Exhibit 10.1

 

NOLAND COMPANY

 

EXECUTIVE SEVERANCE PAY PLAN

 

AND SUMMARY PLAN DESCRIPTION

 

Effective April 1, 2005

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NOLAND COMPANY

EXECUTIVE SEVERANCE PAY PLAN

 

TABLE OF CONTENTS

 

INTRODUCTION

 

ARTICLE I

   DEFINITIONS    I-1     1.01    Accrued Obligations    I-1     1.02   
Administrator    I-1     1.03    Advisor    I-1     1.04    Board    I-1    
1.05    Cause    I-1     1.06    Change of Control    I-2     1.07    Change of
Control Date    I-3     1.08    Code    I-3     1.09    Committee    I-4    
1.10    Company    I-4     1.11    Disability    I-4     1.12    Disability
Effective Date    I-4     1.13    Effective Date    I-4     1.14    ERISA    I-4
    1.15    Executive    I-4     1.16    Excise Tax    I-5     1.17    Fiduciary
   I-5     1.18    Good Reason    I-5     1.19    Named Fiduciary    I-5    
1.20    Notice of Termination    I-6     1.21    Other Benefits    I-6     1.22
   Participant    I-6     1.23    Payment    I-6     1.24    Pension Plan    I-6
    1.25    Plan    I-6     1.26    Plan Year    I-6     1.27    Protection
Period    I-7     1.28    Separation Date    I-7     1.29    Severance Benefit
   I-7     1.30    Severance Multiple    I-7

ARTICLE II

   Participation    II-1     2.01    Eligibility Requirements    II-1

ARTICLE III

   BENEFITS    III-1     3.01    Severance Benefit    III-1

 

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     3.02    Other Benefits    III-1      3.03    Limitation on Payments   
III-2      3.04    Offsets to Severance Benefits    III-2      3.05   
Termination for Death, Disability, Cause, or other than Good Reason.    III-3

ARTICLE IV

   amendment and termination    IV-1      4.01    Amendment    IV-1      4.02   
Termination    IV-1

ARTICLE V

   Administration    V-1      5.01    Named Fiduciaries, Allocation of
Responsibility    V-1      5.02    Assignment of Administrative Authority    V-1
     5.03    Administrator Powers and Duties    V-2      5.04    Discretion of
Administrator    V-2      5.05    Organization and Operation of any Committee   
V-2      5.06    Records and Reports    V-3      5.07    Payment of Expenses   
V-3      5.08    Limitation of Liability    V-3      5.09    Claims Procedure   
V-4

ARTICLE VI

   General Provisions    VI-1      6.01    Construction    VI-1      6.02   
Governing Law    VI-1      6.03    Plan Creates No Separate Rights    VI-1     
6.04    Non-Alienation of Benefits    VI-1      6.05    Action by Corporation   
VI-2      6.06    Non-Exclusivity Of Rights    VI-2      6.07    Full Settlement
   VI-2      6.08    Confidential Information    VI-2      6.09    Arbitration
   VI-3      6.10    Notices    VI-3

 

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NOLAND COMPANY

EXECUTIVE SEVERANCE PAY PLAN

 

INTRODUCTION

 

The Noland Company Executive Severance Pay Plan (the “Plan”) is effective April
1, 2005. The Plan provides severance or income protection benefits to Executives
who are designated as Participants by the Compensation Committee of the Board of
Directors of Noland Company (the “Committee,” “Board,” or “Company,” as
applicable) pursuant to the Plan.

 

The Board has determined that it is in the best interests of the Company and its
shareholders to assure that the Company will have the continued dedication of
the Executives who have been designated as Participants, notwithstanding the
possibility, threat or occurrence of a Change of Control. The Board believes it
is imperative to diminish the inevitable distraction of the Participants by
virtue of the personal uncertainties and risks created by a pending or
threatened Change of Control and to encourage Participants’ full attention and
dedication to the Company currently and in the event of any threatened or
pending Change of Control, and to provide the Participants with severance or
income protection and other benefits upon a Change of Control which ensure that
the compensation and benefits afforded Participants will protect their standard
of living for a reasonable period of time and which are competitive with those
of other corporations. In order to accomplish these objectives, the Board has
caused the Company to adopt this Plan.

 

The Plan is intended to be a “welfare plan,” but not a “pension plan,” as
defined in ERISA sections 3(1) and 3(2), respectively. The Plan must be
interpreted and administered in a manner that is consistent with that intent.
Benefits provided hereunder are in lieu of benefits otherwise provided
Participants under the Noland Company Severance Pay Policy revised September 1,
1993 (the “Policy”). To the extent there is any confusion regarding the tandem
application of the Plan and Policy, any benefits which become payable hereunder
shall be reduced by any benefits paid pursuant to the Policy.

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NOLAND COMPANY

EXECUTIVE SEVERANCE PAY PLAN

 

ARTICLE I

 

DEFINITIONS

 

1.01 Accrued Obligations

 

Accrued Obligations means the sum of, in each case to the extent not theretofore
paid, (a) a Participant’s annualized base salary through the Separation Date;
(b) any annual bonus payable by the Company with respect to the full calendar
year prior to the calendar year in which a Participant’s Separation Date occurs;
(c) the product of (i) a Participant’s most recently established target annual
bonus (annualized for any calendar year consisting of less than twelve full
months or during which the Participant was employed for less than twelve full
months) and (ii) a fraction, the numerator of which is the number of days in the
calendar year through the Separation Date, and the denominator of which is 365;
and (d) any accrued vacation pay.

 

1.02 Administrator

 

Administrator means the person or committee appointed by the Company according
to Plan Article V.

 

1.03 Advisor

 

Advisor has the meaning specified in Plan section 3.03(b).

 

1.04 Board

 

Board means the Company’s board of directors.

 

1.05 Cause

 

Cause means:

 

(a) the willful and continued failure of a Participant to perform substantially
the Participant’s duties with the Company or one of its affiliates (other than
any such failure resulting from incapacity due to physical or mental illness),
after a written demand for substantial performance is delivered to the
Participant by the Board, in the case of the Chief Executive Officer, or by the
Chief Executive Officer of the Company, in the case of any other Participant,
which specifically identifies the manner in which the Board or Chief Executive
Officer believes that the Participant has not substantially performed the
Participant’s duties, or

 

(b) the willful engaging by the Participant in illegal conduct or gross
misconduct which is materially and demonstrably injurious to the Company or its
reputation.

 

For purposes of this definition, no act or failure to act, on the part of a
Participant, will be considered “willful” unless it is done, or omitted to be
done, by the Participant in bad faith or

 

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without reasonable belief that the Participant’s act or omission was in the best
interests of the Company. Any act, or failure to act, based upon authority given
pursuant to a resolution duly adopted by the Board or upon the instructions of
the Chief Executive Officer or a senior officer of the Company or based upon the
advice of counsel for the Company shall be conclusively presumed to be done, or
omitted to be done, by the Participant in good faith and in the best interests
of the Company. The cessation of employment of the Participant shall not be
deemed to be for Cause unless and until there shall have been delivered to the
Participant a copy of a resolution duly adopted by the affirmative vote of not
less than three-quarters of the entire membership of the Board at a meeting of
the Board called and held for such purpose (after reasonable notice is provided
to the Participant and the Participant is given an opportunity, together with
counsel, to be heard before the Board), finding that, in the good faith opinion
of the Board, the Participant is guilty of the conduct described in subparagraph
(a) or (b) above, and specifying the particulars thereof in detail.

 

1.06 Change of Control

 

Change of Control means:

 

(a) Reduction in Noland Entities Holdings. The consummation of a transaction
which results in Lloyd U. Noland, Jr. and Lloyd U. Noland, III, and their
affiliates (including members of their immediate families and entities owned or
controlled by any or all of them) (the “Noland Entities”) owning less than 51%
of (i) the then outstanding shares of common stock of the Company (the
“Outstanding Company Common Stock”) or (ii) the combined voting power of the
then outstanding voting securities of the Company entitled to vote generally in
the election of directors (the “Outstanding Company Voting Securities”); or

 

(b) Board Composition. Individuals who, as of April 1, 2005, constitute the
Board (the “Incumbent Board”) cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual becoming a
director subsequent to such date whose election, or nomination for election by
the Company’s shareholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or

 

(c) Business Combination. Consummation of a reorganization, merger or
consolidation or sale or other disposition of all or substantially all of the
assets of the Company (a “Business Combination”), unless, following such
Business Combination:

 

  (i) all or substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to such Business
Combination beneficially own, directly or indirectly, more

 

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than 51% of, respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Company or all or
substantially all of the assets of the Company either directly or through one or
more subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination of the Outstanding Company Common
Stock and Outstanding Company Voting Securities, as the case may be;

 

  (ii) no Person (excluding the Noland Entities, any corporation resulting from
such Business Combination or any employee benefit plan (or related trust) of the
Company or such corporation resulting from such Business Combination)
beneficially owns, directly or indirectly, 30% or more of, respectively, the
then outstanding shares of common stock of the corporation resulting from such
Business Combination or the combined voting power of the then outstanding voting
securities of such corporation except to the extent that such ownership existed
prior to the Business Combination; and

 

  (iii) at least a majority of the members of the board of directors of the
corporation resulting from such Business Combination were members of the
Incumbent Board at the time of the execution of the initial agreement, or of the
action of the Board, providing for such Business Combination.

 

1.07 Change of Control Date

 

Change of Control Date means the first date after the Effective Date on which a
Change of Control occurs. Anything in this Plan to the contrary notwithstanding,
if a Change of Control occurs, and (i) a Participant’s employment with the
Company is terminated by the Company without Cause or (ii) a Participant ceases
to be an officer of or loses his or her position with the Company in either case
prior to the date on which the Change of Control occurs, and if it is reasonably
demonstrated by the Participant that such termination of employment or cessation
of status as an officer or loss of position (i) was at the request of a third
party who has taken steps reasonably calculated to effect such Change of Control
or (ii) otherwise arose in connection with or anticipation of such Change of
Control, then, in each such case, for all purposes of this Agreement “Change of
Control Date” shall mean the date immediately prior to the date of such
termination of employment or cessation of status as an officer or loss of
position.

 

1.08 Code

 

Code means the Internal Revenue Code of 1986, as amended, at any relevant time.

 

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1.09 Committee

 

Committee means the Compensation Committee of the Board.

 

1.10 Company

 

Company means Noland Company.

 

1.11 Disability

 

Disability means the absence of a Participant from the Participant’s duties with
the Company on a full-time basis for 180 consecutive business days as a result
of incapacity due to mental or physical illness which is determined to be total
and permanent by a physician selected by the Company or its insurers and
acceptable to the Participant or the Participant’s legal representative.
Participants shall cooperate with the Company and the selected physician so that
such determination can be made.

 

1.12 Disability Effective Date

 

Disability Effective Date means the 30th day after a Participant receives
written notice, given in accordance with Plan section 6.11, that the Company
intends to terminate the Participant’s employment on account of a determination
made be the Company in good faith that the Disability of the Participant has
occurred during the Protection Period (pursuant to the Plan’s definition of
Disability), provided that, within the 30 days after receipt of such notice, the
Participant has not returned to full-time performance of the Participant’s
duties.

 

1.13 Effective Date

 

Effective Date means April 1, 2005.

 

1.14 ERISA

 

ERISA means the Employee Retirement Income Security Act of 1974, as amended, at
any relevant time.

 

1.15 Executive

 

Executive means an individual who renders personal services to the Company as an
executive officer or critical employee, and who, in accordance with the
Company’s established payroll accounting and personnel policies is characterized
as a regular full-time employee subject to the control of the Company. An
individual who is in an employer-employee relationship with a Company as
determined for Federal Insurance Contribution Act purposes and Federal
Employment Tax purposes, including Code section 3401(c), automatically satisfies
the preceding sentence’s requirements for determinations of whether that
individual renders personal services and is subject to the control of a Company.

 

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EXECUTIVE SEVERANCE PAY PLAN

 

1.16 Excise Tax

 

Excise Tax means the excise tax imposed by Section 4999 of the Code including
any interest or penalties incurred by the Participant with respect to such
excise tax.

 

1.17 Fiduciary

 

Fiduciary means a fiduciary, as defined in ERISA section 3(21)(A).

 

1.18 Good Reason

 

Good Reason means:

 

(a) the assignment to a Participant of any duties inconsistent in any respect
with the Participant’s position (including status, offices, titles and reporting
requirements), authority, duties or responsibilities, or any other diminution in
such position, authority, duties or responsibilities, excluding for this purpose
an isolated, insubstantial and inadvertent action not taken in bad faith and
which is remedied by the Company promptly after receipt of written notice
thereof given by the Participant to the Company’s Chief Executive Officer, or,
in the case of the Chief Executive Officer, to the Committee;

 

(b) any reduction in a Participant’s pay or benefits, other than an isolated,
insubstantial and inadvertent reduction not occurring in bad faith and which is
remedied by the Company promptly after receipt of written notice thereof given
by the Participant to the Company’s Chief Executive Officer, or, in the case of
the Chief Executive Officer, to the Committee;

 

(c) the Company’s requiring a Participant to be based at any office or location
that is more than 35 miles from where the Participant was employed immediately
preceding the effective date, without the Participant’s prior consent.

 

(d) any purported termination by the Company of the Participant’s employment
otherwise than as expressly permitted under the Plan; or

 

(e) any failure by the Company to require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume this Plan.

 

1.19 Named Fiduciary

 

Named Fiduciary means a named fiduciary, as defined in ERISA section 402(a)(2).

 

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EXECUTIVE SEVERANCE PAY PLAN

 

1.20 Notice of Termination

 

Notice of Termination means a written notice which (i) indicates the specific
termination provision in this Plan relied upon, (ii) to the extent applicable,
sets forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of a Participant’s employment under the provision so
indicated, and (iii) if the Separation Date is other than the date of receipt of
such notice, specifies the termination date (which date shall be not more than
thirty days after the giving of such notice). The rights of a Participant under
the Plan shall not be adversely affected by virtue of the Company’s failure to
provide Notice of Termination.

 

1.21 Other Benefits

 

Other Benefits means, to the extent not theretofore paid or provided, any other
amounts or benefits required to be paid or provided or which a Participant is
eligible to receive under any employee welfare or pension plan, program, policy
or practice or contract or agreement of the Company and its affiliated
companies, including earned but unpaid stock and similar compensation. Such
amounts shall be paid in accordance with the terms of the applicable plan,
program, policy, practice, contract, or agreement.

 

1.22 Participant

 

Participant means an Executive who has been designated by the Committee to
participate in the Plan, in accordance with Plan Article II.

 

1.23 Payment

 

Payment means any payment or distribution by the Company to or for the benefit
of a Participant (whether paid or payable or distributed or distributable
pursuant to the terms of this Plan or otherwise, but determined without regard
to any additional payments required under Plan section 3.03).

 

1.24 Pension Plan

 

Pension Plan means the Improved Retirement Plan for Employees of Noland Company.

 

1.25 Plan

 

Plan means the Noland Company Executive Severance Pay Plan.

 

1.26 Plan Year

 

Plan Year means the 12-month period that is the Company’s tax year.

 

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EXECUTIVE SEVERANCE PAY PLAN

 

1.27 Protection Period

 

Protection Period means the number of consecutive months of protection awarded a
Participant, which shall commence on a Change of Control Date, provided,
however, that the Protection Period may not extend beyond the Participant’s
normal retirement date, as defined under the Pension Plan. Such periods shall be
determined by the Committee in its sole discretion as to each Participant.

 

1.28 Separation Date

 

Separation Date means (i) if a Participant’s employment is terminated by the
Company for Cause, or by the Participant for Good Reason, the date of receipt of
the Notice of Termination or any later date specified therein, as the case may
be, (ii) if a Participant’s employment is terminated by the Company other than
for Cause or Disability, the Separation Date shall be the date on which the
Company notifies the Participant of such termination, and (iii) if a
Participant’s employment is terminated by reason of death or Disability, the
Separation Date shall be the date of death of the Participant or the Disability
Effective Date, as the case may be.

 

1.29 Severance Benefit

 

Severance Benefit means the amounts payable, if any, to a Participant pursuant
to Article III following the Participant’s Separation Date.

 

1.30 Severance Multiple

 

Severance Multiple means the whole and fractional years (based on a 365 day
year) remaining in a Participant’s Protection Period on the Participant’s
Separation Date used to determine the Participant’s Severance Benefit under Plan
section 3.01(b).

 

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ARTICLE II

 

PARTICIPATION

 

2.01 Eligibility Requirements

 

(a) The Committee may, in its sole discretion, designate an Executive to
participate in the Plan, and only Executives designated by the Committee may
become Participants in the Plan. An Executive who has been so designated shall
become a Participant as of the later of the Effective Date or the effective date
of the Committee’s designation.

 

(b) At the Company’s request, the Administrator must provide a list of
Executives who are Participants or who have become Participants since the last
list of Participants was provided.

 

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EXECUTIVE SEVERANCE PAY PLAN

 

ARTICLE III

 

BENEFITS

 

3.01 Severance Benefit

 

(a) A Participant shall be entitled to a Severance Benefit and the other
benefits under Plan sections 3.01 - 3.03 only if during the Protection Period,
either (i) the Participant’s employment with the Company is terminated by the
Company for any reason other than Cause or Disability, or (ii) the Participant
terminates his or her employment with the Company for Good Reason.

 

(b) A Severance Benefit shall be awarded in an amount equal to the Severance
Multiple times the sum of (i) the Participant’s annualized base salary in effect
as of the end of the month preceding the Participant’s Separation Date, and (ii)
the average annual bonus paid or deemed paid to the Participant for the three
full calendar years immediately prior to the calendar year in which the
Participant’s Separation Date occurs. As reflected on the 2002-2004 Bonus
Schedule, attached hereto and made a part hereof as Exhibit I, certain
Participants were assigned deemed bonuses for 2002 and 2003 to reflect the fact
that they were not in their current positions for the entire year.

 

(c) The Severance Benefit provided under this Plan section shall be paid monthly
over the remaining full or partial months in the Protection Period as of the
Participant’s Separation Date. The first installment shall be paid as soon as
practicable after the Participant’s Separation Date. Notwithstanding the above,
an amount equal to any Excise Tax (and the income tax thereon) applicable to
Plan and related benefits shall be distributed to an affected Participant at the
time such payment is due (including any estimated tax payment relating thereto)
and the remaining monthly payments due hereunder shall be adjusted accordingly.
Payments due hereunder shall be less any applicable federal, state, and local
income or employment taxes.

 

3.02 Other Benefits

 

(a) Except as otherwise provided in a cover letter to a Participant dated April
12, 2005, during the Protection Period, or such longer period as may be provided
by the terms of the applicable welfare benefit plan, program, practice or
policy, the Company shall continue medical, disability, and life insurance
benefits to the Participant and/or the Participant’s family at least equal to
those which would have been provided to them in accordance with the Company’s
welfare plans, programs, practices and policies providing such benefits if the
Participant’s employment had not been terminated or, if more favorable to the
Participant, as in effect generally at any time thereafter with respect to other
peer executives of the Company and its affiliated companies and their families;
provided, however, that if the Participant becomes reemployed with another
employer and is eligible to receive such benefits under another employer
provided plan, such benefits shall be secondary to those provided under such
other

 

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plan during the applicable Protection Period; except as provided below, the
period during which the Participant and his family are eligible for health
continuation coverage under Section 4980B of the Code by reason of the
Participant’s termination of employment shall run from the end of such
Protection Period. With respect to any self-insured medical benefits, the
Company and the Participant agree to use their reasonable best efforts to
replace such benefits with comparable fully insured benefits, the cost of which
shall be shared in the same manner as the self-insured coverage. If the Company
and the Participant are unable to effect coverage acceptable to the Participant,
coverage will be made available under the applicable self-insured plan (but not
through any plan or arrangement deemed to be a cafeteria plan under Section 125
of the Code) of the Company and the Participant may elect to pay one hundred
percent of the cost of such coverage on an after-tax basis.

 

(b) The Company shall timely pay or provide to the Participant Accrued
Obligations and Other Benefits.

 

3.03 Limitation on Payments

 

Notwithstanding Plan sections 3.01 and 3.02, if any payment which a Participant
has the right to receive from the Company or any affiliated entity or any
payment or benefits under any plan maintained by the Company or any affiliated
entity would otherwise constitute an “excess parachute payment” (as defined in
Code section 280G), to the extent a Participant would be entitled to a smaller
net after Excise Tax benefit hereunder as a result of the payment of such
“excess parachute payments,” payments due hereunder must be reduced (but not
below zero) to the largest amount that will result in no portion of any such
payment being subject to an Excise Tax. The determination of any reduction
pursuant to this subsection must be made by the Company in good faith, before
any such payments are due and payable to a Participant. Notwithstanding the
preceding, the payment of legal fees and expenses pursuant to Plan sections 6.07
and 6.10 are not subject to reduction under any section of this Plan.

 

3.04 Offsets to Severance Benefits

 

(a) General. Payments to which a Participant otherwise is entitled under this
Plan may be reduced under this section, but not below zero. Reductions in such
payments must be made under this section in the manner described in subsection
3.04(e), and the Company must make any required determination or calculation in
good faith.

 

(b) Actual Earnings From Other Employment. A Participant is not required to seek
or accept other employment. If a Participant obtains any employment during the
months remaining in the Participant’s Employment Period after his termination
date, however, amounts payable must be reduced by all amounts actually earned by
the Participant from such employment during those months; except that no such
reduction may be made because of earnings from employment in which the
Participant could have engaged while he was employed by the Company. For
example, amounts payable may not be reduced because of the Participant’s fees
for service as a director of a corporation other than the Company.

 

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(c) Method of Reducing Amounts Payable. If amounts payable to a Participant must
be reduced under this Plan section 3.04, either (i) the Company must reduce any
installment or other payments by the appropriate amount; or (ii) within ninety
days after the Company determines that this section requires a reduction, the
Participant must refund to the Company the amount required so that the
Participant retains a portion of the amount payable equal to the present value
(using the same interest rate used to determine actuarial equivalents under the
Pension Plan of the amount he would retain if installment payments were reduced
under this sentence. To prevent hardship, repayment of the amount payable under
this section may be made by the Participant in installments, determined in the
Company’s sole discretion; but a repayment arrangement may not be used as a
disguised loan.

 

3.05 Termination for Death, Disability, Cause, or other than Good Reason.

 

(a) Death. If a Participant’s employment is terminated by reason of the
Participant’s death during the Protection Period, the Company shall have no
further obligations to the Participant’s legal representatives under this Plan,
other than for payment of Accrued Obligations and the timely payment or
provision of Other Benefits. Accrued Obligations shall be paid to a
Participant’s estate or beneficiary, as applicable, in a lump sum in cash within
30 days of the Separation Date. With respect to the provision of Other Benefits,
the term Other Benefits as utilized in this Section 3.05(a) shall include,
without limitation, and the Participant’s estate and/or beneficiaries shall be
entitled to receive, benefits at least equal to the most favorable benefits
provided by the Company and affiliated companies to the estates and
beneficiaries of peer executives of the Company and such affiliated companies
under such plans, programs, practices and policies relating to death benefits,
if any, as in effect with respect to other peer executives and their
beneficiaries at any time during the 120-day period immediately preceding the
Change of Control Date or, if more favorable to a Participant’s estate and/or
the Participant’s beneficiaries, as in effect on the date of the Participant’s
death with respect to other peer executives of the Company and its affiliated
companies and their beneficiaries. Notwithstanding the preceding, benefits
payable under a plan, practice, policy, or program that has been amended to
reduce benefits or terminated within the 120-day period immediately preceding
the Change of Control Date for reasons unrelated to affecting benefits due
hereunder shall not be taken into account. In the case of a plan, practice,
policy or program amended to reduce benefits, only the higher pre-amendment
benefit shall be disregarded.

 

(b) Disability. If a Participant’s employment is terminated by reason of the
Participant’s Disability during the Protection Period, the Company shall have no
further obligations to the Participant under this Plan, other than for payment
of Accrued Obligations and the timely payment or provision of Other Benefits.
Accrued Obligations shall be paid to a Participant in a lump sum in cash within
30 days of the Separation Date. With respect to the provision of Other Benefits,
the term Other Benefits as utilized in this Plan section 3.05(b) shall include,
and a Participant shall be entitled after the Disability Effective Date to
receive, disability and other benefits at least equal to the most favorable of
those generally provided by the Company and its affiliated companies to disabled
executives and/or their families in accordance with such plans, programs,
practices and policies relating to disability, if any, as in effect

 

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generally with respect to other peer executives and their families at any time
during the 120-day period immediately preceding the Change of Control Date or,
if more favorable to a Participant and/or the Participant’s family, as in effect
at any time thereafter generally with respect to other peer executives of the
Company and its affiliated companies and their families. Notwithstanding the
preceding benefits payable under a plan, practice, policy, or program that has
been amended to reduce benefits or terminated within the 120-day period
immediately preceding the Change of Control Date for reasons unrelated to
affecting benefits due hereunder shall not be taken into account. In the case of
a plan, practice, policy or program amended to reduce benefits, only the higher
pre-amendment benefit shall be disregarded.

 

(c) Cause; Other than for Good Reason. If a Participant’s employment shall be
terminated for Cause during the Protection Period, the Company shall have no
further obligations to the Participant under this Plan other than the obligation
to pay to the Participant (i) his annual base salary through the Separation
Date, and (ii) Other Benefits, in each case to the extent theretofore unpaid. If
a Participant voluntarily terminates employment during the Protection Period,
excluding a termination for Good Reason, the Company’s shall have no further
obligations to the Participant under this Plan, other than for Accrued
Obligations and the timely payment or provision of Other Benefits. In such case,
all Accrued Obligations shall be paid to a Participant in a lump sum in cash
within 30 days of the Separation Date.

 

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ARTICLE IV

 

AMENDMENT AND TERMINATION

 

4.01 Amendment

 

By action of its Board or the Committee, prior to a Change of Control, the
Company may modify, alter, or amend the Plan, in whole or in part. An amendment
may be made retroactively if it is necessary to make this Plan conform to
applicable law. After a Change of Control, the Plan may not be amended in a
manner that would adversely affect any Participant without the written consent
of the affected Participant.

 

4.02 Termination

 

By action of its Board or the Committee, the Company may terminate the Plan
prior to a Change of Control. After a Change of Control, the Plan may not be
terminated without the written consent of each adversely affected Participant.

 

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ARTICLE V

 

ADMINISTRATION

 

5.01 Named Fiduciaries, Allocation of Responsibility

 

(a) There are two Named Fiduciaries: the Company and the Administrator. Each is
severally liable for its responsibilities.

 

(b) The Administrator has only the responsibilities described in this Plan and
those delegated by the Company.

 

(c) All responsibilities not specifically delegated to another Named Fiduciary
remain with the Company, including designating all Named Fiduciaries not named
in this Plan. The Company’s responsibilities include drafting and designing the
Plan and amendments to it and designating all additional Fiduciaries not named
in this Plan. The Chief Executive Officer of the Company has the power to
delegate fiduciary responsibilities that the Plan does not specifically
delegate. A delegation may be made to any legal person. Each person to whom
fiduciary responsibility is delegated serves at the Company’s pleasure and for
the compensation that the Company and that person determine in advance, except
as prohibited by law. A person to whom responsibility is delegated may resign
after 30 days’ notice to the Company. The Company may make additional
delegations, including delegations occasioned by resignation, death, or other
cause, and including delegations to successor Administrators.

 

(d) This Plan allocates to each Named Fiduciary the individual responsibilities
assigned. Named Fiduciaries do not share responsibilities unless the Plan so
provides.

 

(e) Whenever the Plan requires one Named Fiduciary to follow the directions of
another Named Fiduciary, the two have not been assigned to share the
responsibility. The Named Fiduciary giving directions bears the sole
responsibility for those directions, and the responsibility of the Named
Fiduciary receiving those directions is to follow directions so long as on their
face the directions are not improper under applicable law.

 

5.02 Assignment of Administrative Authority

 

The Chief Executive Officer of the Company may appoint an Administrator to
administer the Plan. The Administrator may be one person or a committee, as the
Chief Executive Officer of the Company determines. Each Administrator or each
committee member serves at the Company’s pleasure. The Administrator or a
committee member may resign by giving oral or written notice to that effect to
the Chief Executive Officer of the Company. The Chief Executive Officer of the
Company may remove the Administrator or a committee member by delivering written
notice to that person and, if there is a committee, to at least one other
committee member. The Chief Executive Officer of the Company may fill vacancies
in the membership of a committee or a vacancy in the position of Administrator
arising from resignation, death, removal,

 

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or other causes; but until a vacancy has been filled, the remaining members of
the committee possess the full powers and authority of the Administrator. If
there is no Administrator and there are no committee members, the Company is the
Administrator until an Administrator is named.

 

5.03 Administrator Powers and Duties

 

The Administrator must administer the Plan by its terms and has all powers
necessary to do so. The Administrator is agent for service of legal process
unless it designates another person to be agent for service of legal process. A
committee may designate a committee member or someone else as agent for the
service of legal process. The Administrator must interpret the Plan.

 

A determination that the Administrator makes in good faith is conclusive and
binding on all persons. The Administrator’s decisions, however, may not take
away any rights that the Plan specifically gives to a Participant. If an
individual who is the Administrator or a committee member is also a Participant,
he must abstain from any action that directly affects him as a Participant in a
manner different from other similarly situated Participants. The Plan, however,
does not prevent an individual who is the Administrator or a committee member
who is also a Participant or a beneficiary from receiving any benefit to which
he may be entitled, if the benefit is computed and paid on a basis that is
consistently applied to all other Participants and beneficiaries.

 

The Administrator may employ and compensate from the Company’s assets according
to Plan section 5.07 such accountants, counsel, specialists, and other advisory
and clerical persons as it deems necessary or desirable in connection with the
Plan’s administration. The Administrator is entitled to rely conclusively on any
opinions from its accountant or counsel. Except to the extent prohibited by law,
the Administrator is fully protected by the Company whenever it takes action
based in good faith on advice from its advisors.

 

5.04 Discretion of Administrator

 

The Administrator’s discretion to perform or consent to any act is exclusive if
all similarly situated Participants are treated in a consistent manner.

 

5.05 Organization and Operation of any Committee

 

If it exists, the committee acts by a majority of its members in office at the
time and may act either by a vote at a meeting or in writing without a meeting.
If there is a tie vote in the committee or other inability of the committee or
the Administrator to act, a majority vote of the Compensation Committee of the
Board must decide the question.

 

The committee may authorize one or more of its members to execute a document for
it as Administrator and must note that authorization in the minutes of the
committee’s meeting. The Company must then accept and rely upon any document
executed by an authorized member as representing action by the Administrator
until the committee files a written revocation of the authorization with the
Company.

 

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The committee’s members may adopt by-laws and regulations consistent with the
Plan and its purposes. The committee must choose a chairman from its members and
may appoint a secretary to keep such records of the committee’s acts as may be
necessary. The secretary need not be a committee member. The secretary may
perform purely ministerial acts delegated by the committee.

 

5.06 Records and Reports

 

The Company must supply information to the Administrator sufficient to enable
the Administrator to fulfill its duties. The Administrator must keep all books
of account, records, and other data necessary for proper administration of the
Plan. The Administrator may appoint any person as agent to keep records.

 

5.07 Payment of Expenses

 

Until the Company determines otherwise, the Administrator and all members of a
committee serve without compensation. The Company must pay the Administrator’s
expenses, including any expenses incident to the functioning of the
Administrator, fees of accountants, legal counsel, and other similar
specialists, and other costs of administering the Plan.

 

5.08 Limitation of Liability

 

If permissible by law, the Administrator and the committee members serve without
bond. If the law requires bond, the Administrator must secure the minimum bond
required and obtain necessary payments according to Plan section 5.07. Unless
the Plan provides otherwise, the Administrator or a member of the committee is
not liable for another committee member’s act or omission or for another
Fiduciary’s act or omission. To the extent allowed by law and except as
otherwise provided in the Plan, the Administrator and each committee member is
not liable for any action or omission that is not the result of the
Administrator’s or member’s own negligence or bad faith.

 

As permitted by law and as limited by any agreement in writing between the
Company and the Administrator, the Company must indemnify and save the
Administrator and each committee member harmless against expenses, claims, and
liabilities arising out of being the Administrator or a committee member, except
expenses, claims, and liabilities arising out of the Administrator’s or member’s
own negligence or bad faith. The Company may obtain insurance against acts or
omissions of the Administrator or committee members. If the Company fails to
obtain that insurance, the Administrator or a committee member may obtain
insurance and must be reimbursed according to Plan section 5.07 and as permitted
by law. At its own expense, the Company may employ its own counsel to defend or
maintain, either in its own name or in the name of the Administrator, or any
committee member, any suit or litigation arising under the Plan concerning the
Administrator or any committee member.

 

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5.09 Claims Procedure

 

(a) It is not necessary to file a claim in order to receive Plan benefits. If a
claim for benefits under the Plan is filed, it shall be submitted to the
Administrator who shall have the initial responsibility for determining
eligibility for benefits. All claims for benefits shall set forth the facts
which such Participant believes to be sufficient to entitle him to the benefit
claimed. The Administrator may adopt forms for the submission of claims for
benefits in which case all claims for benefits shall be filed on such forms.

 

(b) Timing and Notification of Benefit Determination. If a claim for benefits is
denied in whole or in part, the Administrator shall give the claimant written or
electronic notification of the decision within 90 days after receipt of the
claim by the Plan (unless the Administrator determines that special
circumstances require an extension). The notification of the Plan’s decision
shall set forth, in a manner calculated to be understood by the claimant, (i)
the specific reason or reasons for the denial; (ii) reference to pertinent Plan
provisions on which the denial is based; (iii) a description of additional
material or information necessary for the claimant to perfect the claim and an
explanation of why such material or information is necessary; and (iv) a
description of the Plan’s review procedures and time limits applicable to such
procedures, including a statement of the claimant’s right to bring a civil
action under ERISA section 502(a) following an adverse benefit determination on
review.

 

(c) Special Circumstances. If special circumstances require an extension of time
for the Administrator to process the claim, the 90-day period may be extended
for an additional 90 days. Prior to the termination of the initial 90-day
period, the claimant shall be furnished with a written notice setting forth the
reason for the extension. The notice shall indicate the special circumstances
requiring an extension of time and the date by which the Plan expects to render
the benefit determination.

 

(d) Appeal of an Adverse Benefit Determination: Full and Fair Review. If a claim
for benefits is denied in whole or in part, the claimant or his duly authorized
representative, may request a full and fair review of the claim and the adverse
benefit determination. The claims procedure must provide claimants with

 

  (i) at least 60 days following receipt of an adverse determination within
which to appeal the determination;

 

  (ii) the opportunity to submit written comments, documents, records, and other
information relating to the claim for benefits;

 

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EXECUTIVE SEVERANCE PAY PLAN

 

  (iii) upon request, and free of charge, reasonable access to and copies of
documents and records and other information relevant to the claim for benefits;
and

 

  (iv) a review taking into account all comments, documents, records, and
information submitted by the claimant relating to the claim without regard to
whether the information was submitted or considered in the initial benefit
determination.

 

  (v) If the claimant (or his duly authorized representative) fails to appeal
such action to the Administrator in writing within the prescribed period of
time, the Administrator’s adverse determination shall be final, binding, and
conclusive.

 

(e) Timing of Notification of Benefit Determination on Review. The Administrator
shall notify the claimant of the benefit determination on review within a
reasonable time, but no later than 60 days after receipt of the request for a
claim review, unless special circumstances require an extension of time for
processing. If the Administrator determines that an extension is required,
written notice of the extension shall be furnished to the claimant before the
initial 60-day period is over, and in no event shall such extension extend
beyond 60 days from the end of the initial period. The extension notice shall
indicate the special circumstances requiring an extension of time and the date
by which the Plan expects to render the determination.

 

(f) In the case of an adverse benefit determination, the notification shall
provide the claimant with:

 

(i) the specific reason(s) for the adverse determination;

 

(ii) refer to the Plan provisions on which the benefit determination is based,
and

 

(iii) a statement that the claimant is entitled to receive, upon request and
free of charge, reasonable access to and copies of documents and records and
other information relevant to the claim for benefits.

 

(iv) a statement describing any voluntary appeal procedures, if applicable,
under the Plan and a statement of the claimant’s right to bring an action under
ERISA section 502(a).

 

(g) For all purposes under the Plan, such decision on claims where no review is
requested, and decisions on claims where review is requested, shall be final,
binding, and conclusive on all interested parties. Any electronic notification
shall comply with the standards imposed by Department of Labor Regulation
2520.104b-1(c).

 

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EXECUTIVE SEVERANCE PAY PLAN

 

ARTICLE VI

 

GENERAL PROVISIONS

 

6.01 Construction

 

One gender includes the other, and the singular and plural include each other
when the meaning would be appropriate. The Plan’s headings and subheadings have
been inserted for convenience of reference only and must be ignored in any
construction of the provisions. If a provision of this Plan is illegal or
invalid, that illegality or invalidity does not affect other provisions. Any
term with an initial capital not expected by capitalization rules is a defined
term according to Plan Article I. This Plan must be construed according to the
applicable provisions of the Code and Treasury Regulations in a manner that
assures that the Plan provides the benefits and tax consequences intended for
Participants. Any terms defined in the Code or Treasury Regulations that are not
defined terms according to Plan Article I are incorporated in this Plan by
reference.

 

6.02 Governing Law

 

This Plan is construed, enforced, and administered in accordance with the laws
of the Commonwealth of Virginia (other than its choice of law rules), except to
the extent that those laws are superseded by the laws of the United States of
America.

 

6.03 Plan Creates No Separate Rights

 

The creation, continuance, or change of the Plan or any payment does not give
any person a non-statutory legal or equitable right against the Company; or any
of the Company’s officers, agents, or other persons employed by the Company. The
Plan does not modify the terms of a Participant’s employment.

 

6.04 Non-Alienation of Benefits

 

Except as permitted by law and this section, no assignment of any rights or
benefits arising under the Plan is permitted or recognized. No rights or
benefits are subject to attachment or other legal or equitable process or
subject to the jurisdiction of any bankruptcy court. If any Participant is
adjudicated bankrupt or attempts to assign any benefits, then in the Company’s
discretion, those benefits cease. If that happens, the Administrator may apply
those benefits for that Participant or his dependents as the Administrator sees
fit. The Company is not liable for or subject to the debts, contracts,
liabilities, or torts of any person entitled to benefits under this Plan.

 

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EXECUTIVE SEVERANCE PAY PLAN

 

6.05 Action by Corporation

 

Except as otherwise specifically provided, any action of the Company under this
Plan may be by resolution of its Board or by any officer or other person with
authorization from that Board.

 

6.06 Non-Exclusivity Of Rights

 

Nothing in this Plan shall prevent or limit a Participant’s continuing or future
participation in any plan, program, policy or practice provided by the Company
or any of its affiliated companies for which the executive may qualify, nor
shall anything herein limit or otherwise affect such rights as the Participant
may have under any contract or agreement with the Company or any of its
affiliated companies. Amounts which are vested benefits or which a Participant
is otherwise entitled to receive under any plan, policy, practice or program of
or any contract or agreement with the Company or any of its affiliated companies
at or subsequent to his or her Separation Date shall be payable in accordance
with such plan, policy, practice or program or contract or agreement except as
explicitly modified by this Plan.

 

6.07 Full Settlement

 

Except as otherwise specifically provided herein, the Company’s obligation to
make the payments provided for in this Plan and otherwise to perform its
obligations hereunder shall not be affected by any set-off, counterclaim,
recoupment, defense or other claim, right or action which the Company may have
against a Participant or others. Except as otherwise specifically provided
herein, in no event shall a Participant be obligated to seek other employment or
take any other action by way of mitigation of the amounts payable to the
Participant under any of the provisions of this Plan and such amounts shall not
be reduced whether or not the Participant obtains other employment. The Company
agrees to pay as incurred, to the full extent permitted by law, all legal fees
and expenses which a Participant may reasonably incur as a result of any contest
regardless of the outcome thereof by the Company, the Participant or others of
the validity or enforceability of, or liability under, any provision of this
Plan or any guarantee of performance thereof (including as a result of any
contest by a Participant about the amount of any payment pursuant to this Plan),
plus in each case interest on any delayed payment, at the applicable Federal
rate provided for in Code section 7872(f)(2)(A); provided, that the Participant
shall repay to the Company all such amounts paid by the Company, and shall not
be entitled to any further payments hereunder, in connection with a contest
originated by the Participant if the trier of fact in such contest determines
that the Participant’s claim was not brought in good faith or was frivolous.

 

6.08 Confidential Information

 

A Participant shall hold in a fiduciary capacity for the benefit of the Company
all confidential or proprietary information, knowledge or data relating to the
Company or any of its affiliated companies, and their respective businesses,
which shall have been obtained by the

 

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Participant during the Participant’s employment by the Company or any of its
affiliated companies and which shall not be or become public knowledge (other
than by acts by the Participant or representatives of the Participant in
violation of this Plan). After termination of a Participant’s employment with
the Company, the Participant shall not, without the prior written consent of the
Company or as may otherwise be required by law or legal process, communicate or
divulge any such information, knowledge or data to anyone other than the Company
and those designated by it. In addition, to the extent that a Participant is a
party to any other agreement relating to confidential information, inventions or
similar matters with the Company, the Participant shall continue to comply with
the provisions of such agreements. In no event shall an asserted violation of
the provisions of this Plan section 6.09 constitute a basis for deferring or
withholding any amounts otherwise payable to a Participant under this Plan.

 

6.09 Arbitration

 

All disputes, controversies, and claims arising between the Company and a
Participant concerning the subject matter of this Plan, other than Plan section
3.03, shall be settled by arbitration in accordance with the rules and
procedures of the American Arbitration Association then in effect. The location
of the arbitration will be Newport News, Virginia. In rendering any award or
ruling, the arbitrator or arbitrators shall determine the rights and obligations
of the parties according to the substantive and procedural laws of the
Commonwealth of Virginia. The parties to any such dispute, controversy, or claim
shall attempt to agree upon the selection of a single arbitrator. If after a
reasonable period of time the parties are unable to agree upon such a single
arbitrator, then three arbitrators will be appointed with each party selecting
an arbitrator from the American Arbitration Association’s available panel of
arbitrators, and the parties agreeing upon the selection of a third arbitrator.
If the parties cannot agree upon the selection of a third arbitrator, then the
two arbitrators selected by the parties shall agree upon a third arbitrator from
the panel of American Arbitration Association arbitrators. If the two
arbitrators are unable to so agree on a third arbitrator, the third arbitrator
shall be selected by the American Arbitration Association. Any arbitration
pursuant to this section shall be final and binding on the parties, and judgment
upon any award rendered in such arbitration may be entered in any court, state
or federal, having jurisdiction. All fees and expenses of the arbitration shall
be born in accordance with Plan section 6.07. The arbitrator or arbitrators
shall have no authority to award provisional relief, injunctive remedies, or
punitive damages. The parties expressly acknowledge that they are waiving their
right to seek remedies in court, including without limitations the right if any
to a jury trial.

 

6.10 Notices

 

All notices and other communications hereunder shall be in writing and shall be
given by hand delivery to the other party or by registered or certified mail,
return receipt requested, postage prepaid, addressed as follows:

 

If to a Participant, to the Participant’s most recent home address on file with
the Human Resources office;

 

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EXECUTIVE SEVERANCE PAY PLAN

 

If to the Company:

 

Noland Company

80 29th Street

Newport News, VA 23607

 

Attention: Vice President- Human Resources

 

or to such other address as either the Company or a Participant party shall have
furnished to the other in writing in accordance herewith. Notice and
communications shall be effective when actually received by the addressee.

 

NOLAND COMPANY By:  

/s/ Lloyd U. Noland

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

    Lloyd U. Noland, III     Chairman and President

 

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Exhibit I

 

EXHIBIT I-1

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NOLAND COMPANY

EXECUTIVE SEVERANCE PAY PLAN

 

EXHIBIT I-2