights, or to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, shall fix in advance a record date that may not be more than seventy (70) days before the meeting or action requiring a determination of shareholders.  Only such shareholders as shall be shareholders of record on the date fixed shall be entitled to such notice of or to vote at such meeting or any adjournment thereof, or to receive payment of any such dividend or other distribution or allotment of any rights, or to exercise any such rights in respect of stock, or to take any such other lawful action, as the case may be, notwithstanding any transfer of any stock on the books of the Company after any such record date fixed as aforesaid.  The record date shall apply to any adjournment of the meeting unless the Board of Directors shall fix a new record date for the adjourned meeting, which it shall do if the meeting is adjourned to a date more than 120 days after the date fixed for the original meeting.

3

SECTION 1.7.                                Shareholders' List for Meeting.  After fixing a record date for a meeting, the Company shall prepare an alphabetical list of the names of all shareholders who are entitled to notice of the shareholders' meeting.  The list shall be arranged by voting group (and within each voting group by class or series of shares) and show the address of and number of shares held by each shareholder.  The Company shall make the shareholders' list available for inspection by any shareholder, his agent, or his attorney at the time and place of the meeting.

SECTION 1.8.                                Quorum.  Subject to any express provision of law or the Articles of Incorporation, a majority of the votes entitled to be cast by all shares voting together as a group shall constitute a quorum for the transaction of business at all meetings of the shareholders.  Whenever a class of shares or series of shares is entitled to vote as a separate voting group on a matter, a majority of the votes entitled to be cast by each voting group so entitled shall constitute a quorum for purposes of action on any matter requiring such separate voting.  Once a share is represented, either in person or by proxy, for any purpose at a meeting other than solely to object to holding a meeting or transacting business at the meeting, it is deemed present for quorum purposes for the remainder of the meeting and for any adjournment of that meeting unless a new record date is set for the adjourned meeting.

SECTION 1.9.                                Adjournment of Meetings.  The holders of a majority of the voting shares represented at a meeting, or the Chairman of the Board or the President, whether or not a quorum is present, shall have the power to adjourn the meeting from time to time, without notice other than announcement at the meeting.  At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally notified.  If after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each shareholder of record entitled to vote at the adjourned meeting.

SECTION 1.10.                                Vote Required.  When a quorum exists, action on a matter (other than the election of Directors) by a voting group is approved if the votes cast within the voting group favoring the action exceed the votes cast opposing the action, unless the Articles of Incorporation, a bylaw authorized by the Articles of Incorporation or express provision of law requires a greater number of affirmative votes.  Unless otherwise provided in the Articles of Incorporation, Directors are elected by a plurality of the votes cast by the shares entitled to vote in the election at a meeting at which a quorum is present.  Shareholders do not have the right to cumulate their votes unless the Articles of Incorporation so provide.

SECTION 1.11.                                Voting Entitlement of Shares; Proxies.  Unless otherwise provided in the Articles of Incorporation or by law, each shareholder, at every meeting of the shareholders, shall be entitled to cast one vote, on each matter voted on at the meeting, for each share standing in the name of such shareholder on the books of the Company as of the record date.  A shareholder may vote his or her shares in person or by proxy.  A shareholder or his or her agent or attorney in fact may appoint a proxy to vote or otherwise act for the shareholder by signing an appointment form or by an electronic transmission that is suitable for the retention, retrieval and reproduction of information by the recipient.  An electronic transmission must contain or be accompanied by information from which it can be determined that the shareholder, the shareholder's agent or the shareholder's attorney in fact authorized the electronic transmission.  An appointment of proxy is effective when received by the Corporate Secretary of the Company or other officer or agent authorized to tabulate votes and is valid for eleven (11) months unless a longer period is expressly provided in the appointment.  An appointment of proxy is revocable by the shareholder unless the appointment form or electronic transmission states that it is irrevocable and the appointment is coupled with an interest.  Any copy, facsimile transmission or other reliable reproduction of the appointment form or electronic transmission may be substituted or used in lieu of the original appointment form or electronic transmission for any and all purposes for which the original appointment form or electronic transmission could be used, provided that such copy, facsimile transmission or other reproduction shall be a complete reproduction of the entire original appointment form or electronic transmission.

4

SECTION 1.12.                                Inspectors of Election.  The Board of Directors, in advance of any shareholders' meeting, shall appoint an Inspector of Elections to act at the meeting or any adjournment thereof.  The Inspector of Elections shall take and sign an oath faithfully to execute the duties of Inspector of Elections with strict impartiality and according to the best of his or her ability.  The Inspector of Elections shall ascertain the number of shares outstanding and the voting power of each, determine the shares represented at the meeting, determine the validity of proxies and ballots, count all votes, determine the results and make a written report of his or her determinations.  The Inspector of Elections may be an officer or employee of the Company.  Any vacancy may be filled by the appointment of the Board in advance of the meeting or at the meeting by the person presiding thereat.

ARTICLE II

BOARD OF DIRECTORS

SECTION 2.1.                                General Powers.  Subject to the Articles of Incorporation and these Bylaws, all corporate powers shall be exercised by or under the authority of, and the business and affairs of the Company managed under the direction of, the Board of Directors and those committees of the Board of Directors designated in Article III of these Bylaws.

SECTION 2.2.                                Number and Tenure.  The Board of Directors shall consist of at least five (5) members and not more than sixteen (16) members, the exact number of Directors to be fixed from time to time by resolution of the Board of Directors of the Company.  No decrease in the number or minimum number of Directors, through amendment of the Articles of Incorporation or of these Bylaws or otherwise, shall have the effect of shortening the term of any incumbent Director.  All directors elected at the annual meeting of shareholders shall be elected for a one-year term expiring at the next annual meeting of shareholders. Each director who is elected a director, shall hold office until the expiration of the term for which he or she was elected, and until his or her successor shall be elected and shall qualify, or until his or her earlier death, resignation, retirement, removal or disqualification from office. During the intervals between annual meetings of shareholders, any vacancy occurring in the Board of Directors caused by resignation, removal, death or other incapacity, and any newly created Directorships resulting from an increase in the number of Directors, shall be filled by a majority vote of the Directors then in office, whether or not a quorum.  Directors may be elected by shareholders only at an annual meeting of shareholders.  Each Director chosen to fill a vacancy shall hold office for the unexpired term in respect of which such vacancy occurred.  Each Director chosen to fill a newly created Directorship shall hold office until the election and qualification of his or her successor at the next election of Directors by the shareholders.

5

SECTION 2.3.                                Qualifications of Directors.  Directors shall be natural persons who have attained the age of 18 years.  Directors do not need to be residents of the State of Georgia.

SECTION 2.3.1.                                Vote Required in Uncontested Elections.  In the case of an election for Directors where the number of nominees does not exceed the number of Directors to be elected, if a nominee for Director does not receive the vote of at least the Majority of Votes Cast, the Director will promptly tender his or her resignation to the Board of Directors following certification of the shareholder vote.  For purposes of this Bylaw provision, a Majority of Votes Cast means that, at a meeting for the election of Directors at which a quorum is present, the number of shares voted “for” a Director’s election exceeds 50% of the number of votes cast with respect to that Director’s election.  Votes cast include votes to withhold authority in each case and exclude abstentions with respect to that Director’s election.

The Nominating and Corporate Governance Committee will make a recommendation to the Board of Directors as to whether to accept or reject the tendered resignation, or whether other action should be taken.  The Board of Directors will act on the tendered resignation, taking into account the Nominating and Corporate Governance Committee’s recommendation, and publicly disclose (by a press release, a filing with the Securities and Exchange Commission or other broadly disseminated means of communication) its decision regarding the tendered resignation and the rationale behind the decision within 90 days from the date of the certification of the election results.  The Nominating and Corporate Governance Committee in making its recommendation, and the Board of Directors in making its decision, may each consider any factors or other information that it considers appropriate and relevant including, without limitation, the stated reasons why shareholders “withheld” votes for election of such Director, the length of service and qualifications of the Director whose resignation has been tendered, the Director’s contributions to the Company and the Company’s Corporate Governance Guidelines.  The Director who tenders his or her resignation will not participate in the recommendation of the Nominating and Corporate Governance Committee or the decision of the Board of Directors with respect to his or her resignation.  If such Director’s resignation is not accepted by the Board of Directors such Director shall continue to serve until his or her successor is duly elected or until his or her earlier death, resignation or removal.  If a majority of the Nominating and Corporate Governance Committee does not receive a Majority of Votes Cast, then the independent Directors who did not fail to receive a Majority of Votes Cast, shall appoint a committee amongst themselves to consider the resignation offers and recommend to the Board of Directors whether to accept them.  If the only Directors who did not fail to receive a Majority of Votes Cast, constitute three or fewer Directors, all Directors may participate in the action regarding whether to accept the resignation offers.

6

If a Director’s resignation is accepted by the Board of Directors, then any resulting vacancy may be filled pursuant to the provisions of Section 2.4 of these Bylaws or the Board of Directors may decrease the size of the Board of Directors pursuant to the provisions of Section 2.2 of these Bylaws.

This Bylaw provision will be summarized or included in each proxy statement relating to an election of Directors of the Company.

This Section 2.3.1 shall not apply in the case of an election for Directors where the number of nominees exceeds the number of Directors to be elected.

SECTION 2.3.2.                                Re-election after Termination of Principal Employment.  If any Director ceases to hold the position in such Director's principal employment profession, trade or calling that such Director held at the beginning of the current term for which such Director was elected a Director, such person shall not be eligible for re-election to the Board of Directors after the expiration of such current term unless the Board of Directors decides that such person should be eligible for re-election.

SECTION 2.3.3.  Terminating Events.  Any Director who retires from or discontinues his or her employment with the Company (said termination of employment being hereinafter referred to as a “Terminating Event”) shall promptly upon the occurrence of such Terminating Event, tender his or her resignation to the Board of Directors which resignation shall be effective as of the annual meeting of shareholders next following the date of the Terminating Event; provided, however, that the requirements of this sentence shall not apply to anyone who, upon retirement, is Chairman of the Board or President of the Company.  Any Director who attains his or her 75th birthday, shall thereafter, upon completion of the term for which he or she was elected as a Director, cease to be an active Director.

7

SECTION 2.4.                                Vacancies.  Unless the Articles of Incorporation provide otherwise, if a vacancy occurs on the Board of Directors, including a vacancy resulting from an increase in the number of Directors, the vacancy may be filled only by the Board of Directors, or, if the Directors remaining in office constitute fewer than a quorum of the Board, by the affirmative vote of a majority of all Directors remaining in office.  If the vacant office was held by a Director elected by a voting group of shareholders, only the holders of shares of that voting group or the remaining Directors elected by that voting group are entitled to vote to fill the vacancy.

A Director elected to fill a vacancy shall serve for the unexpired term of his or her predecessor in office or, if such vacancy occurs by reason of an increase in the number of Directors, until the next election of Directors by shareholders and the election and qualification of the successor, as provided by law.

SECTION 2.5.                                Meetings.  The annual meeting of the Board of Directors shall be held each year immediately following the annual meeting of shareholders.  The annual meeting of the Board of Directors shall be held at the time and place, within or without the State of Georgia, as may be stated in the notice of the meeting or in a duly executed waiver of notice thereof.  If no designation is made, the place of the annual meeting shall be the principal executive offices of the Company.

Regular meetings of the Board of Directors or any committee may be held between annual meetings at such times and at such places, within or without the State of Georgia, as from time to time shall be determined by the Board or committee, as the case may be.  No notice of such regular meetings need be given.

Special meetings of the Board of Directors may be called at any time by a majority of the Board of Directors, the Chairman of the Board, the President or the Executive Committee by giving each Director two (2) days notice of the date, time and place of the meeting.  Such notice may be given orally or in writing in accordance with the provisions of Section 4.1.  Unless otherwise provided in the Articles of Incorporation, these Bylaws or by law, neither the business to be transacted at, nor the purpose of, any regular or special meeting need be specified in the notice or any waiver of notice.

SECTION 2.6.                                Quorum and Voting.  A majority of the number of Directors or Board committee members fixed or prescribed by the Board or, if no number is fixed or prescribed, a majority of the number of Directors or committee members in office immediately before the meeting begins, shall be present at any meeting of the Board of Directors or such committee in order to constitute a quorum, unless otherwise specifically provided by statute or by the Articles of Incorporation or by these Bylaws.  The affirmative vote of a majority of the Directors present at any meeting at which there is a quorum at the time of such act shall be the act of the Board or of the committee, except as might be otherwise specifically provided by statute or by the Articles of Incorporation or these Bylaws.  In the absence of a quorum, the Directors present by majority vote may adjourn the meeting from time to time without notice other than by verbal announcement at the meeting until a quorum shall attend.  At any such adjourned meeting at which a quorum shall be present, any business may be transacted which might have been transacted at the meeting as originally notified.

8

SECTION 2.7.                                Action Without Meeting.  Unless the Articles of Incorporation or Bylaws provide otherwise, any action required or permitted to be taken at any meeting of the Board of Directors or any committee thereof may be taken without a meeting if the action is taken by all members of the Board or committee, as the case may be.  The action must be evidenced by one or more written consents describing the action taken, signed by each Director or committee member, and filed with the minutes of the proceedings of the Board or committee or filed with the corporate records.

SECTION 2.8.                                Remote Participation in a Meeting.  Unless otherwise restricted by the Articles of Incorporation or the Bylaws, any meeting of the Board of Directors or any committee thereof may be conducted by the use of any means of communication by which all Directors participating may simultaneously hear each other during the meeting.  A Director participating in a meeting by this means is deemed to be present in person at the meeting.

SECTION 2.9.                                Compensation of Directors.  The Board of Directors may fix the compensation of the Directors for their services as Directors or as a member of any committee thereof.  Compensation shall be fixed from time to time by a resolution of the Board of Directors, and may be on the basis of an annual sum or a fixed sum for attendance at each regular or special meeting and every adjournment thereof, or a combination of these methods.  Members may be reimbursed for all reasonable traveling expenses incurred in attending meetings.  No provision of these Bylaws shall be construed to preclude any Director from serving the Company in any other capacity and receiving compensation therefor.

SECTION 2.10.                                Removal of Directors by Shareholders.  Subject to the requirements of Section 14-2-808 of the Georgia Business Corporation Code (the "Code") for the removal of Directors elected by cumulative voting, voting group or staggered terms, any one or more Directors may be removed from office, only with cause, at any meeting of shareholders with respect to which notice of such purpose has been given, by the affirmative vote of the holder or holders of a majority of the outstanding shares of the Company.

SECTION 2.11.                                Nomination of Directors.  Only persons who are nominated in accordance with the following procedures shall be eligible for election as Directors.  Nominations of persons for election to the Board of Directors of the Company may be made at a meeting of shareholders (i) by the Board of Directors or at the direction of the Board by any nominating committee or person appointed by the Board or (ii) by any shareholder of the Company entitled to vote for the election of Directors at the meeting who complies with the notice procedures set forth in Sections 1.2 and 1.3 of Article I of these Bylaws.  Such nominations, other than those made by or at the direction of the Board of Directors, shall be made pursuant to timely notice in writing to the Corporate Secretary of the Company.  Such notice to the Corporate Secretary shall set forth the information required in Section 1.2 and 1.3 of Article I of these Bylaws.  The Company may require any proposed nominee to furnish such other information as reasonably may be required by the Company to determine the eligibility of such proposed nominee to serve as a Director of the Company.  The chairman of the meeting may, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the foregoing procedures, and if the chairman should so determine, shall so declare to the meeting and the defective nomination shall be disregarded.

9

SECTION 2.15.                                Indemnification.  The indemnification authorized in the Articles of Incorporation shall be subject to the following provisions and procedures:

SECTION 2.15.1.                                Determination of Eligibility for Indemnification.  In the case of actions brought by or in the right of the Company, a Director’s right to indemnification as authorized in the Articles of Incorporation shall be determined:

(i)           If there are two or more directors not at the time parties to the proceeding ("Disinterested Directors"), by the board of directors by a majority vote of all the Disinterested Directors (a majority of whom shall for such purpose constitute a quorum), or by a majority of the members of a committee of two or more Disinterested Directors appointed by such a vote;

(ii)           By special legal counsel:

(a) Selected in the manner prescribed in paragraph (i) of this subsection; or

(b) If there are fewer than two Disinterested Directors, selected by the Board of Directors (in which selection directors who do not qualify as Disinterested Directors may participate); or

(iii)           By the shareholders, but shares owned by or voted under the control of a director who at the time does not qualify as a disinterested director may not be voted on the determination.

SECTION 2.15.2.                                Rights Not Exclusive.  The rights to indemnification and advance of expenses granted in the Articles of Incorporation and in these Bylaws are not exclusive, and do not limit the Company's power to pay or reimburse expenses to which a Director may be entitled, whether by agreement, vote of shareholders or Disinterested Directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding office, and do not limit the Company's power to pay or reimburse expenses incurred by a Director in connection with his appearance as a witness in a proceeding at a time when he is not a party.

SECTION 2.15.3.                                Insurance.  The Company and its officers shall have the power to purchase and maintain insurance on behalf of an individual who is or was a Director, officer, employee or agent of the Company or who, while a Director, officer, employee, or agent of the Company, is or was serving as a Director, officer, partner, trustee employee, or agent of another foreign or domestic corporation, partnership, joint venture, trust, employee benefit plan, or other enterprise against liability asserted against or incurred by him in that capacity or arising from his status as a Director, officer, employee or agent, whether or not the Company would have the power to indemnify him against the same liability under the provisions of these Bylaws.

10

SECTION 2.15.4.                                Reports to Shareholders.  If the Company indemnifies or advances expenses to a Director, otherwise than by action of the shareholders or by an insurance carrier pursuant to insurance maintained by the Company, the Company shall report the indemnification or advance in writing to the shareholders with or before the notice of the next annual shareholders’ meeting.

ARTICLE III

COMMITTEES

SECTION 3.1.                                Committees.  The Board of Directors may, by resolution, designate from among its members one or more committees, each committee to consist of one or more Directors, except that committees appointed to take action with respect to indemnification of Directors, Directors' conflicting interest transactions or derivative proceedings shall consist of two or more Directors qualified to serve pursuant to the Code.  If a Lead Director shall have been appointed by the Board of Directors from among the independent directors, then the Lead Director shall serve as Chairman of the Executive Committee.  If no Lead Director shall have been appointed, then either the Chairman of the Board of Directors, a former Chairman of the Board or the Chief Executive Officer, as designated by the Board of Directors, shall serve as Chairman of the Executive Committee.  For all other committees, the Board of Directors shall designate one member of each committee to be a chairman.  Each committee member shall serve at the pleasure of the Board of Directors.

Each Director of the Company who is not designated as a member of a particular Committee hereby is designated as an alternate member of any such Committee, who may act in the place and stead of any absent member or members at any meeting of such Committee in the event (i) a quorum of such Committee is not present and (ii) the Chairman of the Board or, in his absence, the President, appoints such alternate member to act for that meeting as a member of such Committee; and such alternate member shall serve only at the meeting for which such appointment is made, but shall have at that meeting all the powers of a regular member of such Committee.

11

Any such committee, to the extent specified by the Board of Directors, Articles of Incorporation or Bylaws, shall have and may exercise all of the authority of the Board of Directors in the management of the business affairs of the Company, except that it may not (i) approve or propose to shareholders action that the Code requires to be approved by shareholders; (ii) fill vacancies on the Board of Directors or any of its committees; (iii) amend the Articles of Incorporation, except that a committee may, to the extent authorized in a resolution or resolutions adopted by the Board, amend the Articles of Incorporation to fix the designations, preferences, limitations and relative rights of shares pursuant to Section 14-2-602 of the Code or to increase or decrease the number of shares contained in a series of shares established in accordance with said Code Section but not below the number of such shares then issued; (iv) adopt, amend, or repeal Bylaws; or (v) approve a plan of merger not requiring shareholder approval.

SECTION 3.2.                                Meetings of Committees.  Regular meetings of any committee may be held without notice at such time and at such place, within or without the State of Georgia, as from time to time shall be determined by such committee.  A special meeting of any such committee appointed by the Board may be called by the Chairman of the Board of Directors, the President, the Board of Directors or the committee by vote at a meeting, or by two members of any committee in writing without a meeting by giving each such committee member two (2) days notice of the date, time and place of the meeting.  Such notice may be given orally or in writing in accordance with the provisions of Section 4.1.  Unless otherwise provided in the Articles of Incorporation, these Bylaws or by law, neither the business to be transacted at, nor the purpose of, any regular or special meeting of any such committee need be specified in the notice or any waiver of notice.

ARTICLE IV

NOTICES

SECTION 4.1.                                Notice.  Whenever, under the provisions of the Articles of Incorporation or these Bylaws or by law, notice is required to be given to any Director or shareholder, such notice may be given in writing, by mail; by telegram, telex or facsimile transmission; by other form of wire or wireless communication; or by private carrier.  Unless otherwise required or permitted by law, such notice shall be deemed to be effective at the earliest of when received, or when delivered, properly addressed, to the addressee's last known principal place of business or residence; or, except as provided in the immediate next sentence, five days after the same shall be deposited in the United States mail if mailed with first-class postage prepaid and correctly addressed; or on the date shown on the return receipt, if sent by registered or certified mail or statutory overnight delivery, return receipt requested, and the receipt is signed by or on behalf of the addressee.  Written notice to the Company's shareholders, if in comprehensible form, is effective when mailed, if mailed with first-class postage prepaid and correctly addressed to the shareholder's address shown in the Company's current record of shareholders; provided, however, that if the Company has more than 500 shareholders of record entitled to vote at a meeting, it may utilize a class of mail other than first class if the notice of meeting is mailed, with adequate postage prepaid, not less than 30 days before the date of the meeting.  Notice to any Director or shareholder may also be oral if oral notice is reasonable under the circumstances.  Oral notice is effective when communicated if communicated in a comprehensible manner.  If these forms of personal notice are impractical, notice may be communicated by a newspaper of general circulation in the area where published, or by radio, television, or other form of public broadcast communication.

12

SECTION 4.2.                                Waiver of Notice.  Whenever any notice is required to be given under provisions of the Articles of Incorporation or of these Bylaws or by law, a waiver thereof, signed by the person entitled to notice and delivered to the Company for inclusion in the minutes or filing with the corporate records, whether before or after the time stated therein, shall be deemed equivalent to notice.  Attendance of a person at a meeting shall constitute a waiver of notice of such meeting and of all objections to the place or time of the meeting or the manner in which it has been called or convened, except when the person attends a meeting for the express purpose of stating, at the beginning of the meeting, any such objection and, in the case of a Director, does not thereafter vote for or assent to action taken at the meeting.  Neither the business to be transacted at nor the purpose of any regular or special meeting of the shareholders, Directors or a committee of Directors need be specified in any written waiver of notice; provided, however, that any waiver of notice of a meeting of shareholders required with respect to an amendment of the Articles of Incorporation, a plan of merger or share exchange, a plan of consolidation, a sale of assets or any other action which would entitle the shareholder to dissent pursuant to Section 14-2-1302 of the Code and obtain payment for his shares shall be effective only upon compliance with Section 14-2-706(c) of the Code or successor provisions.

ARTICLE V

OFFICERS

SECTION 5.1.                                Appointment.  Appointment.  The Board of Directors shall appoint such officers of the Company and its subsidiaries as it shall deem necessary, which  officers shall include: (a) for the Company, a Chairman of the Board, a Chief Executive Officer, a President, a Chief Financial Officer and a Corporate Secretary; and (b) any other executive officer of the Company who is designated by the Board of Directors as an “executive officer” for reporting purposes under Section 16 of the Securities Exchange Act of 1934, as amended.    Each of the officers appointed by the Board shall exercise such powers and perform such duties as may be specified in the applicable Bylaws or as shall otherwise be determined from time to time by the Board of Directors consistent with the applicable Bylaws.  Each such officer shall hold office until the corresponding meeting of the Board of Directors in the next year and until each such successor officer shall have been duly appointed and qualified or until such officer shall have resigned or shall have been removed in the manner provided in Section 5.2 of this Article V.  Any number of offices may be held by the same person unless the Articles of Incorporation or these Bylaws otherwise provide.  The appointment of an officer does not itself create contract rights.

13

SECTION 5.2.                                Resignation and Removal of Officers.  An officer may resign at any time by delivering notice to the Company and such resignation is effective when the notice is delivered unless the notice specifies a later effective date.  The Board of Directors or the Executive Committee (except in the case of an officer appointed by the Board of Directors) or an officer upon whom the power of appointment may have been conferred may remove any officer at any time with or without cause.

SECTION 5.3.                                Vacancies.  Any vacancy in office resulting from any cause may be filled by the Board of Directors at any regular or special meeting.

SECTION 5.4.                                Powers and Duties.  Each officer has the authority and shall perform the duties set forth below or, to the extent consistent with these Bylaws, the duties prescribed by the Board of Directors or by direction of an officer authorized by the Board of Directors to prescribe the duties of other officers.

SECTION 5.4.1.                                Chairman of the Board of Directors.  The Chairman of the Board of Directors may be chosen from among the Directors of the Company and need not be an Executive Officer or employee of the Company.  The Chairman shall preside at all meetings of the Board of Directors and may serve as Chairman of and preside at all meetings of the Executive Committee.  The Chairman shall have the usual powers and duties incident to the office of the chairman of the board of directors of a corporation and such other powers and duties as from time to time may be assigned by the Board of Directors.

SECTION 5.4.2.                                Chief Executive Officer.  The Board of Directors may designate as the Chief Executive Officer of the Company the President or any other officer of the Company including the Chairman if the Chairman is a full-time officer and employee of the Company.  The Chief Executive Officer of the Company shall have general and active management responsibility for the business of the Company and shall see that all orders and resolutions of the Board of Directors are carried into effect.  The Chief Executive Officer shall preside at all meetings of the shareholders and may serve as Chairman of and preside at all meetings of the Executive Committee. Except where by law the signature of the President is required, the Chief Executive Officer shall have the same powers as the President to sign all authorized certificates, contracts, bonds, deeds, mortgages and other instruments.  The Chief Executive Officer shall have the usual powers and duties incident to the position of chief executive officer of a corporation and such other powers and duties as from time to time may be assigned by the Board of Directors.  In the event there is no Chairman of the Board, the Chief Executive Officer shall also have all the powers and authority that the Chairman is given in these Bylaws or otherwise.  During the absence or disability of the Chairman of the Board, the Chief Executive Officer shall preside at all meetings of the Board of Directors.  The Board of Directors may, or if it does not, the Chief Executive Officer may, from time to time designate an Executive Officer of the Company to assume and perform the duties and powers of the Chief Executive Officer during the absence or disability of the Chief Executive Officer.

14

SECTION 5.4.3.                                President.  The President shall be responsible for the general supervision of the affairs of the Company.  The President shall have the power to make and execute certificates, contracts, bonds, deeds, mortgages and other instruments on behalf of the Company, except in cases in which the signing thereof shall have been expressly delegated to some other officer or agent of the Company and to delegate such power to others. The President shall have the usual powers and duties incident to the office of a president of a corporation and such other powers and duties as are specifically imposed on the President by law and as from time to time may be assigned by the Board of Directors.  If the Board of Directors designates the President as the Chief Executive Officer of the Company, the President shall also have the powers and duties of the Chief Executive Officer.

SECTION 5.4.4.                                Vice Presidents.  The Senior or Executive Vice Presidents shall be senior in authority among the Vice Presidents.   During the absence or disability of the President, the Board of Directors shall designate which of the Senior or Executive Vice Presidents shall exercise all the powers and discharge all of the duties of the President, provided, however, that if such Senior or Executive Vice President is not a Director, such Senior or Executive Vice President shall not preside at any meetings of the Board of Directors or the Executive Committee.  The Vice Presidents shall perform such duties as vice presidents customarily perform and shall have the usual powers and duties incident to the office of a vice president of a corporation and such other powers and duties as from time to time may be assigned by the Board of Directors, the Chairman of the Board, the Chief Executive Officer or the President.

SECTION 5.4.5                                Chief Financial Officer.  The Chief Financial Officer shall be charged with the management of the financial affairs of the Company and shall cause to be maintained complete and true accounts of all financial transactions of the Company.  The Chief Financial Officer shall render to the Board of Directors, the Chairman of the Board, the Chief Executive Officer and the President, whenever requested, an account of the financial condition of the Company.  The Chief Financial Officer shall have the usual powers and duties incident to the position of chief financial officer of a corporation and such other powers and duties as from time to time may be assigned by the Board of Directors.

SECTION 5.4.6.                                Chief Operating Officer.  The Chief Operating Officer shall have general and active responsibility for the operations of the Company.  The Chief Operating Officer shall have the usual powers and duties incident to the position of chief operating officer of a corporation and such other powers and duties as from time to time may be assigned by the Board of Directors.

SECTION 5.4.7.                                Corporate Secretary.  The Corporate Secretary shall attend all meetings of the shareholders and all meetings of the Board of Directors and shall record all votes and minutes of all proceedings in books to be kept for that purpose, and shall perform like duties for the standing committees when required.  The Corporate Secretary shall have custody of the corporate seal of the Company, shall have the authority to affix the same to any instrument the execution of which on behalf of the Company under its seal is duly authorized and shall attest to the same whenever required.  The Board of Directors may give general authority to any other officer to affix the seal of the Company and to attest to the same.  The Corporate Secretary shall give, or cause to be given, any notice required to be given of any meetings of the shareholders, the Board of Directors and of the standing committees when required.  The Corporate Secretary shall cause to be kept such books and records as the Board of Directors, the Chairman of the Board, the Chief Executive Officer or the President may require and shall cause to be prepared, recorded, transferred, issued, sealed and canceled certificates of stock as required by the transactions of the Company and its shareholders.  The corporate Secretary shall attend to such correspondence and shall perform such other duties as may be incident to the office of a corporate secretary or as may be assigned to the Corporate Secretary by the Board of Directors, the Chairman of the Board, the Chief Executive Officer or the President.

15

SECTION 5.4.8.                                Treasurer.  The Treasurer shall have charge of and be responsible for all funds, securities, receipts and disbursements of the Company, and shall deposit or cause to be deposited, in the name of the Company, all moneys or other valuable effects in such banks, trust companies, or other depositaries as shall from time to time be selected by the Board of Directors, the Chief Executive Officer, the President or the Chief Financial Officer. In general, the Treasurer shall perform such duties as treasurers usually perform and shall perform such other duties and shall exercise such other powers as the Board of Directors, the Chairman of the Board, the Chief Executive Officer, the President or the Chief Financial Officer may from time to time designate and shall render to the Board of Directors, the Chairman of the Board, the Chief Executive Officer, the President or the Chief Financial Officer, whenever requested, an account of the financial condition of the Company.

SECTION 5.4.9.                                Controller.  The Controller shall have charge of and be responsible for preparation of financial and management reports, budgeting, rate material, property accounting, taxes and such other duties as are commonly incident to the office of Controller.  The Controller shall perform such other duties and shall exercise such other powers as the Board of Directors, the Chairman of the Board, the Chief Executive Officer, the President or the Chief Financial Officer may from time to time designate.

SECTION 5.4.10.                                Assistant Vice President, Assistant Corporate Secretary and Assistant Treasurer.  One or more Assistant Vice Presidents, Assistant Corporate Secretaries and Assistant Treasurers, in the absence or disability of any Vice President, the Corporate Secretary or the Treasurer, respectively, shall perform the duties and exercise the powers of those offices, and, in general, they shall perform such other duties and shall exercise such other powers as the Board of Directors or the person appointing them may from time to time designate.  Specifically the Assistant Corporate Secretaries may affix the corporate seal to all necessary documents and attest the signature of any officer of the Company.

SECTION 5.4.11.                                Other Officers.  The Board of Directors may appoint such other officers as it may deem desirable.  Each such officer shall hold office for such period, have such authority and perform such duties as the Board of Directors may prescribe.  The Board of Directors may from time to time authorize any officer to appoint other officers of the Company and its major subsidiaries, to prescribe the powers, term, duties and salary, if any, of such appointed officers, and to remove any officers thus appointed, consistent with the applicable Bylaws and the resolutions of the Board of Directors authorizing such appointment and removal.

16

SECTION 5.5.                                Officers Holding More Than One Office. The same person may simultaneously hold more than one office, but no officer shall execute, acknowledge or verify any instrument in more than one capacity if such instrument be required by statute, by the Articles of Incorporation or by these Bylaws to be executed, acknowledge or verified by any two or more officers.

SECTION 5.6.                                Compensation.  The Board of Directors shall have power to fix the compensation of all officers of the Company.  It may authorize any officer, upon whom the power of appointing other officers may have been conferred, to fix the compensation of such other officers.

ARTICLE VI

CAPITAL STOCK

SECTION 6.1.                                Share Certificates.  Unless the Articles of Incorporation or these Bylaws provide otherwise, the Board of Directors may authorize the issue of some or all of the shares of any or all of its classes or series with or without certificates.  Unless the Code provides otherwise, there shall be no differences in the rights and obligations of shareholders based on whether or not their shares are represented by certificates.

In the event that the Board of Directors authorizes shares with certificates, each certificate representing shares of stock of the Company shall be in such form as shall be approved by the Board of Directors and shall set forth upon the face thereof the name of the Company and that it is organized under the laws of the State of Georgia, the name of the person to whom the certificate is issued, and the number and class of shares and the designation of the series, if any, the certificate represents.  The Board of Directors may designate any one or more officers to sign each share certificate, either manually or by facsimile.  In the absence of such designation, each share certificate must be signed by the President or a Vice President and the Corporate Secretary or an Assistant Corporate Secretary.  If the person who signed a share certificate, either manually or in facsimile, no longer holds office when the certificate is issued, the certificate is nevertheless valid.

SECTION 6.2.                                Record of Shareholders.  The Company or an agent designated by the Board of Directors shall maintain a record of the Company's shareholders in a form that permits preparation of a list of names and addresses of all shareholders, in alphabetical order by class or shares showing the number and class of shares held by each shareholder.  The Company shall be entitled to treat the person in whose name shares are registered in the records of the Company as the owner thereof for all purposes unless it accepts for its records a nominee certificate naming a beneficial owner of shares other than the record owner, and shall not otherwise be bound to recognize any equitable or other claim to or interest in such shares except as may be provided by law.

17

SECTION 6.3.                                Lost Certificates.  In the event that a share certificate is lost, stolen, mutilated or destroyed, the Board of Directors may direct that a new certificate be issued in place of such certificate.  When authorizing the issue of a new certificate, the Board of Directors may require such proof of loss as it may deem appropriate as a condition precedent to the issuance thereof, including a requirement that the owner of such lost, stolen or destroyed certificate, or the owner's legal representative, advertise the same in such manner as the Board shall require and/or that the owner give the Company a bond in such sum as the Board may direct as indemnity against any claim that may be made against the Company with respect to the certificate alleged to have been lost, stolen or destroyed.

SECTION 6.4.                                Transfers of Shares.  Transfers of shares of the capital stock of the Company shall be made only upon the books of the Company by the registered holder thereof, or by the registered holder's duly authorized attorney, or with a transfer clerk or transfer agent appointed as provided in Section 6.5 hereof, and, in the case of a share represented by certificate, on surrender of the certificate or certificates for such shares properly endorsed and the payment of all taxes thereon.  The Company shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, to vote as such owner, and for all other purposes, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided in Section 6.2 hereof or by law.

SECTION 6.5.                                Transfer Agents and Registrars.  The Board of Directors may establish such other regulations as it deems appropriate governing the issue, transfer, conversion and registration of share certificates, including appointment of transfer agents, clerks or registrars.

ARTICLE VII

GENERAL PROVISIONS

SECTION 7.1.                                Indemnification of Officers, Employees and Agents.  The Company shall indemnify any officer who was or is made a party to or is otherwise involved in any threatened, pending or completed action, suit or proceeding, whether civil, derivative, criminal, administrative or investigative, to the same extent as it is obligated to indemnify any Director of the Company, but without being subject to the same procedural conditions imposed for the indemnification of Directors.  The Company may indemnify and advance expenses to an employee or agent who is not a Director or officer to the extent, consistent with public policy, permitted by the Articles of Incorporation, the Bylaws or by law.

18

SECTION 7.2.                                Seal.  The Company may have a seal, which shall be in such form as the Board of Directors may from time to time determine.  In the event that the use of the seal is at any time inconvenient, the signature of an officer of the Company, followed by the word "Seal" enclosed in parentheses, shall be deemed the seal of the Company.

SECTION 7.3.                                Voting Shares in Other Corporations.  In the absence of other arrangements by the Board of Directors, shares of stock issued by another corporation and owned or controlled by the Company, whether in a fiduciary capacity or otherwise, may be voted by the President or any Vice President, in the absence of action by the President, in the same order as they preside in the absence of the President, or, in the absence of action by the President or any Vice President, by any other officer of the Company, and such person may execute the aforementioned powers by executing proxies and written waivers and consents on behalf of the Company.

SECTION 7.4.                                Amendment of Bylaws.  These Bylaws may be amended or repealed and new bylaws may be adopted by the Board of Directors at any regular or special meeting of the Board of Directors unless the Articles of Incorporation or the Code reserve this power exclusively to the shareholders in whole or in part or the shareholders, in amending or repealing the particular bylaw, provide expressly that the Board of Directors may not amend or repeal that bylaw.  Unless the shareholders have fixed a greater quorum or voting requirement, these Bylaws also may be altered, amended or repealed and new bylaws may be adopted, unless such action has been recommended by the Board of Directors, by an affirmative vote of the holders of at least two-thirds of all outstanding shares entitled to vote.

SECTION 7.5.                                Execution of Bonds, Debentures, Evidences of Indebtedness, Checks, Drafts and Other Obligations and Orders for Payment.  The signatures of any officer or officers of the Company executing a corporate bond, debenture or other debt security of the Company or attesting the corporate seal thereon, or upon any interest coupons annexed to any such corporate bond, debenture or other debt security of the Company, and the corporate seal affixed to any such bond, debenture or other debt security of the Company, may be facsimiles, engraved or printed, provided that such bond, debenture or other debt security of the Company is authenticated or countersigned with the manual signature of an authorized officer of the corporate trustee designated by the indenture or other agreement under which said security is issued by a transfer agent, or registered by a registrar, other than the Company itself, or an employee of the Company.  If the person who signed such, bond, debenture or other debt security of the Company, either manually or in facsimile, no longer holds office when the certificate is issued, the certificate is nevertheless valid.

SECTION 7.6.                                Business Combinations.  All of the requirements of Sections 14-2-1131 to 1133, inclusive, of the Code, as now in effect and as hereafter from time to time amended, shall be applicable to this Company and to any business combination approved or recommended by the Board of Directors.

19

ARTICLE VIII

EMERGENCY BYLAWS

SECTION 8.1.                                Emergency Bylaws.  This Article shall be operative during any emergency resulting from some catastrophic event that prevents a quorum of the Board of Directors or any committee thereof from being readily assembled (an "emergency"), notwithstanding any different or conflicting provisions set forth elsewhere in these Bylaws or in the Articles of Incorporation.  To the extent not inconsistent with the provisions of this Article, the bylaws set forth elsewhere herein and the provisions of the Articles of Incorporation shall remain in effect during such emergency, and upon termination of such emergency, the provisions of this Article shall cease to be operative.

SECTION 8.2.                                Meetings.  During any emergency, a meeting of the Board of Directors or any committee thereof may be called by any Director, or by the President, any Vice President, the Corporate Secretary or the Treasurer (the "Designated Officers") of the Company.  Notice of the time and place of the meeting shall be given by any available means of communication by the person calling the meeting to such of the Directors and/or Designated Officers as may be feasible to reach.  Such notice shall be given at such time in advance of the meeting as, in the judgement of the person calling the meeting, circumstances permit.

SECTION 8.3                                Quorum.  At any meeting of the Board of Directors or any committee thereof called in accordance with this Article, the presence or participation of two Directors, one Director and a Designated Officer, or two Designated Officers shall constitute a quorum for the transaction of business.

SECTION 8.4.                                Bylaws.  At any meeting called in accordance with this Article, the Board of Directors or committee thereof, as the case may be, may modify, amend or add to the provisions of this Article so as to make any provision that may be practical or necessary for the circumstance of the emergency.

SECTION 8.5.                                Liability.  Corporate action taken in good faith in accordance with the emergency bylaws may not be used to impose liability on a Director, officer, employee or agent of the Company.

SECTION 8.6.                                Repeal or Change.  The provisions of this Article shall be subject to repeal or change by further action of the Board of Directors or by action of shareholders, but no such repeal or change shall modify the provisions of the immediately preceding section of this Article with regard to action taken prior to the time of such repeal or change.

20

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the AGL Resources Inc.’s Registration Statements Nos. 33-50301, 33-62155, 333-01519, 333-02353, 333-26961, 333-26963, 333-86983, 333-86987, 333-75524, 333-97121, 333-104701, 333-115044, 333-127161, 333-136241, 333-142575, 333-154965, and 333-174375 on Forms S-8; Registration Statements Nos. 333-22867, 333-145606, 333-160975, and 333-168901 on Forms S-3; and Registration Statement No. 333-172084 on Form S-4 of our report dated February 24, 2011, relating to the consolidated financial statements and financial statement schedule of Nicor Inc. and subsidiaries (“Nicor Inc.”), and the effectiveness of Nicor Inc.’s internal control over financial reporting, appearing in the Current Report on Form 8-K of AGL Resources Inc. dated December 13, 2011.

/s/ DELOITTE & TOUCHE LLP

Chicago, Illinois

December 13, 2011

EX-99.1

Exhibit 99.1

Press Release

Illinois Commerce Commission Approves Merger of

AGL Resources and Nicor

ATLANTA and NAPERVILLE, ILL., Dec. 7, 2011 – AGL Resources Inc. (NYSE: AGL) and Nicor Inc. (NYSE: GAS) today received approval of their merger from the Illinois Commerce Commission.  This is the final approval required to close the transaction.

“We are pleased with the ICC’s decision to approve our merger,” said John W. Somerhalder II, chairman, president and chief executive officer of AGL Resources.  “We will review the ICC’s final order and plan to close the transaction in a timely manner.”

Once completed, the merger is expected to create the largest system of affiliated natural gas-only distribution companies in the country based on customer count, serving approximately 4.5 million customers in seven states. The increased scale and scope of the combined company is expected to create long-term benefits for customers.

About AGL Resources

AGL Resources (NYSE: AGL), an Atlanta-based energy services company, serves approximately 2.3 million customers in six states. The company also owns Houston-based Sequent Energy Management, an asset manager serving natural gas wholesale customers throughout North America. As an 85-percent owner in the SouthStar partnership, AGL Resources markets natural gas to consumers in Georgia under the Georgia Natural Gas brand. The company also owns and operates two high-deliverability natural gas storage facilities: Jefferson Island Storage & Hub near the Henry Hub in Louisiana and Golden Triangle Storage in Texas. For more information, visit http://www.aglresources.com/.

About Nicor Inc.

Nicor Inc. (NYSE:GAS) is a holding company and is a member of the Standard & Poor's 500 Index. Its primary business is Nicor Gas, one of the nation's largest natural gas distribution companies. Nicor owns Tropical Shipping, a containerized shipping business serving the Caribbean region and the Bahamas. In addition, the company owns and/or has an equity interest in several energy-related businesses. For more information, visit the Nicor website at www.nicor.com.

Forward Looking Statements

To the extent any statements made in this document contain information that is not historical, these statements are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (collectively, “forward-looking statements”).

These forward-looking statements relate to, among other things, the Company’s expectation to be the largest system of affiliated natural gas-only distribution companies in the country and the expected benefits from the Company’s increased scale and scope. Forward-looking statements can generally be identified by the use of words such as “believe”, “anticipate”, “expect”, “estimate”, “intend”, “continue”, “plan”, “project”, “will”, “may”, “should”, “could”, “would”, “target”, “potential” and other similar expressions. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances are forward-looking statements. Although certain of these statements set out herein are indicated above, all of the statements in this release that contain forward-looking statements are qualified by these cautionary statements. Although AGL Resources and Nicor believe that the expectations reflected in such forward-looking statements are reasonable, such statements involve risks and uncertainties, and undue reliance should not be placed on such statements. Certain material factors or assumptions are applied in making forward-looking statements, including, but not limited to, factors and assumptions regarding the items outlined above. Actual results may differ materially from those expressed or implied in such statements. Important factors that could cause actual results to differ materially from these expectations include, among other things, the following: the risk that a condition to closing of the merger may not be satisfied; the possibility that the anticipated benefits and synergies from the proposed merger cannot be fully realized or may take longer to realize than expected; the possibility that costs or difficulties related to the integration of AGL Resources and Nicor operations will be greater than expected; the ability of the combined company to retain and hire key personnel and maintain relationships with customers, suppliers or other business partners; the impact of legislative, regulatory, competitive and technological changes; the risk that the credit ratings of the combined company may be different from what the companies expect; and other risk factors relating to the energy industry, as detailed from time to time in each of AGL Resources’ and Nicor’s reports filed with the Securities and Exchange Commission (“SEC”). There can be no assurance that the proposed merger will in fact be consummated.

Additional information about these factors and about the material factors or assumptions underlying such forward-looking statements may be found in the body of this release, as well as under Item 1.A. in each of AGL Resources’ and Nicor’s Annual Report on Form 10-K for the fiscal year December 31, 2010. AGL Resources and Nicor caution that the foregoing list of important factors that may affect future results is not exhaustive. When relying on forward-looking statements to make decisions with respect to AGL Resources and Nicor, investors and others should carefully consider the foregoing factors and other uncertainties and potential events. All subsequent written and oral forward-looking statements concerning the proposed transaction or other matters attributable to AGL Resources and Nicor or any other person acting on their behalf are expressly qualified in their entirety by the cautionary statements referenced above. The forward-looking statements contained herein speak only as of the date of this presentation. Neither AGL Resources nor Nicor undertakes any obligation to update or revise any forward-looking statement, except as may be required by law.

Additional Information

In connection with the proposed Merger, a definitive joint proxy statement/prospectus was mailed on or about May 10, 2011 to shareholders of record of AGL Resources and Nicor Inc. (“Nicor”) as of April 18, 2011.  WE URGE INVESTORS TO READ THE DEFINITIVE JOINT PROXY STATEMENT/PROSPECTUS CAREFULLY, AS WELL AS OTHER DOCUMENTS FILED WITH THE SEC, BECAUSE THEY CONTAIN IMPORTANT INFORMATION ABOUT AGL RESOURCES, NICOR AND THE PROPOSED TRANSACTION.  The definitive joint proxy statement/prospectus, as well as other filings containing information about AGL Resources and Nicor, can be obtained free of charge at the website maintained by the SEC at www.sec.gov.  You may also obtain these documents, free of charge, from AGL Resources’ website (www.aglresources.com) under the tab Investor Relations/SEC Filings or by directing a request to AGL Resources Inc., P.O. Box 4569, Atlanta, GA, 30302-4569.  You may also obtain these documents, free of charge, from Nicor’s website (www.nicor.com) under the tab Investor Information/SEC Filings or by directing a request to Nicor Inc., P.O. Box 3014, Naperville, IL 60566-7014.

The respective directors and executive officers of AGL Resources and Nicor, and other persons, may be deemed to be participants in the solicitation of proxies in respect of the proposed transaction.  Information regarding AGL Resources’ directors and executive officers is available in the definitive joint proxy statement/prospectus and its definitive proxy statement filed with the SEC by AGL Resources on March 14, 2011, and information regarding Nicor directors and executive officers is available in the definitive joint proxy statement/prospectus and its definitive proxy statement filed with the SEC by Nicor on April 19, 2011.  These documents can be obtained free of charge from the sources indicated above.  Other information regarding the interests of the participants in the proxy solicitation are included in the definitive joint proxy statement/prospectus and other relevant materials filed with the SEC.  This communication shall not constitute an offer to sell or the solicitation of an offer to sell or the solicitation of an offer to buy any securities, or a solicitation of any vote or approval, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.  No offer of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended.

EX-99.2

Exhibit 99.2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of Nicor Inc.

We have audited the accompanying consolidated balance sheets of Nicor Inc. and subsidiaries (the “Company”) as of December 31, 2010 and 2009, and the related consolidated statements of income, common equity, comprehensive income, and cash flows for each of the three years in the period ended December 31, 2010.  Our audits also included the financial statement schedule at Item 15(a)(2).  We also have audited the Company’s internal control over financial reporting as of December 31, 2010, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.  The Company's management is responsible for these financial statements and financial statement schedule, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting.  Our responsibility is to express an opinion on these financial statements and financial statement schedule and an opinion on the Company's internal control over financial reporting based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects.  Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation.  Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.  Our audits also included performing such other procedures as we considered necessary in the circumstances.  We believe that our audits provide a reasonable basis for our opinions.

A company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or persons performing similar functions, and effected by the company's board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.  A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis.  Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (concluded)

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2010 and 2009, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2010, in conformity with accounting principles generally accepted in the United States of America.  Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.  Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2010, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

/s/ DELOITTE & TOUCHE LLP

Chicago, Illinois

February 24, 2011

Management’s Report on Internal Control Over Financial Reporting

Internal control over financial reporting refers to the process designed by, or under the supervision of, the company’s Chief Executive Officer and Chief Financial Officer, and effected by the company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, and includes those policies and procedures that:

1.   Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company;

2.   Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and

3.   Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.

Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations.  Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures.  Internal control over financial reporting also can be circumvented by collusion or improper management override.  Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting.  However, these inherent limitations are known features of the financial reporting process.  Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.  Management is responsible for establishing and maintaining adequate internal control over financial reporting for the company.

Management has used the framework set forth in the report entitled “Internal Control—Integrated Framework” published by the Committee of Sponsoring Organizations of the Treadway Commission to evaluate the effectiveness of the company’s internal control over financial reporting.  Management has concluded that the company’s internal control over financial reporting was effective as of December 31, 2010.  Deloitte & Touche LLP, an independent registered public accounting firm, has issued an attestation report on the company’s internal control over financial reporting.

There has been no change in the company’s internal controls over financial reporting during the company’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting.

Nicor Inc.
Consolidated Statements of Income
(millions, except per share data)
	Year ended December 31
	2010			2009			2008
Operating revenues
Gas distribution (includes revenue taxes of $148.1, $150.3
and $174.0, respectively)	$	2,204.4		$	2,140.8		$	3,206.9
Shipping		345.0			352.6			425.2
Other energy ventures		218.4			239.0			230.3
Corporate and eliminations		(58.0	)		(80.3	)		(85.8	)
Total operating revenues		2,709.8			2,652.1			3,776.6
Operating expenses
Gas distribution
Cost of gas		1,364.1			1,345.7			2,427.8
Operating and maintenance		300.0			300.4			294.6
Depreciation		183.6			177.4			170.9
Taxes, other than income taxes		164.6			167.6			189.4
Other		(2.6	)		-			(.2	)
Shipping		330.6			323.4			385.9
Other energy ventures		184.0			193.5			205.0
Other corporate expenses and eliminations		(50.2	)		(76.2	)		(81.8	)
Total operating expenses		2,474.1			2,431.8			3,591.6
Operating income		235.7			220.3			185.0
Interest expense, net of amounts capitalized		38.1			38.7			40.1
Equity investment income, net		8.2			15.8			9.4
Interest income		1.1			2.3			8.8
Other income, net		1.2			.9			.7
Income before income taxes		208.1			200.6			163.8
Income tax expense, net of benefits		69.7			65.1			44.3
Net income	$	138.4		$	135.5		$	119.5
Average shares of common stock outstanding
Basic		45.7			45.4			45.3
Diluted		45.7			45.5			45.4
Earnings per average share of common stock
Basic	$	3.02		$	2.99		$	2.64
Diluted		3.02			2.98			2.63
The accompanying notes are an integral part of these statements.

Nicor Inc.
Consolidated Statements of Cash Flows
(millions)
	Year ended December 31
	2010			2009			2008
Operating activities
Net income	$	138.4		$	135.5		$	119.5
Adjustments to reconcile net income to net cash flow provided from   (used for) operating activities:
Depreciation		202.7			195.8			189.8
Deferred income tax expense (benefit)		3.7			4.9			(3.4	)
Gain on sale of equity investment		-			(10.1	)		-
Changes in assets and liabilities:
Receivables, less allowances		19.7			198.3			(47.3	)
Gas in storage		(26.7	)		71.3			(54.5	)
Deferred/accrued gas costs		21.4			24.7			(104.1	)
Derivative instruments		(12.2	)		(85.2	)		133.3
Margin accounts - derivative instruments		.9			103.7			(134.9	)
Pension benefits		(15.1	)		(21.5	)		179.1
Regulatory postretirement asset		1.6			39.6			(186.3	)
Other assets		18.1			16.0			(64.3	)
Accounts payable		(22.5	)		(57.4	)		(16.9	)
Customer credit balances and deposits		(31.1	)		(45.6	)		(47.2	)
Health care and other postretirement benefits		31.3			3.5			12.2
Other liabilities		23.9			(9.1	)		(.9	)
Other items		.7			6.4			(1.5	)
Net cash flow provided from (used for) operating activities		354.8			570.8			(27.4	)
Investing activities
Additions to property, plant and equipment		(226.8	)		(220.3	)		(249.9	)
Net (increase) decrease in other short-term investments		7.0			(11.4	)		(20.4	)
Proceeds from sale of equity investment		.9			13.0			-
Other investing activities		(10.3	)		7.2			5.0
Net cash flow used for investing activities		(229.2	)		(211.5	)		(265.3	)
Financing activities
Proceeds from issuing long-term debt		-			50.0			75.0
Disbursements to retire long-term obligations		-			(50.5	)		(75.0	)
Net issuances (repayments) of commercial paper		(69.0	)		(245.9	)		370.9
Dividends paid		(85.1	)		(84.8	)		(84.4	)
Other financing activities		4.3			1.6			(10.6	)
Net cash flow provided from (used for) financing activities		(149.8	)		(329.6	)		275.9
Net increase (decrease) in cash and cash equivalents		(24.2	)		29.7			(16.8	)
Cash and cash equivalents, beginning of year		55.7			26.0			42.8
Cash and cash equivalents, end of year	$	31.5		$	55.7		$	26.0
Supplemental information
Income taxes paid, net	$	56.1		$	46.8		$	71.2
Interest paid, net of amounts capitalized		30.1			30.8			50.2
The accompanying notes are an integral part of these statements.

Nicor Inc.
Consolidated Balance Sheets
(millions)
ASSETS
	December 31
	2010		2009
Current assets
Cash and cash equivalents	$	31.5	$	55.7
Short-term investments		70.6		78.0
Receivables, less allowances of $27.6 and $33.0, respectively		472.4		492.1
Gas in storage		163.9		137.2
Derivative instruments		49.1		30.9
Margin accounts - derivative instruments		50.9		46.1
Other		115.2		163.3
Total current assets		953.6		1,003.3
Property, plant and equipment, at cost
Gas distribution		4,733.6		4,598.2
Shipping		333.6		330.0
Other		60.5		32.8
Property, plant and equipment, at cost		5,127.7		4,961.0
Less accumulated depreciation		2,104.9		2,021.9
Total property, plant and equipment, net		3,022.8		2,939.1
Long-term investments		134.2		128.8
Other assets		385.9		364.5
Total assets	$	4,496.5	$	4,435.7
The accompanying notes are an integral part of these statements.

Nicor Inc.
Consolidated Balance Sheets
(millions, except share data)
LIABILITIES AND CAPITALIZATION
	December 31
	2010			2009
Current liabilities
Short-term debt	$	425.0		$	494.0
Accounts payable		335.5			353.9
Customer credit balances and deposits		110.6			141.7
Derivative instruments		82.9			72.3
Other		120.3			106.2
Total current liabilities		1,074.3			1,168.1
Deferred credits and other liabilities
Regulatory asset retirement liability		843.9			796.8
Deferred income taxes		423.4			409.9
Health care and other postretirement benefits		229.7			199.7
Asset retirement obligation		190.9			191.6
Other		132.0			133.6
Total deferred credits and other liabilities		1,819.9			1,731.6
Commitments and contingencies
Capitalization
Long-term obligations		498.4			498.3
Common equity
Common stock, $2.50 par value per share, (45,546,759 and 45,245,409 shares
outstanding, respectively)		113.9			113.1
Paid-in capital		69.1			54.6
Retained earnings		934.1			881.0
Accumulated other comprehensive loss		(13.2	)		(11.0	)
Total common equity		1,103.9			1,037.7
Total capitalization		1,602.3			1,536.0
Total liabilities and capitalization	$	4,496.5		$	4,435.7
The accompanying notes are an integral part of these statements.

Nicor Inc.
Consolidated Statements of Common Equity
(millions, except per share data)
	Year ended December 31
	2010			2009			2008
Common stock
Balance at beginning of year	$	113.1		$	113.0		$	112.8
Issued and converted stock, net of cancellations		.8			.1			.2
Balance at end of year		113.9			113.1			113.0
Paid-in capital
Balance at beginning of year		54.6			49.5			44.8
Issued and converted stock		15.2			5.3			5.0
Reacquired and cancelled stock		(.7	)		(.2	)		(.3	)
Balance at end of year		69.1			54.6			49.5
Retained earnings
Balance at beginning of year		881.0			830.3			795.5
Net income		138.4			135.5			119.5
Dividends on common stock ($1.86 per share for 2010 to 2008)		(85.3	)		(84.8	)		(84.5	)
Other		-			-			(.2	)
Balance at end of year		934.1			881.0			830.3
Accumulated other comprehensive loss
Balance at beginning of year		(11.0	)		(19.7	)		(7.9	)
Other comprehensive income (loss)		(2.2	)		8.7			(11.8	)
Balance at end of year		(13.2	)		(11.0	)		(19.7	)
Total common equity	$	1,103.9		$	1,037.7		$	973.1

Consolidated Statements of Comprehensive Income
(millions)
	Year ended December 31
	2010			2009			2008
Net income	$	138.4		$	135.5		$	119.5
Other comprehensive income (loss)
Loss on cash flow hedges (net of income tax of $(2.8), $(2.8) and $(2.4),      respectively)		(4.5	)		(4.3	)		(3.6	)
Reclassifications of hedge (gains) losses to net income (net of income      tax of $1.7, $7.9 and $(1.4), respectively)		2.6			12.0			(2.1	)
Postretirement gains (losses) (net of income tax of $0.1, $0.9 and $(3.9),      respectively)		-			1.2			(6.0	)
Foreign currency translation adjustment		(.3	)		(.2	)		(.1	)
Other comprehensive income (loss), net of tax		(2.2	)		8.7			(11.8	)
Comprehensive income	$	136.2		$	144.2		$	107.7
The accompanying notes are an integral part of these statements.

Notes to the Consolidated Financial Statements

Certain terms used herein are defined in the glossary on pages ii and iii.

1. PROPOSED MERGER WITH AGL RESOURCES

In December 2010, Nicor entered into an Agreement and Plan of Merger (the “Merger Agreement”) with AGL Resources, a copy of which was filed with the SEC.  In accordance with the Merger Agreement, each share of Nicor stock, other than shares to be cancelled and Dissenting Shares (as defined in the Merger Agreement), outstanding at the Effective Time (as defined in the Merger Agreement) will be converted into the right to receive consideration consisting of (i) $21.20 in cash and (ii) 0.8382 shares of AGL Resources common stock, subject to adjustments in certain circumstances.

Completion of the proposed merger is conditioned upon, among other things, shareholder approval by both companies, the SEC’s clearance of a registration statement registering AGL Resources common stock, expiration or termination of any applicable waiting period under the Hart-Scott-Rodino Antitrust Improvement Act and regulatory approval by the ICC.

The Merger Agreement provides certain termination rights for both Nicor and AGL Resources, and provides for the payment of fees and expenses upon the termination of the Merger Agreement under certain circumstances. Nicor currently anticipates the merger will be completed in the second half of 2011.  Although the company believes that Nicor and AGL Resources will receive the required authorizations, approvals and consents to complete the proposed merger, there can be no assurance as to the timing of these authorizations, approvals and consents or as to the ultimate ability to obtain such authorizations, consents or approvals (or any additional authorizations, approvals or consents which may otherwise become necessary) or that such authorizations, approvals or consents will be obtained on terms and subject to conditions satisfactory to Nicor and AGL Resources.

For additional information concerning the proposed merger, please see Nicor’s Form 8-K filed with the SEC on December 7, 2010 and the Form S-4 registration statement filed with the SEC by AGL Resources on February 4, 2011.

For the year ended December 31, 2010, the company has incurred and expensed $4.6 million of merger-related costs.  No other adjustments have been made to the financial statements as a result of the proposed merger.

2. ACCOUNTING POLICIES

Consolidation.  The consolidated financial statements include the accounts of Nicor and all majority-owned subsidiaries.  Nicor’s key subsidiaries are described in Note 14 – Business Segment and Geographic Information.  All significant intercompany balances and transactions have been eliminated.

Use of estimates.  The preparation of the financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates that affect reported amounts.  Actual results could differ from those estimates and such differences could be material.  Accounting estimates requiring significant management judgment involve accrued unbilled revenues, derivative instruments, regulatory assets and liabilities, pension and other postretirement benefits, potential asset impairments, asset retirement obligations, loss contingencies including environmental contingencies, credit risk and income taxes.

Subsequent events.  The company’s management evaluated subsequent events for potential recognition and disclosure through the date the financial statements were issued.

Cash and cash equivalents.  Cash equivalents are comprised of highly liquid investments of domestic subsidiaries with an initial maturity of three months or less.  The carrying value of these investments approximates fair value.

Regulatory assets and liabilities.  Nicor Gas is regulated by the ICC, which establishes the rules and regulations governing utility rates and services in Illinois.  As a rate-regulated company, Nicor Gas is required to recognize the economic effects of rate regulation and, accordingly, has recorded regulatory assets and liabilities.  Regulatory assets represent probable future revenue associated with certain costs that are expected to be recovered from customers through rate riders or base rates, upon approval by the ICC.  Regulatory liabilities represent probable future reductions in revenues collected from ratepayers through a rate rider or base rates, or probable future expenditures.  If Nicor Gas’ operations become no longer subject to rate regulation, a write-off of net regulatory liabilities would be required.

The company had regulatory assets and liabilities at December 31 as follows (in millions):

	2010			2009
Regulatory assets - current
Regulatory postretirement asset	$	21.1	$	20.6
Deferred gas costs		6.5		24.9
Other		7.4		5.4
Regulatory assets - noncurrent
Regulatory postretirement asset		193.3		195.4
Deferred gas costs		1.4		4.4
Deferred environmental costs		25.0		18.1
Unamortized losses on reacquired debt		13.1		14.2
Other		9.6		8.9
	$	277.4	$	291.9
Regulatory liabilities - current
Regulatory asset retirement liability	$	17.2	$	14.5
Bad debt rider		16.4		-
Other		7.7		2.7
Regulatory liabilities - noncurrent
Regulatory asset retirement liability		843.9		796.8
Regulatory income tax liability		18.2		39.1
Bad debt rider		11.7		-
Other		.9		.8
	$	916.0	$	853.9

All items listed above are classified in Other on the Consolidated Balance Sheets, with the exception of the noncurrent portion of the Regulatory asset retirement liability, which is stated separately.

The ICC does not presently allow Nicor Gas the opportunity to earn a return on its regulatory postretirement asset.  The regulatory postretirement asset is expected to be recovered from ratepayers over a period of approximately 9 to 12 years.  The regulatory assets related to debt are not included in rate base, but are recovered over the term of the debt through the rate of return authorized by the ICC.  Nicor Gas is allowed to recover and is required to pay, using short-term interest rates, the carrying costs related to temporary under or overcollections of natural gas costs, certain environmental costs and energy efficiency costs charged to its customers.  However, there is no interest associated with the under or overcollections of bad debt expense.

Investments.  The company’s investments in marketable securities are categorized at the date of acquisition as trading, held-to-maturity, or available-for-sale.  Trading securities, which include money market funds, are carried at fair value and are classified as current assets unless held to satisfy a long-term obligation.  The company classifies money market funds held by its non-U.S. subsidiaries as short-term investments and all others are classified as cash equivalents.  Debt securities are categorized as held-to-maturity when the company has the positive intent and ability to hold the securities to maturity.  Held-to-maturity securities are included in either short-term or long-term investments based upon their contractual maturity date.  The company carries held-to-maturity securities at amortized cost, which approximates fair value.  Available-for-sale securities are carried at fair value, with unrealized gains and losses, net of tax, reported in common equity as a component of accumulated other comprehensive income.  Available-for-sale securities are classified as noncurrent assets unless the intent is to sell the security within 12 months.  The specific identification method is used to determine realized gains or losses on the sale of marketable securities.

Investments in equity securities that do not have a readily determinable fair value and do not qualify for the equity method are carried at cost.

Equity method investments.  The company invests in partnerships and limited liability companies that are accounted for under the equity method.  Related investment balances classified as long-term investments at December 31, 2010 and 2009 were $93.8 million and $99.6 million, respectively, and include $76.0 million and $84.8 million, respectively, related to Triton.

Goodwill and other intangible assets.  Goodwill is the excess cost of an acquired business over the fair value of assets acquired and liabilities assumed in a business combination.  Tropical Shipping had goodwill of $22.5 million and $20.9 million at December 31, 2010 and 2009, respectively.  The increase in goodwill from 2009 to 2010 is due primarily to the acquisition of the assets of V.I. Cargo Services, Inc., a provider of less-than-container load and full container load consolidation services from the United States to the island of St. Croix (in the U.S. Virgin Islands).  Nicor Services had goodwill of $4.0 million at both December 31, 2010 and 2009.  Goodwill is tested for impairment annually.  Intangible assets other than goodwill with definite lives are amortized over their useful lives and totaled $5.1 million and $2.6 million, net of accumulated amortization, at December 31, 2010 and 2009, respectively.  These intangible assets consisted primarily of customer and agency relationships at Tropical Shipping.  At December 31, 2010, intangible assets also included rights that were obtained by Central Valley related to the storage facility development.  Goodwill and other intangible assets are classified in noncurrent other assets on the Consolidated Balance Sheets.

Asset retirement obligations.  The company records legal obligations associated with the retirement of long-lived assets in the period in which the obligation is incurred, if sufficient information exists to reasonably estimate the fair value of the obligation.  When an asset retirement obligation is recorded as a liability, a corresponding amount is recorded as an asset retirement cost (an additional cost of the long-lived asset).  Subsequently, the asset retirement obligation is accreted to the expected settlement amount and the asset retirement cost is depreciated over the life of the asset on a straight-line basis.

Subject to rate regulation, Nicor Gas continues to accrue all future asset retirement costs through depreciation over the lives of its assets even when a legal retirement obligation does not exist or insufficient information exists to determine the fair value of the obligation.  Amounts charged to depreciation by Nicor Gas for future retirement costs, in excess of the normal depreciation and accretion described above, are classified as a regulatory asset retirement liability.

Derivative instruments.Cash flows from derivative instruments are recognized in the Consolidated Statements of Cash Flows, and gains and losses are recognized in the Consolidated Statements of Income, in the same categories as the underlying transactions.

Cash flow hedge accounting may be elected only for highly effective hedges, based upon an assessment, performed at least quarterly, of the historical and probable future correlation of cash flows from the derivative instrument to changes in the expected future cash flows of the hedged item.  To the extent cash flow hedge accounting is applied, the effective portion of any changes in the fair value of the derivative

instruments is reported as a component of accumulated other comprehensive income.  Ineffectiveness, if any, is immediately recognized in operating income.  The amount in accumulated other comprehensive income is reclassified to earnings when the forecasted transaction is recognized in the Consolidated Statements of Income, even if the derivative instrument is sold, extinguished or terminated prior to the transaction occurring.  If the forecasted transaction is no longer expected to occur, the amount in accumulated other comprehensive income is immediately reclassified to operating income.

Nicor Gas.  Derivative instruments, such as futures contracts, options and swap agreements, are utilized primarily in the purchase of natural gas for customers.  These derivative instruments are reflected at fair value and are not designated as hedges.  Realized gains or losses on such instruments are included in the cost of gas delivered and are passed directly through to customers, subject to ICC review, and therefore have no direct impact on earnings.  Unrealized changes in the fair value of these derivative instruments are deferred as regulatory assets or liabilities.

Nicor Gas enters into swap agreements to reduce the earnings volatility of certain forecasted operating costs arising from fluctuations in natural gas prices, such as the purchase of natural gas for use in company operations.  These derivative instruments are carried at fair value.  To the extent hedge accounting is not elected, changes in such fair values are immediately recorded in the current period as operating and maintenance expense.

Nicor Enerchange.  Derivative instruments, such as futures contracts, options, forward contracts, swap agreements and other energy-related contracts are held by Nicor’s wholesale natural gas marketing business, Nicor Enerchange, for trading purposes.  Certain of these derivative instruments are used to economically hedge price risk associated with inventories of natural gas, fixed-price purchase and sale agreements and other future natural gas commitments.  Nicor Enerchange records such derivative instruments at fair value and generally cannot elect hedge accounting.  As a result, changes in derivative fair values may have a material impact on Nicor’s financial statements.

Other derivative instruments are used by Nicor Enerchange to hedge price risks related to the activities of affiliates.  Derivatives are held related to certain utility-bill management products sold to retail customers.  These derivative instruments are carried at fair value and cash flow hedge accounting may or may not be elected.  Other derivative instruments are held for the purpose of hedging the commodity price risk associated with the forecasted purchase of base gas that will be injected as part of the development of the natural gas storage facility by Central Valley.  Such derivative instruments are carried at fair value and cash flow hedge accounting has been elected on a consolidated basis.  The base gas is a component of the storage facility’s construction costs.  Therefore, amounts recorded in accumulated other comprehensive income related to these derivative instruments will not be reclassified to earnings until the storage facility is retired and the base gas is sold.

Nicor. Forward-starting interest rate swaps are utilized to hedge the interest payments associated with long-term debt.  These derivative instruments are carried at fair value and cash flow hedge accounting is elected.  The effective portion of any changes in the fair value of the derivatives is deferred in accumulated other comprehensive income.  Upon settlement, the deferred amount is amortized to interest expense over the life of the debt.

Credit risk and concentrations.  Nicor’s major subsidiaries have diversified customer bases and the company believes that it maintains prudent credit policies which mitigate customer receivable, supplier performance and derivative counterparty credit risk.  The company is exposed to credit risk in the event a customer or supplier defaults on a contract to pay for or deliver product at agreed-upon terms and conditions, or a counterparty to a derivative instrument defaults on a settlement or otherwise fails to perform under contractual terms.  To manage this risk, the company has established procedures to determine and monitor the creditworthiness of counterparties, to seek guarantees or collateral back-up in the form of cash or letters of credit, to acquire credit insurance in certain instances, and to limit its exposure to any one counterparty.  Nicor also, in some instances, enters into netting arrangements to

mitigate counterparty credit risk.  Fair value measurements consider credit risk.  For assets and liabilities not carried at fair value, credit losses are accrued when probable and reasonably estimable.

On February 2, 2010, the ICC approved a bad debt rider that was filed for in 2009 by Nicor Gas.  The bad debt rider provides for the recovery from (or refund to) customers of the difference between Nicor Gas’ actual bad debt experience on an annual basis and the benchmark bad debt expense included in its rates for the respective year.

Revenue recognition.  Gas distribution revenues are recognized when natural gas is delivered to customers.  In accordance with ICC regulations and subject to its review, the cost of gas delivered is charged to customers without markup, although the timing of cost recovery can vary.  Temporary under and overcollections of gas costs are deferred or accrued as a regulatory asset or liability with a corresponding decrease or increase to cost of gas, respectively.

Nicor Gas accrues revenues for estimated deliveries to customers from the date of their last bill until the balance sheet date.  Receivables include accrued unbilled revenues of $144.8 million and $141.0 million at December 31, 2010 and 2009, respectively, related primarily to gas distribution operations.

Nicor Gas classifies revenue taxes billed to customers as operating revenues and related taxes incurred as operating expenses.  Revenue taxes included in operating expense for 2010, 2009 and 2008 were $145.9 million, $148.1 million and $171.1 million, respectively.

In the shipping business, revenues and related delivery costs are recognized at the time vessels depart from port.  While alternative methods of recognizing shipping revenue and related costs exist, the difference between those methods and the company’s policy does not have a material impact on operating results.

Nicor Enerchange presents revenue from natural gas sales, cost of sales, and related derivative instruments, which are entered into for trading purposes, on a net basis.  For Nicor Solutions and Nicor Advanced Energy, revenue is recognized on their 12-month utility-bill management contracts as the lesser of cumulative earned or cumulative billed amounts.  Nicor Services recognizes revenue for warranty and repair contracts on a straight-line basis over the contract term.  Revenue for maintenance services is recognized at the time such services are performed.

Repair and maintenance expense.  Nicor records expense for repair and maintenance costs as incurred.  The shipping business uses the direct expensing method for planned major maintenance related to dry-docking and major repairs of its owned vessels.

Legal defense costs.  The company accrues estimated legal defense costs associated with loss contingencies in the period in which it determines that such costs are probable of being incurred and are reasonably estimable.

Depreciation.  Property, plant and equipment are depreciated over estimated useful lives on a straight-line basis.  The gas distribution business composite depreciation rate is 4.1 percent, which includes all estimated future retirement costs.  Upon the retirement of these assets, no gain or loss is recognized.  In the shipping business, the estimated useful lives of vessels range from 20 to 25 years.

Income taxes.  Deferred income taxes are provided at the current statutory income tax rate for temporary differences between the tax basis (adjusted for related unrecognized tax benefits, if any) of an asset or liability and its reported amount in the financial statements.  In the gas distribution business, investment tax credits and regulatory income tax liabilities for deferred taxes in excess of the current statutory rate are amortized to income as the temporary difference reverses.

A deferred income tax liability is not recorded on undistributed foreign earnings that are expected in management’s judgment to be indefinitely reinvested offshore.  Management considers, among other factors, actual cash investments offshore as well as projected cash requirements in making this determination.  Changes in management’s investment or repatriation plans or circumstances could result in a different deferred income tax liability.

The company records unrecognized tax benefits based on a recognition threshold and valuation method to recognize and measure an income tax position taken, or expected to be taken, in a tax return.  The evaluation is based on a two-step approach.  The first step requires the company to evaluate whether the tax position would “more likely than not,” based upon its technical merits, be sustained upon examination by the appropriate taxing authority.  The second step requires the tax position to be measured at the largest amount of tax benefit that is greater than 50 percent likely of being realized upon settlement.  The company recognizes accrued interest related to unrecognized tax benefits in interest expense and interest income.  Penalties, if any, are recorded in operating expense.

3. INVESTMENTS

The company’s investments in debt and equity securities at December 31 are as follows (in millions):

	2010		2009
Money market funds	$	82.9	$	121.1
Corporate bonds		6.8		1.3
Other investments		8.5		4.8
	$	98.2	$	127.2

Investments in debt and equity securities are classified on the Consolidated Balance Sheets at December 31 as follows (in millions):

	2010		2009
Cash equivalents	$	12.6	$	43.8
Short-term investments		70.6		78.0
Long-term investments		15.0		5.4
	$	98.2	$	127.2

Investments categorized as trading (including money market funds) totaled $85.0 million and $122.7 million at December 31, 2010 and 2009, respectively.  Corporate bonds and certain other investments are categorized as held-to-maturity.  The contractual maturities of the held-to-maturity investments at December 31, 2010 are as follows (in millions):

        Years to maturity

Less than 1 year		1-5 Years		5-10 Years		Total
$	.2	$	7.7	$	.9	$	8.8

Nicor’s investments also include certain restricted investments, including certificates of deposit and bank accounts, maintained to fulfill statutory or contractual requirements.  These investments totaled $2.0 million and $3.1 million at December 31, 2010 and 2009, respectively.  In addition, the company holds a $2.4 million investment in a port facility development venture carried at cost.

Gains or losses included in earnings resulting from the sale of investments were not significant.

4. ASSET RETIREMENT OBLIGATIONS

Nicor records AROs associated with services, mains and other components of the distribution system and the buildings in its gas distribution business and with certain equipment in its shipping business.  Nicor has not recognized an ARO associated with gathering lines and storage wells in its gas distribution business because there is insufficient company or industry retirement history to reasonably estimate the fair value of the obligation.

The following table presents a reconciliation of the beginning and ending ARO for the years ended December 31 (in millions):

	2010			2009
Beginning of period	$	192.2		$	187.2
Liabilities incurred during the period		2.1			2.1
Liabilities settled during the period		(4.1	)		(6.3	)
Accretion		11.0			10.8
Revision in estimated cash flows		(9.8	)		(1.6	)
End of period	$	191.4		$	192.2

Substantially all of the ARO is classified as a noncurrent liability.

5. GAS IN STORAGE

Gas in storage at December 31 included natural gas inventory of the following subsidiaries (in millions):

	2010		2009
Nicor Gas	$	119.2	$	104.7
Nicor Enerchange		44.7		32.5
	$	163.9	$	137.2

Nicor Gas’ inventory is carried at cost on a LIFO basis.  Nicor Enerchange’s inventory is carried at the lower of weighted-average cost or market.

Based on the average cost of gas purchased in December 2010 and 2009, the estimated replacement cost of Nicor Gas’ inventory at December 31, 2010 and 2009 exceeded the LIFO cost by $226.8 million and $288.5 million, respectively.

During 2009, Nicor Gas liquidated 8.8 Bcf of its LIFO-based inventory at an average cost per Mcf of $7.83.  For gas purchased in 2009, the company’s average cost per Mcf was $3.89 lower than the average LIFO liquidation rate.  Applying LIFO cost in valuing the liquidation, as opposed to using the average gas purchase cost, had the effect of increasing the cost of gas in 2009 by $34.3 million.

There was no liquidation of LIFO layers during 2010 or 2008.

Since the cost of gas, including inventory costs, is charged to customers without markup, subject to ICC review, the LIFO liquidation in 2009 had no impact on net income.

Nicor Enerchange recorded charges of $7.4 million, $2.8 million and $8.3 million in 2010, 2009 and 2008, respectively, resulting from lower of cost or market valuations.

6. SHORT-TERM AND LONG-TERM DEBT

The following table presents the long-term debt of Nicor Gas at December 31, which is classified as long-term obligations on the Consolidated Balance Sheets (in millions):

	2010		2009
First Mortgage Bonds
6.625% Series due 2011	$	75.0	$	75.0
7.20% Series due 2016		50.0		50.0
4.70% Series due 2019		50.0		50.0
5.80% Series due 2023		50.0		50.0
6.58% Series due 2028		50.0		50.0
5.90% Series due 2032		50.0		50.0
5.90% Series due 2033		50.0		50.0
5.85% Series due 2036		50.0		50.0
6.25% Series due 2038		75.0		75.0
		500.0		500.0
Less:  Unamortized debt discount, net of premium		1.6		1.8
Total long-term debt	$	498.4	$	498.2

In February 2011, Nicor Gas issued $75 million First Mortgage Bonds at 2.86 percent, due in 2016 through a private placement and utilized the proceeds to retire the $75 million 6.625 percent First Mortgage Bond series which matured in February 2011.

In February 2009, the $50 million 5.37 percent First Mortgage Bond series matured and was retired.  In July 2009, Nicor Gas issued $50 million First Mortgage Bonds at 4.70 percent, due in 2019 through a private placement.

In determining that the bonds issued in 2011 and 2009 qualified for exemption from registration under Section 4(2) of the Securities Act of 1933, Nicor Gas relied on the facts that the bonds were offered only to a limited number of large institutional investors and each institutional investor that purchased the bonds represented that it was purchasing the bonds for its own account and not with a view to distribute them. 

Substantially all gas distribution properties are subject to the lien of the indenture securing Nicor Gas’ First Mortgage Bonds.

In April 2010, Nicor Gas established a $400 million, 364-day revolving credit facility, expiring April 2011 to replace the $550 million, 364-day revolving credit facility, which was set to expire in May 2010 and Nicor and Nicor Gas established a $600 million, three-year revolving credit facility, expiring April 2013 to replace the $600 million, five-year revolving credit facility, which was set to expire in September 2010.  These facilities were established with major domestic and foreign banks and serve as backup for the issuance of commercial paper.  The company had $425 million and $494 million of commercial paper outstanding with a weighted-average interest rate of 0.2 percent and 0.1 percent at December 31, 2010 and 2009, respectively.

In 2010, Nicor entered into forward-starting interest rate swaps with a notional totaling $90 million.  The swaps hedge the risk associated with the interest payments attributable to the probable issuance of long-term fixed-rate debt in 2012 intended to finance the development of a natural gas storage facility.  Under the terms of the swaps, Nicor agrees to pay a fixed swap rate and receive a floating rate based on LIBOR.

The company believes it is in compliance with all debt covenants.

The company incurred total interest expense of $38.2 million, $38.8 million and $40.3 million in 2010, 2009 and 2008, respectively.  Interest expense is reported net of amounts capitalized.  Interest expense capitalized for the years ended December 31, 2010, 2009 and 2008 was immaterial.

Nicor Gas may not extend cash advances to an affiliate if Nicor Gas has any outstanding short-term borrowings.  Nicor Gas’ practice also provides that the balance of cash deposits or advances from Nicor Gas to an affiliate at any time shall not exceed the unused balance of funds actually available to that affiliate under its existing bank credit agreements or its commercial paper facilities with unaffiliated third parties.  Similarly, the balance of cash advances to Nicor Gas from an affiliate may not exceed the unused balance of funds actually available to Nicor Gas under its existing credit agreements or commercial paper facilities with unaffiliated third parties.  Nicor Gas’ positive cash deposits, if any, may be applied by Nicor to offset negative balances of other Nicor subsidiaries and vice versa.

7. FAIR VALUE MEASUREMENTS

The fair value of assets and liabilities that are measured on a recurring basis are categorized in the table below (in millions) into three broad levels (with Level 1 considered the most reliable) based upon the valuation inputs.

	Quoted prices in active markets		Significant observable inputs		Significant unobservable inputs
	(Level 1)		(Level 2)		(Level 3)		Total
December 31, 2010
Assets
Money market funds	$	82.9	$	-	$	-	$	82.9
Commodity derivatives		21.3		35.7		9.3		66.3
Interest rate derivative		-		1.0		-		1.0
	$	104.2	$	36.7	$	9.3	$	150.2
Liabilities
Commodity derivatives	$	55.4	$	31.3	$	12.3	$	99.0
Interest rate derivative		-		3.2		-		3.2
	$	55.4	$	34.5	$	12.3	$	102.2
December 31, 2009
Assets
Money market funds	$	121.1	$	-	$	-	$	121.1
Commodity derivatives		14.6		16.8		8.8		40.2
	$	135.7	$	16.8	$	8.8	$	161.3
Liabilities
Commodity derivatives	$	54.2	$	29.3	$	3.8	$	87.3

When available and appropriate, the company uses quoted market prices in active markets to determine fair value and classifies such items within Level 1.  For derivatives, Level 1 values include only those derivative instruments traded on the NYMEX.  The company enters into over-the-counter instruments with values that are similar to, and correlate with, quoted prices for exchange-traded instruments in active markets; the fair values of these over-the-counter items consider credit risk and are classified within Level 2.  In certain instances, the company may be required to determine a fair value using significant unobservable inputs such as indicative broker prices; the resulting valuation is classified as Level 3.

A description of the company’s objectives and strategies for using derivative instruments, and related accounting policies, is included in Note 2 – Accounting Policies – Derivative instruments and Credit risk and concentrations.

The following table presents a reconciliation of the Level 3 beginning and ending net derivative asset (liability) balances for the periods ended December 31 (in millions):

	2010			2009
Beginning of period	$	5.0		$	1.6
Net realized/unrealized gains (losses)
Included in regulatory assets and liabilities		(.6	)		(3.5	)
Included in net income		(1.5	)		15.2
Settlements, net of purchases and issuances		5.7			(2.0	)
Transfers into Level 3		(9.8	)		5.4
Transfers out of Level 3		(1.8	)		(11.7	)
End of period	$	(3.0	)	$	5.0
Net unrealized gains (losses) included in net income above relating to derivatives still held at December 31	$	(2.3	)	$	5.0

Net realized/unrealized gains (losses) included in net income are attributable to Nicor Enerchange and are classified as operating revenues.

Transfers into and out of Level 3 reflect the liquidity at the relevant natural gas trading locations and dates which affects the significance of unobservable inputs used in the valuation.  In 2010, in accordance with new accounting guidance, the company elected to determine both transfers into and out of Level 3 using values at the end of the interim period in which the transfer occurred.  In 2009, transfers into Level 3 were determined using beginning of period values and transfers out of Level 3 were determined using end of period values.

Nicor maintains margin accounts related to financial derivative transactions.  The company’s policy is not to offset the fair value of assets and liabilities recognized for derivative instruments or any related margin account.  The following table represents the balance sheet classification of margin accounts related to derivative instruments at December 31 (in millions):

	2010		2009
Assets
Margin accounts - derivative instruments	$	50.9	$	46.1
Other - noncurrent		8.1		13.8

In addition, the recorded amount of restricted short and long-term investments and short-term borrowings approximates fair value.  Long-term debt outstanding is recorded at the principal balance outstanding, net of unamortized discounts.  The principal balance of Nicor Gas’ First Mortgage Bonds outstanding at December 31, 2010 and 2009 was $500 million.  Based on quoted prices or market interest rates, the fair value of the company’s First Mortgage Bonds was approximately $554 million and $543 million at December 31, 2010 and 2009, respectively.

8. DERIVATIVE INSTRUMENTS

A description of the company’s objectives and strategies for using derivative instruments, and related accounting policies, is included in Note 2 – Accounting Policies – Derivative instruments and Credit risk and concentrations.  All derivatives recognized on the Consolidated Balance Sheets are measured at fair value, as described in Note 7 – Fair Value Measurements.

Consolidated Balance Sheets.  Derivative assets and liabilities at December 31 are classified as shown in the table below (in millions):

	2010		2009
Derivatives designated as hedging instruments
Assets
Derivative instruments	$	.4	$	.3
Other - noncurrent		1.0		-
	$	1.4	$	.3
Liabilities
Derivative instruments	$	2.2	$	1.0
Other - noncurrent		3.2		-
	$	5.4	$	1.0
Derivatives not designated as hedging instruments
Assets
Derivative instruments	$	48.7	$	30.6
Other - noncurrent		17.2		9.3
	$	65.9	$	39.9
Liabilities
Derivative instruments	$	80.7	$	71.3
Other - noncurrent		16.1		15.0
	$	96.8	$	86.3

Volumes.  As of December 31, 2010 and 2009, Nicor Gas held outstanding derivative contracts of approximately 49 Bcf and 64 Bcf, respectively, to hedge natural gas purchases for customer use, with hedges spanning approximately three years for each of the respective periods.  Commodity price-risk arising from Nicor Enerchange’s activities and Nicor Gas’ natural gas purchases for company use is mitigated with derivative instruments that total to a net short position of 3.9 Bcf and 1.3 Bcf as of December 31, 2010 and 2009, respectively.  The above volumes exclude contracts such as variable-priced contracts and basis swaps, which are accounted for as derivatives but whose fair values are not directly impacted by changes in commodity prices.

As of December 31, 2010, Nicor held forward-starting interest rate swaps with a notional totaling $90 million. The swaps hedge the risk associated with the interest payments attributable to the probable issuance of long-term fixed-rate debt in 2012.

Consolidated Statements of Income - cash flow hedges.  Changes in the fair value of derivatives designated as a cash flow hedge are recognized in other comprehensive income until the hedged transaction is recognized in the Consolidated Statements of Income.  Cash flow hedges used by the company’s other energy ventures, to hedge utility-bill management products, are eventually recognized within operating revenues.  Cash flow hedges used by Nicor Gas, to hedge purchases of natural gas for company use, are eventually recorded within operating and maintenance expense.  Cash flow hedges used by Nicor, to hedge the interest payments attributable to long-term fixed-rate debt, will eventually be recorded within interest expense.

Cash flow hedges affected accumulated other comprehensive income (effective portion) as shown in the following table for the year ended December 31 (in millions):

	2010		2009
Pretax loss recognized in other comprehensive income	$	7.3	$	7.1

The pretax loss reclassified from accumulated other comprehensive income into income (effective portion) is shown in the following table for the year ended December 31 (in millions):

Location	2010		2009
Operating revenues	$	2.2	$	11.3
Operating and maintenance		1.9		8.4
	$	4.1	$	19.7

Any amounts recognized in operating income, related to ineffectiveness or due to a forecasted transaction that is no longer expected to occur, were immaterial for the years ended December 31, 2010 and 2009.

As of December 31, 2010 and 2009, the time horizon of cash flow hedges of natural gas purchases for Nicor Gas company use and for utility-bill management products sold by Nicor’s other energy ventures span as long as two years.  For these hedges, the total pretax loss deferred in accumulated other comprehensive income at December 31, 2010 and 2009 was $2.0 million ($1.2 million after taxes) and $0.9 million ($0.5 million after taxes), respectively.  At the respective reporting dates, substantially all of these amounts were expected to be reclassified to earnings within the next 12 months.

The amounts deferred in accumulated other comprehensive income for the forward-starting interest rate swaps entered into in 2010 will be amortized to interest expense upon the issuance of long-term fixed rate debt.  The total pretax loss deferred in accumulated other comprehensive income relating to the interest rate swaps at December 31, 2010 was $2.2 million ($1.3 million after taxes).

Consolidated Statements of Income - derivatives not designated as hedges.  The earnings of the company are subject to volatility for those derivatives not designated as hedges.  Non-designated derivatives used by the company’s other energy ventures, to hedge energy trading activities and utility-bill management products, are recorded in operating revenues.  Non-designated derivatives used by Nicor Gas, to hedge purchases of natural gas for company use, are recorded within operating and maintenance expense.  Pretax net losses recognized in income are summarized in the table below for the year ended December 31 (in millions):

Location	2010		2009
Operating revenues	$	.8	$	17.1
Operating and maintenance		1.0		1.9
	$	1.8	$	19.0

Nicor Gas’ derivatives used to hedge the purchase of natural gas for its customers are also not designated as hedging instruments.  Gains or losses on these derivatives are not recognized in pretax earnings, but are deferred as regulatory assets or liabilities until the related revenue is recognized.  Net losses deferred for the years ended December 31, 2010 and 2009 were $112.0 million and $166.1 million, respectively.

Credit-risk-related contingent features.  Provisions within certain derivative agreements require the company to post collateral if the company’s net liability position exceeds a specified threshold.  Also, certain derivative agreements contain credit-risk-related contingent features, whereby the company would be required to provide additional collateral or pay the amount due to the counterparty when a credit event occurs, such as if the company’s credit rating was to be lowered.  As of December 31, 2010 and 2009 for agreements with such features, derivative contracts with liability fair values totaled approximately $12 million and $20 million, respectively, for which the company had posted no collateral to its counterparties.  If it was assumed that the company had to post the maximum contractually specified collateral or settle the liability, the company would have been required to pay approximately $11 million and $19 million at December 31, 2010 and 2009, respectively.

9. INCOME TAXES

The components of income tax expense are presented below (in millions):

	2010			2009			2008
Current
Federal	$	57.1		$	52.1		$	42.1
State		9.3			8.6			6.5
		66.4			60.7			48.6
Deferred
Federal		7.7			2.9			(1.7	)
State		(4.0	)		2.0			(1.7	)
		3.7			4.9			(3.4	)
Amortization of investment tax credits, net		(.9	)		(.8	)		(1.4	)
Foreign taxes		.5			.3			.5
Income tax expense	$	69.7		$	65.1		$	44.3

The temporary differences which gave rise to the net deferred tax liability at December 31 were as follows (in millions):

	2010		2009
Deferred tax liabilities
Property, plant and equipment	$	352.3	$	327.5
Investment in partnerships		66.5		85.0
Other		33.9		38.0
		452.7		450.5
Deferred tax assets
Other		56.8		78.0
Net deferred tax liability	$	395.9	$	372.5

For purposes of computing deferred income tax assets and liabilities, temporary differences associated with regulatory assets and liabilities have been netted against related offsetting temporary differences.

Differences between the federal statutory rate and the effective combined federal and state income tax rate are shown below:

	2010			2009			2008
Federal statutory rate		35.0	%		35.0	%		35.0	%
State income taxes, net		2.0			3.7			2.2
Tax credits		(1.5	)		(1.5	)		(2.8	)
Amortization of regulatory income tax liability		(.9	)		(.6	)		(.9	)
Undistributed foreign earnings		(1.2	)		(3.4	)		(5.3	)
Other		.1			(.8	)		(1.2	)
Effective combined federal and state income tax rate		33.5	%		32.4	%		27.0	%

The higher effective income tax rate in 2010 compared to 2009 is due primarily to lower untaxed foreign shipping earnings and the unfavorable impact of the tax law change with respect to Medicare Part D subsidies (included in Other in the table above), partially offset by favorable tax reserve adjustments.  The higher effective income tax rate in 2009 compared to 2008 reflects higher pretax income in 2009 (which causes a higher effective income tax rate since permanent differences and tax credits are a smaller share of pretax income), as well as a decrease in untaxed foreign shipping earnings and the absence of the 2008 tax reserve adjustments.

The company's major tax jurisdictions include the United States and Illinois, with tax returns examined by the IRS and IDR, respectively.  At December 31, 2010, the years that remain subject to examination include years beginning after 2006 for the IRS and the IDR.  For tax positions within years that remain subject to examination, management has recognized the largest amount of tax benefit that it believes is greater than 50 percent likely of being realized upon settlement with the taxing authority.

A reconciliation of the beginning and ending amounts of the liability for unrecognized tax benefits is as follows (in millions):

	2010			2009			2008
Balance at January 1	$	9.6		$	10.8		$	5.7
Additions based on tax positions related to the current year		1.7			1.7			.9
Reductions based on tax positions related to the current year		(.6	)		-			-
Additions for tax positions of prior years		-			.3			7.8
Reductions for tax positions of prior years		(2.2	)		(.1	)		(4.0	)
Reduction based on lapse of statute of limitations		(2.6	)		-			-
Settlements		(3.0	)		(3.1	)		.4
Balance at December 31	$	2.9		$	9.6		$	10.8

At December 31, 2010, 2009 and 2008, there were $1.9 million, $4.6 million and $2.5 million, respectively, of unrecognized tax benefits that if recognized, would affect the company’s annual effective tax rate.

If settlements vary from these estimated amounts recognized for unrecognized tax benefits, the company does not anticipate any adjustment would result in a material change to its financial position.  However, the company believes that it is reasonably possible that a change to its liability for unrecognized tax benefits could occur within 12 months, potentially decreasing its unrecognized tax benefit by approximately $3 million.

The company recognized net interest expense (income) on tax matters of approximately $(1) million, $1 million and $(3) million in 2010, 2009 and 2008, respectively.  The company had approximately $2

million of interest receivable at December 31, 2010 compared with $5 million of interest receivable as of December 31, 2009.  The decrease in interest receivable in 2010 when compared to the prior year is due primarily to the receipt of interest in the second quarter of 2010 related to a federal income tax settlement.  Amounts recognized in operating expense related to penalties were insignificant.

In March 2010, the Health Care Act was signed into law resulting in comprehensive health care reform.  The Health Care Act contains a provision that eliminates the tax deduction related to Medicare Part D subsidies received after 2012.  Federal subsidies are provided to sponsors of retiree health benefit plans, such as Nicor Gas, that provide a benefit that is at least actuarially equivalent to the benefits under Medicare Part D.  Such subsidies have reduced the company’s actuarially determined projected benefit obligation and annual net periodic benefit costs.  Due to the change in taxation, in the first quarter of 2010 Nicor Gas reduced deferred tax assets by $17.5 million, reversed an existing regulatory income tax liability of $10.0 million, established a regulatory income tax asset of $7.0 million and recognized a $0.5 million charge to income tax expense.  Beginning in 2010, the change in taxation will also reduce earnings by an estimated $1.7 million annually for periods subsequent to the enactment date.

In 2006, the company reorganized certain shipping and related operations.  The reorganization allows the company to take advantage of certain provisions of the Jobs Act that provide the opportunity for tax savings subsequent to the date of the reorganization.  Generally, to the extent foreign shipping earnings are not repatriated to the United States, such earnings are not expected to be subject to current taxation.  In addition, to the extent such earnings are expected to be indefinitely reinvested offshore, no deferred income tax expense would be recorded by the company.  For the years ended December 31, 2010, 2009 and 2008, income tax expense has not been provided on approximately $5 million, $19 million and $23 million, respectively, of foreign company shipping earnings.

At December 31, 2010, Nicor has approximately $12 million of deferred income tax liabilities related to approximately $34 million of cumulative undistributed earnings of its foreign subsidiaries.  Nicor has not recorded deferred income taxes of approximately $59 million on approximately $170 million of cumulative undistributed foreign earnings.

The balance of unamortized investment tax credits at December 31, 2010 and 2009 was $24.3 million and $25.2 million, respectively.

10. POSTRETIREMENT BENEFITS

Nicor Gas maintains a noncontributory defined benefit pension plan covering substantially all employees hired prior to 1998.  Pension benefits are based on years of service and the highest average salary for management employees and job level for collectively bargained employees (referred to as pension bands).  The benefit obligation related to collectively bargained benefits considers the company’s past practice of regular benefit increases.  Nicor Gas also provides health care and life insurance benefits to eligible retired employees under a plan that includes a limit on the company’s share of cost for employees hired after 1982.

The following table summarizes the changes in the funded status of the plans and the related assets (liabilities) recognized in the Consolidated Balance Sheets as of December 31 (in millions):

	Pension benefits						Health care and other benefits
	2010			2009			2010			2009
Change in benefit obligation
Benefit obligation at beginning of period	$	305.6		$	270.2		$	211.2		$	207.7
Service cost		9.8			8.6			2.3			2.2
Interest cost		16.0			16.5			11.8			12.1
Actuarial loss (gain)		4.4			22.3			26.8			(2.1	)
Participant contributions		-			-			.9			1.2
Medicare Part D reimbursements		-			-			1.6			1.1
Benefits paid		(18.4	)		(12.0	)		(12.1	)		(12.8	)
Other		-			-			-			1.8
Benefit obligation at end of period		317.4			305.6			242.5			211.2

Change in plan assets
Fair value of plan assets at beginning of period		363.5			306.6			-			-
Actual return on plan assets		45.3			68.9			-			-
Employer contributions		-			-			11.2			11.6
Participant contributions		-			-			.9			1.2
Benefits paid		(18.4	)		(12.0	)		(12.1	)		(12.8	)
Fair value of plan assets at end of period		390.4			363.5			-			-
Funded status	$	73.0		$	57.9		$	(242.5	)	$	(211.2	)

Amounts recognized in the Consolidated Balance Sheets
Noncurrent assets	$	73.0	$	57.9	$	-		$	-
Current liabilities		-		-		(12.8	)		(11.5	)
Noncurrent liabilities		-		-		(229.7	)		(199.7	)
Total recognized	$	73.0	$	57.9	$	(242.5	)	$	(211.2	)

The company’s postretirement benefit costs have historically been considered in rate proceedings in the period they are accrued.  As a regulated utility, Nicor Gas expects continued rate recovery of the eligible costs of its defined benefit postretirement plans and, accordingly, associated changes in the plan’s funded status have been deferred as a regulatory asset or liability until recognized in net income, instead of being recorded in accumulated other comprehensive income.  However, to the extent Nicor Gas employees perform services for non-regulated affiliates and to the extent such employees are eligible to participate in these plans, the affiliates are charged for the cost of these benefits and the changes in the funded status relating to these employees are recorded in accumulated other comprehensive income.

Postretirement benefit costs (credits) recorded within net regulatory assets and accumulated other comprehensive income, and changes thereto, were as follows (in millions):

	Net regulatory assets						Accumulated other comprehensive income						Total
	Pension benefits			Health care and other benefits			Pension benefits			Health care and other benefits			Pension benefits			Health care and other benefits
January 1, 2009	$	181.6		$	73.4		$	9.6		$	3.9		$	191.2		$	77.3
Current year actuarial gain		(20.3	)		(.3	)		(1.1	)		-			(21.4	)		(.3	)
Amortization of actuarial loss		(14.5	)		(4.3	)		(.8	)		(.3	)		(15.3	)		(4.6	)
Amortization of prior service (cost) benefit		(.4	)		.1			-			-			(.4	)		.1
December 31, 2009		146.4			68.9			7.7			3.6			154.1			72.5
Current year actuarial (gain) loss		(11.2	)		25.4			(.6	)		1.3			(11.8	)		26.7
Amortization of actuarial loss		(11.3	)		(3.9	)		(.6	)		(.2	)		(11.9	)		(4.1	)
Amortization of prior service cost		(.4	)		(.1	)		-			-			(.4	)		(.1	)
December 31, 2010	$	123.5		$	90.3		$	6.5		$	4.7		$	130.0		$	95.0

The balances as of December 31 relate primarily to unrecognized net actuarial losses.

The associated amounts in net regulatory assets and accumulated other comprehensive income at December 31, 2010 that are expected to be amortized to net benefit cost in 2011 are as follows (in millions):

	Net regulatory assets				Accumulated other comprehensive income				Total
	Pension benefits		Health care and other benefits		Pension benefits		Health care and other benefits		Pension benefits		Health care and other benefits
Net actuarial loss	$	9.2	$	5.7	$	.5	$	.3	$	9.7	$	6.0
Net prior service cost		.4		.1		-		-		.4		.1
	$	9.6	$	5.8	$	.5	$	. 3	$	10.1	$	6.1

The accumulated benefit obligation for pension benefits, a measure which excludes the effect of salary and wage increases, was $279.8 million and $269.1 million at December 31, 2010 and 2009, respectively.

About one-fourth of the net benefit cost or credit related to these plans has been capitalized as a cost of constructing gas distribution facilities and the remainder is included in gas distribution operating and maintenance expense, net of amounts charged to affiliates.  Net benefit cost (credit) included the following components (in millions):

	Pension benefits									Health care and other benefits
	2010			2009			2008			2010		2009			2008
Service cost	$	9.8		$	8.6		$	8.6		$	2.3	$	2.2		$	2.2
Interest cost		16.0			16.5			15.9			11.8		12.1			12.0
Expected return on plan assets		(29.1	)		(25.2	)		(39.9	)		-		-			-
Recognized net actuarial loss		11.9			15.3			-			4.1		4.6			4.6
Amortization of prior service cost		.4			.4			.3			.1		(.1	)		(.1	)
Net benefit cost (credit)	$	9.0		$	15.6		$	(15.1	)	$	18.3	$	18.8		$	18.7

Assumptions used to determine benefit obligations included the following:

	Pension benefits						Health care and other benefits
	2010			2009			2010			2009
Discount rate		5.40	%		5.45	%		5.20	%		5.75	%
Rate of compensation increase		3.75			3.75			3.75			3.75
Pension band increase		2.00			2.00			-			-

The discount rates for each plan were determined by performing a cash flow matching study using the Citigroup Pension Discount Curve.  The Citigroup Pension Discount Curve is constructed from a Treasury yield curve and adjusted by adding a corporate bond spread.  The corporate bond spread is developed from a large pool of high quality corporate bonds and mitigates the risks associated with selecting individual corporate bonds whose values may not be representative of the broader market.

Assumptions used to determine net benefit cost for the years ended December 31 included the following:

	Pension benefits									Health care and other benefits
	2010			2009			2008			2010			2009			2008
Discount rate		5.45	%		6.35	%		6.25	%		5.75	%		6.00	%		6.25	%
Expected return on assets		8.25			8.50			8.50			-			-			-
Rate of compensation increase		3.75			3.75			3.75			3.75			3.75			3.75
Pension band increase		2.00			3.00			3.00			-			-			-

Nicor Gas establishes its expected long-term return on asset assumption by considering historical and projected returns for each investment asset category, asset allocations and the effects of active plan management.  Projected returns are calculated with the assistance of independent firms via probability-based models.  The company has elected to apply this assumption to the fair value of plan assets, rather than to a rolling-average fair value, in calculating the expected return on plan assets component of net benefit cost.

Other assumptions used to determine the health care benefit obligation were as follows:

	2010			2009
Initial health care cost trend rate		8.0	%		8.0	%
Ultimate rate to which the cost trend rate is assumed to decline		5.0	%		5.0	%
Years to reach ultimate rate		6			6

Other assumptions used to determine the health care benefit cost for the years ended December 31 were as follows:

	2010			2009			2008
Initial health care cost trend rate		8.0	%		8.5	%		9.0	%
Ultimate rate to which the cost trend rate is assumed to decline		5.0	%		5.0	%		5.0	%
Years to reach ultimate rate		6			7			6

Assumed health care cost trend rates can have a significant effect on the amounts reported for the health care plans.  A one-percentage-point change in the assumed health care cost trend rates would have the following effects (in millions):

	Increase (decrease)			Effect on net benefit cost			Effect on benefit obligation
Health care cost trend rate		1.0	%	$	1.0		$	20.7
		(1.0	%)		(.9	)		(17.6	)

The Medicare Prescription Drug, Improvement and Modernization Act of 2003 continues to provide a prescription drug benefit as well as a potential federal subsidy to sponsors of certain retiree health care benefit plans whose prescription drug benefits are actuarially equivalent to the Medicare Part D benefit.  Nicor Gas has determined that the prescription drug benefits of its plan are actuarially equivalent and accordingly has reflected the effects of the subsidy in its determination of the benefit obligation and annual net benefit cost.

The Health Care Act contains provisions that may impact Nicor Gas’ obligation for retiree health care benefits.  The company does not currently believe these provisions will materially increase its postretirement benefit obligation, but will continue to evaluate the impact of future regulations and interpretations.

The company’s investment objective relating to pension plan assets is to provide a total investment return which will allow the pension plan to meet its remaining benefit obligations.  The company’s investment strategy is to diversify its investments among asset classes in order to reduce risk.  Investment performance is measured against a targeted rate of return which reflects the asset allocation of the plan assets and an appropriate published index return for each asset class.  The company will rebalance the investment portfolio periodically if the actual asset allocation is significantly out of tolerance from the target allocation.

The following table sets forth the company’s current asset allocation target and actual percentage of plan assets by major asset category as of December 31:

	Target			Percentage of plan assets
Asset category	allocation			2010			2009
Equity securities		60	%		62	%		61	%
Fixed income securities		40			38			39
		100	%		100	%		100	%

Equity securities are comprised of collective trusts which invest in domestic and international equity investments.  Domestic equity securities are diversified across the small, mid and large cap asset classes.  International equity securities are diversified across countries and capitalization size in order to maintain a broad market representation of non-U.S. markets.

Fixed income securities are diversified across a broad range of investment grade corporate bonds and other fixed income securities.  Other fixed income securities are primarily comprised of government issued bonds and cash and cash equivalents.  The fixed income portfolio is targeted to maintain an average credit quality rating of at least single-A and a weighted duration that approximates the duration of the expected benefit obligations.

The table below categorizes the fair value of pension plan assets (in millions) based upon the valuation inputs described in Note 7 – Fair Value Measurements.  There were no fair values determined using unobservable inputs (Level 3) at December 31, 2010 and 2009.

	Quoted prices in active markets		Significant observable inputs
	(Level 1)		(Level 2)		Total
December 31, 2010
Equity securities
Domestic	$	-	$	162.1	$	162.1
International		-		79.5		79.5
Fixed income securities
Debt securities		-		121.7		121.7
Other		3.2		23.9		27.1
	$	3.2	$	387.2	$	390.4
December 31, 2009
Equity securities
Domestic	$	-	$	149.6	$	149.6
International		-		72.9		72.9
Fixed income securities
Debt securities		-		110.7		110.7
Other		6.1		24.2		30.3
	$	6.1	$	357.4	$	363.5

The company does not expect to contribute to its pension plan in 2011 but does expect to contribute about $14.3 million (before Medicare subsidies) to its other postretirement benefit plan in 2011.  The following table sets forth the gross benefit payments from the plans expected over the next 10 years (in millions):

Twelve months ending December 31	Pension benefits		Health care and other benefits		Expected Medicare subsidy
2011	$	27.4	$	14.3	$	(1.6	)
2012		25.3		15.1		(1.7	)
2013		25.3		16.0		(1.8	)
2014		28.5		16.7		(1.9	)
2015		29.7		17.5		(2.0	)
2016-2020		180.2		98.1		(10.7	)

Nicor also has a separate unfunded supplemental retirement plan and provides unfunded postretirement health care and life insurance benefits to employees of discontinued businesses.  These plans are noncontributory with defined benefits.  Net plan expenses were $0.8 million, $0.3 million and $0.3 million in 2010, 2009 and 2008, respectively.  The projected benefit obligation associated with these plans was $5.5 million and $5.2 million at December 31, 2010 and 2009, respectively.

The company also sponsors defined contribution plans covering substantially all employees.  These plans provide for employer matching contributions.  The total cost of these plans was $8.2 million, $7.8 million and $7.6 million in 2010, 2009 and 2008, respectively.

11. STOCK-BASED COMPENSATION

Nicor has a long-term incentive compensation plan that permits the granting of restricted stock units and  performance units to key executives and managerial employees, as well as a stock deferral plan, an employee stock purchase plan and directors’ stock-based compensation plans.

At December 31, 2010, there was $3.5 million of total unrecognized compensation cost related to all nonvested share-based compensation arrangements.  That cost is expected to be recognized over a weighted-average period of approximately two years.  The company recognized compensation cost and related tax effects for all share-based compensation arrangements for the years ended December 31 as follows (in millions):

	2010		2009		2008
Operating and maintenance expense	$	8.6	$	5.2	$	2.9
Income tax benefits		3.4		2.1		1.2

Cash flows related to stock options for the years ended December 31 were as follows (in millions):

	2010		2009		2008
Proceeds from the exercise of stock options	$	9.8	$	.3	$	1.7
Associated income tax benefits realized		.8		-		.1

The difference between the proceeds from the exercise of stock options and the par value of the stock is recorded within Paid-in capital on the Consolidated Balance Sheets.

Restricted stock units.  Restricted stock units represent shares of common stock that generally vest based on continued employment at the end of a four-year period.  Vesting can be accelerated due to certain events such as retirement eligibility, change in control, death or disability.  The fair value of restricted stock units is determined using the company’s closing stock price on the grant date.  Compensation cost, measured using the grant date fair value adjusted for a historical forfeiture rate, is recognized over the requisite service period.

A summary of the status of the company’s restricted stock units and changes during the year ended December 31, 2010 is as follows:

				Weighted-
	Number			average grant-
	of shares			date fair value
Nonvested at January 1, 2010		205,195		$	37.86
Granted		57,280			42.64
Vested		(115,680	)		38.81
Forfeited		(3,620	)		39.44
Nonvested at December 31, 2010		143,175			38.97

Performance units.  Performance units represent cash payments which are paid out based on a measure of relative total shareholder return.  Performance units are earned at the end of a three-year performance period depending on Nicor’s three-year total shareholder return relative to the performance of other companies in a predetermined utility industry peer group.  Units vest over approximately three years and can be accelerated due to certain events such as retirement, change in control, death or disability.  The liability for the performance units is adjusted to fair value each quarter-end, and compensation cost is ultimately measured as the settlement date fair value (or cash payment).  Interim fair values are estimated by discounting probability-weighted expected cash flows.  The company paid $1.0 million, $1.0 million and $0.4 million during the years ended December 31, 2010, 2009 and 2008, respectively, to settle performance unit obligations.

Other.  Among the company’sother stock-based compensation plans are liability awards that are re-measured to fair value at the end of each period.  Such re-measurements can cause fluctuations in the amount of recognized compensation expense.  The company’s other stock-based compensation plans had an immaterial impact on net income for the years ended December 31, 2010, 2009 and 2008.

12. COMMON EQUITY

Nicor had 160,000,000 shares of common stock authorized, of which 2,972,852 shares and 3,600,378 shares were reserved for share-based awards and other purposes at December 31, 2010 and 2009, respectively.

Changes in common shares.  Changes in common shares outstanding are below (in millions):

	2010		2009		2008
Beginning of year		45.2		45.2		45.1
Issued		.3		-		.1
End of year		45.5		45.2		45.2

Shares issued during 2010 and 2008 were due primarily to stock option exercises.  There were no repurchases of common stock in 2010, 2009 and 2008 under the common stock repurchase program announced in 2001.

Dividend restrictions.  Pursuant to the Merger Agreement, Nicor is restricted from paying a dividend in excess of $0.465 per share in any quarter.  Other than the Merger Agreement, Nicor has no contractual or regulatory restrictions on the payment of dividends.  Nicor Gas is restricted by regulation in the amount it can dividend or loan to affiliates.  Dividends are allowed only to the extent of Nicor Gas’ retained earnings balance.

Accumulated other comprehensive loss.  Accumulated other comprehensive loss is comprised of the following at December 31 (in millions):

	2010		2009
Cash flow hedges	$	5.9	$	4.0
Postretirement benefit plans		6.5		6.5
Foreign currency translation adjustment		.8		.5
	$	13.2	$	11.0

13. PREFERRED STOCK

Voting.  Each share of preferred stock, regardless of class, entitles the holder to one vote as to matters considered at the company’s annual meeting of shareholders.

Preferred stock.  Nicor had 1,600,000 cumulative, $50 par value, preferred shares and 20,000,000 cumulative, no par value, preference shares authorized at December 31, 2010.  In 2010 and 2009, Nicor redeemed 1,431 shares and 10,150 shares, respectively, of the 4.48 percent Mandatorily Redeemable Preferred Stock, $50 par value, at an average redemption price of $51.06 and $46.43 per share, respectively, plus accrued unpaid dividends.  As a result, there were no shares of the 4.48 percent Mandatorily Redeemable Preferred Stock outstanding at December 31, 2010.

In January 2011, Nicor redeemed 247 shares of the 5.00 percent Convertible Preferred Stock, $50 par value, at an average redemption price of $50.13 per share.  Nicor had no shares of preferred stock outstanding following such redemption.

14. BUSINESS SEGMENT AND GEOGRAPHIC INFORMATION

Nicor is a holding company that operates in three separately managed reportable business segments: gas distribution, shipping and wholesale marketing.  The gas distribution segment, Nicor’s principal business, serves 2.2 million customers in a service territory that encompasses most of the northern third of Illinois, excluding the city of Chicago.  The shipping segment transports containerized freight between Florida, the eastern coast of Canada, the Bahamas and the Caribbean region.  The shipping segment also includes amounts related to cargo insurance coverage sold to its customers and other third parties.  The wholesale marketing segment engages in wholesale marketing of natural gas supply services primarily in the Midwest, administers the Chicago Hub for Nicor Gas, serves commercial and industrial customers in the northern Illinois market area, and manages Nicor Solutions’ and Nicor Advanced Energy’s product risks, including the purchases of natural gas supplies.

Nicor’s other businesses operate primarily in northern Illinois and include businesses that market retail energy-related products and services to residential and small business customers through Nicor Services, Nicor Solutions and Nicor Advanced Energy.  They also include a 50-percent-owned natural gas pipeline (Horizon Pipeline) with Natural Gas Pipeline Company of America, natural gas storage facility developments (Central Valley and Sawgrass Storage), and a previously owned engineering and consulting firm (EN Engineering), which was sold on March 31, 2009.  Financial information about these other business segments is combined under the heading “Other” on the table that follows.  Intersegment revenues on the table are presented prior to elimination.

Gas distribution revenues are comprised principally of natural gas sales bundled with delivery, delivery-only (transportation) services and revenue taxes, as follows (in millions):

	2010		2009		2008
Bundled sales	$	1,839.7	$	1,766.5	$	2,789.5
Transportation		163.4		169.7		187.1
Revenue taxes		148.1		150.3		174.0
Other		53.2		54.3		56.3
	$	2,204.4	$	2,140.8	$	3,206.9

The shipping segment’s vessels are under foreign registry, and its containers are considered instruments of international trade.  Although the majority of its long-lived assets are foreign owned and its revenues are derived from foreign operations, the functional currency is generally the U.S. dollar.

Nicor management evaluates segment performance based on operating income.  Intercompany billing for goods and services exchanged between segments is based generally upon direct and indirect costs incurred, but in some instances is based upon the prevailing tariff or market-based price of the provider.

Intersegment revenues include gas distribution revenues related to customers entering into utility-bill management contracts with Nicor Solutions and wholesale marketing revenues from the sale of natural gas to Nicor Advanced Energy.  Under the utility-bill management contracts, Nicor Solutions bills a fixed amount to a customer, regardless of changes in natural gas prices or weather, and in exchange pays the customer’s utility bills from Nicor Gas.  Nicor Advanced Energy provides natural gas and related services on an unregulated basis to residential and small commercial customers and purchases most of its natural gas supplies from Nicor Enerchange.  Intersegment revenues are eliminated in the consolidated financial statements.

Operating income in the Corporate and eliminations column includes the following items:

·   Merger-related costs of $4.6 million in 2010.

·   Costs associated with Nicor’s other energy ventures’ utility-bill management contracts attributable to colder than normal weather in 2010, 2009 and 2008 were $1.3 million, $3.7 million and $6.2 million, respectively.  The weather impact of these contracts generally serves to partially offset the gas distribution segment’s weather risk.  This cost is recorded primarily at the corporate level as a result of an agreement between the parent company and certain of its subsidiaries.

·   Legal cost recoveries of $3.1 million in 2008.  The total recovery (from a counterparty with whom Nicor previously did business during the PBR timeframe) was $5.0 million, of which $3.1 million was allocated to corporate and $1.9 million was allocated to the gas distribution segment (recorded as a reduction to operating and maintenance expense).

Financial data by reportable segment is as follows (in millions):

Nicor Inc.
Business Segments - Financial Data
						Other Energy Ventures				Corporate
	Gas					Wholesale				and
	distribution			Shipping		marketing		Other		eliminations			Consolidated
Operating revenues
2010
External customers	$	2,163.4		$	345.0	$	24.1	$	177.3	$	-		$	2,709.8
Intersegment		41.0			-		14.9		2.1		(58.0	)		-
		2,204.4			345.0		39.0		179.4		(58.0	)		2,709.8
2009
External customers		2,097.7			352.6		15.2		186.6		-			2,652.1
Intersegment		43.1			-		35.3		1.9		(80.3	)		-
		2,140.8			352.6		50.5		188.5		(80.3	)		2,652.1
2008
External customers		3,135.8			425.2		24.1		191.5		-			3,776.6
Intersegment		71.1			-		12.5		2.2		(85.8	)		-
		3,206.9			425.2		36.6		193.7		(85.8	)		3,776.6
Operating income (loss)
2010	$	194.7		$	14.4	$	10.6	$	23.8	$	(7.8	)	$	235.7
2009		149.7			29.2		24.1		21.4		(4.1	)		220.3
2008		124.4			39.3		5.8		19.5		(4.0	)		185.0
Equity investment income
(loss), net
2010	$	-		$	-	$	-	$	.9	$	7.3		$	8.2
2009		-			-		-		12.0		3.8			15.8
2008		(.1	)		-		-		4.7		4.8			9.4
Interest income
2010	$	.8		$	.3	$	.1	$	.1	$	(.2	)	$	1.1
2009		1.5			.5		-		.3		-			2.3
2008		5.5			1.8		.2		.9		.4			8.8
Interest expense, net of
amounts capitalized
2010	$	36.6		$	-	$	-	$	.1	$	1.4		$	38.1
2009		36.9			-		.2		.2		1.4			38.7
2008		39.8			-		1.2		.1		(1.0	)		40.1
Income tax expense
(benefit), net
2010	$	59.3		$	4.0	$	4.2	$	9.8	$	(7.6	)	$	69.7
2009		40.3			3.9		9.4		13.3		(1.8	)		65.1
2008		31.0			6.2		1.9		9.7		(4.5	)		44.3
Property, plant and
equipment, net
2010	$	2,854.5		$	128.3	$	1.3	$	38.9	$	(.2	)	$	3,022.8
2009		2,794.8			128.0		1.1		15.5		(.3	)		2,939.1
2008		2,723.5			121.2		.5		13.7		(.3	)		2,858.6
Capital expenditures
2010	$	198.3		$	15.0	$	.6	$	27.5	$	-		$	241.4
2009		203.2			21.9		.3		5.3		-			230.7
2008		229.4			16.3		.2		3.8		.2			249.9
Depreciation
2010	$	183.6		$	14.8	$	.3	$	4.1	$	(.1	)	$	202.7
2009		177.4			14.5		.3		3.7		(.1	)		195.8
2008		170.9			15.4		.2		3.4		(.1	)		189.8

15. EQUITY INVESTMENT INCOME, NET

Equity investment income, net included the following (in millions):

	2010			2009			2008
Triton	$	7.8		$	5.3		$	6.4
Horizon Pipeline		1.5			1.5			1.5
EN Engineering		-			10.5			3.2
Other		(1.1	)		(1.5	)		(1.7	)
	$	8.2		$	15.8		$	9.4

On March 31, 2009, the company sold its 50-percent interest in EN Engineering.  The company’s share of the sale price was $16.0 million, with an additional $1.5 million which is contingent on EN Engineering’s 2010 performance and is due in 2011.  After closing costs and other adjustments, Nicor received cash of $13.0 million and recorded a gain on the sale of $10.1 million.

In 2010, 2009 and 2008, Nicor received dividends from equity investees of $18.5 million, $10.0 million and $16.0 million, respectively.

16. RELATED PARTY TRANSACTIONS

Horizon Pipeline charged Nicor Gas $10.4 million, $10.3 million and $10.3 million, respectively, for the years ended December 31, 2010, 2009 and 2008 for natural gas transportation under rates that have been accepted by the FERC.

Nicor sold its ownership in EN Engineering on March 31, 2009.  Prior to the sale, EN Engineering charged Nicor Gas $1.7 million and $7.2 million for engineering and corrosion services rendered for 2009 and 2008, respectively.  A majority of the work performed by EN Engineering was capital in nature, and is classified as property, plant and equipment on the Consolidated Balance Sheets.

In addition, certain related parties may acquire regulated utility services at rates approved by the ICC.

17. COMMITMENTS

At December 31, 2010, Nicor had purchase commitments with payments due as follows (in millions):

	Unconditional purchase obligations		Operating leases
2011	$	45.6	$	17.5
2012		6.3		10.1
2013		1.8		4.6
2014		1.5		3.0
2015		1.6		2.3
After 2015		1.6		11.5
	$	58.4	$	49.0

Unconditional purchase obligations consist of a natural gas transportation agreement and property, plant and equipment purchases.  Operating leases are primarily for vessels, containers and equipment in the shipping business, office space and equipment in the gas distribution business and office space for the company’s other energy ventures.

Tropical Shipping has certain equipment operating leases which include escalation clauses for adjusting rent to reflect changes in price indices, various renewal options and options to purchase leased equipment.  Rental expense under operating leases was $25.7 million, $31.4 million and $41.7 million in 2010, 2009 and 2008, respectively.

The Merger Agreement contains termination rights for both Nicor and AGL Resources and provides that if Nicor terminates the Merger Agreement under specified circumstances, Nicor may be required to pay a termination fee of $67 million.

18. REGULATORY PROCEEDINGS

Rate proceeding.  On March 25, 2009, the ICC issued an order approving an increase in base revenues of approximately $69 million, a rate of return on rate base of 7.58 percent and a rate of return on equity of 10.17 percent.  The order also approved an energy efficiency rider.  Nicor Gas placed the rates approved in the March 25, 2009 order into effect on April 3, 2009.

On April 24, 2009, Nicor Gas filed a request for rehearing with the ICC concerning the capital structure contained in the ICC’s rate order contending the company’s return on rate base should be higher.  On October 7, 2009, the ICC issued its decision on rehearing in which it increased the annual base revenues approved for Nicor Gas in the March 25, 2009 order by approximately $11 million, increasing the rate of return on rate base to 8.09 percent.  Nicor Gas placed the rates approved in the rehearing decision into effect on a prospective basis on October 15, 2009.  Therefore, the total annual base revenue increase authorized in the rate case originally filed by the company in April 2008 is approximately $80 million.

Bad debt rider.  In September 2009, Nicor Gas filed for approval of a bad debt rider with the ICC under an Illinois state law which took effect in July 2009.  On February 2, 2010, the ICC issued an order approving the company’s proposed bad debt rider.  This rider provides for recovery from customers of the amount over the benchmark for bad debt expense established in the company’s rate cases.  It also provides for refunds to customers if bad debt expense is below such benchmarks.

As a result of the February 2010 order, Nicor Gas recorded in income a net recovery related to 2008 and 2009 of $31.7 million in the first quarter of 2010, all of which has been collected.  The benchmark, against which 2010 actual bad debt experience is compared, is approximately $63 million.  The company’s actual 2010 bad debt experience was $35.7 million, resulting in a refund to customers of $27.3 million which will be refunded over a 12-month period beginning June 2011.

19. GUARANTEES AND INDEMNITIES

Nicor and certain subsidiaries enter into various financial and performance guarantees and indemnities providing assurance to third parties.

Financial guarantees.  TEL has an obligation to restore to zero any deficit in its equity account for income tax purposes in the unlikely event that Triton is liquidated and a deficit balance remains.  This obligation continues for the life of the Triton partnerships and any payment is effectively limited to the assets of TEL, which were approximately $2 million at December 31, 2010.  Nicor believes the likelihood of any such payment by TEL is remote.  No liability has been recorded for this obligation.

Performance guarantees. Nicor Services markets product warranty contracts that provide for the repair of heating, ventilation and air conditioning equipment, natural gas lines and other appliances within homes.  Revenues from these product warranty contracts are recognized ratably over the coverage period, and related repair costs are charged to expense as incurred.  Repair expenses of $10.6 million, $7.9 million and $7.1 million were incurred in 2010, 2009 and 2008, respectively.

Indemnities.  In certain instances, Nicor has undertaken to indemnify current property owners and others against costs associated with the effects and/or remediation of contaminated sites for which the company may be responsible under applicable federal or state environmental laws, generally with no limitation as to the amount.  These indemnifications relate primarily to ongoing coal tar cleanup, as discussed in Note 20 – Contingencies – Manufactured Gas Plant Sites.  Nicor believes that the likelihood of payment under its other environmental indemnifications is remote.  No liability has been recorded for such indemnifications.

Nicor has also indemnified, to the fullest extent permitted under the laws of the State of Illinois and any other applicable laws, its present and former directors, officers and employees against expenses they may incur in connection with litigation they are a party to by reason of their association with the company.  There is generally no limitation as to the amount.  During 2007, the SEC filed a civil injunctive action against three former officers of Nicor relating to the PBR plan.  Defense costs that are being incurred by these former officers in connection with the SEC action currently are being tendered to, and paid by, the company’s insurer.  In July 2010, one of these former officers settled the SEC’s action against him and was indemnified by Nicor.  While the company does not expect to incur significant costs relating to the indemnification of present and former directors, officers and employees after taking into account available insurance, it is not possible to estimate the maximum future potential payments.

20. CONTINGENCIES

The following contingencies of Nicor are in various stages of investigation or disposition.  Although in some cases the company is unable to estimate the amount of loss reasonably possible in addition to any amounts already recognized, it is possible that the resolution of these contingencies, either individually or in aggregate, will require the company to take charges against, or will result in reductions in, future earnings.  It is the opinion of management that the resolution of these contingencies, either individually or in aggregate, could be material to earnings in a particular period but is not expected to have a material adverse impact on Nicor’s liquidity or financial condition.

PBR Plan.  Nicor Gas’ PBR plan for natural gas costs went into effect in 2000 and was terminated by the company effective January 1, 2003.  Under the PBR plan, Nicor Gas’ total gas supply costs were compared to a market-sensitive benchmark.  Savings and losses relative to the benchmark were determined annually and shared equally with sales customers.  The PBR plan is currently under ICC review.  There are allegations that the company acted improperly in connection with the PBR plan, and the ICC and others are reviewing these allegations.  On June 27, 2002, the Citizens Utility Board (“CUB”) filed a motion to reopen the record in the ICC’s proceedings to review the PBR plan (the “ICC Proceedings”).  As a result of the motion to reopen, Nicor Gas, the staff of the ICC and CUB entered into a stipulation providing for additional discovery.  The Illinois Attorney General’s Office (“IAGO”) has also intervened in this matter.  In addition, the IAGO issued Civil Investigation Demands (“CIDs”) to CUB and the ICC staff.  The CIDs ordered that CUB and the ICC staff produce all documents relating to any claims that Nicor Gas may have presented, or caused to be presented, false information related to its PBR plan.  The company has committed to cooperate fully in the reviews of the PBR plan.

In response to these allegations, on July 18, 2002, the Nicor Board of Directors appointed a special committee of independent, non-management directors to conduct an inquiry into issues surrounding natural gas purchases, sales, transportation, storage and such other matters as may come to the attention of the special committee in the course of its investigation.  The special committee presented the report of its counsel (“Report”) to Nicor’s Board of Directors on October 28, 2002.

In response, the Nicor Board of Directors directed the company’s management to, among other things, make appropriate adjustments to account for, and fully address, the adverse consequences to ratepayers of the items noted in the Report, and conduct a detailed study of the adequacy of internal accounting and regulatory controls.  The adjustments were made in prior years’ financial statements resulting in a $24.8 million liability.  Included in such $24.8 million liability is a $4.1 million loss contingency.  A $1.8 million adjustment to the previously recorded liability, which is discussed below, was made in 2004 increasing the recorded liability to $26.6 million.  Nicor Gas estimates that there is $26.9 million due to the company from the 2002 PBR plan year, which has not been recognized in the financial statements due to uncertainties surrounding the PBR plan.  In addition, interest due to the company on certain components of these amounts has not been recognized in the financial statements due to the same uncertainties.  By the end of 2003, the company completed steps to correct the weaknesses and deficiencies identified in the detailed study of the adequacy of internal controls.

Pursuant to the agreement of all parties, including the company, the ICC re-opened the 1999 and 2000 purchased gas adjustment filings for review of certain transactions related to the PBR plan and consolidated the reviews of the 1999-2002 purchased gas adjustment filings with the PBR plan review.

On February 5, 2003, CUB filed a motion for $27 million in sanctions against the company in the ICC Proceedings.  In that motion, CUB alleged that Nicor Gas’ responses to certain CUB data requests were false.  Also on February 5, 2003, CUB stated in a press release that, in addition to $27 million in sanctions, it would seek additional refunds to consumers.  On March 5, 2003, the ICC staff filed a response brief in support of CUB’s motion for sanctions.  On May 1, 2003, the ALJs assigned to the proceeding issued a ruling denying CUB’s motion for sanctions.  CUB has filed an appeal of the motion for sanctions with the ICC, and the ICC has indicated that it will not rule on the appeal until the final disposition of the ICC Proceedings.  It is not possible to determine how the ICC will resolve the claims of CUB or other parties to the ICC Proceedings.

In 2004, the company became aware of additional information relating to the activities of individuals affecting the PBR plan for the period from 1999 through 2002, including information consisting of third party documents and recordings of telephone conversations from Entergy-Koch Trading, LP (“EKT”), a natural gas, storage and transportation trader and consultant with whom Nicor did business under the PBR plan.  Review of additional information completed in 2004 resulted in the $1.8 million adjustment to the previously recorded liability referenced above.

The evidentiary hearings on this matter were stayed in 2004 in order to permit the parties to undertake additional third party discovery from EKT.  In December 2006, the additional third party discovery from EKT was obtained and the ALJs issued a scheduling order that provided for Nicor Gas to submit direct testimony by April 13, 2007.  In its direct testimony, Nicor Gas seeks a reimbursement of approximately $6 million, which includes interest due to the company, as noted above, of $1.6 million, as of March 31, 2007.  In September 2009, the staff of the ICC, IAGO and CUB submitted direct testimony to the ICC requesting refunds of $109 million, $255 million and $286 million, respectively.  No date has been set for evidentiary hearings on this matter.

Nicor is unable to predict the outcome of the ICC’s review or the company’s potential exposure thereunder.  Because the PBR plan and historical gas costs are still under ICC review, the final outcome could be materially different than the amounts reflected in the company’s financial statements as of December 31, 2010.

Litigation relating to proposed merger.  Nicor, its board of directors, AGL Resources and one or both of AGL Resources’ acquisition subsidiaries and, in one instance, Nicor’s Executive Vice President and Chief Financial Officer have been named as defendants in five putative class action lawsuits brought by purported Nicor shareholders challenging Nicor’s proposed merger with AGL Resources. The first shareholder action was filed on December 7, 2010 in the Eighteenth Circuit Court of DuPage County, Illinois, County Department, Chancery Division (Joseph Pirolli v. Nicor Inc., et al.).  The other four actions were filed between December 10, 2010 and December 17, 2010 in the Circuit Court of Cook County, Illinois, County Department, Chancery Division (Maxine Phillips v. Nicor Inc., et al., filed December 10, 2010; Plumbers Local #65 Pension Fund v. Nicor Inc., et al., filed December 13, 2010; Gus Monahu v. Nicor Inc., et al., filed December 17, 2010; and Roberto R. Vela v. Russ M. Strobel, et al., filed December 17, 2010).

The shareholder actions variously allege, among other things, that the Nicor Board breached its fiduciary duties to Nicor and its shareholders by (i) approving the sale of Nicor to AGL Resources at an inadequate purchase price (and thus failing to maximize value to Nicor shareholders); (ii) conducting an inadequate sale process by agreeing to preclusive deal protection provisions in the Merger Agreement; and (iii) failing to disclose material information regarding the proposed merger to Nicor shareholders.  The complaints also allege that AGL Resources, Nicor and the acquisition subsidiaries aided and abetted these alleged breaches of fiduciary duty. The shareholder actions seek, among other things, declaratory and injunctive relief, including orders enjoining the defendants from consummating the proposed merger and, in certain instances, damages.

On January 10, 2011, the four actions filed in the Circuit Court of Cook County, Illinois, County Department, Chancery Division were consolidated.  Nicor believes the claims asserted in each lawsuit to be without merit and intends to vigorously defend against them.  The final disposition of these shareholder litigation-related matters is not expected to have a material adverse impact on the company’s liquidity or financial condition.

Mercury.  Nicor Gas has incurred, and expects to continue to incur, costs related to its historical use of mercury in various kinds of company equipment.

As of December 31, 2010, Nicor Gas had remaining an estimated liability of $0.6 million related to inspection, cleanup and legal defense costs.  This represents management’s best estimate of future costs based on an evaluation of currently available information.  Actual costs may vary from this estimate.  Nicor Gas remains a defendant in several private lawsuits that were filed on August 29, 2000, all in the Circuit Court of Cook County, Illinois, seeking a variety of unquantified damages (including bodily injury and property damages) allegedly caused by mercury spillage resulting from the removal of mercury-containing regulators.  Potential liabilities relating to these claims have been assumed by a contractor’s insurer subject to certain limitations.

The final disposition of these mercury-related matters is not expected to have a material adverse impact on the company’s liquidity or financial condition.

Manufactured Gas Plant Sites.  Manufactured gas plants were used in the 1800s and early to mid 1900s to produce manufactured gas from coal, creating a coal tar byproduct.  Current environmental laws may require the cleanup of coal tar at certain former manufactured gas plant sites.

Nicor Gas has identified properties for which it may have some responsibility.  Most of these properties are not presently owned by the company.  Nicor Gas and Commonwealth Edison Company (“ComEd”) are parties to an agreement to cooperate in cleaning up residue at many of these properties.  The agreement allocates to Nicor Gas 51.73 percent of cleanup costs for 24 sites, no portion of the cleanup costs for 14 other sites and 50 percent of general remediation program costs that do not relate exclusively to particular sites.  Information regarding preliminary site reviews has been presented to the Illinois Environmental Protection Agency for certain properties.  More detailed investigations and remedial activities are complete, in progress or planned at many of these sites.  The results of the detailed site-by-site investigations will determine the extent additional remediation is necessary and provide a basis for estimating additional future costs.  As of December 31, 2010, the company had recorded a liability in connection with these matters of $28.7 million.  In accordance with ICC authorization, the company has been recovering, and expects to continue to recover, these costs from its customers, subject to annual prudence reviews.

In April 2002, Nicor Gas was named as a defendant, together with ComEd, in a lawsuit brought by the Metropolitan Water Reclamation District of Greater Chicago (the “MWRDGC”) under the Federal Comprehensive Environmental Response, Compensation and Liability Act seeking recovery of past and future remediation costs and a declaration of the level of appropriate cleanup for a former manufactured gas plant site in Skokie, Illinois now owned by the MWRDGC.  In January 2003, the suit was amended to include a claim under the Federal Resource Conservation and Recovery Act.  The suit was filed in the United States District Court for the Northern District of Illinois.  Management cannot predict the outcome of this litigation or the company’s potential exposure thereto, if any, and has not recorded a liability associated with this contingency.

Since costs and recoveries relating to the cleanup of manufactured gas plant sites are passed directly through to customers in accordance with ICC regulations, subject to an annual ICC prudence review, the final disposition of manufactured gas plant matters is not expected to have a material impact on the company’s financial condition or results of operations.

Municipal Tax Matters.  Many municipalities in Nicor Gas’ service territory have enacted ordinances that impose taxes on gas sales to customers within municipal boundaries.  Most of these municipal taxes are imposed on Nicor Gas based on revenues generated by Nicor Gas within the municipality.  Other municipal taxes are imposed on natural gas consumers within the municipality but are collected from consumers and remitted to the municipality by Nicor Gas.  A number of municipalities have instituted audits of Nicor Gas’ tax remittances.  In May 2007, five of those municipalities filed an action against Nicor Gas in state court in DuPage County, Illinois relating to these tax audits.  Following a dismissal of this action without prejudice by the trial court, the municipalities filed an amended complaint.  The amended complaint seeks, among other things, compensation for alleged unpaid taxes.  Nicor Gas is contesting the claims in the amended complaint.  In December 2007, 25 additional municipalities, all represented by the same audit firm involved in the lawsuit, issued assessments to Nicor Gas claiming that it failed to provide information requested by the audit firm and owed the municipalities back taxes.  Nicor Gas believes the assessments are improper and has challenged them.  While the company is unable to predict the outcome of these matters or to reasonably estimate its potential exposure related thereto, if any, and has not recorded a liability associated with this contingency, the final disposition of these matters is not expected to have a material adverse impact on the company’s liquidity or financial condition.

Other.  In addition to the matters set forth above, the company is involved in legal or administrative proceedings before various courts and agencies with respect to general claims, taxes, environmental, gas cost prudence reviews and other matters.  Although unable to determine the ultimate outcome of these other contingencies, management believes that these amounts are appropriately reflected in the financial statements, including the recording of appropriate liabilities when reasonably estimable.

21. QUARTERLY RESULTS (UNAUDITED)

Quarterly results may be impacted by the variability in the results of the gas distribution business due to seasonal and other factors.  Summarized quarterly financial data is presented below (in millions, except per share data).

	Quarter ended
	Mar. 31		June 30		Sept. 30		Dec. 31
2010
Operating revenues	$	1,192.9	$	425.6	$	352.5	$	738.8
Operating income		96.0		43.4		30.4		65.9
Net income		60.5		24.2		13.6		40.1
Earnings per average share of common stock
Basic		1.33		.53		.30		.87
Diluted		1.33		.53		.30		.87
2009
Operating revenues	$	1,110.8	$	447.6	$	325.6	$	768.1
Operating income		59.9		39.5		29.8		91.1
Net income		43.8		22.9		13.6		55.2
Earnings per average share of common stock
Basic		.97		.50		.30		1.22
Diluted		.96		.50		.30		1.21

ITEM 15(a)(2) Financial Statement Schedules

Nicor Inc.

Schedule II

VALUATION AND QUALIFYING ACCOUNTS

(millions)

			Additions
	Balance at		Charged to			Charged to						Balance
	beginning		costs and			other						at end
Description	of period		expenses			accounts			Deductions			of period
2010
Allowance for doubtful accounts receivable	$	33.0	$	40.1	(d)	$	-		$	45.5	(a)	$	27.6
Accrued mercury-related costs		2.1		-			-			1.5	(b)		.6
Accrued manufactured gas plant environmental costs		23.8		-			17.5	(c)		12.6	(b)		28.7
2009
Allowance for doubtful accounts receivable	$	44.9	$	56.6		$	-		$	68.5	(a)	$	33.0
Accrued mercury-related costs		2.5		-			-			.4	(b)		2.1
Accrued manufactured gas plant environmental costs		21.4		-			11.2	(c)		8.8	(b)		23.8
2008
Allowance for doubtful accounts receivable	$	35.1	$	74.1		$	-		$	64.3	(a)	$	44.9
Accrued mercury-related costs		2.8		.6			-			.9	(b)		2.5
Accrued manufactured gas plant environmental costs		15.2		-			19.8	(c)		13.6	(b)		21.4

(a) Accounts receivable written off, net of recoveries.

(b) Expenditures, other adjustments.

(c) Accrual of estimated future remediation costs that are deferred as regulatory assets.

(d) Amount excludes refunds to / recoveries from customers attributable to the bad debt rider.

EX-99.3

Exhibit 99.3

Part I - FINANCIAL INFORMATION

Item 1.  Financial Statements

Nicor Inc.

Condensed Consolidated Statements of Income (Unaudited)

(millions, except per share data)

	Three months ended						Nine months ended
	September 30						September 30
	2011			2010			2011			2010
Operating revenues
Gas distribution (includes revenue taxes of $14.4, $14.0,
$120.7 and $111.8, respectively)	$	239.9		$	233.5		$	1,514.6		$	1,601.8
Shipping		78.4			83.9			239.1			253.4
Other energy ventures		35.8			41.2			147.3			157.2
Corporate and eliminations		(5.7	)		(6.1	)		(38.6	)		(41.4	)
Total operating revenues		348.4			352.5			1,862.4			1,971.0
Operating expenses
Gas distribution
Cost of gas		92.9			75.5			914.7			982.3
Operating and maintenance		60.0			74.2			210.0			217.1
Depreciation		47.1			45.9			141.3			137.8
Taxes, other than income taxes		18.6			18.3			133.5			124.4
Other		-			(1.3	)		-			(1.3	)
Shipping		82.1			80.3			244.3			246.1
Other energy ventures		34.1			34.1			131.7			134.3
Other corporate expenses and eliminations		(4.7	)		(4.9	)		(32.4	)		(39.5	)
Total operating expenses		330.1			322.1			1,743.1			1,801.2
Operating income		18.3			30.4			119.3			169.8
Interest expense, net of amounts capitalized		8.5			9.7			24.1			28.4
Equity investment income, net		4.3			1.5			12.0			5.1
Other income, net		.5			.5			1.3			1.9
Income before income taxes		14.6			22.7			108.5			148.4
Income tax expense, net of benefits		8.9			9.1			38.4			50.1
Net income	$	5.7		$	13.6		$	70.1		$	98.3
Average shares of common stock outstanding
Basic		45.9			45.7			45.9			45.6
Diluted		46.0			45.9			45.9			45.8
Earnings per average share of common stock
Basic	$	.12		$	.30		$	1.52		$	2.16
Diluted		.12			.30			1.52			2.15
Dividends declared per share of common stock	$	.465		$	.465		$	1.395		$	1.395
The accompanying notes are an integral part of these statements.

Nicor Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited)

(millions)

	Nine months ended
	September 30
	2011			2010
Operating activities
Net income	$	70.1		$	98.3
Adjustments to reconcile net income to net cash flow provided from
operating activities:
Depreciation		155.4			151.9
Deferred income tax expense (benefit)		2.0			(9.9	)
Changes in assets and liabilities:
Receivables, less allowances		241.1			256.4
Gas in storage		(76.3	)		(90.6	)
Deferred/accrued gas costs		(9.2	)		6.9
Derivative instruments		(9.1	)		6.6
Margin accounts - derivative instruments		33.5			(1.7	)
Other assets		(9.7	)		23.2
Accounts payable		(39.6	)		(68.1	)
Customer credit balances and deposits		(1.3	)		(10.5	)
Other liabilities		20.1			(6.3	)
Other items		(11.9	)		(8.4	)
Net cash flow provided from operating activities		365.1			347.8
Investing activities
Additions to property, plant & equipment		(190.5	)		(148.7	)
Purchases of held-to-maturity securities		-			(8.0	)
Net decrease in other short-term investments		20.0			10.8
Other investing activities		(1.5	)		(1.6	)
Net cash flow used for investing activities		(172.0	)		(147.5	)
Financing activities
Proceeds from issuing long-term debt		75.0			-
Disbursements to retire long-term debt		(75.0	)		-
Net repayments of commercial paper		(112.4	)		(120.7	)
Debt issuance costs		(1.5	)		(5.8	)
Dividends paid		(64.0	)		(63.8	)
Repurchases of common stock		(11.1	)		(.3	)
Proceeds from exercise of stock options		5.9			9.0
Other financing activities		.1			.7
Net cash flow used for financing activities		(183.0	)		(180.9	)
Net increase in cash and cash equivalents		10.1			19.4
Cash and cash equivalents, beginning of period		31.5			55.7
Cash and cash equivalents, end of period	$	41.6		$	75.1
The accompanying notes are an integral part of these statements.

Nicor Inc.

Condensed Consolidated Balance Sheets (Unaudited)

(millions)

	September 30			December 31			September 30
	2011			2010			2010
Assets
Current assets
Cash and cash equivalents	$	41.6		$	31.5		$	75.1
Short-term investments		52.8			70.6			66.8
Receivables, less allowances of $27.1, $27.6 and $37.7, respectively		231.5			472.4			235.7
Gas in storage		240.2			163.9			227.8
Derivative instruments		49.6			49.1			70.4
Margin accounts - derivative instruments		27.5			50.9			58.8
Other		144.8			115.2			148.8
Total current assets		788.0			953.6			883.4
Property, plant and equipment, at cost
Gas distribution		4,841.7			4,733.6			4,680.3
Shipping		323.7			333.6			332.2
Other		112.9			60.5			48.1
Property, plant and equipment, at cost		5,278.3			5,127.7			5,060.6
Less accumulated depreciation		2,172.6			2,104.9			2,081.1
Total property, plant and equipment, net		3,105.7			3,022.8			2,979.5
Long-term investments		134.6			134.2			133.9
Other assets		381.9			385.9			373.6
Total assets	$	4,410.2		$	4,496.5		$	4,370.4
Liabilities and Capitalization
Current liabilities
Long-term debt due within one year	$	-		$	-		$	75.0
Short-term debt		312.6			425.0			373.3
Accounts payable		305.8			335.5			285.8
Customer credit balances and deposits		109.3			110.6			131.2
Derivative instruments		80.3			82.9			115.9
Other		116.3			120.3			96.3
Total current liabilities		924.3			1,074.3			1,077.5
Deferred credits and other liabilities
Regulatory asset retirement liability		878.5			843.9			836.0
Deferred income taxes		437.1			423.4			416.2
Health care and other postretirement benefits		232.6			229.7			201.9
Asset retirement obligation		197.3			190.9			188.6
Other		140.2			132.0			148.0
Total deferred credits and other liabilities		1,885.7			1,819.9			1,790.7
Commitments and contingencies
Capitalization
Long-term obligations		498.5			498.4			423.4
Common equity
Common stock		113.9			113.9			113.8
Paid-in capital		67.5			69.1			67.0
Retained earnings		939.9			934.1			915.4
Accumulated other comprehensive loss		(19.6	)		(13.2	)		(17.4	)
Total common equity		1,101.7			1,103.9			1,078.8
Total capitalization		1,600.2			1,602.3			1,502.2
Total liabilities and capitalization	$	4,410.2		$	4,496.5		$	4,370.4
The accompanying notes are an integral part of these statements.

Nicor Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

1. PROPOSED MERGER WITH AGL RESOURCES

In December 2010, Nicor entered into an Agreement and Plan of Merger (the “Merger Agreement”) with AGL Resources, which Nicor expects will be complete in the fourth quarter of 2011.  In accordance with the Merger Agreement, each share of Nicor common stock outstanding at the Effective Time (as defined in the Merger Agreement), other than shares to be cancelled and Dissenting Shares (as defined in the Merger Agreement), will be converted into the right to receive consideration consisting of (i) $21.20 in cash and (ii) 0.8382 shares of AGL Resources common stock, subject to adjustments in certain circumstances.

Completion of the proposed merger is conditioned upon, among other things, shareholder approval by both companies and the receipt of various regulatory approvals.  AGL Resources filed a registration statement with the SEC to register the AGL Resources common stock to be issued in the merger, and the SEC permitted that registration to become effective on April 29, 2011.  AGL Resources and Nicor also filed their pre-merger notifications under the Hart-Scott-Rodino Antitrust Improvements Act and were granted early termination of the waiting period on April 18, 2011.  The approvals from Nicor shareholders and AGL Resources shareholders required in connection with the merger were received on June 14, 2011.

In January 2011, Nicor, Nicor Gas and AGL Resources filed a joint application with the ICC for approval of the proposed merger.  The approval by the ICC is a condition to completion of the merger.  The ICC has eleven months to act upon the application, with their statutory deadline for action being December 16, 2011.  The application did not request a rate increase and included a commitment to maintain the number of full-time equivalent employees involved in the operation of Nicor Gas at a level comparable to current staffing for a period of three years following merger completion.  The Staff of the ICC and several intervenors who are participating in the proceeding submitted testimony and legal briefs, recommending that the ICC deny the joint application or that it impose various requirements on the joint applicants as conditions of approval.  On September 29, 2011, the ALJ assigned by the ICC to preside over the proceeding issued a proposed order recommending approval of the proposed merger.  The ALJ also recommended imposing the condition that Nicor Gas no longer be permitted to provide sales solicitation for Nicor Services’ warranty products.  On October 13, 2011, briefs were filed to comment on the proposed order.  Testimony and legal briefs of the parties and the ALJ’s proposed order are available on the ICC’s website.  In ruling on the merger application, the ICC may accept, modify or reject the proposed order recommended by the ALJ.

The merger may also be subject to review by the governmental authorities of various other federal, state or local jurisdictions under the antitrust and utility regulation or other applicable laws of those jurisdictions.  For example, AGL Resources provided a voluntary notice of the merger to the New Jersey Board of Public Utilities (“NJBPU”), which included a description of the transaction, described the benefits of the transaction and explained why AGL Resources does not believe that the approval of the NJBPU is required to complete the merger.  AGL Resources provided a similar notice to the Maryland Public Service Commission, which then issued a letter stating that it had reviewed the notification of proposed merger filed by AGL Resources and after considering the matter, noted the transaction.  It is possible that one or more state commissions will open proceedings to determine whether they have jurisdiction over the merger.  In the event that any reviewing authorities are determined to have jurisdiction over the merger transaction, there can be no assurance that the reviewing authorities will permit the applicable statutory waiting periods to expire or that the reviewing authorities will terminate the applicable statutory waiting periods at all, or otherwise approve the merger without restrictions or conditions (which are difficult to predict or quantify) that would have a material adverse effect on the combined company if the merger were completed.

The Merger Agreement contains certain termination rights for both Nicor and AGL Resources, and further provides for the payment of fees and expenses upon termination under specified circumstances.  For additional information relating to the proposed merger, please see the joint proxy statement / prospectus contained in the registration statement on Form S-4 that was filed with the SEC by AGL Resources on April 29, 2011.

For the three and nine months ended September 30, 2011, the company has incurred and expensed approximately $0.4 million and $2.8 million, respectively, of merger transaction costs.  These amounts do not include the cost of company personnel participating in efforts to develop integration plans for the combined entity which are included in operating expenses of the respective companies.  No other adjustments have been made to the financial statements as a result of the proposed merger.

2. BASIS OF PRESENTATION

The unaudited Condensed Consolidated Financial Statements of Nicor have been prepared by the company pursuant to the rules and regulations of the SEC.  Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to SEC rules and regulations.  The unaudited Condensed Consolidated Financial Statements and Notes should be read in conjunction with the financial statements and the notes thereto included in the company’s 2010 Annual Report on Form 10-K.

The information furnished reflects, in the opinion of the company, all adjustments (consisting only of normal recurring adjustments) necessary for a fair statement of the results for the interim periods presented.  Results for the interim periods presented are not necessarily indicative of the results to be expected for the full fiscal year due to seasonal and other factors.

The company’s management evaluated subsequent events for potential recognition and disclosure through the date the financial statements were issued.

3. ACCOUNTING POLICIES

Gas in storage.  Nicor Gas’ inventory is carried at cost on a LIFO basis.  Inventory decrements occurring during interim periods that are expected to be restored prior to year-end are charged to cost of gas at the estimated annual replacement cost, and the difference between this cost and the actual LIFO layer cost is recorded on the balance sheet as a temporary LIFO inventory liquidation.  Interim inventory decrements not expected to be restored prior to year-end are charged to cost of gas at the actual LIFO cost of the layers liquidated.  At September 30, 2011 and 2010, there was no inventory decrement.

Nicor Enerchange’s inventory is carried at the lower of weighted-average cost or market (market is represented by the cash price per the close of business on the last trading day of the period).  Nicor Enerchange recorded charges resulting from lower of cost or market valuations for the three and nine months ended September 30, 2011 of $5.1 million and $5.9 million, respectively, and $2.4 million and $7.4 million, respectively, for the same periods in 2010.

Regulatory assets and liabilities.  Nicor Gas is regulated by the ICC, which establishes the rules and regulations governing utility rates and services in Illinois.  As a rate-regulated company, Nicor Gas is required to recognize the economic effects of rate regulation and, accordingly, has recorded regulatory assets and liabilities.  Regulatory assets represent probable future revenue associated with certain costs that are expected to be recovered from customers through rate riders or base rates, upon approval by the ICC.  Regulatory liabilities represent probable future reductions in revenues collected from ratepayers through a rate rider or base rates, or probable future expenditures.  If Nicor Gas’ operations become no longer subject to rate regulation, a write-off of net regulatory liabilities would be required.

The company had regulatory assets and liabilities as follows (in millions):

	September 30		December 31		September 30
	2011		2010		2010
Regulatory assets - current
Regulatory postretirement asset	$	21.1	$	21.1	$	20.6
Deferred gas costs		17.7		6.5		18.1
Bad debt rider		-		-		4.2
Other		9.7		7.4		7.2
Regulatory assets - noncurrent
Regulatory postretirement asset		181.7		193.3		183.6
Deferred gas costs		-		1.4		4.3
Deferred environmental costs		46.6		25.0		24.8
Unamortized losses on reacquired debt		12.3		13.1		13.4
Other		6.7		9.6		11.4
	$	295.8	$	277.4	$	287.6

Regulatory liabilities - current
Regulatory asset retirement liability	$	17.2	$	17.2	$	14.5
Bad debt rider		26.9		16.4		-
Other		2.3		7.7		11.5
Regulatory liabilities - noncurrent
Regulatory asset retirement liability		878.5		843.9		836.0
Regulatory income tax liability		13.1		18.2		19.1
Bad debt rider		16.4		11.7		9.3
Other		1.5		.9		.9
	$	955.9	$	916.0	$	891.3

All items listed above are classified in Other on the Condensed Consolidated Balance Sheets, with the exception of the noncurrent portion of the Regulatory asset retirement liability, which is stated separately.

The ICC does not presently allow Nicor Gas the opportunity to earn a return on its regulatory postretirement asset.  This regulatory postretirement asset is expected to be recovered from ratepayers over a period of approximately 9 to 12 years.  The regulatory assets related to debt are not included in rate base, but are recovered over the term of the debt through the rate of return authorized by the ICC.  Nicor Gas is allowed to recover and is required to pay, using short-term interest rates, the carrying costs related to temporary under or overcollections of natural gas costs, certain environmental costs and energy efficiency program costs charged to its customers.  However, there is no interest associated with the under or overcollections of bad debt expense.

Revenue recognition. Nicor Gas accrues revenues for estimated deliveries to customers from the date of their last bill until the balance sheet date.  Receivables include accrued unbilled revenues of $34.7 million, $144.8 million and $29.7 million at September 30, 2011, December 31, 2010 and September 30, 2010, respectively, related primarily to gas distribution operations.

Nicor Gas classifies revenue taxes billed to customers as operating revenues and related taxes incurred as operating expenses.  Revenue taxes included in operating expense for the three and nine months ended September 30, 2011 were $14.0 million and $118.7 million, respectively, and $13.8 million and $110.2 million, respectively, for the same periods in 2010.

Derivative instruments.Cash flows from derivative instruments are recognized in the Condensed Consolidated Statements of Cash Flows, and gains and losses are recognized in the Condensed Consolidated Statements of Income, in the same categories as the underlying transactions.

Cash flow hedge accounting may be elected only for highly effective hedges, based upon an assessment, performed at least quarterly, of the historical and probable future correlation of cash flows from the derivative instrument to changes in the expected future cash flows of the hedged item.  To the extent cash flow hedge accounting is applied, the effective portion of any changes in the fair value of the derivative instruments is reported as a component of accumulated other comprehensive income.  Ineffectiveness, if any, is immediately recognized in operating income.  The amount in accumulated other comprehensive income is reclassified to earnings when the forecasted transaction is recognized in the Condensed Consolidated Statements of Income, even if the derivative instrument is sold, extinguished or terminated prior to the transaction occurring.  If the forecasted transaction is no longer expected to occur, the amount in accumulated other comprehensive income is immediately reclassified to operating income.

Nicor Gas.  Derivative instruments, such as futures contracts, options and swap agreements, are utilized primarily in the purchase of natural gas for customers.  These derivative instruments are reflected at fair value and are not designated as hedges.  Realized gains or losses on such instruments are included in the cost of gas delivered and are passed directly through to customers, subject to ICC review, and therefore have no direct impact on earnings.  Unrealized changes in the fair value of these derivative instruments are deferred as regulatory assets or liabilities.

Nicor Gas enters into swap agreements to reduce the earnings volatility of certain forecasted operating costs arising from fluctuations in natural gas prices, such as the purchase of natural gas for use in company operations.  These derivative instruments are carried at fair value.  To the extent hedge accounting is not elected, changes in such fair values are immediately recorded in the current period as operating and maintenance expense.

Nicor Enerchange.  Derivative instruments, such as futures contracts, options, forward contracts, swap agreements and other energy-related contracts are held by Nicor’s wholesale natural gas marketing business, Nicor Enerchange, for trading purposes.  Certain of these derivative instruments are used to economically hedge price risk associated with inventories of natural gas, fixed-price purchase and sale agreements and other future natural gas commitments.  Nicor Enerchange records such derivative instruments at fair value and generally does not elect hedge accounting.  As a result, changes in derivative fair values may have a material impact on Nicor’s financial statements.

Other derivative instruments are used by Nicor Enerchange to hedge price risks related to the activities of affiliates.  Derivatives are held related to certain utility-bill management products sold to retail customers.  These derivative instruments are carried at fair value and cash flow hedge accounting may or may not be elected.  Other derivative instruments are held for the purpose of hedging the commodity price risk associated with the forecasted purchase of base gas that will be injected as part of the development of the natural gas storage facility by Central Valley.  Such derivative instruments are carried at fair value and cash flow hedge accounting has been elected on a consolidated basis.  The base gas is a component of the storage facility’s construction costs.  Therefore, amounts recorded in accumulated other comprehensive income related to these derivative instruments will not be reclassified to earnings until the storage facility is retired and the base gas is sold.

Nicor. Forward-starting interest rate swaps are utilized to hedge the interest payments associated with long-term debt.  These derivative instruments are carried at fair value and cash flow hedge accounting is elected.  The effective portion of any changes in the fair value of the derivatives is deferred in accumulated other comprehensive income.  Upon settlement, the deferred amount is amortized to interest expense over the life of the debt.

Credit risk and concentrations.  Nicor’s major subsidiaries have diversified customer bases and the company believes that it maintains prudent credit policies which mitigate customer receivable, supplier performance and derivative counterparty credit risk.  The company is exposed to credit risk in the event a customer or supplier defaults on a contract to pay for or deliver product at agreed-upon terms and conditions, or a counterparty to a derivative instrument defaults on a settlement or otherwise fails to perform under contractual terms.  To manage this risk, the company has established procedures to determine and monitor the creditworthiness of counterparties, to seek guarantees or collateral back-up in the form of cash or letters of credit, to acquire credit insurance in certain instances, and to limit its exposure to any one counterparty.  Nicor also, in some instances, enters into netting arrangements to mitigate counterparty credit risk.  Fair value measurements consider credit risk.  For assets and liabilities not carried at fair value, credit losses are accrued when probable and reasonably estimable.

On February 2, 2010, the ICC approved a bad debt rider that was filed in 2009 by Nicor Gas.  The bad debt rider provides for the recovery from (or refund to) customers of the difference between Nicor Gas’ actual bad debt experience on an annual basis and the benchmark bad debt expense included in its rates for the respective year.

4. INVESTMENTS

The company’s investments in debt and equity securities are as follows (in millions):

	September 30		December 31		September 30
	2011		2010		2010
Money market funds	$	59.0	$	82.9	$	128.8
Corporate bonds		6.5		6.8		6.8
Other investments		9.2		8.5		6.1
	$	74.7	$	98.2	$	141.7

Investments in debt and equity securities are classified on the Condensed Consolidated Balance Sheets as follows (in millions):

	September 30		December 31		September 30
	2011		2010		2010
Cash equivalents	$	8.7	$	12.6	$	62.3
Short-term investments		52.8		70.6		66.8
Long-term investments		13.2		15.0		12.6
	$	74.7	$	98.2	$	141.7

Investments categorized as trading (including money market funds) totaled $61.3 million, $85.0 million and $130.8 million at September 30, 2011, December 31, 2010 and September 30, 2010, respectively.  Corporate bonds and certain other investments are categorized as held-to-maturity.  The contractual maturities of the held-to-maturity investments at September 30, 2011 are as follows (in millions):

Years to maturity

Less than 1 year		1-5 Years		Total
$	2.1	$	6.5	$	8.6

Nicor’s investments also include certain restricted investments, including certificates of deposit and bank accounts, maintained to fulfill statutory or contractual requirements.  These investments totaled $2.4 million, $2.0 million and $2.1 million at September 30, 2011, December 31, 2010 and September 30, 2010, respectively.  In addition, the company holds a $2.4 million investment in a port facility development venture carried at cost.

There were no significant gains or losses included in earnings resulting from the sale of investments for the three and nine months ended September 30, 2011 and 2010.

5. SHORT-TERM AND LONG-TERM DEBT

In February 2011, Nicor Gas issued $75 million First Mortgage Bonds at 2.86 percent, due in 2016 through a private placement and utilized the proceeds to retire the $75 million 6.625 percent First Mortgage Bond series which matured in February 2011.  In determining that these bonds qualified for exemption from registration under Section 4(2) of the Securities Act of 1933, Nicor Gas relied on the facts that the bonds were offered only to a limited number of large institutional investors and each institutional investor that purchased the bonds represented that it was purchasing the bonds for its own account and not with a view to distribute them. 

In April 2011, Nicor Gas established a $400 million, 364-day revolving credit facility, expiring April 2012 to replace the $400 million, 364-day revolving credit facility, which was set to expire in April 2011.  In April 2010, Nicor and Nicor Gas established a $600 million, three-year revolving credit facility, expiring April 2013 to replace the $600 million, five-year revolving credit facility, which was set to expire in September 2010.  These facilities were established with major domestic and foreign banks and serve as backup for the issuance of commercial paper.  The company had $312.6 million, $425.0 million and $373.3 million of commercial paper borrowings outstanding at September 30, 2011, December 31, 2010 and September 30, 2010, respectively.

Nicor held forward-starting interest rate swaps with a notional totaling $90 million at September 30, 2011, December 31, 2010 and September 30, 2010.  The swaps hedge the risk associated with the interest payments attributable to the probable issuance of long-term fixed-rate debt in 2012 intended to finance the development of a natural gas storage facility.  Under the terms of the swaps, Nicor agrees to pay a fixed swap rate and receive a floating rate based on LIBOR.

The company believes it is in compliance with all debt covenants.

6. INCOME TAXES

The effective income tax rate for the three months ended September 30, 2011 increased to 61.0 percent from 39.9 percent in the prior year.  The effective income tax rate for both quarters is higher than the expected annual effective income tax rate as it reflects the impact of a reduction in projected annual untaxed foreign shipping earnings identified in the respective quarters.  The year-to-date adjustment to income taxes recognized in the quarter resulting from these changes has a larger impact in quarters with lower income.  The effective income tax rate for the nine months ended September 30, 2011 increased to 35.4 percent from 33.7 percent in the prior year.  The higher effective income tax rate for the nine months ended September 30, 2011 is due primarily to lower forecasted annual untaxed foreign shipping earnings and an increase to the Illinois state income tax rate, partially offset by an adjustment to reduce certain state income tax liabilities in the first quarter of 2011 and lower forecasted annual pretax income.  Effective January 1, 2011, the State of Illinois raised the corporate income tax rate from 7.3 percent to 9.5 percent.

In 2006, the company reorganized certain shipping and related operations.  The reorganization allows the company to take advantage of certain provisions of the Jobs Act that provide the opportunity for tax savings subsequent to the date of the reorganization.  Generally, to the extent foreign shipping earnings are not repatriated to the United States, such earnings are not expected to be subject to current taxation.  In addition, to the extent such earnings are determined to be indefinitely reinvested offshore, no deferred income tax expense would be recorded by the company.  For the three months ended September 30, 2011 and 2010, an income tax benefit (expense) has not been recognized (provided) on approximately $6 million and $(1) million, respectively, of foreign company shipping losses (earnings).  For the nine months ended September 30, 2011, an income tax benefit has not been recognized on approximately $14 million of foreign company shipping losses.  There were no significant untaxed foreign company shipping earnings for the nine months ended September 30, 2010.  As of September 30, 2011, Nicor has not recorded deferred income taxes of approximately $54 million on approximately $156 million of cumulative undistributed foreign earnings.

The company's major tax jurisdictions include the United States and Illinois, with tax returns examined by the IRS and IDR, respectively.  At September 30, 2011, the years that remain subject to examination include years beginning after 2007 for the IRS and after 2006 for the IDR.  The company had no liability for unrecognized tax benefits at September 30, 2011.  The decrease in the liability for unrecognized tax benefits from $2.9 million at December 31, 2010 was due to a reduction in state tax reserves.  The company does not believe that it is reasonably possible that a significant change in the liability for unrecognized tax benefits could occur within 12 months.

The balance of unamortized investment tax credits at September 30, 2011, December 31, 2010 and September 30, 2010 was $22.9 million, $24.3 million and $23.7 million, respectively.

7. FAIR VALUE MEASUREMENTS

The fair value of assets and liabilities that are measured on a recurring basis are categorized in the table below (in millions) into three broad levels (with Level 1 considered the most reliable) based upon the valuation inputs.

	Quoted prices in active markets		Significant observable inputs		Significant unobservable inputs
	(Level 1)		(Level 2)		(Level 3)		Total
September 30, 2011
Assets
Money market funds	$	59.0	$	-	$	-	$	59.0
Commodity derivatives		22.0		32.4		7.2		61.6
	$	81.0	$	32.4	$	7.2	$	120.6
Liabilities
Commodity derivatives	$	47.9	$	23.3	$	2.5	$	73.7
Interest rate derivatives		-		13.7		-		13.7
	$	47.9	$	37.0	$	2.5	$	87.4

December 31, 2010
Assets
Money market funds	$	82.9	$	-	$	-	$	82.9
Commodity derivatives		21.3		35.7		9.3		66.3
Interest rate derivative		-		1.0		-		1.0
	$	104.2	$	36.7	$	9.3	$	150.2

Liabilities
Commodity derivatives	$	55.4	$	31.3	$	12.3	$	99.0
Interest rate derivative		-		3.2		-		3.2
	$	55.4	$	34.5	$	12.3	$	102.2
September 30, 2010
Assets
Money market funds	$	128.8	$	-	$	-	$	128.8
Commodity derivatives		42.0		42.4		9.0		93.4
	$	170.8	$	42.4	$	9.0	$	222.2
Liabilities
Commodity derivatives	$	83.1	$	40.6	$	15.9	$	139.6
Interest rate derivatives		-		7.5		-		7.5
	$	83.1	$	48.1	$	15.9	$	147.1

When available and appropriate, the company uses quoted market prices in active markets to determine fair value and classifies such items within Level 1.  For derivatives, Level 1 values include only those derivative instruments traded on the NYMEX.  The company enters into over-the-counter instruments with values that are similar to, and correlate with, quoted prices for exchange-traded instruments in active markets; the fair values of these over-the-counter items consider credit risk and are classified within Level 2.  In certain instances, the company may be required to determine a fair value using significant unobservable inputs such as indicative broker prices; the resulting valuation is classified as Level 3.

A description of the company’s objectives and strategies for using derivative instruments, and related accounting policies, is included in Note 3 – Accounting Policies – Derivative instruments and Credit risk and concentrations.

The following table presents a reconciliation of the Level 3 beginning and ending net derivative asset (liability) balances (in millions):

	Three months ended September 30						Nine months ended September 30
	2011			2010			2011			2010
Beginning of period	$	7.5		$	7.1		$	(3.0	)	$	5.0
Net realized/unrealized gains (losses)
Included in regulatory assets and   liabilities		(3.7	)		(.9	)		1.4			(1.7	)
Included in net income		2.1			4.8			1.6			(2.0	)
Settlements, net of purchases**		(1.9	)		.6			(1.4	)		4.5
Transfers into Level 3		.6			(13.6	)		2.1			(10.8	)
Transfers out of Level 3		.1			(4.9	)		4.0			(1.9	)
End of period	$	4.7		$	(6.9	)	$	4.7		$	(6.9	)
Net unrealized gains (losses) included in net income above relating to derivatives still held at September 30	$	1.2		$	1.7		$	1.3		$	(4.0	)
** There were no purchases for the three and nine months ended September 30, 2011.

Net realized/unrealized gains (losses) included in net income are attributable to Nicor Enerchange and are classified as operating revenues.

Transfers into and out of Level 3 reflect the liquidity at the relevant natural gas trading locations and dates which affects the significance of unobservable inputs used in the valuation.  Transfers into and out of Level 3 are determined using values at the end of the interim period in which the transfer occurred.

Nicor maintains margin accounts related to financial derivative transactions.  The company’s policy is not to offset the fair value of assets and liabilities recognized for derivative instruments or any related margin account.  The following table represents the balance sheet classification of margin accounts related to derivative instruments (in millions):

	September 30		December 31		September 30
	2011		2010		2010
Assets
Margin accounts - derivative instruments	$	27.5	$	50.9	$	58.8
Other - noncurrent		.6		8.1		9.5
Liabilities
Other - current	$	2.2	$	-	$	2.2
Other - noncurrent		.4		-		4.5

In addition, the recorded amount of restricted short and long-term investments and short-term borrowings approximates fair value.  Long-term debt outstanding, including current maturities, is recorded at the principal balance outstanding, net of unamortized discounts.  The principal balance of Nicor Gas’ First Mortgage Bonds outstanding at September 30, 2011, December 31, 2010 and September 30, 2010 was $500 million.  Based on quoted prices or market interest rates, the fair value of the company’s First Mortgage Bonds outstanding was approximately $621 million, $554 million and $575 million at September 30, 2011, December 31, 2010 and September 30, 2010, respectively.

8. DERIVATIVE INSTRUMENTS

A description of the company’s objectives and strategies for using derivative instruments, and related accounting policies, is included in Note 3 – Accounting Policies – Derivative instruments and Credit risk and concentrations.  All derivatives recognized on the Condensed Consolidated Balance Sheets are measured at fair value, as described in Note 7 – Fair Value Measurements.

Condensed Consolidated Balance Sheets.  Derivative assets and liabilities are classified as shown in the table below (in millions):

	September 30		December 31		September 30
	2011		2010		2010
Derivatives designated as hedging instruments
Assets
Derivative instruments	$	.5	$	.4	$	-
Other - noncurrent		-		1.0		-
	$	.5	$	1.4	$	-
Liabilities
Derivative instruments	$	15.9	$	2.2	$	3.4
Other - noncurrent		.1		3.2		7.7
	$	16.0	$	5.4	$	11.1

Derivatives not designated as hedging instruments
Assets
Derivative instruments	$	49.1	$	48.7	$	70.4
Other - noncurrent		12.0		17.2		23.0
	$	61.1	$	65.9	$	93.4
Liabilities
Derivative instruments	$	64.4	$	80.7	$	112.5
Other - noncurrent		7.0		16.1		23.5
	$	71.4	$	96.8	$	136.0

Volumes.  As of September 30, 2011, December 31, 2010 and September 30, 2010, Nicor Gas held outstanding derivative contracts of approximately 30 Bcf, 49 Bcf and 48 Bcf, respectively, to hedge natural gas purchases for customer use, with hedges spanning as long as three years.  Commodity price-risk exposure arising from Nicor Enerchange’s activities and Nicor Gas’ natural gas purchases for company use is mitigated with derivative instruments that total to a net short position of 4.5 Bcf, 3.9 Bcf and 3.0 Bcf as of September 30, 2011, December 31, 2010 and September 30, 2010, respectively.  The above volumes exclude contracts such as variable-priced contracts and basis swaps, which are accounted for as derivatives but whose fair values are not directly impacted by changes in commodity prices.

Nicor held forward-starting interest rate swaps with a notional totaling $90 million at September 30, 2011, December 31, 2010 and September 30, 2010.  The swaps hedge the risk associated with the interest payments attributable to the probable issuance of long-term fixed-rate debt in 2012.

Condensed Consolidated Statements of Income – cash flow hedges.  Changes in the fair value of derivatives designated as a cash flow hedge are recognized in other comprehensive income until the hedged transaction is recognized in the Condensed Consolidated Statements of Income.  Cash flow hedges used by the company’s other energy ventures, to hedge utility-bill management products, are eventually recognized within operating revenues.  Cash flow hedges used by Nicor Gas, to hedge purchases of natural gas for company use, are eventually recorded within operating and maintenance expense.  Cash flow hedges used by Nicor, to hedge the interest payments attributable to long-term fixed-rate debt, will eventually be recorded within interest expense.

Cash flow hedges affected accumulated other comprehensive income (effective portion) as shown in the following table (in millions):

	Three months ended September 30				Nine months ended September 30
	2011		2010		2011		2010
Pretax loss recognized in other comprehensive income	$	10.8	$	5.8	$	14.1	$	13.1

The pretax loss reclassified from accumulated other comprehensive income into income (effective portion) is shown in the following table (in millions):

	Three months ended September 30				Nine months ended September 30
Location	2011		2010		2011		2010
Operating revenues	$	-	$	.1	$	1.4	$	1.1
Operating and maintenance		.3		.5		.8		1.1
	$	.3	$	.6	$	2.2	$	2.2

Any amounts recognized in operating income, related to ineffectiveness or due to a forecasted transaction that is no longer expected to occur, were immaterial for the three and nine months ended September 30, 2011 and 2010.

As of September 30, 2011, December 31, 2010 and September 30, 2010, the time horizon of cash flow hedges of natural gas purchases for Nicor Gas company use and for utility-bill management products sold by Nicor’s other energy ventures span as long as two years.  For these hedges, the total pretax loss deferred in accumulated other comprehensive income at September 30, 2011, December 31, 2010 and September 30, 2010 was $2.2 million ($1.3 million after taxes), $2.0 million ($1.2 million after taxes) and $4.2 million ($2.5 million after taxes), respectively.  At the respective reporting dates, substantially all of these amounts were expected to be reclassified to earnings within the next 12 months.

The amounts deferred in accumulated other comprehensive income for the forward-starting interest rate swaps will be amortized to interest expense upon the issuance of long-term fixed-rate debt.  The total pretax loss deferred in accumulated other comprehensive income relating to the interest rate swaps at September 30, 2011, December 31, 2010 and September 30, 2010 was $13.7 million ($8.1 million after taxes), $2.2 million ($1.3 million after taxes) and $7.5 million ($4.5 million after taxes), respectively.

Condensed Consolidated Statements of Income – derivatives not designated as hedges.  The earnings of the company are subject to volatility for those derivatives not designated as hedges.  Non-designated derivatives used by the company’s other energy ventures, to hedge energy trading activities and utility-bill management products, are recorded in operating revenues.  Non-designated derivatives used by Nicor Gas, to hedge purchases of natural gas for company use, are recorded within operating and maintenance expense.  Pretax net gains (losses) recognized in income are summarized in the table below (in millions):

	Three months ended September 30						Nine months ended September 30
Location	2011			2010			2011			2010
Operating revenues	$	4.5		$	5.3		$	.3		$	3.9
Operating and maintenance		(.3	)		(.3	)		(.4	)		(1.0	)
	$	4.2		$	5.0		$	(.1	)	$	2.9

Nicor Gas’ derivatives used to hedge the purchase of natural gas for its customers are also not designated as hedging instruments.  Gains or losses on these derivatives are not recognized in pretax earnings, but are deferred as regulatory assets or liabilities until the related revenue is recognized.  Net losses deferred for the three and nine months ended September 30, 2011 were $29.0 million and $32.6 million, respectively, and $47.5 million and $121.6 million, respectively, for the same periods in 2010.

Credit-risk-related contingent features.  Provisions within certain derivative agreements require the company to post collateral if the company’s net liability position exceeds a specified threshold.  Also, certain derivative agreements contain credit-risk-related contingent features, whereby the company would be required to provide additional collateral or pay the amount due to the counterparty when a credit event occurs, such as if the company’s credit rating was to be lowered.  As of September 30, 2011, December 31, 2010 and September 30, 2010 for agreements with such features, derivative contracts with liability fair values totaled approximately $17 million, $12 million and $17 million, respectively, for which the company had posted no collateral to its counterparties.  If it was assumed that the company had to post the maximum contractually specified collateral or settle the liability, the company would have been required to pay approximately $17 million, $11 million and $16 million at September 30, 2011, December 31, 2010 and September 30, 2010, respectively.

9. POSTRETIREMENT BENEFITS

Nicor Gas maintains a noncontributory defined benefit pension plan covering substantially all employees hired prior to 1998.  Pension benefits are based on years of service and the highest average salary for management employees and job level for collectively bargained employees (referred to as pension bands).  The benefit obligation related to collectively bargained benefits considers the company’s past practice of regular benefit increases.  Nicor Gas also provides health care and life insurance benefits to eligible retired employees under a plan that includes a limit on the company’s share of cost for employees hired after 1982.

The company’s postretirement benefit costs have historically been considered in rate proceedings in the period they are accrued.  As a regulated utility, Nicor Gas expects continued rate recovery of the eligible costs of its defined benefit postretirement plans and, accordingly, associated changes in the plan’s funded status have been deferred as a regulatory asset or liability until recognized in net income, instead of being recorded in accumulated other comprehensive income.  However, to the extent Nicor Gas employees perform services for non-regulated affiliates and to the extent such employees are eligible to participate in these plans, the affiliates are charged for the cost of these benefits and the changes in the funded status relating to these employees are recorded in accumulated other comprehensive income.

About one-fourth of the net benefit cost related to these plans has been capitalized as a cost of constructing gas distribution facilities and the remainder is included in gas distribution operating and maintenance expense, net of amounts charged to affiliates.  Net benefit cost included the following components (in millions):

	Pension benefits						Health care and other benefits
	2011			2010			2011		2010
Three months ended September 30
Service cost	$	2.4		$	2.4		$	.6	$	.6
Interest cost		4.1			4.0			3.1		3.0
Expected return on plan assets		(7.7	)		(7.2	)		-		-
Recognized net actuarial loss		2.5			3.0			1.5		1.0
Amortization of prior service cost		.1			.1			-		-
Net benefit cost	$	1.4		$	2.3		$	5.2	$	4.6

Nine months ended September 30
Service cost	$	7.4		$	7.3		$	1.8	$	1.7
Interest cost		12.3			12.0			9.2		8.9
Expected return on plan assets		(23.3	)		(21.7	)		-		-
Recognized net actuarial loss		7.3			8.9			4.5		3.1
Amortization of prior service cost		.3			.3			.1		.1
Net benefit cost	$	4.0		$	6.8		$	15.6	$	13.8

The Health Care Act contains provisions that may impact Nicor Gas’ obligation for retiree health care benefits.  The company does not currently believe these provisions will materially increase its postretirement benefit obligation, but will continue to evaluate the impact of future regulations and interpretations.

10. EQUITY INVESTMENT INCOME, NET

Equity investment income includes investment income from Triton of $3.8 million and $11.2 million for the three and nine months ended September 30, 2011, respectively, and $1.5 million and $4.7 million, respectively, for the same periods in 2010.  Nicor received cash distributions from equity investees for the three and nine months ended September 30, 2011 of $4.3 million and $12.5 million, respectively, and $6.1 million and $14.0 million, respectively, for the same periods in 2010.

11. COMPREHENSIVE INCOME

Total comprehensive income (loss) is as follows (in millions):

	Three months ended						Nine months ended
	September 30						September 30
	2011			2010			2011			2010
Net income	$	5.7		$	13.6		$	70.1		$	98.3
Other comprehensive loss, after tax		(6.0	)		(3.0	)		(6.4	)		(6.4	)
Total comprehensive income (loss)	$	(.3	)	$	10.6		$	63.7		$	91.9

Other comprehensive loss consists primarily of net gains and losses from derivative financial instruments accounted for as cash flow hedges and gains and losses from postretirement benefits.

12. BUSINESS SEGMENT INFORMATION

Financial data by reportable segment is as follows (in millions):

Nicor Inc.

Business Segments - Financial Data

	Three months ended						Nine months ended
	September 30						September 30
	2011			2010			2011			2010
Gas distribution
Operating revenues
External customers	$	235.4		$	229.0		$	1,485.7		$	1,571.3
Intersegment		4.5			4.5			28.9			30.5
	$	239.9		$	233.5		$	1,514.6		$	1,601.8
Operating income	$	21.3		$	20.9		$	115.1		$	141.5
Shipping
Operating revenues
External customers	$	78.4		$	83.9		$	239.1		$	253.4
Intersegment		-			-			-			-
	$	78.4		$	83.9		$	239.1		$	253.4
Operating income (loss)	$	(3.7	)	$	3.6		$	(5.2	)	$	7.3
Other Energy Ventures
Wholesale marketing
Operating revenues
External customers	$	1.6		$	7.1		$	12.8		$	20.5
Intersegment		.7			1.1			8.4			9.3
	$	2.3		$	8.2		$	21.2		$	29.8
Operating income (loss)	$	(4.7	)	$	.7		$	(.1	)	$	8.1
Other
Operating revenues
External customers	$	33.0		$	32.5		$	124.8		$	125.8
Intersegment		.5			.5			1.3			1.6
	$	33.5		$	33.0		$	126.1		$	127.4
Operating income	$	6.4		$	6.4		$	15.7		$	14.8
Corporate and eliminations
Operating revenues
External customers	$	-		$	-		$	-		$	-
Intersegment		(5.7	)		(6.1	)		(38.6	)		(41.4	)
	$	(5.7	)	$	(6.1	)	$	(38.6	)	$	(41.4	)
Operating loss	$	(1.0	)	$	(1.2	)	$	(6.2	)	$	(1.9	)
Consolidated
Operating revenues
External customers	$	348.4		$	352.5		$	1,862.4		$	1,971.0
Intersegment		-			-			-			-
	$	348.4		$	352.5		$	1,862.4		$	1,971.0
Operating income	$	18.3		$	30.4		$	119.3		$	169.8

Intersegment revenues include gas distribution revenues related to customers entering into utility-bill management contracts with Nicor Solutions and wholesale marketing revenues from the sale of natural gas to Nicor Advanced Energy.  Under the utility-bill management contracts, Nicor Solutions bills a fixed amount to a customer, regardless of changes in natural gas prices or weather, and in exchange pays the customer’s utility bills from Nicor Gas.  Nicor Advanced Energy provides natural gas and related services on an unregulated basis to residential and small commercial customers and purchases most of its natural gas supplies from Nicor Enerchange.  Intersegment revenues are eliminated in the Condensed Consolidated Financial Statements.

Costs (benefits) associated with Nicor’s other energy ventures’ utility-bill management contracts attributable to variances from normal weather for the three and nine months ended September 30, 2011 were $0.3 million and $2.6 million, respectively, and $(0.1) million and $0.3 million, respectively, for the same periods in 2010.  The weather impact of these contracts generally serves to partially offset the gas distribution segment’s weather risk.  This cost (benefit) is recorded primarily at the corporate level as a result of an agreement between the parent company and certain of its subsidiaries.  Additionally, operating income of corporate and eliminations includes merger transaction costs of approximately $0.4 million and $2.8 million, respectively, for the three and nine months ended September 30, 2011.

13. REGULATORY MATTERS

Bad debt rider.  In September 2009, Nicor Gas filed for approval of a bad debt rider with the ICC under an Illinois state law which took effect in July 2009.  On February 2, 2010, the ICC issued an order approving the company’s proposed bad debt rider.  This rider provides for recovery from customers of the amount over the benchmark for bad debt expense established in the company’s rate cases.  It also provides for refunds to customers if bad debt expense is below such benchmarks.

As a result of the February 2010 order, Nicor Gas recorded in income a net recovery related to 2008 and 2009 of $31.7 million in the first quarter of 2010, all of which has been collected.  The benchmark, against which 2011 and 2010 actual bad debt experience is compared, is approximately $63 million.  The company’s actual 2010 bad debt experience was $35.7 million, resulting in a refund to customers of $27.3 million which is being refunded over a 12-month period that began June 2011.

SNG plant legislation.  Nicor Gas signed an agreement in the third quarter of 2011 to purchase approximately 25 Bcf of SNG annually for a 10-year term beginning as early as 2015.  The counterparty intends to construct a 60 Bcf per year coal gasification plant in southern Illinois.  The project is expected to be financed by the counterparty with external debt and equity.  In addition, the final price of the SNG may exceed market prices and is dependent upon a variety of factors, including plant construction costs, and is not estimable.  However, this agreement complies with an Illinois statute that authorizes full recovery of the purchase costs; therefore the company expects to recover such costs.  Since the purchase agreement is contingent upon various milestones to be achieved by the counterparty to the agreement, the company’s obligation is not certain at this time.  While the purchase agreement is a variable interest in the counterparty, Nicor Gas has concluded, based on a qualitative evaluation, that it is not the primary beneficiary required to consolidate the counterparty.  No amount has been recognized on Nicor’s balance sheet in connection with the purchase agreement.

On October 11, 2011, the IPA approved the form of a draft 30-year contract for the purchase of 20 Bcf per year of SNG from a second proposed plant.  The draft contract approved by the IPA has been submitted to the ICC for further approvals by that regulatory body.  The ICC is expected to approve a final form of contract for the second plant in 2012.

14. GUARANTEES AND INDEMNITIES

Nicor and certain subsidiaries enter into various financial and performance guarantees and indemnities providing assurance to third parties.

Financial guarantees.  TEL has an obligation to restore to zero any deficit in its equity account for income tax purposes in the unlikely event that Triton is liquidated and a deficit balance remains.  This obligation continues for the life of the Triton partnerships and any payment is effectively limited to the assets of TEL, which were zero at September 30, 2011.  Nicor believes the likelihood of any such payment by TEL is remote.  No liability has been recorded for this obligation.

Performance guarantees. Directly or through a subsidiary, Nicor Services markets product warranty contracts that provide for the repair of heating, ventilation and air conditioning equipment, natural gas lines and other appliances within homes.  Revenues from these product warranty contracts are recognized ratably over the coverage period, and related repair costs are charged to expense as incurred.  Repair expenses of $3.2 million and $9.1 million were incurred in the three and nine months ended September 30, 2011, respectively, and $2.7 million and $7.5 million, respectively, for the same periods in 2010.

Indemnities.  In certain instances, Nicor has undertaken to indemnify current property owners and others against costs associated with the effects and/or remediation of contaminated sites for which the company may be responsible under applicable federal or state environmental laws, generally with no limitation as to the amount.  These indemnifications relate primarily to ongoing coal tar cleanup, as discussed in Note 15 – Contingencies – Manufactured Gas Plant Sites.  Nicor believes that the likelihood of payment under its other environmental indemnifications is remote.  No liability has been recorded for such indemnifications.

Nicor has also indemnified, to the fullest extent permitted under the laws of the State of Illinois and any other applicable laws, its present and former directors, officers and employees against expenses they may incur in connection with litigation they are a party to by reason of their association with the company.  There is generally no limitation as to the amount.  During 2007, the SEC filed a civil injunctive action against three former officers of Nicor relating to the PBR Plan.  Defense costs that are being incurred by these former officers in connection with the SEC action currently are being tendered to, and paid by, the company’s insurer.  In July 2010, one of these former officers settled the SEC’s action against him and was indemnified by Nicor.  While the company does not expect to incur significant costs relating to the indemnification of present and former directors, officers and employees after taking into account available insurance, it is not possible to estimate the maximum future potential payments.

15. CONTINGENCIES

The following contingencies of Nicor are in various stages of investigation or disposition.  Although in some cases the company is unable to estimate the amount of loss reasonably possible in addition to any amounts already recognized, it is possible that the resolution of these contingencies, either individually or in aggregate, will require the company to take charges against, or will result in reductions in, future earnings.  It is the opinion of management that the resolution of these contingencies, either individually or in aggregate, could be material to earnings in a particular period but is not expected to have a material adverse impact on Nicor’s liquidity or financial condition.

PBR Plan.  Nicor Gas’ PBR plan for natural gas costs went into effect in 2000 and was terminated by the company effective January 1, 2003.  Under the PBR plan, Nicor Gas’ total gas supply costs were compared to a market-sensitive benchmark.  Savings and losses relative to the benchmark were determined annually and shared equally with sales customers.  The PBR plan is currently under ICC review.  There are allegations that the company acted improperly in connection with the PBR plan, and the ICC and others are reviewing these allegations.  On June 27, 2002, the Citizens Utility Board (“CUB”) filed a motion to reopen the record in the ICC’s proceedings to review the PBR plan (the “ICC Proceedings”).  As a result of the motion to reopen, Nicor Gas, the staff of the ICC and CUB entered into a stipulation providing for additional discovery.  The Illinois Attorney General’s Office (“IAGO”) has also intervened in this matter.  In addition, the IAGO issued Civil Investigation Demands (“CIDs”) to CUB and the ICC staff.  The CIDs ordered that CUB and the ICC staff produce all documents relating to any claims that Nicor Gas may have presented, or caused to be presented, false information related to its PBR plan.  The company has committed to cooperate fully in the reviews of the PBR plan.

In response to these allegations, on July 18, 2002, the Nicor Board of Directors appointed a special committee of independent, non-management directors to conduct an inquiry into issues surrounding natural gas purchases, sales, transportation, storage and such other matters as may come to the attention of the special committee in the course of its investigation.  The special committee presented the report of its counsel (“Report”) to Nicor’s Board of Directors on October 28, 2002.

In response, the Nicor Board of Directors directed the company’s management to, among other things, make appropriate adjustments to account for, and fully address, the adverse consequences to ratepayers of the items noted in the Report, and conduct a detailed study of the adequacy of internal accounting and regulatory controls.  The adjustments were made in prior years’ financial statements resulting in a $24.8 million liability.  Included in such $24.8 million liability is a $4.1 million loss contingency.  A $1.8 million adjustment to the previously recorded liability, which is discussed below, was made in 2004 increasing the recorded liability to $26.6 million.  Nicor Gas estimates that there is $26.9 million due to the company from the 2002 PBR plan year, which has not been recognized in the financial statements due to uncertainties surrounding the PBR plan.  In addition, interest due to the company on certain components of these amounts has not been recognized in the financial statements due to the same uncertainties.  By the end of 2003, the company completed steps to correct the weaknesses and deficiencies identified in the detailed study of the adequacy of internal controls.

Pursuant to the agreement of all parties, including the company, the ICC re-opened the 1999 and 2000 purchased gas adjustment filings for review of certain transactions related to the PBR plan and consolidated the reviews of the 1999-2002 purchased gas adjustment filings with the PBR plan review.

On February 5, 2003, CUB filed a motion for $27 million in sanctions against the company in the ICC Proceedings.  In that motion, CUB alleged that Nicor Gas’ responses to certain CUB data requests were false.  Also on February 5, 2003, CUB stated in a press release that, in addition to $27 million in sanctions, it would seek additional refunds to consumers.  On March 5, 2003, the ICC staff filed a response brief in support of CUB’s motion for sanctions.  On May 1, 2003, the ALJs assigned to the proceeding issued a ruling denying CUB’s motion for sanctions.  CUB has filed an appeal of the motion for sanctions with the ICC, and the ICC has indicated that it will not rule on the appeal until the final disposition of the ICC Proceedings.  It is not possible to determine how the ICC will resolve the claims of CUB or other parties to the ICC Proceedings.

In 2004, the company became aware of additional information relating to the activities of individuals affecting the PBR plan for the period from 1999 through 2002, including information consisting of third party documents and recordings of telephone conversations from Entergy-Koch Trading, LP (“EKT”), a natural gas, storage and transportation trader and consultant with whom Nicor did business under the PBR plan.  Review of additional information completed in 2004 resulted in the $1.8 million adjustment to the previously recorded liability referenced above.

The evidentiary hearings on this matter were stayed in 2004 in order to permit the parties to undertake additional third party discovery from EKT.  In December 2006, the additional third party discovery from EKT was obtained and the ALJs issued a scheduling order that provided for Nicor Gas to submit direct testimony by April 13, 2007.  In its direct testimony, Nicor Gas sought a reimbursement of approximately $6 million, which included interest due to the company, as noted above, of $1.6 million, as of March 31, 2007, and it reaffirmed this position in rebuttal testimony submitted in April 2011.  The staff of the ICC, IAGO and CUB submitted direct testimony to the ICC in April 2009 and rebuttal testimony in October 2011.  In rebuttal testimony, the staff of the ICC, IAOG and CUB requested refunds of $85 million, $255 million and $305 million, respectively.  No date has been set for evidentiary hearings on this matter.

Nicor is unable to predict the outcome of the ICC’s review or the company’s potential exposure thereunder.  Because the PBR plan and historical gas costs are still under ICC review, the final outcome could be materially different than the amounts reflected in the company’s financial statements as of September 30, 2011.

Litigation relating to proposed merger.  Nicor, its board of directors, AGL Resources and one or both of AGL Resources’ acquisition subsidiaries and, in one instance, Nicor’s Executive Vice President and Chief Financial Officer have been named as defendants in six putative class action lawsuits brought by purported Nicor shareholders challenging Nicor’s proposed merger with AGL Resources, two of which, including the lawsuit that named Nicor’s Executive Vice President and Chief Financial Officer as a defendant, have subsequently been voluntarily dismissed.  The first action, Joseph Pirolli v. Nicor Inc., et al. (the “Pirolli Action”) was filed on December 7, 2010 in the Eighteenth Circuit Court of DuPage County, Illinois, County Department, Chancery Division (“DuPage County Court”).  Four other actions were filed between December 10, 2010 and December 17, 2010 in the Circuit Court of Cook County, Illinois, County Department, Chancery Division (“Cook County Court”): Maxine Phillips v. Nicor Inc., et al., filed December 10, 2010; Plumbers Local #65 Pension Fund v. Nicor Inc., et al., filed December 13, 2010; Gus Monahu v. Nicor Inc., et al., filed December 17, 2010; and Roberto R. Vela v. Russ M. Strobel, et al., filed December 17, 2010.  The sixth action, which is both an individual action and a putative class action, was filed on March 1, 2011 in the United States District Court for the Northern District of Illinois, Eastern Division and captioned Maxine Phillips v. Nicor Inc.,et al. (the “Federal Action”).

On January 10, 2011, the four actions filed in the Cook County Court were consolidated (the “Consolidated Action”).  On February 18, 2011, plaintiffs in the Consolidated Action filed an amended complaint (the “Consolidated Amended Complaint”).  On February 28, 2011, the Phillips Action in the Cook County Court was voluntarily dismissed and, on March 7, 2011, the Pirolli Action in DuPage County Court was voluntarily dismissed.  Accordingly, the remaining cases pending are the Consolidated Action and the Federal Action.

The Consolidated Amended Complaint alleges, among other things, that: (a) the Nicor Board breached its fiduciary duties to Nicor and its shareholders by (i) approving the sale of Nicor to AGL Resources at an inadequate purchase price (and thus failing to maximize value to Nicor shareholders), (ii) conducting an inadequate sale process by agreeing to preclusive deal protection provisions in the Merger Agreement and failing to solicit other potential bids or alternative transactions and (iii) failing to disclose material information regarding the proposed merger to Nicor shareholders; and (b) AGL Resources, Nicor and the acquisition subsidiaries aided and abetted these alleged breaches of fiduciary duty.  The Consolidated Amended Complaint seeks, among other things, declaratory and injunctive relief, including an order enjoining the defendants from consummating the proposed merger.

The Federal Action asserts both individual and purported class claims for breach of fiduciary duty and violations of the federal securities laws.  Among other things, plaintiffs allege that: (i) Nicor and the Nicor board of directors violated Section 14(a) of the Securities and Exchange Act of 1934 (sometimes referred to as the Exchange Act) and Rule 14a-9 promulgated thereunder by issuing a materially incomplete registration statement in connection with the proposed merger; and (ii) the Nicor board of directors violated Section 20(a) of the Exchange Act by virtue of its control over the content and dissemination of that registration statement.  The Federal Action also claims that: (a) the Nicor board of directors breached its fiduciary duties to Nicor and its shareholders by (i) approving the sale of Nicor to AGL Resources at an inadequate price (and thus failing to maximize value to Nicor shareholders), (ii) conducting an inadequate sale process by agreeing to preclusive deal protection provisions in the Merger Agreement and failing to solicit other potential bids or alternative transactions and (iii) failing to disclose material information regarding the proposed merger; and (b) Nicor and AGL Resources aided and abetted the alleged breaches of fiduciary duty.  The Federal Action seeks, among other things, damages and declaratory and injunctive relief, including an order enjoining the defendants from consummating the proposed merger.

On May 25, 2011, solely to avoid the costs, risks and uncertainties inherent in litigation, Nicor and the other named defendants signed a memorandum of understanding with the plaintiffs to settle the Consolidated Action and the Federal Action.  This memorandum of understanding provides, among other things, that the parties will seek to enter into a stipulation of settlement which provides for the release of all asserted claims.  The asserted claims will not be released until such stipulation of settlement is approved by the court.  Additionally, as part of the memorandum of understanding, Nicor and AGL Resources made certain additional disclosures related to the proposed merger.  Finally, in connection with the proposed settlement, plaintiffs intend to seek, and the defendants have agreed to pay, an award of attorneys fees and expenses of $675,000, subject to court approval.

Mercury.  Nicor Gas remains a defendant in several private lawsuits that were filed on August 29, 2000, all in the Circuit Court of Cook County, Illinois, seeking a variety of unquantified damages (including bodily injury and property damages) allegedly caused by mercury spillage resulting from the removal of mercury-containing regulators.  Potential liabilities relating to these claims have been assumed by a contractor’s insurer, subject to certain limitations.  The final disposition of these mercury-related matters is not expected to have a material adverse impact on the company’s liquidity or financial condition.

Manufactured Gas Plant Sites.  Manufactured gas plants were used in the 1800s and early to mid 1900s to produce manufactured gas from coal, creating a coal tar byproduct.  Current environmental laws may require the cleanup of coal tar at certain former manufactured gas plant sites.

Nicor Gas has identified properties for which it may have some responsibility.  Most of these properties are not presently owned by the company.  Nicor Gas and Commonwealth Edison Company (“ComEd”) are parties to an agreement to cooperate in cleaning up residue at many of these properties.  The agreement allocates to Nicor Gas 51.73 percent of cleanup costs for 24 sites, no portion of the cleanup costs for 14 other sites and 50 percent of general remediation program costs that do not relate exclusively to particular sites.  Information regarding preliminary site reviews has been presented to the Illinois Environmental Protection Agency for certain properties.  More detailed investigations and remedial activities are complete, in progress or planned at many of these sites.  The results of the detailed site-by-site investigations will determine the extent additional remediation is necessary and provide a basis for estimating additional future costs.  

In April 2002, Nicor Gas was named as a defendant, together with ComEd, in a lawsuit brought by the Metropolitan Water Reclamation District of Greater Chicago (the “MWRDGC”) under the Federal Comprehensive Environmental Response, Compensation and Liability Act seeking recovery of past and future remediation costs and a declaration of the level of appropriate cleanup for a former manufactured gas plant site in Skokie, Illinois now owned by the MWRDGC.  In January 2003, the suit was amended to include a claim under the Federal Resource Conservation and Recovery Act.  The suit was filed in the United States District Court for the Northern District of Illinois.  In September 2011, Nicor Gas and ComEd entered into a settlement with the MWRDGC addressing the appropriate level of cleanup for this former manufactured gas plant site and the lawsuit has been dismissed.

As of September 30, 2011, the company had recorded a liability in connection with these matters of $52.7 million.  In accordance with ICC authorization, the company has been recovering, and expects to continue to recover, these costs from its customers.  Since costs and recoveries relating to the cleanup of manufactured gas plant sites are passed directly through to customers, subject to an annual ICC prudence review, the final disposition of manufactured gas plant matters is not expected to have a material impact on the company’s financial condition or results of operations.

Municipal Tax Matters.  Many municipalities in Nicor Gas’ service territory have enacted ordinances that impose taxes on gas sales to customers within municipal boundaries.  Most of these municipal taxes are imposed on Nicor Gas based on revenues generated by Nicor Gas within the municipality.  Other municipal taxes are imposed on natural gas consumers within the municipality but are collected from consumers and remitted to the municipality by Nicor Gas.  A number of municipalities have instituted audits of Nicor Gas’ tax remittances.  In May 2007, five of those municipalities filed an action against Nicor Gas in state court in DuPage County, Illinois relating to these tax audits.  Following a dismissal of this action without prejudice by the trial court, the municipalities filed an amended complaint.  The amended complaint seeks, among other things, compensation for alleged unpaid taxes.  Nicor Gas is contesting the claims in the amended complaint.  In December 2007, 25 additional municipalities, all represented by the same audit firm involved in the lawsuit, issued assessments to Nicor Gas claiming that it failed to provide information requested by the audit firm and owed the municipalities back taxes.  Nicor Gas believes the assessments are improper and has challenged them.  While the company is unable to predict the outcome of these matters or to reasonably estimate its potential exposure related thereto, if any, and has not recorded a liability associated with this contingency, the final disposition of these matters is not expected to have a material adverse impact on the company’s liquidity or financial condition.

Nicor Services Warranty Product Actions.  In the first quarter of 2011, three putative class actions were filed against Nicor Services and Nicor Gas, and in one case against Nicor.  In September 2011, the three cases were consolidated into a single class action pending in state court in Cook County, Illinois.  The plaintiffs purport to represent a class of customers of Nicor Gas who purchased appliance warranty and service plans from Nicor Services and/or a class of customers of Nicor Gas who purchased the Gas Line Comfort Guard product from Nicor Services.  In the consolidated action, the plaintiffs variously allege that the marketing, sale and billing of the Nicor Services appliance warranty and service plans and Gas Line Comfort Guard violate the Illinois Consumer Fraud and Deceptive Business Practices Act, constitute common law fraud and result in unjust enrichment of Nicor Gas and Nicor Services.  The plaintiffs seek, on behalf of the classes they purport to represent, actual and punitive damages, interest, costs, attorneys fees and injunctive relief.  While the company is unable to predict the outcome of this matter or to reasonably estimate its potential exposure related thereto, if any, and has not recorded a liability associated with this contingency, the final disposition of this matter is not expected to have a material adverse impact on the company’s liquidity or financial condition.

Other.  In addition to the matters set forth above, the company is involved in legal or administrative proceedings before various courts and agencies with respect to general claims, taxes, environmental, gas cost prudence reviews and other matters.  Although unable to determine the ultimate outcome of these other contingencies, management believes that these amounts are appropriately reflected in the financial statements, including the recording of appropriate liabilities when reasonably estimable.

EX-99.4

Exhibit 99.4

UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED FINANCIAL INFORMATION

The Unaudited Pro Forma Condensed Combined Consolidated Financial Statements (sometimes referred to as pro forma financial statements) have been derived from the historical consolidated financial statements of AGL Resources Inc. (AGL Resources) and Nicor Inc. (Nicor).

The Unaudited Pro Forma Condensed Combined Consolidated Statements of Income (sometimes referred to as pro forma statements of income) for the nine months ended September 30, 2011, and for the year ended December 31, 2010, give effect to the merger as if it were completed on January 1, 2010. The Unaudited Pro Forma Condensed Combined Statement of Financial Position (sometimes referred to as pro forma balance sheet) as of September 30, 2011, gives effect to the merger as if it were completed on September 30, 2011.

The historical consolidated financial information has been adjusted in the pro forma financial statements to give effect to pro forma events that are: (i) directly attributable to the merger; (ii) factually supportable; and (iii) with respect to the pro forma statements of income, expected to have a continuing impact on the combined results of AGL Resources and Nicor. As such, the impact from merger-related expenses is not included in the accompanying pro forma statements of income. However, the impact of these expenses is reflected in the pro forma balance sheet as a decrease to retained earnings. Further, the pro forma financial statements do not reflect any cost savings (or associated costs to achieve such savings) from operating efficiencies, synergies or other restructuring that could result from the merger.

The acquisition of Nicor common stock by AGL Resources in the merger will be accounted for in accordance with the acquisition method of accounting and the regulations of the SEC. The final purchase price will be computed using (i) Nicor’s outstanding shares immediately prior to the effective time of the merger, and the market value of AGL Resources’ common stock issued in connection with the merger based on the volume-weighted average price of AGL Resources’ common stock the business day immediately preceding the effective time of the merger, (ii) the cost of debt issued based on Nicor’s outstanding shares immediately preceding the effective time of the merger and the commitment to pay cash of $21.20 per Nicor common share and (iii) the cash payment to settle shares outstanding under Nicor’s stock compensation plans.

Assumptions and estimates underlying the pro forma adjustments are described in the accompanying notes, which should be read in connection with the pro forma financial statements. Since the pro forma financial statements have been prepared based on preliminary estimates, the final amounts recorded may differ materially from the information presented. These estimates are subject to change pending further review of the assets acquired and liabilities assumed.

The pro forma financial statements have been presented for illustrative purposes only and are not necessarily indicative of results of operations and financial position that would have been achieved had the pro forma events taken place on the dates indicated, or the future consolidated results of operations or financial position of the combined company.

The following pro forma financial statements should be read in conjunction with:

·   The accompanying notes to the Unaudited Pro Forma Condensed Combined Consolidated Financial Statements;

·   The consolidated financial statements of AGL Resources as of and for the year ended December 31, 2010, included in AGL Resources’ Form 10-K;

·   The unaudited condensed consolidated interim financial statements of AGL Resources as of and for the nine months ended September 30, 2011, included in AGL Resources’ Form 10-Q;

·   The consolidated financial statements of Nicor as of and for the year ended December 31, 2010, included in Nicor’s Form 10-K;

·   The unaudited condensed consolidated interim financial statements of Nicor as of and for the nine months ended September 30, 2011, included in Nicor’s Form 10-Q;

·   Information contained in, or incorporated by reference in our joint proxy statement/prospectus filed with the SEC on April 28, 2011.

AGL RESOURCES INC. AND NICOR INC.

UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED STATEMENT OF INCOME

For the Nine Months Ended September 30, 2011

	AGL				Pro Forma			Pro Forma
	Resources		Nicor (a)		Adjustments			Combined
	(In millions, except per share amounts)
OPERATING REVENUES	$	1,548	$	1,862	$	-		$	3,410
OPERATING EXPENSES:
Cost of gas		701		944		-			1,645
Operation and maintenance		363		502		(29)	(b)		836
Depreciation and amortization		126		155		9	(c)		290
Taxes other than income taxes		36		142		-			178
Total operating expenses		1,226		1,743		(20)			2,949
OPERATING INCOME		322		119		20			461
Interest expense		(92)		(24)		(24)	(d)		(140)
Other income		4		13		-			17
INCOME BEFORE INCOME TAXES		234		108		(4)			338
INCOME TAXES		85		38		(2)	(e)		121
NET INCOME		149		70		(2)			217
Less: net income attributable to the noncontrolling interest		10		-		-			10
NET INCOME ATTRIBUTABLE TO PARENT	$	139	$	70	$	(2)		$	207
BASIC EARNINGS PER SHARE OF COMMON STOCK	$	1.79	$	1.52				$	1.78
WEIGHTED-AVERAGE NUMBER OF BASIC SHARES OUTSTANDING		77.9		45.9		(7.8)	(f)		116.0
DILUTED EARNINGS PER SHARE OF COMMON STOCK	$	1.78	$	1.52				$	1.78
WEIGHTED-AVERAGE NUMBER OF DILUTED SHARES OUTSTANDING		78.4		45.9		(7.8)	(f)		116.5

See accompanying Notes to the Pro Forma Condensed Combined Consolidated Financial Statements, which are an integral part of these statements.

AGL RESOURCES INC. AND NICOR INC.

UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED STATEMENT OF INCOME

For the Year Ended December 31, 2010

	AGL				Pro Forma			Pro Forma
	Resources		Nicor (a)		Adjustments			Combined
	(In millions, except per share amounts)
OPERATING REVENUES	$	2,373	$	2,710	$	-		$	5,083
Cost of gas		1,164		1,406		-			2,570
Operation and maintenance		503		692		(10)	(b)		1,185
Depreciation and amortization		160		203		12	(c)		375
Taxes other than income taxes		46		173		-			219
Total operating expenses		1,873		2,474		2			4,349
OPERATING INCOME		500		236		(2)			734
Interest expense		(109)		(37)		(40)	(d)		(186)
Other (loss) income		(1)		9		-			8
INCOME BEFORE INCOME TAXES		390		208		(42)			556
INCOME TAXES		140		70		(10)	(e)		200
NET INCOME		250		138		(32)			356
Less: net income attributable to the noncontrolling interest		16		-		-			16
NET INCOME ATTRIBUTABLE TO PARENT	$	234	$	138	$	(32)		$	340
BASIC EARNINGS PER SHARE OF COMMON STOCK	$	3.02	$	3.02				$	2.94
WEIGHTED-AVERAGE NUMBER OF BASIC SHARES OUTSTANDING		77.4		45.7		(7.6)	(f)		115.5
DILUTED EARNINGS PER SHARE OF COMMON STOCK	$	3.00	$	3.02				$	2.93
WEIGHTED-AVERAGE NUMBER OF DILUTED SHARES OUTSTANDING		77.8		45.7		(7.6)	(f)		115.9

See accompanying Notes to the Pro Forma Condensed Combined Consolidated Financial Statements, which are an integral part of these statements.

AGL RESOURCES INC. AND NICOR INC.

UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As of September 30, 2011

	AGL				Pro Forma			Pro Forma
	Resources		Nicor (a)		Adjustments			Combined
			(In millions)
ASSETS
Current Assets:
Cash and cash equivalents	$	165	$	42	$	(145)	(l)	$	62
Total receivables, net of allowance		639		232		-			871
Inventories, net		635		240		-			875
Derivative financial instruments		148		50		-			198
Recoverable regulatory assets		85		49		-			134
Other current assets		129		175		-			304
		1,801		788		(145)			2,444
Property, plant and equipment, net		4,635		3,106		6	(g)		7,747
Goodwill		418		27		1,322	(h)		1,767
Recoverable regulatory assets		529		247		121	(i)		897
Derivative financial instruments		38		12		-			50
Other		38		230		161	(j)		429
	$	7,459	$	4,410	$	1,465		$	13,334
LIABILITIES AND EQUITY
Current Liabilities:
Short-term debt	$	2	$	313	$	578	(l)	$	893
Accounts payable		710		253		-			963
Current portion of long-term debt		15		-		-			15
Accrued expenses		87		70		36	(k)		193
Derivative financial instruments		45		80		-			125
Accrued regulatory liabilities		174		46		-			220
Other current liabilities		107		162		-			269
		1,140		924		614			2,678
Long-term debt		2,687		499		396	(l)		3,582
Accumulated deferred income taxes		895		437		61	(m)		1,393
Accrued regulatory liabilities		592		910		-			1,502
Accrued pension and postretirement expenses		180		233		-			413
Derivative financial instruments		14		7		-			21
Other long-term liabilities and other deferred credits		70		298		-			368
		4,438		2,384		457			7,279
Equity:
Common shareholders’ equity		1,864		1,102		394	(n)		3,360
Noncontrolling interest		17		-		-			17
		1,881		1,102		394			3,377
	$	7,459	$	4,410	$	1,465		$	13,334

See accompanying Notes to the Pro Forma Condensed Combined Consolidated Financial Statements, which are an integral part of these statements.

NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Basis of Pro Forma Presentation

The pro forma statements of income for the nine months ended September 30, 2011, and for the year ended December 31, 2010, give effect to the merger as if it were completed on January 1, 2010. The pro forma statement of financial position as of September 30, 2011, gives effect to the merger as if it were completed on September 30, 2011.

The pro forma financial statements have been derived from the historical consolidated financial statements of AGL Resources and Nicor. Assumptions and estimates underlying the pro forma adjustments are described in the accompanying notes, which should be read in conjunction with the pro forma financial statements. Since the pro forma financial statements have been prepared based upon preliminary estimates, the final amounts recorded may differ materially from the information presented. These estimates are subject to change pending further review of the assets acquired and liabilities assumed.

The merger is reflected in the pro forma financial statements as being accounted for based on the guidance provided by Accounting Standards Codification (ASC) 805 (sometimes referred to as ASC 805), Business Combinations. Under the acquisition method, the preliminary purchase price is calculated as described in Note 2 to the pro forma financial statements. In accordance with ASC 805, the assets acquired, and the liabilities assumed, have been measured at fair value. The fair value measurements utilize estimates based on key assumptions of the merger, including prior acquisition experience, benchmarking of similar acquisitions and historical and current market data. The pro forma adjustments included herein may be revised as additional information becomes available and as additional analyses are performed. The final purchase price allocation may differ materially from the information presented.

Estimated transaction costs have been excluded from the pro forma statements of income as they reflect non-recurring charges directly related to the merger. However, the anticipated transaction costs are reflected in the pro forma balance sheet, as an adjustment to accrued expenses and a reduction to retained earnings. Further, the pro forma financial statements do not reflect any cost savings (or associated costs to achieve such savings) from operating efficiencies, synergies or other restructuring that could result from the merger.

For the purpose of measuring the estimated fair value of the assets acquired and liabilities assumed, as reflected in the pro forma financial statements, AGL Resources has applied ASC 820, Fair Value Measurements and Disclosures, which defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Note 2.   Preliminary Purchase Price

AGL Resources acquired all of the outstanding shares of Nicor’s common stock. The preliminary purchase price for the merger is as follows:

Cost of equity issued
Nicor shares outstanding at December 9, 2011 (millions)		45.5
Exchange ratio		0.8382
Number of shares of AGL Resources issued (millions)		38.1
Volume-weighted average price of AGL Resources common stock on December 8, 2011	$	39.90
Cost of equity issued (millions)	$	1,520
Cash payment for shares outstanding
Nicor shares outstanding at December 9, 2011  (millions)		45.5
Cash payment per share of Nicor common stock	$	21.20
Cash payment for Nicor shares outstanding (millions)	$	965
Additional shares outstanding under Nicor’s stock compensation plans granted prior to the execution of the merger agreement (millions)		0.6
Cash payment per additional Nicor share outstanding (millions)	$	54.64
Cost to settle additional Nicor shares outstanding (millions)	$	33
Total cash payment for shares outstanding (millions)	$	998
Total preliminary purchase price (millions)	$	2,518

The preliminary purchase price was computed using (i) Nicor’s shares outstanding immediately prior to the effective time of the merger and the market value of AGL Resources’ common stock issued in connection with the merger based on the volume-weighted average price of AGL Resources’ common stock on December 8, 2011, (ii) the cost of debt issued based on Nicor’s shares outstanding immediately preceding the effective time of the merger and the commitment to pay cash of $21.20 per Nicor common share and (iii) the cash payment to settle the additional shares outstanding under Nicor’s stock compensation plans. The cash payment per additional share was calculated based on the exchange ratio multiplied by the volume-weighted average price of AGL Resources common stock on December 8, 2011, plus $21.20.

Note 3. Pro Forma Adjustments

The pro forma adjustments included in the pro forma financial statements are as follows:

Adjustments to Pro Forma Financial Statements

(a) AGL Resources and Nicor historical presentation — Based on the amounts reported in the Consolidated Statements of Income and Statements of Financial Position of AGL Resources and Nicor, certain financial line items included in Nicor’s historical presentation have been reclassified to corresponding line items included in AGL Resources’ historical presentation. These reclassifications have no material impact on the historical operating income, net income, earnings available to parent, total assets, liabilities or shareholder’s equity reported by AGL Resources or Nicor.

Additionally, based on AGL Resources’ review of Nicor’s summary of significant accounting policies disclosed in Nicor’s financial statements and preliminary discussions with Nicor management, the nature and amount of any adjustments to the historical financial statements of Nicor to conform its accounting policies to those of AGL Resources are not expected to be material. Further review of Nicor’s accounting policies and financial statements may result in revisions to Nicor’s policies and classifications to conform to AGL Resources, some of which may be material.

The allocation of the preliminary purchase price to the fair values of assets acquired and liabilities assumed includes pro forma adjustments for the fair value of Nicor’s assets and liabilities. The final allocation of the purchase price could differ materially from the preliminary allocation used for the Unaudited Pro Forma Condensed Combined Consolidated Statement of Financial Position. The allocation of the preliminary purchase price is as follows (in millions):

Current assets	$	788
Property, plant and equipment		3,112
Goodwill		1,349
Other noncurrent assets, excluding goodwill		769
Current liabilities		(934	)
Noncurrent liabilities		(2,566	)
Preliminary purchase price	$	2,518

Adjustments to Pro Forma Condensed Combined Consolidated Statements of Income

(b) Operation and maintenance — Represents a decrease in operation and maintenance expense by removing the non-recurring transaction costs incurred by AGL Resources and Nicor through September 30, 2011, and December 31, 2010.

(c) Provision for depreciation and amortization, net — Represents the net incremental depreciation expense and incremental amortization of identified intangibles resulting from the pro forma fair value adjustments to Nicor’s unregulated property, plant and equipment and intangible assets. The estimates are preliminary, subject to change and could vary materially from the actual adjustment.

(d) Interest expense — Represents an increase in interest expense as the result of AGL Resources’ debt issuances to make a cash payment of $998 million to fund the requirement to pay $21.20 for each outstanding common share of Nicor and to settle the additional shares outstanding under Nicor’s stock compensation plans.

(e) Income taxes — Represents the adjustment to the income tax expense to reflect a combined consolidated estimated statutory income tax rate of 37%.

(f) Shares outstanding — Reflects the elimination of Nicor’s common stock offset by issuance of approximately 38.1 million shares of AGL Resources common stock. This share issuance does not consider that fractional shares will be paid in cash. The pro forma weighted-average number of basic shares outstanding is calculated by adding AGL Resources’ weighted-average number of basic shares of common stock outstanding for the nine months ended September 30, 2011, and the year ended December 31, 2010, to the number of AGL Resources’ shares issued as a result of the merger. The pro forma weighted-average number of diluted shares outstanding is calculated by adding AGL Resources’ weighted-average number of diluted shares of common stock outstanding for the nine months ended September 30, 2011, and the year ended December 31, 2010, to the number of AGL Resources’ shares issued as a result of the merger.

	Nine Months Ended September 30, 2011		Year Ended December 31, 2010
Basic (millions):
AGL Resources weighted-average number of basic shares outstanding		77.9		77.4
Equivalent Nicor common shares after exchange		38.1		38.1
		116.0		115.5
Diluted (millions):
AGL Resources weighted-average number of diluted shares outstanding		78.4		77.8
Equivalent Nicor common shares after exchange		38.1		38.1
		116.5		115.9

Adjustments to Pro Forma Condensed Combined Consolidated Balance Sheet

(g) Property, Plant and Equipment — Reflects a $6 million increase to record Nicor’s unregulated property, plant and equipment to the estimated fair value. The estimate is preliminary, subject to change and could vary materially from the actual adjustment.

(h) Goodwill — Reflects the preliminary estimate of the excess of the purchase price paid over the fair value of Nicor’s assets acquired and liabilities assumed. The preliminary purchase price of the transaction, based on the volume-weighted average price of AGL Resources common stock on the NYSE on December 8, 2011, and the excess purchase price over the fair value of the assets acquired and liabilities assumed is calculated as follows (in millions):

Preliminary purchase price	$	2,518
Less: Fair value of net assets acquired		1,169
Less: Nicor existing goodwill		27
Pro forma goodwill adjustment	$	1,322

(i) Regulatory assets — Represents the estimated fair value adjustment of $121 million, based on prevailing market prices at September 30, 2011, associated with AGL Resources assuming Nicor’s debt.

(j) Other assets — Represents (i) the estimated fair value adjustment of $146 million associated with customer relationships and trade names of Nicor, (ii) the estimated fair value adjustment of $13 million related to investments in equity method joint ventures and (iii) the estimated debt issuance costs of $2 million. The customer relationships and trade names are expected to be amortized on a straight-line basis over their estimated remaining useful lives, while the debt issuance costs are expected to be amortized on a straight-line basis over the lives of the various debt instruments. The estimated lives of these assets are as follows:

Asset	Amortization Period
Customer relationships	15 years
Trade names	5 – 19 years
Debt issuance costs	5 – 30 years

(k) Accrued expenses — Reflects the accrual for estimated non-recurring transaction costs of $41 million to be incurred after September 30, 2011, partially offset by the current portion of income tax expense of $5 million.

(l) Debt — In connection with the merger agreement, AGL Resources assumed all of Nicor’s outstanding debt. The pro forma adjustment to short-term debt reflects the re-issuance of $700 million of commercial paper which was previously repaid as a result of our 2011 debt financings and $23 million of commercial paper borrowings necessary to complete the payment of the cash portion of the purchase consideration, less the $145 million adjustment to reduce AGL Resources’ cash balance to an amount that would have been  maintained if the merger-related financing was not secured prior to the balance sheet date. The pro forma adjustment to long-term debt reflects the issuance of $975 million of debt by AGL Resources, less approximately $700 million that had been secured as of September 30, 2011 that was used to help finance the merger, and the fair value adjustment of Nicor’s debt based on prevailing market prices at September 30, 2011 of $121 million. Subsequent to September 30, 2011, AGL Resources completed an issuance of $275 million in senior unsecured notes with various institutional investors in the private placement market.

(m) Accumulated deferred income taxes — Represents the estimated deferred tax liability, based on AGL Resources’ estimated post-merger composite statutory tax rate of 37% multiplied by the fair value adjustments recorded to the assets acquired and liabilities assumed, excluding goodwill. This estimated tax rate is different from AGL Resources’ effective tax rate for the nine months ended September 30, 2011, which includes other tax charges or benefits, and does not take into account any historical or possible future tax events that may impact the combined company.

(n) Equity — The pro forma balance sheet reflects the elimination of Nicor’s historical equity balance, recognition of additional 38.1 million AGL Resources common shares issued and adjustment to reduce retained earnings by $24 million (net of tax) for the remaining estimated non-recurring transaction costs. These transaction costs are shown as an adjustment to retained earnings to reflect the impact of accounting guidance applicable to business combinations, which requires that these costs be expensed. Estimated transaction costs have been excluded from the pro forma income statements as they reflect non-recurring charges directly related to the merger.