ex10-4



 


Exhibit 10.4




WGL Holdings, Inc.



1999 Incentive Compensation Plan



(As approved by Shareholders March 3, 2000)



(As amended as of November 1, 2000)



 






 





WGL HOLDINGS, INC.

1999 INCENTIVE COMPENSATION PLAN



SECTION 1



PURPOSE



     Purpose. The purpose of this 1999 Incentive Compensation Plan (the
“Plan”) of WGL Holdings, Inc., a Virginia corporation (the “Company”), is to
advance the interests of the Company and its stockholders by providing a means
to attract, retain and reward officers and other key employees of, and
consultants and other service providers to, the Company and Subsidiaries and to
enable such persons to acquire or increase their interests in the Company and
its success, thereby promoting a closer identity of interests between such
persons and the Company’s stockholders. The Plan is intended to qualify certain
compensation awarded under the Plan as “performance-based compensation” under
Code section 162(m) to the extent deemed appropriate by the Committee.


SECTION 2



GENERAL DEFINITIONS



     Definitions. The definitions of awards under the Plan, including Options,
SARs, Restricted Stock, Deferred Stock, Stock granted as a bonus or in lieu of
other awards, Dividend Equivalents, Other Stock-Based Awards and Cash Awards,
are set forth in Section 6 of the Plan. Such awards, together with any other
right or interest granted to a Participant under the Plan, are termed “Awards.”
For purposes of the Plan, the following additional terms shall be defined as
set forth below:


     (a)  “Award Agreement” means any written agreement, contract, notice or
other instrument or document evidencing or relating to an Award.


     (b)  “Beneficiary” means the person, persons, trust or trusts which have
been designated by a Participant in his most recent written beneficiary
designation filed with the Committee to exercise the rights and receive the
benefits specified under an Award upon such Participant’s death or, if there is
no designated Beneficiary or surviving designated Beneficiary, then the person,
persons, trust or trusts entitled by will or the laws of descent and
distribution to exercise such rights and receive such benefits.


     (c)  “Board” means the Board of Directors of the Company.


     (d)  “Change of Control” means:



		
	 	     (i) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a “Person”), of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 30% or more of either (A) the then-outstanding shares of
common stock of the Company or (ii) the combined voting power of the
then-outstanding voting securities of the Company entitled to vote generally
in the election of directors; provided, however, that for purposes of this
paragraph (i), the following acquisitions shall not constitute a Change of
Control: (A) any acquisition directly from the Company, (B) any acquisition
by the Company, or any corporation controlled by or otherwise affiliated with
the Company, (C) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any corporation controlled
by or otherwise affiliated with the Company; or (D) any transaction described
in clauses (A), (B), and (C) of paragraph (iv) of this definition; or




		
	 	     (ii) Individuals who, as of the close of business on November 1, 2000,
constituted the Board of Directors of the Company (the “Incumbent Company
Board”) cease for any reason to constitute at least a majority of the Board
of Directors of the Company; provided, however, that any individual becoming
a director subsequent to November 1, 2000 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 Company Board shall
be considered as though such individual were a member of the Incumbent
Company 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 Incumbent Company Board; or



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	 	     (iii) The acquisition by any Person of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 30% or more of
either (A) the then-outstanding shares of common stock of Washington Gas
Light Company (the “Utility”) or (B) the combined voting power of the
then-outstanding voting securities of the Utility entitled to vote generally
in the election of directors, provided, however, that for purposes of this
paragraph (iii), the following acquisitions shall not constitute a Change of
Control: (A) any acquisition directly from the Utility, (B) any acquisition
by the Utility or any corporation controlled by or otherwise affiliated with
the Utility, (C) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Utility or any corporation controlled
by or otherwise affiliated with the Utility; or (C) any transaction described
in clauses (A) and (B) of paragraph (V) of this definition; or




		
	 	     (iv) 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”), in each case unless, following such Business
Combination, (A) all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of outstanding the Company common
stock and outstanding Company voting securities immediately prior to such
Business Combination beneficially own, directly or indirectly, more than 50%
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 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, (B) no Person (excluding 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 (C) 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 Company Board at the time of the execution of the initial
agreement, or of such Incumbent Company Board, providing for such Business
Combination; or




		
	 	     (v) Consummation of a reorganization, merger or consolidation or sale or
other disposition of all or substantially all of the assets of the Utility (a
“Utility Business Combination”), in each case unless, following such Utility
Business Combination, (A) all or substantially all of the individuals and
entities who were the beneficial owners, directly or indirectly,
respectively, of the outstanding Utility common stock and the outstanding
Utility voting securities immediately prior to such Utility Business
Combination beneficially own, directly or indirectly, more than 50% 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 Utility Business Combination in substantially
the same proportions as their ownership, immediately prior to such Utility
Business Combination, of the outstanding Utility common stock and outstanding
Utility voting securities, as the case may be, and (B) no Person (excluding
any corporation resulting from such Utility Business Combination or any
employee benefit plan (or related trust) of the Utility or such corporation
resulting from such Utility 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 Utility 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 Utility Business Combination; or




		
	 	     (vi) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.



     For purposes of this definition, the term “affiliated” includes any
entity controlled by, controlling or under common control with the entity
referred to.


     (e)  “Code” means the Internal Revenue Code of 1986, as amended from time
to time. References to any provision of the Code shall be deemed to include the
regulations thereunder and successor provisions and regulations thereto.


     (f)  “Committee” means the committee appointed by the Board to administer
the Plan or, if no committee is appointed, the Board.


     (g)  “Exchange Act” means the Securities Exchange Act of 1934, as amended
from time to time. References to any provision of the Exchange Act shall be
deemed to include the rules thereunder and successor provisions and rules
thereto.


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     (h)  “Fair Market Value” means, on any given day, the closing price of one
share of Stock as reported on the New York Stock Exchange composite tape on
such day or, if the Stock was not traded on such day, then on the next
preceding day that the Stock was traded, all as reported by such source as the
Committee may select.


     (i)  “ISO” means any Option intended to be and designated as an incentive
stock option within the meaning of Code section 422.


     (j)  “Participant” means a person who, at a time when eligible under
Section 5, has been granted an Award.


     (k)  “Plan Year” means the Company’s fiscal year.


     (l)  “Rule 16b-3” means Rule 16b-3, as from time to time in effect and
applicable to the Plan and Participants, promulgated by the Securities and
Exchange Commission under Section 16 of the Exchange Act.


     (m)  “Stock” means the common stock, no par value, of the Company and such
other securities as may be substituted for Stock or for such other securities
pursuant to Section 4(c).


     (n)  “Subsidiary” or “Subsidiaries” means any corporation or corporations
which, together with the Company, would form a group of corporations described
in Code section 424(f). The term shall also refer to any entity designated as
such by the Board for purposes of the Plan.


SECTION 3



ADMINISTRATION



     (a)  Authority of the Committee. The Plan shall be administered by the
Committee. The Committee shall have full and final authority to take the
following actions, in each case subject to and consistent with the provisions
of the Plan:



		
	 	     (i) to select persons to whom Awards may be granted;




		
	 	     (ii) to determine the type or types of Awards to be granted to each such
person;




		
	 	     (iii) to determine the number of Awards to be granted, the number of
shares of Stock to which an Award will relate, the terms and conditions of
any Award (including, without limitation, any exercise price, any grant price
or purchase price, any restriction or condition, any schedule for lapse of
restrictions or conditions relating to transferability, forfeiture,
exercisability or settlement and any waivers or accelerations thereof and any
performance conditions (including, without limitation, any performance
conditions relating to Awards not intended to be governed by Section 7(f) and
any waivers and modifications thereof), based in each case on such
considerations as the Committee shall determine) and all other matters to be
determined in connection with an Award;




		
	 	     (iv) to determine whether, to what extent and under what circumstances
an Award may be settled, or the exercise price of an Award may be paid, in
cash, Stock, other Awards or other property, or an Award may be canceled,
forfeited or surrendered;




		
	 	     (v) to determine whether, to what extent and under what circumstances
cash, Stock, other Awards or other property payable with respect to an Award
will be deferred either automatically, or at the election of the Committee or
of the Participant;




		
	 	     (vi) to prescribe the form of each Award Agreement, which need not be
identical for each Participant;




		
	 	     (vii) to adopt, amend, suspend, waive and rescind such rules and
regulations and appoint such agents as the Committee may deem necessary or
advisable to administer the Plan;




		
	 	     (viii) to correct any defect or omission or reconcile any inconsistency
in the Plan and to construe and interpret the Plan and any Award, rules and
regulations or Award Agreement; and
	 
	 	     (ix) to make all other decisions and determinations as may be required
under the terms of the Plan or as the Committee may deem necessary or
advisable for the proper administration of the Plan.



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     Other provisions of the Plan notwithstanding, the Board may perform any
function of the Committee under the Plan, including, without limitation, for
the purpose of ensuring that transactions under the Plan by Participants who
are then subject to Section 16 of the Exchange Act in respect of the Company
are exempt under Rule 16b-3. In any case in which the Board is performing a
function of the Committee under the Plan, each reference to the Committee
herein shall be deemed to refer to the Board.


     (b)  Manner of Exercise of Committee Authority. Any determination or
action of the Committee with respect to the Plan or any Award shall be taken in
the sole and absolute discretion of the Committee and shall be final,
conclusive and binding on all persons, including, without limitation, the
Company, any Subsidiary, any Participant, any person claiming any rights or
interests under the Plan or any Award from or through any Participant and the
Company’s stockholders, except to the extent that the Committee may
subsequently modify, or make a further determination or take further action not
consistent with its prior determination or action. If not specified in the
Plan, the time at which the Committee must or may make any determination or
take any action shall be determined by the Committee, and any such
determination or action may thereafter be modified by the Committee (subject to
Section 8(e)). The express grant of any specific power to the Committee, the
making of any determination or the taking of any action by the Committee or the
failure to make any determination or take any action shall not be construed as
limiting any power or authority of the Committee. Except as provided in Section
7(f), the Committee may delegate to officers or managers of the Company or any
Subsidiary authority, subject to such terms and conditions as the Committee
shall determine, to perform such functions as the Committee may determine, to
the extent permitted under applicable law.


     (c)  Limitation of Liability. Each member of the Committee shall be
entitled to, in good faith, rely or act upon any report or other information
furnished to him by any officer or other employee of the Company or any
Subsidiary, the Company’s independent certified public accountants or any
executive compensation consultant, legal counsel or other professional retained
by the Company to assist in the administration of the Plan. No member of the
Committee, nor any officer or employee of the Company acting on behalf of the
Committee, shall be personally liable for any determination, action or
interpretation taken or made in good faith with respect to the Plan, and all
members of the Committee and any officer or employee of the Company acting on
its behalf shall, to the extent permitted by law, be fully indemnified and
protected by the Company with respect to any such determination, action or
interpretation.


SECTION 4



STOCK SUBJECT TO THE PLAN AND MAXIMUM AWARDS



     (a)  Shares of Stock Reserved. Subject to adjustment as provided in
Section 4(c), the total number of shares of Stock that may be subject to
Awards, determined immediately after the grant of any Award, shall not exceed
1,000,000. Shares subject to any Award which is canceled, expired, forfeited,
settled in cash or otherwise terminated without delivery of shares of Stock to
the Participant (or Beneficiary), including, without limitation, shares of
Stock withheld or surrendered in payment of any exercise price of an Award or
taxes related to an Award, shall again be available for Awards. Notwithstanding
the foregoing, the number of shares that may be delivered upon the exercise of
ISOs shall not exceed 1,000,000, and the number of shares that may be delivered
in the form of Restricted Stock shall not exceed 300,000, in each case subject
to adjustment as provided in Section 4(c). Any shares of Stock delivered
pursuant to an Award may consist, in whole or in part, of authorized and
unissued shares, treasury shares or shares acquired by the Company.


     (b)  Annual Per-Participant Limitations. During any Plan Year, no
Participant may be granted Awards relating to more than 200,000 shares of
Stock, subject to adjustment as provided in Section 4(c). In addition, with
respect to Cash Awards, no Participant may be paid during any Plan Year cash or
other property relating to such Awards that exceeds the Fair Market Value of
the number of shares of Stock set forth in the preceding sentence, determined
either at the date of grant or the date of settlement, whichever is greater.
This provision sets forth two separate limitations, so that Awards that may be
settled solely by delivery of Stock will not operate to reduce the amount of
Cash Awards, and vice versa. Awards that may be settled either in Stock or in
cash must not exceed either limitation during the applicable Plan Year.


     (c)  Adjustments. In the event that the Committee shall determine that any
recapitalization, forward or reverse split, reorganization, merger,
consolidation, spin-off, combination, repurchase or exchange of Stock or other
securities, Stock dividend or other special, large and nonrecurring dividend or
distribution (whether in the form of cash, securities or other property),
liquidation, dissolution or other similar corporate transaction or event
affects the Stock such that an adjustment is appropriate in order to prevent
dilution or enlargement of the rights of Participants, then the Committee
shall, in such manner as it may deem equitable, adjust any or all of (i) the
number and kind of shares of Stock reserved and available for Awards under
Section 4(a), including, without limitation, the share limitations for
Restricted Stock and ISOs, (ii) the number and kind of shares of Stock
specified in the annual per-Participant limitations under Section 4(b), (iii)
the number and kind of shares of Stock relating to outstanding Restricted Stock
or other Awards in

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connection with which shares have been issued, (iv) the number and kind of
shares of Stock that may be issued in respect of any other outstanding Awards
and (v) the exercise price, grant price or purchase price relating to any
Awards (or, if deemed appropriate, the Committee may make provision for a cash
payment with respect to any outstanding Awards). In addition, the Committee is
authorized to make adjustments in the terms and conditions of, and the criteria
included in, Awards (including, without limitation, cancellation of unexercised
or outstanding Awards, or substitution of Awards using stock of a successor or
other entity) in recognition of unusual or nonrecurring events (including,
without limitation, events described in the preceding sentence and events
constituting a Change of Control) affecting the Company or any Subsidiary or
the financial statements of the Company or any Subsidiary, or in response to
changes in applicable laws, regulations or accounting principles.


SECTION 5



ELIGIBILITY



     Executive officers and other key employees of the Company or of any
Subsidiary, including any member of the Board who is also such an employee, and
persons who provide consulting or other services to the Company or any
Subsidiary deemed by the Committee to be of substantial value, are eligible to
be granted Awards. In addition, persons who have been offered employment by the
Company or any Subsidiary, and persons employed by an entity that the Committee
reasonably expects to become a Subsidiary, are eligible to be granted Awards.


SECTION 6



SPECIFIC TERMS OF AWARDS



     (a)  General. Awards may be granted on the terms and conditions set forth
in this Section 6. In addition, the Committee may impose, in connection with
any Award, such additional terms and conditions, not inconsistent with the
provisions of the Plan, as the Committee shall determine, including, without
limitation, terms requiring forfeiture of Awards in the event of termination of
employment or service of the Participant. Except as provided in Section 6(f),
6(h) or 7(a), or to the extent required to comply with requirements of
applicable law, only services may be required as consideration for the grant
(but not the exercise) of any Award.


     (b)  Options. The Committee is authorized to grant options to purchase
Stock on the following terms and conditions (“Options”):



		
	 	     (i) Exercise Price. The exercise price per share of Stock purchasable
under an Option shall be determined by the Committee; provided, however, that
except as provided in Section 7(a), the exercise price shall be not less than
the Fair Market Value on the date of grant.




		
	 	     (ii) Time and Method of Exercise. The Committee shall determine the
time or times at which an Option may be exercised in whole or in part, the
methods by which the exercise price may be paid or deemed to be paid, the
form of such payment, including, without limitation, cash, Stock, other
Awards or other property (including, without limitation, awards granted under
other Company plans, notes or other contractual obligations of Participants
to make payment on a deferred basis, such as through “cashless exercise”
arrangements, to the extent permitted by applicable law) and the methods by
which Stock will be delivered or deemed to be delivered to Participants.




		
	 	     (iii) ISOs. The terms and conditions of any ISOs shall comply in all
respects with the requirements of Code section 422. Notwithstanding anything
to the contrary herein, no term of the Plan or of any Award Agreement
relating to ISOs shall be interpreted, amended or altered, nor shall any
discretion or authority granted hereunder be exercised, so as to cause the
ISOs to fail to qualify as such under Code section 422, unless such result is
mutually agreed to by the Company and the Participant.




		
	 	     (iv) Termination of Employment or Service. Unless otherwise determined
by the Committee, upon termination of a Participant’s employment or service,
as applicable, with the Company and all Subsidiaries, such Participant may
exercise any Options during the three-month period following such termination
of employment or service, but only to the extent that such Option was
exercisable as of such termination of employment or service. Notwithstanding
the foregoing, if the Committee determines that such termination is for
cause, all Options held by the Participant shall terminate as of the
termination of employment or service.



     (c)  Stock Appreciation Rights. The Committee is authorized to grant Stock
appreciation rights on the following terms and conditions (“SARs”):


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	 	     (i) Right to Payment. An SAR shall confer on the Participant to whom it
is granted a right to receive, upon exercise thereof, the excess of (A) the
Fair Market Value on the date of exercise (or, if the Committee shall so
determine in the case of any such right other than one related to an ISO, the
Fair Market Value at any time during a specified period before or after the
date of exercise), over (B) the grant price of the SAR as determined by the
Committee as of the date of grant of the SAR, which, except as provided in
Section 7(a), shall be not less than the Fair Market Value on the date of
grant.




		
	 	     (ii) Other Terms. The Committee shall determine the time or times at
which an SAR may be exercised in whole or in part, the method of exercise,
method of settlement, form of consideration payable in settlement, method by
which Stock will be delivered or deemed to be delivered to Participants,
whether or not an SAR shall be in tandem with any other Award, and any other
terms and conditions of any SAR.



     (d)  Restricted Stock. The Committee is authorized to grant restricted
shares of Stock on the following terms and conditions (“Restricted Stock”):



		
	 	     (i) Grant and Restrictions. Restricted Stock shall be subject to such
restrictions on transferability and other restrictions, if any, as the
Committee may impose, which restrictions may lapse separately or in
combination at such times, under such circumstances, in such installments or
otherwise, as the Committee may determine. Except to the extent restricted
under the terms of the Plan and any Award Agreement relating to the
Restricted Stock, a Participant granted Restricted Stock shall have all of
the rights of a stockholder, including, without limitation, the right to vote
the Restricted Stock and the right to receive dividends thereon.




		
	 	     (ii) Forfeiture. Except as otherwise determined by the Committee, upon
a Participant’s termination of employment or service (as determined under
criteria established by the Committee) during the applicable restriction
period, Restricted Stock that is at that time subject to restrictions shall
be forfeited and reacquired by the Company; provided, however, that the
Committee may provide, by rule or regulation or in any Award Agreement, or
may determine in any individual case, that restrictions or forfeiture
conditions relating to Restricted Stock shall be waived in whole or in part
in the event of termination resulting from specified causes.




		
	 	     (iii) Certificates for Stock. Restricted Stock may be evidenced in such
manner as the Committee shall determine. If certificates representing
Restricted Stock are registered in the name of the Participant, such
certificates may bear an appropriate legend referring to the terms,
conditions and restrictions applicable to the Restricted Stock, the Company
may retain physical possession of the certificates and the Participant may be
required to deliver a stock power to the Company, endorsed in blank, relating
to the Restricted Stock.




		
	 	     (iv) Dividends. Dividends paid on Restricted Stock shall be either paid
at the dividend payment date in cash or in shares of unrestricted Stock
having a Fair Market Value equal to the aggregate amount of such dividends,
or the payment of such dividends shall be deferred and/or the amount or value
thereof automatically reinvested in additional shares of Restricted Stock,
other Awards or other property, as the Committee shall determine or permit
the Participant to elect. Stock distributed in connection with a Stock split
or Stock dividend, and other property distributed as a dividend, shall be
subject to restrictions and a risk of forfeiture to the same extent as the
Restricted Stock with respect to which such Stock or other property has been
distributed, unless otherwise determined by the Committee.



     (e)  Deferred Stock. The Committee is authorized to grant deferred shares
of Stock subject to the following terms and conditions (“Deferred Stock”):



		
	 	     (i) Award and Restrictions. Delivery of Deferred Stock shall occur upon
expiration of the deferral period specified in the Award by the Committee or,
if permitted by the Committee, as elected by the Participant. In addition,
Deferred Stock shall be subject to such restrictions as the Committee may
impose, if any, which restrictions may lapse at the expiration of the
deferral period or at other specified times, separately or in combination at
such times, under such circumstances, in installments or otherwise, as the
Committee may determine.




		
	 	     (ii) Forfeiture. Except as otherwise determined by the Committee, upon
termination of employment or service (as determined under criteria
established by the Committee) during the applicable deferral period or
portion thereof to which restrictions or forfeiture conditions apply, all
Deferred Stock that is at that time subject to such restrictions or
forfeiture conditions shall be forfeited; provided, however, that the
Committee may provide, by rule or regulation or in any Award Agreement, or
may



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	 	determine in any individual case, that restrictions or forfeiture
conditions relating to Deferred Stock shall be waived in whole or in part in
the event of termination resulting from specified causes.



     (f)  Bonus Stock and Awards in Lieu of Cash Obligations. The Committee is
authorized to grant Stock as a bonus, or to grant Stock or other Awards in lieu
of Company obligations to pay cash or other property, under other plans or
compensatory arrangements.


     (g)  Dividend Equivalents. The Committee is authorized to grant dividend
equivalents entitling the Participant to receive cash, Stock, other Awards or
other property equal in value to dividends paid with respect to a specified
number of shares of Stock (“Dividend Equivalents”). Dividend Equivalents may be
awarded on a free-standing basis or in connection with another Award. The
Committee may provide that Dividend Equivalents shall be paid or distributed
when accrued or shall be deemed to have been reinvested in additional Stock,
Awards or other property, and shall be subject to such restrictions on
transferability and risks of forfeiture, as the Committee may determine.


     (h)  Other Stock-Based or Cash Awards. The Committee is authorized,
subject to limitations under applicable law, to grant such other Awards that
may be denominated or payable in, valued in whole or in part by reference to or
otherwise based on or related to Stock and factors that may influence the value
of Stock, as deemed by the Committee to be consistent with the purposes of the
Plan, including, without limitation, performance shares, convertible or
exchangeable debt securities, other rights convertible or exchangeable into
Stock, purchase rights for Stock, Awards with a value or payment contingent
upon performance of Stock (or any other factors designated by the Committee)
and Awards valued by reference to the book value of Stock or the value of
securities of or the performance of specified Subsidiaries (“Other Stock-Based
Awards”). The Committee shall determine the terms and conditions of such
Awards. Stock issued pursuant to an Other Stock-Based Award in the nature of a
purchase right granted under this Section 6(h) shall be purchased for such
consideration, paid for at such times, by such methods and in such forms,
including, without limitation, cash, Stock, other Awards or other property, as
the Committee shall determine. Awards that may be settled in whole or in part
in cash or other property (not including Stock) may also be granted pursuant to
this Section 6(h) (“Cash Awards”). The Committee shall determine the terms and
conditions of such Cash Awards.


SECTION 7



CERTAIN PROVISIONS APPLICABLE TO AWARDS



     (a)  Stand-Alone, Additional, Tandem and Substitute Awards. Awards may be
granted either alone or in addition to, in tandem with or in substitution for
any other Award or any award granted under any other plan of the Company, any
business entity to be acquired by the Company or any Subsidiary, or any other
right of a Participant to receive payment from the Company or any Subsidiary.
Awards granted in addition to or in tandem with other Awards or awards may be
granted either as of the same time or as of a different time from the grant of
such other Awards or awards.


     (b)  Term of Awards. The term of each Award shall be for such period as
may be determined by the Committee; provided, however, that in no event shall
the term of any ISO or any SAR granted in tandem therewith exceed the period
permitted under Code section 422.


     (c)  Form of Payment Under Awards. Subject to the terms of the Plan and
any applicable Award Agreement, payments to be made by the Company or any
Subsidiary upon the grant, exercise or settlement of an Award may be made in
such forms as the Committee shall determine, including, without limitation,
cash, Stock, other Awards or other property, and may be made in a single
payment or transfer, in installments or on a deferred basis. Such payments may
include, without limitation, provisions for the payment or crediting of
reasonable interest on installment or deferred payments or the grant or
crediting of Dividend Equivalents in respect of installment or deferred
payments denominated in Stock.


     (d)  Legal Compliance.



		
	 	     (i) Compliance with Code Section 162(m). It is the intent of the
Company that Options, SARs and other Awards designated as such constitute
“performance-based compensation” within the meaning of Code section 162(m).
Subject to automatic acceleration and payout resulting from a Change of
Control under Section 7(g), if any provision of the Plan or of any Award
Agreement relating to such an Award does not comply or is inconsistent with
the requirements of Code section 162(m), such provision shall be construed or
deemed amended to the extent necessary to conform to such requirements, and
no provision shall be deemed to confer upon the Committee or any other person
discretion to increase the amount of compensation otherwise payable in
connection with any such Award upon attainment of the performance goals.



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	 	     (ii) Section 16 Compliance. With respect to a Participant who is then
subject to Section 16 of the Exchange Act in respect of the Company, the
Committee shall implement transactions under the Plan and administer the Plan
in a manner that will ensure that each transaction by such a Participant is
exempt from liability under Rule 16b-3, except that such a Participant may be
permitted to engage in a nonexempt transaction under the Plan if written
notice has been given to the Participant regarding the nonexempt nature of
such transaction. The Committee may authorize the Company to repurchase any
Award or shares of Stock resulting from any Award in order to prevent a
Participant who is subject to Section 16 of the Exchange Act from incurring
liability under Section 16(b). Unless otherwise specified by the Participant,
equity securities, including, without limitation, derivative securities,
acquired under the Plan which are disposed of by a Participant shall be
deemed to be disposed of in the order acquired by the Participant.



     (e)  Loan Provisions. With the consent of the Committee, and subject at
all times to, and only to the extent, if any, permitted under and in accordance
with, laws and regulations and other binding obligations or provisions
applicable to the Company, the Company may make, guarantee or arrange for a
loan or loans to a Participant with respect to the exercise of any Option or
other payment by the Participant in connection with any Award, including,
without limitation, the payment by a Participant of any or all federal, state
or local income or other taxes due in connection with any Award. Subject to
such limitations, the Committee shall have full authority to decide whether to
make a loan or loans hereunder and to determine the amount, terms and
provisions of any such loan or loans, including, without limitation, the
interest rate to be charged in respect of any such loan or loans, whether the
loan or loans are to be with or without recourse against the Participant, the
terms on which the loan or loans are to be repaid and the conditions, if any,
under which the loan or loans may be forgiven.


     (f)  Performance-Based Awards. The Committee may designate any Award, the
exercisability, vesting, payment or settlement of which is subject to the
attainment of one or more preestablished performance goals, as a
performance-based Award intended to qualify as “performance-based compensation”
within the meaning of Code section 162(m). The performance goals for an Award
subject to this Section 7(f) shall consist of one or more business criteria,
identified below, and a targeted level or levels of performance with respect to
such criteria, as specified by the Committee. Performance goals shall be
objective and shall otherwise meet the requirements of Code section
162(m)(4)(C). The following business criteria for the Company, on a
consolidated basis, and/or for specified Subsidiaries or business units of the
Company, shall be used by the Committee in establishing performance goals for
such Awards: (i) earnings; (ii) net income; (iii) net income applicable to
Stock; (iv) revenue (v) cash flow; (vi) return on assets; (vii) return on net
assets; (viii) return on invested capital; (ix) return on equity; (x)
profitability; (xi) economic value added; (xii) operating margins or profit
margins; (xiii) income before income taxes; (xiv) income before interest and
income taxes; (xv) income before interest, income taxes, depreciation and
amortization; (xvi) total return on Common Stock; (xvii) book value; (xviii)
expense management; (xix) capital structure and working capital; (xx) strategic
business criteria, consisting of one or more objectives based on meeting
specified revenue, gross profit, market penetration, geographic business
expansion, cost targets or goals relating to acquisitions or divestitures;
(xxi) costs; (xxii) employee morale or productivity; (xxiii) customer
satisfaction or loyalty; (xxiv) customer service; (xxv) compliance programs;
(xxvi) gas delivered; (xxvii) system reliability; (xxviii) adequacy and
security of gas supply; and (xxix) safety. The levels of performance required
with respect to such business criteria may be expressed in absolute or relative
terms, including, without limitation, per share amounts and comparisons to the
performance of a published or special index deemed applicable by the Committee,
such as the Standard & Poor’s 500 Stock Index or the performance of one or more
comparator companies. In establishing the levels of performance to be attained,
the Committee may disregard or offset the effect of such factors as
extraordinary and/or nonrecurring events as determined by the Company’s
independent certified public accountants in accordance with generally accepted
accounting principles and changes in or modifications to accounting standards
as may be required by the Financial Accounting Standards Board. Achievement of
performance goals with respect to such Awards shall be measured over a period
of not less than one year nor more than five years, as the Committee may
specify. Performance goals may differ for Awards to different Participants. The
Committee shall specify the weighting to be given to each business criterion
for purposes of determining the final amount payable with respect to any such
Award. The Committee may reduce the amount of a payout otherwise to be made in
connection with an Award subject to this Section 7(f), but may not exercise its
discretion to increase such amount, and the Committee may consider other
performance criteria in exercising such negative discretion. All determinations
by the Committee as to the attainment of performance goals shall be in writing.
The Committee may not delegate any responsibility with respect to an Award that
is intended to qualify as “performance-based compensation” within the meaning
of Code section 162(m).


     (g)  Acceleration and Payout upon a Change of Control. Notwithstanding
anything contained herein to the contrary, all conditions and/or restrictions
relating to the continued performance of services and/or the achievement of
performance goals with respect to the exercisability, vesting, payment or
settlement of an Award shall immediately lapse upon a Change of Control, and
all Awards shall be immediately paid or settled in Stock; provided, however,
(i) that such lapse shall not occur if (A) it is intended that the transaction
constituting such Change of Control be accounted for as a pooling of interests
under Accounting Principles Board Opinion No. 16 (or any successor thereto),
and operation of this Section 7(g) would be the sole reason for the inability
to comply with


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Paragraph 47(c) thereof (or any successor thereto), or (B) the Committee
determines that such lapse shall not occur, except that the Committee shall not
have the discretion granted in this clause (B) if it is intended that the
transaction constituting such Change of Control be accounted for as a pooling
of interests under Accounting Principles Board Opinion No. 16 (or any successor
thereto), and such discretion or the exercise thereof would be the sole reason
for the inability to comply with Paragraph 47(c) thereof (or any successor
thereto); and, (ii) that obligations under such Awards shall be immediately
paid or settled in cash, rather than in Stock, if it is intended that the
transaction constituting such Change of Control be accounted for as a pooling
of interests under Accounting Principles Board Opinion No. 16 (or any successor
thereto), and payment or settlement in Stock would be the sole reason for the
inability to comply with Paragraph 47(c) thereof (or any successor thereto).


SECTION 8



GENERAL PROVISIONS



     (a)  Compliance with Laws and Obligations. The Company shall not be
obligated to issue or deliver Stock in connection with any Award or to take any
other action under the Plan in a transaction subject to the requirements of any
applicable securities law, any requirement under any listing agreement between
the Company and any national securities exchange or automated quotation system
or any other law, regulation or contractual obligation until the Company is
satisfied that such laws, regulations and other obligations have been complied
with in full. Certificates representing shares of Stock issued under the Plan
may be subject to such stop-transfer orders and other restrictions as may be
applicable under such laws, regulations and other obligations, including,
without limitation, any requirement that a legend or legends be placed thereon.


     (b)  Limitations on Transferability. Awards and other rights or benefits
under the Plan shall not be transferable by a Participant except by will or the
laws of descent and distribution or to a Beneficiary in the event of the
Participant’s death, shall not be pledged, mortgaged, hypothecated or otherwise
encumbered, or otherwise be subject to the claims of creditors and, in the case
of ISOs and SARs in tandem therewith, shall be exercisable during the lifetime
of a Participant only by such Participant or his guardian or legal
representative; provided, however, that Awards and other rights (other than
ISOs and SARs in tandem therewith) may be transferred to one or more
transferees during the lifetime of the Participant to the extent and on such
terms and conditions as may then be permitted by the Committee.


     (c)  No Right to Continued Employment or Service. Neither the Plan nor any
action taken hereunder shall be construed as giving any employee or any person
the right to be retained in the employ or service, as applicable, of the
Company or any Subsidiary, nor shall it interfere in any way with the right of
the Company or any Subsidiary to terminate any employee’s employment or any
person’s service at any time.


     (d)  Taxes. The Company and any Subsidiary is authorized to withhold from
any Award granted or exercised, vested, paid or settled any delivery of cash,
Stock, other Awards or other property, or from any payroll or other payment to
a Participant, amounts of withholding and other taxes due or potentially
payable in connection with any transaction involving an Award, and to take such
other action as the Committee may deem advisable to enable the Company and the
Participant to satisfy obligations for the payment of withholding taxes and
other tax obligations relating to any Award. This authority shall include,
without limitation, authority to withhold or receive Stock, other Awards or
other property, and to make cash payments in respect thereof, in satisfaction
of a Participant’s tax obligations.


     (e) Changes to the Plan and Awards. The Board may amend, alter, suspend,
discontinue or terminate the Plan or the Committee’s authority to grant Awards
under the Plan without the consent of the Company’s stockholders or
Participants, except that any such Board action shall be subject to the
approval of the Company’s stockholders at or before the next annual meeting of
stockholders for which the record date is after such Board action if such Board
action increases the number of shares of Stock subject to the Plan or if such
stockholder approval is required by any federal or state law or regulation or
the rules of any stock exchange or automated quotation system on which the
Stock may then be listed or quoted, and the Board may otherwise, in its
discretion, determine to submit other such changes to the Plan to stockholders
for approval; provided, however, that, without the consent of an affected
Participant, no such action may materially impair the rights or benefits of
such Participant under any Award theretofore granted to him (as such rights and
benefits are set forth in the Plan and the Award Agreement). The Committee may
waive any terms or conditions under, or amend, alter, suspend, discontinue or
terminate any Award theretofore granted and any Award Agreement relating
thereto; provided, however, that, without the consent of an affected
Participant, no such action may materially impair the rights or benefits of
such Participant under such Award (as such rights or benefits are set forth in
the Plan and the Award Agreement) except to the extent necessary for a business
combination in which the Company is a party to be accounted for under the
pooling-of-interests method of accounting.


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     (f)  No Rights to Awards; No Stockholder Rights. No Participant, employee
or eligible person shall have any claim to be granted any Award, and there is
no obligation for uniformity of treatment of Participants, employees or
eligible persons. No Award shall confer on any Participant any of the rights or
benefits of a stockholder of the Company unless and until Stock is duly issued
or transferred and delivered to the Participant in accordance with the terms of
the Award or, in the case of an Option, the Option is duly exercised.


     (g)  Unfunded Status of Awards; Creation of Trusts. The Plan is intended
to constitute an “unfunded” plan for incentive and deferred compensation. With
respect to any payments not yet made to a Participant pursuant to an Award,
nothing contained in the Plan or any Award Agreement shall give any such
Participant any rights or benefits that are greater than those of a general
creditor of the Company; provided, however, that the Committee may authorize
the creation of trusts or make other arrangements to meet the Company’s
obligations under the Plan to deliver cash, Stock, other Awards or other
property pursuant to any Award, which trusts or other arrangements shall be
consistent with the “unfunded” status of the Plan unless the Committee
otherwise determines with the consent of an affected Participant.


     (h)  Nonexclusivity of the Plan. Neither the adoption of the Plan by the
Board nor its submission to the Company’s stockholders for approval shall be
construed as creating any limitations on the power of the Board to adopt such
other compensatory arrangements as it may deem desirable, including, without
limitation, the granting of stock options otherwise than under the Plan, and
such arrangements may be either applicable generally or only in specific cases.


     (i)  No Fractional Shares. No fractional shares of Stock shall be issued
or delivered pursuant to the Plan or any Award. The Committee shall determine
whether cash, other Awards or other property shall be issued or paid in lieu of
such fractional shares, or whether such fractional shares or any rights thereto
shall be forfeited or otherwise eliminated.


     (j)  Gender; Singular and Plural. All masculine pronouns shall be deemed
to include their feminine counterparts. As the context may require, the
singular may be read as the plural and vice versa.


     (k)  Governing Law. The validity, construction and effect of the Plan or
any Award Agreement and any rules and regulations relating to the Plan or any
Award Agreement shall be determined in accordance with the laws of the
Commonwealth of Virginia, without giving effect to principles of conflicts of
laws, and applicable federal law.


     (1)  Effective Date; Plan Termination. The Plan shall become effective as
of the date of its approval by the Company’s stockholders, and shall continue
in effect until terminated by the Board.



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