Document:

ex10-7

 

EXHIBIT 10.7

EMPLOYMENT AGREEMENT

     This EMPLOYMENT AGREEMENT (the “Agreement”) is entered into by and between
Washington Gas Light Company (the “Company” or the “Utility”) and James H.
DeGraffenreidt, Jr. (the “Executive”), as of the 14th day of December, 2001.

RECITALS

     The Board of Directors of the Company (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 Executive, notwithstanding
the possibility, threat or occurrence of a Change of Control (as defined below)
of the Company or its parent company, WGL Holdings, Inc. The Board believes it
is imperative to diminish the inevitable distraction of the Executive by virtue
of the personal uncertainties and risks created by a pending or threatened
Change of Control of the Company or WGL Holdings, Inc., to encourage the
Executive’s full attention and dedication to the interests of the Company
currently and in the event of any threatened or pending Change of Control of
the Company or WGL Holdings, Inc. and to provide the Executive with
compensation and benefits arrangements upon such a Change of Control which
ensure that the compensation and benefits expectations of the Executive will be
satisfied and which are competitive with those of other corporations.
Therefore, in order to accomplish these objectives, the Board has caused the
Company to enter into this Agreement.

AGREEMENT

     NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:

     1.      Certain Definitions. (a) The “Effective Date” shall mean the first
date during the Change of Control Period (as defined in Section l(b)) on which
a Change of Control (as defined in Section 2) occurs. Anything in this
Agreement to the contrary notwithstanding, if a Change of Control occurs and if
the Executive’s employment with the Company is terminated within twelve months
prior to the date on which the Change of Control occurs, and if it is
reasonably demonstrated by the Executive that such termination of employment
(i) was at the request of a third party who has taken steps reasonably
calculated to effect a Change of Control or (ii) otherwise arose in connection
with or anticipation of a Change of Control, then for all purposes of this
Agreement the “Effective Date” shall mean the date immediately prior to the
date of such termination of employment.

1

 

     (b)      The “Change of Control Period” shall mean the period commencing on the
date hereof and ending on the second anniversary of the Effective Date.

		
	 	     2.      Change of Control. For the purpose of this Agreement, a “Change
of Control” shall mean:

		
	 	     (a)     The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act
of 1934, as amended (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 (i) the then-outstanding shares
of common stock of WGL Holdings, Inc. or (ii) the combined voting power
of the then-outstanding voting securities of WGL Holdings, Inc. entitled
to vote generally in the election of directors; provided, however, that
for purposes of this subsection (a), the following acquisitions shall
not constitute a Change of Control: (i) any acquisition directly from
WGL Holdings, Inc., (ii) any acquisition by WGL Holdings, Inc. or any
corporation controlled by or otherwise affiliated with WGL Holdings,
Inc., (iii) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by WGL Holdings, Inc. or any corporation
controlled by or otherwise affiliated with WGL Holdings, Inc.; or (iv)
any transaction described in clauses (i), (ii), and (iii) of subsection
(d) of this Section 2; or

		
	 	     (b)     Individuals who, as of the close of business on November 1,
2000, constituted the Board of Directors of WGL Holdings, Inc. (the
“Incumbent WGL Holdings, Inc. Board”) cease for any reason to constitute
at least a majority of the Board of Directors of WGL Holdings, Inc.;
provided, however, that any individual becoming a director subsequent to
November 1, 2000 whose election, or nomination for election by WGL
Holdings, Inc.’s shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent WGL Holdings,
Inc. Board shall be considered as though such individual were a member
of the Incumbent WGL Holdings, Inc. 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 WGL Holdings, Inc. Board; or

		
	 	     (c)     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 (i) the then-outstanding shares of common stock

2

 

		
	 	of the Utility or (ii) 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 subsection (a), the following acquisitions shall not
constitute a Change of Control: (i) any acquisition directly from the
Utility, (ii) any acquisition by the Utility or any corporation
controlled by or otherwise affiliated with the Utility, (iii) 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 (iv) any transaction described in
clauses (i) and (ii) of subsection (e) of this Section 2; or

		
	 	     (d)     Consummation of a reorganization, merger or consolidation or
sale or other disposition of all or substantially all of the assets of
the WGL Holdings, Inc. (a “Business Combination”), in each case unless,
following such Business Combination, (i) all or substantially all of the
individuals and entities who were the beneficial owners, respectively,
of the outstanding WGL Holdings, Inc. common stock and outstanding WGL
Holdings, Inc. 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 WGL Holdings, Inc.
common stock and outstanding WGL Holdings, Inc. voting securities, as
the case may be, (ii) no Person (excluding any corporation resulting
from such Business Combination or any employee benefit plan (or related
trust) of WGL Holdings, Inc. 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 WGL Holdings, Inc. Board at
the time of the execution of the initial agreement, or of such Incumbent
WGL Holdings, Inc. Board, providing for such Business Combination; or

		
	 	     (e)     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

3

 

		
	 	unless, following such Utility Business Combination, (i) 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
(ii) 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

		
	 	     (f)     Approval by the shareholders of WGL Holdings, Inc. of a complete
liquidation or dissolution of WGL Holdings, Inc.

     3.     Employment Period. The Company hereby agrees to continue the Executive
in its employ, and the Executive hereby agrees to remain in the employ of the
Company subject to the terms and conditions of this Agreement, for the period
commencing on the Effective Date and ending on the second anniversary of such
date (the “Employment Period”).

     4.     Terms of Employment. (a) Position and Duties. (i) During the
Employment Period, (A) the Executive’s position, duties and responsibilities
shall be at least commensurate in all material respects with the most
significant of those held, exercised and assigned at any time during the
120-day period immediately preceding the Effective Date and (B) the Executive’s
services shall be performed at the location where the Executive was employed
immediately preceding the Effective Date or any office or location less than 35
miles from such location; and

     (ii)      During the Employment Period, and excluding any periods of vacation
and sick leave to which the Executive is entitled, the Executive agrees to
devote reasonable attention and time during normal business hours to the
business and affairs of the Company and, to the extent necessary to discharge

4

 

the responsibilities assigned to the Executive hereunder, to use the
Executive’s reasonable best efforts to perform faithfully and efficiently such
responsibilities. During the Employment Period it shall not be a violation of
this Agreement for the Executive to (A) serve on corporate, civic or charitable
boards or committees, (B) deliver lectures, fulfill speaking engagements or
teach at educational institutions, and (C) manage personal investments, so long
as such activities do not significantly interfere with the performance of the
Executive’s responsibilities as an employee of the Company in accordance with
this Agreement. It is expressly understood and agreed that to the extent that
any such activities have been conducted by the Executive prior to the Effective
Date, the continued conduct of such activities (or the conduct of the
activities similar in nature and scope thereto) subsequent to the Effective
Date shall not thereafter be deemed to interfere with the performance of the
Executive’s responsibilities to the Company.

     (b)      Compensation. (i) Base Salary. During the Employment Period, the
Executive shall receive an annual base salary (“Annual Base Salary”), which
shall be paid at a monthly rate, at least equal to twelve times the highest
monthly base salary paid or payable, including any base salary which has been
earned but deferred, to the Executive by the Company and its affiliated
companies in respect of the 12-month period immediately preceding the month in
which the Effective Date occurs. As used herein, “Annual Base Salary” will
include all wages or salary paid to the Executive and will be calculated before
any salary reduction or deferrals, including but not limited to reductions made
pursuant to Sections 125 and 401(k) of the Internal Revenue Code of 1986, as
amended. During the Employment Period, the Annual Base Salary shall be
reviewed no more than 12 months after the last salary increase awarded to the
Executive prior to the Effective Date and thereafter at least annually. Any
increase in Annual Base Salary shall not serve to limit or reduce any other
obligation to the Executive under this Agreement. Annual Base Salary shall not
be reduced after any such increase and the term Annual Base Salary as utilized
in this Agreement shall refer to Annual Base Salary as so increased. As used
in this Agreement, the term “affiliated companies” shall include any company
controlled by, controlling or under common control with the Company.

     (ii)      Annual Incentive. In addition to Annual Base Salary, the Executive
shall earn annual incentive compensation (the “Annual Incentive”) for each
fiscal year ending during the Employment Period, at least equal to that
available to other peer executives of the Company and its affiliated companies.
Each such Annual Incentive shall be paid no later than the end of the third
month of the fiscal year next following the fiscal year for which the Annual
Incentive is awarded, unless the Executive shall elect to defer the receipt of
such Annual Incentive. In the event the Executive is terminated during the

5

 

Employment Period, the Executive’s Annual Incentive for the most recent
year shall be prorated for the portion of that year that the Executive worked
in the manner set forth in Section 6(a)(i)(A)(2).

     (iii)      Incentive, Savings and Retirement Plans. During the Employment
Period, the Executive shall be entitled to participate in all incentive,
savings and retirement plans, practices, policies and programs applicable
generally to other peer executives of the Company and its affiliated companies,
but in no event shall such plans, practices, policies and programs provide the
Executive with incentive opportunities (measured with respect to both regular
and special incentive opportunities, to the extent, if any, that such
distinction is applicable), savings opportunities and retirement benefit
opportunities, less favorable, in the aggregate, than the most favorable of
those provided by the Company and its affiliated companies for the Executive
under such plans, practices, policies and programs as in effect at any time
during the 120-day period immediately preceding the Effective Date or if more
favorable to the Executive, those provided generally at any time after the
Effective Date to other peer executives of the Company and its affiliated
companies.

     (iv)      Welfare Benefit Plans. During the Employment Period, the Executive
and/or the Executive’s beneficiaries, as the case may be, shall be eligible for
participation in and shall receive all benefits under welfare benefit plans,
practices, policies and programs provided by the Company and its affiliated
companies (including, without limitation, medical, prescription, dental,
disability, employee life, group life, accidental death and travel accident
insurance plans and programs) to the extent applicable generally to other peer
executives of the Company and its affiliated companies, but in no event shall
such plans, practices, policies and programs provide the Executive with
benefits which are less favorable, in the aggregate, than the most favorable of
such plans, practices, policies and programs in effect for the Executive at any
time during the 120-day period immediately preceding the Effective Date or, if
more favorable to the Executive, those provided generally at any time after the
Effective Date to other peer executives of the Company and its affiliated
companies.

     (v)     Expenses. During the Employment Period, the Executive shall be
entitled to receive prompt reimbursement for all reasonable expenses incurred
by the Executive in accordance with the most favorable policies, practices and
procedures of the Company and its affiliated companies in effect for the
Executive at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in effect generally
at any time thereafter with respect to other peer executives of the Company and
its affiliated companies.

6

 

     (vi)     Fringe Benefits. During the Employment Period, the Executive shall
be entitled to fringe benefits, including, without limitation, payment of club
dues, and, if applicable, use of an automobile and payment of related expenses,
in accordance with the most favorable plans, practices, programs and policies
of the Company and its affiliated companies in effect for the Executive at any
time during the 120-day period immediately preceding the Effective Date or, if
more favorable to the Executive, as in effect generally at any time thereafter
with respect to other peer executives of the Company and its affiliated
companies.

     (vii)      Office. During the Employment Period, the Executive shall be
entitled to an office at least equal to that of other peer executives of the
Company and its affiliated companies.

     (viii)      Vacation. During the Employment Period, the Executive shall be
entitled to paid vacation in accordance with the most favorable plans,
policies, programs and practices of the Company and its affiliated companies as
in effect for the Executive at any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other peer executives
of the Company and its affiliated companies.

     5.     Termination of Employment. (a) Death or Disability. The Executive’s
employment shall terminate automatically upon the Executive’s death during the
Employment Period. If the Company determines in good faith that the Disability
of the Executive has occurred during the Employment Period (pursuant to the
definition of Disability set forth below), it may give to the Executive written
notice in accordance with Section 12(b) of this Agreement of its intention to
terminate the Executive’s employment. In such event, the Executive’s
employment with the Company shall terminate effective on the 30th day after
receipt of such notice by the Executive (the “Disability Effective Date”),
provided that, within the 30 days after such receipt, the Executive shall not
have returned to full-time performance of the Executive’s duties. For purposes
of this Agreement, “Disability” shall mean the absence of the Executive from
the Executive’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 Executive or the
Executive’s legal representative.

     (b)      Cause. The Company may terminate the Executive’s employment during
the Employment Period for Cause. For purposes of this Agreement, “Cause” shall
mean:

7

 

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

		
	 	     (ii)     the willful engaging by the Executive in illegal conduct or
gross misconduct which is materially and demonstrably injurious to the
Company.

For purposes of this provision, no act or failure to act, on the part of the
Executive, shall be considered “willful” unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive’s action 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 based upon the advice of counsel for the Company
shall be conclusively presumed to be done, or omitted to be done, by the
Executive in good faith and in the best interests of the Company. The
cessation of employment of the Executive shall not be deemed to be for Cause
unless and until there shall have been delivered to the Executive 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 Executive and the
Executive is given an opportunity, together with counsel, to be heard before
the Board), finding that, in the good faith opinion of the Board, the Executive
is guilty of the conduct described in subparagraph (i) or (ii) above, and
specifying the particulars thereof in detail.

     (c)  Good Reason. The Executive’s employment may be terminated by the
Executive for Good Reason. For purposes of this Agreement, “Good Reason” shall
mean:

		
	 	     (i)     the assignment to the Executive of any duties inconsistent in
any material respect with the Executive’s position as contemplated by
Section 4(a) of this Agreement, excluding for this purpose an isolated,
insubstantial and inadvertent action which is remedied by the Company
promptly after receipt of notice thereof given by the Executive;

		
	 	     (ii)     any failure by the Company to comply with any of the provisions
of Section 4(b) of this Agreement, other than an isolated, insubstantial
and inadvertent failure which is remedied by the Company promptly after
receipt of notice thereof given by the Executive;

8

 

		
	 	     (iii)     if there is a Change of Control, merger, acquisition or other
similar affiliation with another entity and Executive does not continue
as the Chairman and Chief Executive Officer of the most senior resulting
entity;

		
	 	     (iv)     failure by the Company to reimburse the Executive for expenses
related to a required relocation;

		
	 	     (v)     any required relocation of the Executive more than thirty five
miles from Washington, D.C., other than on a temporary basis (less than
two months);

		
	 	     (vi)     any purported termination by the Company of the Executive’s
employment otherwise than as expressly permitted by this Agreement; or

		
	 	     (vii)     any failure by the Company to comply with and satisfy Section
11 (c) of this Agreement.

     (d)      Notice of Termination. Any termination by the Company for Cause, or
by the Executive for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 12(b) of
this Agreement. For purposes of this Agreement, a “Notice of Termination”
means a written notice which (i) indicates the specific termination provision
in this Agreement relied upon, (ii) to the extent applicable, sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive’s employment under the provision so indicated and
(iii) if the Date of Termination (as defined below) is other than the date of
receipt of such notice, specifies the termination date (which date shall be not
more than 30 days after the giving of such notice). The failure by the
Executive or the Company to set forth in the Notice of Termination any fact or
circumstance which contributes to a showing of Good Reason or Cause shall not
waive any right of the Executive or the Company, respectively, hereunder or
preclude the Executive or the Company, respectively, from asserting such fact
or circumstance in enforcing the Executive’s or the Company’s rights hereunder.

     (e)      Date of Termination. “Date of Termination” means (i) if the
Executive’s employment is terminated by the Company for Cause, or by the
Executive 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 the Executive’s
employment is terminated by the Company other than for Cause or Disability,
the Date of Termination shall be the date on which the Company notifies the
Executive of such termination and (iii) if the Executive’s employment is

9

 

terminated by reason of death or Disability, the Date of Termination shall
be the date of death of the Executive or the Disability Effective Date, as the
case may be.

     6.     Obligations of the Company upon Termination During Employment Period.
(a) Good Reason, Other Than for Cause, Death or Disability. If, during the
Employment Period, the Company shall terminate the Executive’s employment other
than for Cause or Disability or the Executive shall terminate employment for
Good Reason:

		
	 	     (i)     the Company shall pay to the Executive in a lump sum in cash
within 30 days after the Date of Termination the aggregate of the
following amounts:

		
	 	     A.      the sum of (1) the Executive’s Annual Base Salary through
the Date of Termination to the extent not theretofore paid, (2) the
product of (x) the Target Annual Incentive (as defined in the
Executive Compensation Plan of the Company) in the fiscal year of
the Executive’s Termination and (y) a fraction, the numerator of
which is the number of days in the current fiscal year through the
Date of Termination, and the denominator of which is 365 and (3)
any compensation previously deferred by the Executive (together
with any accrued interest or earnings thereon) and any accrued
vacation pay, in each case to the extent not therefore paid (the
sum of the amounts described in clauses (1), (2), and (3) shall be
hereinafter referred to as the “Accrued Obligations”); and

		
	 	     B.     Subject to the provisions of Section 9, the amount equal to
three times the Executive’s Highest Pay. For purposes of this
Agreement, Highest Pay shall mean the sum of (1) the Executive’s
Annual Base Salary, plus (2) the highest of the Executive’s Annual
Incentive actually earned for the last three full fiscal years.

		
	 	     (ii)     for three years after the Executive’s Date of Termination, or
such longer period as may be provided by the terms of the appropriate
plan, program, practice or policy, the Company shall continue benefits to
the Executive and/or the Executive’s beneficiaries at least equal to
those which would have been provided to them in accordance with the
plans, programs, practices and policies described in Section 4(b)(iv) of
this Agreement if the Executive’s employment had not been terminated or,
if more favorable to the Executive, 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

10

 

		
	 	Executive becomes reemployed with another employer and is eligible
to receive medical or other welfare benefits under another
employer-provided plan, the medical and other welfare benefits described
herein shall be secondary to those provided under such other plan during
such applicable period of eligibility. After this three-year term, the
Executive shall immediately be eligible for COBRA benefits. For purposes
of determining eligibility (but not the time of commencement of benefits)
of the Executive for retiree benefits pursuant to such plans, practices,
programs and policies, the Executive shall be considered to have remained
employed until three years after the Date of Termination and to have
retired on the last day of such period;

		
	 	     (iii)    &nbspto the extent not theretofore paid or provided, the Company
shall timely pay or provide to the Executive any other amounts or
benefits required to be paid or provided or which the Executive is
eligible to receive under any plan, program, policy or practice or
contract or agreement of the Company and its affiliated companies (such
other amounts and benefits shall be hereinafter referred to as the “Other
Benefits”);

		
	 	     (iv)     the Company shall credit the Executive with up to an additional
three years of benefit service under the Company’s Supplemental Executive
Retirement Plan (the “SERP”), but in no event shall such additional years
of benefit service result in total years of benefit service exceeding the
maximum under the SERP;

		
	 	     (v)     the Company shall, at its sole expense as incurred, provide the
Executive with reasonable outplacement services the scope and provider of
which shall be selected by the Executive in the Executive’s sole
discretion; and

		
	 	     (vi)     immediately prior to termination of the Executive’s employment,
all restricted stock grants made to the Executive which are outstanding
at the time of such event shall be accelerated and vest.

     (b)      Death. If the Executive’s employment is terminated by reason of the
Executive’s death during the Employment Period, this Agreement shall terminate
without further obligations to the Executive’s legal representatives under this
Agreement, other than for payment of Accrued Obligations and the timely payment
or provision of Other Benefits. Accrued Obligations shall be paid to the
Executive’s estate or beneficiary, as applicable, in a lump sum in cash within
30 days of the Date of Termination. With respect to the provision of Other
Benefits, the term Other Benefits as utilized in this Section 6(b) shall
include, without limitation, and the Executive’s estate and/or

11

 

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 peers and their
beneficiaries at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive’s estate and/or the
Executive’s beneficiaries, as in effect on the date of the Executive’s death
with respect to other peer executives of the Company and its affiliated
companies and their beneficiaries.

     (c)      Disability. If the Executive’s employment is terminated by reason of
the Executive’s Disability during the Employment Period, this Agreement shall
terminate without further obligations to the Executive, other than for payment
of Accrued Obligations and the timely payment or provision of Other Benefits.
Accrued Obligations shall be paid to the Executive in a lump sum in cash within
30 days of the Date of Termination. With respect to the provision of Other
Benefits, the term “Other Benefits” as utilized in this Section 6(c) shall
include, and the Executive 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 generally with respect to other peer executives and their families at
any time during the 120-day period immediately preceding the Effective Date or,
if more favorable to the Executive and/or the Executive’s beneficiaries, as in
effect at any time thereafter generally with respect to other peer executives
of the Company and its affiliated companies and their families.

     (d)      Cause: Other than for Good Reason. If the Executive’s employment
shall be terminated for Cause during the Employment Period, this Agreement
shall terminate without further obligations to the Executive other than the
obligation to pay to the Executive (x) the Executive’s Annual Base Salary
through the Date of Termination, (y) the amount of any compensation previously
deferred by the Executive, and (z) Other Benefits, in each case to the extent
theretofore unpaid. If the Executive voluntarily terminates employment during
the Employment Period, excluding a termination for Good Reason, this Agreement
shall terminate without further obligations to the Executive, other than for
Accrued Obligations and the timely payment or provision of Other Benefits. In
such case, all Accrued Obligations shall be paid to the Executive in a lump sum
in cash within 30 days of the Date of Termination.

     7.     Nonexclusivity of Rights. Nothing in this Agreement shall prevent or
limit the Executive’s continuing or future participation in any plan,

12

 

program, policy or practice provided by the Company or any of its
affiliated companies and for which the Executive may qualify, nor, subject to
Section 12(f), shall anything herein limit or otherwise affect such rights as
the Executive may have under any contract or agreement with the Company or any
of its affiliated companies. Amounts which are vested benefits or which the
Executive 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 the Date of Termination shall be
payable in accordance with such plan, policy, practice or program or contract
or agreement except as explicitly modified by this Agreement.

     8.     Full Settlement. The Company’s obligation to make the payments
provided for in this Agreement 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 the
Executive or others. In no event shall the Executive be obligated to seek
other employment or take any other action by way of mitigation of the amounts
payable to the Executive under any of the provisions of this Agreement and such
amounts shall not be reduced whether or not the Executive obtains other
employment.

     9.     Certain Additional Payments by the Company. (a) Anything in this
Agreement to the contrary notwithstanding and except as set forth below, in the
event it shall be determined that any payment or distribution by the Company to
or for the benefit of the Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required under this
Section 9) (a “Payment”) would be subject to the excise tax imposed by Section
4999 of the Code or any interest or penalties are incurred by the Executive
with respect to such excise tax (such excise tax, together with any such
interest and penalties, are hereinafter collectively referred to as the “Excise
Tax”), then the Executive shall be entitled to receive an additional payment (a
“Gross-Up Payment”) in an amount such that after payment by the Executive of
all taxes (including any interest or penalties imposed with respect to such
taxes), including, without limitation, any income taxes (and any interest and
penalties imposed with respect thereto) and Excise Tax imposed upon the
Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal
to the Excise Tax imposed upon the Payments.

     (b)      Subject to the provisions of Section 9(c), all determinations required
to be made under this Section 9, including whether and when a Gross-Up Payment
is required and the amount of such Gross-Up Payment and the assumptions to be
utilized in arriving at such determination, shall be made by such certified
public accounting firm as may be designated by the Company

13

 

(the “Accounting Firm”) which shall provide detailed supporting
calculations both to the Company and the Executive within 15 business days of
the receipt of notice from the Executive that there has been a Payment, or such
earlier time as is requested by the Company. In the event that the Accounting
Firm is serving as accountant or auditor for the individual, entity or group
effecting the Change of Control, the Company shall appoint another nationally
recognized accounting firm to make the determinations required hereunder (which
accounting firm shall then be referred to as the Accounting Firm hereunder).
All fees and expenses of the Accounting Firm shall be borne solely by the
Company. Any Gross-Up Payment, as determined pursuant to this Section 9, shall
be paid by the Company to the Executive within five days of the receipt of the
Accounting Firm’s determination. Any determination by the Accounting Firm
shall be binding upon the Company and the Executive. As a result of the
uncertainty in the application of Section 4999 of the Code at the time of the
initial determination by the Accounting Firm hereunder, it is possible that
Gross-Up Payments which will not have been made by the Company should have been
made (“Underpayment”), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies pursuant to
Section 9(c) and the Executive thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of the Underpayment
that has occurred and any such Underpayment shall be promptly paid by the
Company to or for the benefit of the Executive.

     (c)      In the event the Internal Revenue Service (“IRS”) subsequently
challenges the Excise Tax computation herein described, then the Executive
shall notify the Company in writing of any claim by the IRS that, if
successful, would require the payment by the Executive of additional Excise
Taxes. Such notification shall be given no later than ten days after the
Executive receives written notice of such claim. The Executive shall not pay
such claim prior to the expiration of the 30-day period following the date on
which the Executive gives notice to the Company (or such shorter period ending
on the date that any payment of taxes with respect to such claim is due). If
the Company notifies the Executive in writing prior to the expiration of such
period that it desires to contest such claim and that it will bear the costs
and provide the indemnification as required by this sentence, the Executive
shall cooperate with the Company in good faith in order effectively to contest
such claim and permit the Company to participate in any proceedings relating to
such claim. In the event a final determination is made with respect to the IRS
claim, or in the event the Company chooses not to further challenge such claim,
then the Company shall reimburse the Executive for the additional Excise Tax
owed to the IRS in excess of the Excise Tax calculated by the Accounting Firm.
The Company shall also reimburse the Executive for all interest and penalties
related to the underpayment of such Excise Tax. The

14

 

Company will also reimburse the Executive for all federal and state income
tax and employment taxes thereon.

     10.     Confidential Information. The Executive shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential 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
Executive during the Executive’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 Executive or representatives of the Executive in violation
of this Agreement). After termination of the Executive’s employment with the
Company, the Executive 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 no event shall an asserted violation of
the provisions of this Section 10 constitute a basis for deferring or
withholding any amounts otherwise payable to the Executive under this
Agreement.

     11.     Successors & Assigns. (a) This Agreement is personal to the Executive
and without the prior written consent of the Company shall not be assignable by
the Executive otherwise than by will or the laws of descent and distribution.
This Agreement shall inure to the benefit of and be enforceable by the
Executive’s legal representatives.

     (b)      This Agreement shall inure to the benefit of and be binding upon the
Company and its successors and assigns.

     (c)      The Company will require any successor or any party that acquires
control of the Company (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business and/or
assets of the Company or any party that acquires control of the Company to
assume expressly and agree to perform this Agreement in the same manner and to
the same extent that the Company would be required to perform it if no such
succession had taken place. As used in this Agreement, “Company” shall mean
the Company as hereinbefore defined and any successor to its business and/or
assets as aforesaid which assumes and agrees to perform this Agreement by
operation of law, or otherwise.

     12.     Miscellaneous. (a) Governing Law; Headings; Amendment. This
Agreement shall be governed by and construed in accordance with the laws of the
Commonwealth of Virginia, without reference to principles of conflict of laws.
The captions of this Agreement are not part of the provisions hereof and shall
have no force or effect. This Agreement may not be amended

15

 

or modified otherwise than by a written agreement executed by the parties
hereto or their respective successors and legal representatives.

     (b)  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 the Executive:

at the address for Executive that is on file with the Company

	 	If to the Company:

Washington Gas Light Company

1100 H Street, N.W.

Washington, D.C. 20080

ATTN: General Counsel

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

     (c)      Severability. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.

     (d)      Withholding. The Company may withhold from any amounts payable under
this Agreement such federal, state, local or foreign taxes as shall be
required to be withheld pursuant to any applicable law or regulation.

     (e)      Waiver. The Executive’s or the Company’s failure to insist upon
strict compliance with any provision of this Agreement or the failure to assert
any right the Executive or the Company may have hereunder, including, without
limitation, the right of the Executive to terminate employment for Good Reason
pursuant to Section 5(c)(i)-(v) of this Agreement, shall not be deemed to be a
waiver of such provision or right or any other provision or right under this
Agreement.

     (f)      At Will Employment. The Executive and the Company acknowledge that,
except as may otherwise be provided under any other written agreement between
the Executive and the Company, the employment of the Executive by the Company
is “at will” and, subject to Section l(a) hereof, prior to the Effective Date,
the Executive’s employment and/or this Agreement may be terminated by either
the Executive or the Company at any time prior to the Effective Date, in which
case the Executive shall have no further rights

16

 

under this Agreement. From and after the Effective Date this Agreement
shall supersede any other agreement between the parties with respect to the
subject matter hereof.

     (g)      Arbitration. In the event of any dispute between the parties
regarding this Agreement, the parties shall submit to binding arbitration,
conducted in Washington, DC or in Virginia within 25 miles of Washington, DC.
The arbitration shall be conducted pursuant to the rules of the American
Arbitration Association. Each of the parties shall select one arbitrator, who
shall not be related to, affiliated with or employed by that party. The two
arbitrators shall, in turn, select a third arbitrator. The decision of any two
of the arbitrators shall be binding upon the parties, and may, if necessary, be
reduced to judgment in any court of competent jurisdiction. Notwithstanding
the foregoing, the parties expressly agree that nothing herein in any way
precludes Company from seeking injunctive relief or declaratory judgment
through a court of competent jurisdiction with respect to a breach (or an
alleged breach) of any covenant not to compete or of any confidentiality
covenant contained in this Agreement. In the event the Executive pursues
arbitration pursuant to this Section herein, the Executive shall be compensated
up to $150,000 in legal costs.

     (h)      Pooling of Interests Accounting. In the event any provision of this
Agreement would prevent the use of pooling of interests accounting in a
corporate transaction involving the Company and such transaction is contingent
upon pooling of interests accounting, then that provision shall be deemed
amended or revoked to the extent required to preserve such pooling of
interests. The Executive will, upon advice from the Company, take (or refrain
from taking, as appropriate) all actions necessary or desirable to ensure that
pooling of interests accounting is available.

     (i)     Effect of Prior Agreements. This Agreement contains the entire
understanding between the parties hereto and supersedes the Employment
Agreement dated November 1, 2000 between the Company and the Executive.

17

 

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.

	 	 
	 	

	 	Name:  James H. DeGraffenreidt, Jr.
	 	 
	 	WASHINGTON GAS LIGHT COMPANY
	 	 
	 	 

By:  Daniel J. Callahan, III

Title:  Chairman

          Human Resources Committee

18ex10-8

 

EXHIBIT 10.8

WASHINGTON GAS LIGHT COMPANY

SUPPLEMENTAL EXECUTIVE

RETIREMENT PLAN

As Amended Through November 1, 2000

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	 	 	 	 	Page
	 
	 	 	
Article 1. Purpose
	 	1
	 
	 	 	
Article 2. Definitions
	 	2
	 
	 	 	
Article 3. Participation
	 	9
	 
	 	 	
Article 4. Vesting
	 	10
	 
	 	 	
Article 5. Service
	 	13
	 
	 	 	
Article 6. Benefits
	 	14
	 
	 	 	
Article 7. Death Benefits
	 	19
	 
	 	 	
Article 8. Miscellaneous
	 	22
	 
	 	 	
Article 9. Appeals from Denial of Claims
	 	25
	 
	Exhibit A	 	
Participants in the Supplemental Executive
Retirement Plan as of January 1, 1999
	 	27
	 
	Exhibit B	 	
Participants eligible to elect a Full Retirement
Pension or Early Retirement Pension
	 	28
	 
	Exhibit C	 	
Early Retirement Pension Benefit “Legacy”
Formula
	 	29
	 
	Exhibit D	 	
Early Retirement Pension Benefit “New”
Formula
	 	30
	 
	Exhibit E	 	
Lump Sum Calculation Procedure
	 	31
	 
	Exhibit F	 	
Actuarial Equivalent Reduction Factors for
Disability Benefits Commencing Prior to Age 55
	 	32

-i-

 

Article 1

Purpose

1.1    Purpose: The purpose of this Supplemental Executive Retirement Plan
(Supplemental Plan) is to provide a minimum level of retirement income in the
event of normal or early retirement and a minimum level of benefits in the
event of death or disability as a means of attracting, retaining, and
motivating executives. This Supplemental Plan is designed to provide a benefit
which, when added to the benefit provided by the Washington Gas Light Company
Employees’ Pension Plan will meet the purpose described above.

     The Company intends that the Supplemental Plan shall at all times be
maintained on an unfunded basis for federal income tax purposes under the
Internal Revenue Code of 1986, as amended, and be administered as a “top-hat”
plan exempt from the substantive requirements of the Employee Retirement Income
Security Act of 1974, as amended.

-1-

 

Article 2

Definitions

2.1    Accredited Service: Accredited Service as defined in the Basic Plan.

2.2    Accrued Benefit: The amount expressed in terms of an annual single-life
annuity commencing at Normal Retirement Date and determined in accordance with
Section 6.4 which describes the Normal Retirement Pension.

        An Accrued Benefit payable at a date other than the Normal Retirement Date
shall be calculated by (1) applying to the amount determined in Section 6.4(a)
the applicable adjustment factors to reflect the age of the Participant at the
commencement date, (2) determining the offsets under Section 6.4(b) adjusted to
reflect the age of the Participant at the benefit commencement date, and, then
(3) subtracting the amount determined in (2) from the amount determined in (1).
Any adjustments to the resulting benefit to reflect a payment form other than
a life annuity are then applied to the result of Step (3).

2.3    Administrator: The Administrator appointed by the Committee to carry out
the administration of this Supplemental Plan.

2.4    Affiliate: An “Affiliate” of a person is a person that directly or
indirectly, through one or more intermediaries, controls or is controlled by,
or is under common control with such person.

-2-

 

2.5    Basic Plan: Washington Gas Light Company Employees’ Pension Plan, as
amended from time to time.

2.6    Benefit Service: As defined in Section 5.1 of this Supplemental Plan.

2.7    Board or Board of Directors: The Board of Directors of Washington Gas
Light Company.

2.8    Change of Control: The occurrence of any one or more of the triggering
events specified below:

		
	 	     (a)    The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act
of 1934, as amended (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 (i) the then-outstanding shares
of common stock of WGL Holdings, Inc. or (ii) the combined voting power
of the then-outstanding voting securities of WGL Holdings, Inc. entitled
to vote generally in the election of directors; provided, however, that
for purposes of this subsection (a), the following acquisitions shall
not constitute a Change of Control: (i) any acquisition directly from
WGL Holdings, Inc., (ii) any acquisition by WGL Holdings, Inc. or any
corporation controlled by or otherwise affiliated with WGL Holdings,
Inc., (iii) any acquisition by any

-3-

 

		
	 	employee benefit plan (or related trust) sponsored or maintained by
WGL Holdings, Inc. or any corporation controlled by or otherwise
affiliated with WGL Holdings, Inc.; or (iv) any transaction described in
clauses (i), (ii), and (iii) of subsection (d) of this Section 2.8; or

		
	 	     (b)    Individuals who, as of the close of business on November 1,
2000, constituted the Board of Directors of WGL Holdings, Inc. (the
“Incumbent WGL Holdings, Inc. Board”) cease for any reason to constitute
at least a majority of the Board of Directors of WGL Holdings, Inc.;
provided, however, that any individual becoming a director subsequent to
November 1, 2000 whose election, or nomination for election by WGL
Holdings, Inc.’s shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent WGL Holdings,
Inc. Board shall be considered as though such individual were a member
of the Incumbent WGL Holdings, Inc. 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 WGL Holdings, Inc. Board; or
	 
	 	     (c)    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 (i) the then-outstanding shares of common stock of
Washington Gas Light Company (the “Utility”) or (ii) 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

-4-

 

		
	 	purposes of this subsection (c), the following acquisitions shall
not constitute a Change of Control: (i) any acquisition directly from
the Utility, (ii) any acquisition by the Utility or any corporation
controlled by or otherwise affiliated with the Utility, (iii) 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 (iv) any transaction described in
clauses (i) and (ii) of subsection (e) of this Section 2.8; or
	 
	 	     (d)    Consummation of a reorganization, merger or consolidation or
sale or other disposition of all or substantially all of the assets of
the WGL Holdings, Inc. (a “Business Combination”), in each case unless,
following such Business Combination, (i) all or substantially all of the
individuals and entities who were the beneficial owners, respectively,
of the outstanding WGL Holdings, Inc. common stock and outstanding WGL
Holdings, Inc. 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 WGL Holdings, Inc.
common stock and outstanding WGL Holdings, Inc. voting securities, as
the case may be, (ii) no Person (excluding any corporation resulting
from such Business Combination or any employee benefit plan (or related
trust) of WGL Holdings, Inc. or such

-5-

 

		
	 	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 WGL Holdings, Inc. Board at the time of the execution of
the initial agreement, or of such Incumbent WGL Holdings, Inc. Board,
providing for such Business Combination; or
	 
	 	     (e)    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, (i) 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

-6-

 

		
	 	Utility common stock and outstanding Utility voting securities, as
the case may be, and (ii) 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
	 
	 	     (f)    Approval by the shareholders of WGL Holdings, Inc. of a complete
liquidation or dissolution of WGL Holdings, Inc.

2.9    Committee: Means the Committee appointed by the Board to administer the
Plan or if no committee is appointed, the Board.

2.10    Company: Washington Gas Light Company and/or its Affiliates.

2.11     Disability: Disability as defined in the Basic Plan.

2.12     Early Retirement Date: Early Retirement Date as defined in the Basic Plan.

-7-

 

2.13     Employee: Any employee who receives salary, wages or commissions from the
Company.

2.14     Final Average Compensation: The average of the Participant’s highest
Rates of Annual Basic Compensation on December 31 of each of the three years
out of the final five years of the Participant’s Accredited Service as a
Participant preceding such Participant’s Normal Retirement Date, Early
Retirement Date, date of Disability, death or the date of the Participant’s
Termination as described in Section 3.2, whichever is applicable; however, if
such five-year period should include any approved leave of absence in effect on
December 31 of any year during such five-year period, his or her Rate of Annual
Basic Compensation in effect at the beginning of such leave shall be deemed to
be his or her Rates of Annual Basic Compensation in effect for that year. In
the event a Participant is entitled to an Accrued Benefit under this
Supplemental Plan but has less than three years of Accredited Service as a
Participant, the Participant’s Rate of Annual Basic Compensation on December 31
of each year of service while a Participant shall be averaged and such average
shall be Participant’s Final Average Compensation. Should a Participant die or
incur a Disability and have less than one year of Accredited Service, which
year does not include December 31, the Participant’s Final Average Compensation
shall be, as applicable, his or her Rates of Annual Basic Compensation on the
day preceding the date of such Participant’s death or the Administrator’s
acceptance of the Disability under Section 6.7.

-8-

 

2.15     Former Vested Participant: A person who was a former employee who has
earned a vested benefit under Article 4 of this Plan. See Sections 6.8 and 7.3
of this Plan.

2.16     Hardship Election: The election described in Section 7.5 of this Plan.

2.17     Normal Retirement Date: Normal Retirement Date as defined in the Basic
Plan.

2.18     Participant: A person designated as such by the Committee pursuant to
Section 3.1 of this Supplemental Plan. Unless expressly provided herein to the
contrary or the context dictates otherwise, a Participant shall also include
any person (including a beneficiary) who is entitled to a benefit under this
Supplemental Plan.

2.19     Plan: This Supplemental Executive Retirement Plan, as it is in effect
from time to time (also referred to as the “Supplemental Plan”).

2.20     Rates of Annual Basic Compensation: Participant’s salary as of December
31 and any short term incentive award declared during the year under the
Company’s Executive Incentive Compensation Plan, the 1999 Incentive
Compensation Plan, or any successor plan, whether taken in cash or deferred.

-9-

 

2.21     Retirement: Retirement as defined in the Basic Plan.

2.22     Supplemental Plan: This Supplemental Executive Retirement Plan

2.23     Utility: Washington Gas Light Company, and its successors.

2.24     Vesting Service: See “Year of Vesting Service”

2.25     Year of Vesting Service: 1000 hours of service with the Company as a
Participant in any one calendar year.

-10-

 

Article 3

Participation

3.1    Designation: Each employee of the Company who is designated by the
Committee shall be a Participant in this Supplemental Plan. As of January 1,
1999, the active employees listed on Exhibit A were included as Participants in
this Supplemental Plan.

3.2    Termination: In the event Participant’s employment with the Company is
terminated for whatever reason or in the event the Committee withdraws or
rescinds its designation of Participant status with respect to a current
employee, such terminated or current employee, as applicable, shall thereafter
accrue no additional benefits under this Supplemental Plan and shall have, with
respect to previously credited benefits, only such rights as are provided in
Articles 4, 5 and 6 hereof.

-11-

 

Article 4

Vesting

     4.1   Vested Pension — General: Except as provided in Section 4.2 of this
Article, a Participant shall be vested in, and have rights to, an Accrued
Benefit as follows:

     (a)   Participants in this Plan on January 1, 1999:

     For persons who were Participants in this Plan on January 1, 1999,
benefits under this Plan vest at the rate of 10% for each completed 5-year
period of Accredited Service with the Company (whether or not as a
Participant) prior to January 1, 1999. Four complete Years of Accredited
Service plus one day of Accredited Service with the Company in any one calendar
year will be treated as a 5-year period for this purpose. After January 1,
1999, vesting for these Employees is at the rate of 5% per Year of Vesting
Service as a Participant to, and including, the year the Participant attains
age 49; and 10% per Year of Vesting Service as a Participant hereafter, to a
maximum of 100%.

     (b)   Participants joining the Plan after January 1, 1999:

     For any person first becoming a Participant in this Plan after January 1,
1999, benefits vest at the following rates:

     (i)   10% for each completed 5-year period of Accredited Service up to
January 1 of the year in which he or she became a Participant. Four complete
Years of Accredited Service

-12-

 

plus one day of Accredited Service with the Company will be treated as a 5-year
period for this purpose; and

     (ii)   5% per Year of Vesting Service earned up to, and including, the year
the Participant attains age 49, and

     (iii)   10% per Year of Vesting Service thereafter, to a maximum of 100%.
Provided however, no person shall be vested in a benefit under this Plan prior
to completion of 60 months of Accredited Service with the Company, unless this
requirement is waived by the Committee pursuant to Sec. 4.2(c) of this Plan.

     (c)   Minimum vesting level as of January 1, 1999:

     For Participants on January 1, 1999, there is a minimum initial vesting of
10%.

     (d)   Grandfather provision:

     For persons who were Participants in this Plan on June 27, 1989, the
vested percentage is not less than the percentage earned by that Participant as
of June 27, 1989. This percentage is calculated under Section 4.2(a), below.

     (e)   Disability:

     Upon Disability of a Participant, the Participant is 100% vested under the
Plan. The Disability Pension benefit is provided under Article 6 of this Plan.

     (f)   Death:

     Death benefits are provided by Article 7 of this Plan and are calculated
without regard to vesting.

-13-

 

     (g)   Change of Control:

     Upon a Change of Control, Participants are 100% vested in their Accrued
Benefit.

4.2    Vested Pension — Exceptions: Notwithstanding the general provisions in
Section 4.1, the following exceptions shall apply —

     (a)   For participation on or before June 27, 1989, a Participant shall be
vested in, and have rights to, an Accrued Benefit as set out in the table
below.

	 	 	 	 	 
	Completed Years	 	 	 	 
	of	 	Vested
	Vesting Service	 	Percentage
	 	 	 
	1
	 	 	20	%
	2
	 	 	40	%
	3
	 	 	60	%
	4
	 	 	80	%
	5
	 	 	100	%

     (b)  A Participant’s Accrued Benefit shall vest in accordance with the
table in (a) above if his or her termination of employment occurs as a result
of a Company-initiated action or request or if his or her designation of
Participant status is withdrawn or rescinded by the Company; provided, however,
that this provision shall not apply if the forfeiture provisions of Section 8.5
apply.

-14-

 

     (c)  The Committee may waive all vesting requirements or permit accelerated
vesting arrangements in any case which, in the Committee’s discretion,
represents special circumstances.

-15-

 

Article 5

Service

5.1 Benefit Service: Except as provided in Section 5.2 of this Article,
Benefit Service shall be equal to Accredited Service as determined under the
Basic Plan plus, for each full year of Accredited Service as a Participant, one
additional year to a maximum of 30 years.

5.2 Prior Benefit Service: A Participant who began participation on or before
June 27, 1989, shall receive Benefit Service for the period prior to June 27,
1989 which shall be equal to (i) Accredited Service earned through that date as
determined under the Basic Plan plus; (ii) two additional years for each full
year of Accredited Service as a Participant prior to June 27, 1989.

-16-

 

Article 6

Benefits

6.1 Normal Form of Pension: A Participant who is entitled to receive a
retirement benefit under this Supplemental Plan may elect to receive such
benefit in the form of a single-life annuity, joint-and-survivor annuity or any
other optional form of benefit as set forth in Section 5.2 of the Basic Plan.
The normal form of pension under this Supplemental Plan shall be identical to
the form of benefit selected by the Participant under the Basic Plan unless the
Participant requests, and the Company approves, the lump-sum option described
in Section 6.2 of this Supplemental Plan. Any temporary actuarial increase in
benefits generated by Participant’s selection of the option in Section 5.2(b)
of the Basic Plan shall not be considered in determining the Normal Retirement
Pension upon which the benefit from this Supplemental Plan is calculated, nor
shall any reduction in Normal Retirement Pension under the Basic Plan at age 62
increase a benefit under this Supplemental Plan.

6.2 Lump-Sum Option: A Participant may request that the portion of his or her
retirement benefit under this Supplemental Plan related to any short-term
incentive award declared under the Company’s Executive Incentive Compensation
Plan, the 1999 Incentive Compensation Plan, or any successor plan as used in
determining Rates of Annual Basic Compensation, be paid in the form of a lump
sum, the amount of which shall be the actuarial equivalent of the Accrued

-17-

 

Benefit otherwise payable to the Participant under this Supplemental Plan. A
Participant’s request for a lump sum payment must be submitted in writing to
the Administrator at least six
months prior to the date on which a benefit would otherwise be payable
hereunder and must be accompanied by a medical certificate of the Participant’s
good health signed by the Company’s Medical Director in a form satisfactory to
the Administrator. A Participant’s request for a lump sum payment shall be
subject to the sole discretion of the Administrator and shall be approved by
the Administrator only if considered to be in the interests of the Company. If
approved by the Administrator, a Participant’s lump-sum payment shall be
calculated on the basis specified on Exhibit E.

6.3 Election of Benefit: A Participant shall not receive a benefit under this
Supplemental Plan prior to initiating a benefit under the Basic Plan, except
in the case where Participant is not eligible to commence a benefit under the
Basic Plan. A Participant shall not elect a benefit for a beneficiary of over
50% of the Participant’s benefit without presenting a medical certificate of
the Participant’s good health signed by the Company’s Medical Director in a
form satisfactory to the Administrator.

6.4 Normal Retirement Pension: On Normal Retirement Date, a Participant shall
be eligible to receive a monthly Normal Retirement Pension equal to 1/12 of the
excess of (a) over (b) where:

-18-

 

	(a)	 	equals 2% of Final Average Compensation multiplied by the
number of years of Benefit Service; and
	 
	(b)	 	equals the sum of:

	 	(1)	 	the Normal Retirement Pension payable
under the Basic Plan; and
	 
	 	(2)	 	the annual amount of any other
supplemental pension benefit provided by the Company.

In no event shall the Normal Retirement Pension be less than the Accrued
Benefit calculated as of June 27, 1989.

6.5 Full Retirement Pension: A Participant listed on Exhibit B who has
attained at least age 60 and has 30 years of Benefit Service shall be eligible
for a monthly payment of an amount equal to 100% of the Normal Retirement
Pension.

6.6 Early Retirement Pension: A Participant who has attained age 55 and has 10
or more years of Benefit Service is eligible to select either:

	 	(a)	 	an amount, commencing at age 65, equal to the Accrued
Benefit, determined in the same manner as the Normal Retirement
Pension in Section 6.4, based on Benefit Service and Final Average
Compensation as of the Participant’s Early Retirement Date; or

-19-

 

	 	(b)	 	an amount, commencing upon termination of employment , equal
to the Participant’s Accrued Benefit subject to an early retirement
reduction determined in accordance with Exhibit C or D, as
applicable. Provided, however, that Participants listed on Exhibit
B shall receive the greater of the benefits determined in accordance
with Exhibits C and D; or
	 
	 	(c)	 	an amount equal to the Participant’s Accrued Benefit to
commence on a specified date 24 months or more after termination of
employment, subject to an early retirement reduction determined in
accordance with Exhibit C or D, as applicable. Provided, however,
that Participants listed on Exhibit B shall receive the greater of
the benefits determined in accordance with Exhibits C and D.

6.7 Disability Pension: A Participant who has 10 or more years of Benefit
Service and has suffered a Disability shall be eligible for a monthly amount
equal to: (1) the Early Retirement Pension (except that any such Participant
under age 55 will be treated as though age 55); or (2) an amount equal to 110%
of the Disability Pension available from the Basic Plan, whichever is greater;
but in no event shall the amount exceed the Normal Retirement Pension under
this Plan as set out in Section 6.4 above. An Application for a Disability
Pension shall be submitted to the Administrator by the applicant or by the
Company, together with a medical certificate signed by the Company’s Medical
Director in a form satisfactory to the Administrator. A Participant with less
than 10 years of Benefit Service who suffers a Disability supported by a
medical certificate

-20-

 

satisfactory to the Administrator shall be eligible for an immediate benefit
calculated in a manner consistent with the Early Retirement Pension described
in Section 6.6(b), subject to an actuarial reduction calculated on the basis
specified in Exhibit F. The Supplemental Plan Disability Benefit will be
reduced by any payments under the Company’s Long-term Disability Plan.

6.8 Vested Termination Pension – Former Vested Participants.

	 	(a)	 	Former Vested Participants. A Former Vested Participant who
has terminated service with the Company prior to age 55 has the
following election which may be made during the calendar year prior
to the year in which the Former Vested Participant attains age 55:
he or she may elect to (i) commence receiving a benefit under this
Plan at age 55, or (ii) to defer commencement of payment to a
specified date at least 24 months following attainment of age 55.
	 
	 	(b)	 	If the Former Vested Participant does not make a timely
election under Paragraph 6.8(a) above, then the benefit will
commence at age 55.
	 
	 	(c)	 	Reference is made to the Hardship Election provision below.
	 
	 	(d)	 	The amount of the benefit will be the Participant’s Accrued
Benefit, subject to an early retirement reduction determined in
accordance with Exhibit C or D, as applicable. Participants listed
on Exhibit B shall receive the greater of the benefits determined in
accordance with Exhibits C and D.

-21-

 

6.9 Benefit Compensation: Except as provided in Sections 4.1(d) and 5.2 of
this Plan , a Participant’s pension shall be computed under the terms of the
Supplemental Plan in effect as of the date of the Participant’s termination of
employment with the Company, and shall not be recomputed, increased or
decreased after such termination, except for supplemental increases, if any, as
may be granted by the Company’s Board of Directors.

-22-

 

Article 7

Death Benefits

7.1 Death Benefits: Except for the surviving spouse’s annuity described in
Sections 7.2 and 7.3, and any survivor death benefit selected by a Participant
in accordance with Section 7.4, no death benefits shall be payable under this
Supplemental Plan and a Participant shall forfeit all rights to any benefits
hereunder upon his or her death. As used in this Article, the term “surviving
spouse” refers to the person who is legally married to the Participant at the
time of his death and for the full one year (365 days) period immediately prior
to his death.

7.2 Surviving Spouse of Active Participant: The surviving spouse of a
Participant who dies while an active employee shall be eligible to receive a
monthly annuity in an amount equal to 50% of the deceased Participant’s Accrued
Benefit (without regard to vesting) determined on the basis of (i) the
Participant’s Final Average Compensation at the date of death, and (ii) the
Benefit Service the Participant would have had if employment had continued
until the Normal Retirement Date, and (iii) no reduction for benefit
commencement before age 65. This benefit shall continue for the lifetime of the
surviving spouse. Payment of this benefit shall commence in the month
following the Participant’s death.

-23-

 

7.3 Surviving Spouse of Former Vested Participant

	 	(a)	 	Upon the death of a person who is a Former Vested Participant
and is not receiving a benefit under this Plan, the surviving spouse
of such person shall receive an annuity in an amount equal to 50% of
the annuity that would have been paid to the Former Vested
Participant under Section 6.8.
	 
	 	(b)	 	If the Former Vested Participant dies prior to the year in
which he or she would have reached age 55, then the surviving spouse
may elect in that year to (i) commence benefits at the time the
Former Vested Participant would have reached age 55 (the “age 55
date”), or (ii) to defer receipt of that benefit to a specified date
at least 24 months following the age 55 date. If no such election
is made, the benefit will commence in the month following the age 55
date.
	 
	 	(c)	 	If the Former Vested Participant dies on after the year he or
she reaches age 55. the benefit to the surviving spouse shall
commence in the month following the Former Vested Participant’s
death.
	 
	 	(d)	 	Reference is made to the Hardship Election provision below.
	 
	 	(e)	 	The amount of the benefit will be 50% of Former Vested
Participant’s Accrued Benefit, subject to early retirement reduction
in accordance with Exhibits C or D, as applicable, and shall
continue for the lifetime of the surviving spouse.

-24-

 

7.4 Survivor Death Benefit: Upon the death of a retired Participant who is
receiving or is entitled to receive annuity benefits hereunder and who, in
accordance with Section 6.1 hereof, had previously elected to receive his or
her Accrued Benefit in a form which pays a death benefit to a designated
surviving beneficiary, such death benefit shall be paid to such designated
surviving beneficiary in accordance with such prior election.

7.5 Hardship Election. If, in the opinion of the Committee, any election to
defer a benefit under this Plan results in an undue hardship, then upon request
of the beneficiary, the beneficiary may elect to accelerate payment of that
benefit.

-25-

 

Article 8

Miscellaneous

8.1 Amendment, Suspension, or Termination: Any amendment, suspension, or
termination of this Supplemental Plan shall have prospective effect only, be
non-discriminatory, and shall not affect any Accrued Benefit or vested right.

8.2 Nonguarantee of Employment: Nothing in this Supplemental Plan shall be
construed as a contract of employment between the Company and any Participant,
or as a right of any Participant to be continued in the employment of the
Company, or as a limitation of the right of the Company to discharge any
Participant, with or without cause.

8.3 Cost: The Company shall pay the full cost of this Supplemental Plan and
the Plan shall at all times be maintained on an unfunded basis. A
Participant’s rights to a benefit under this Supplemental Plan are contractual
in nature and in the event the Company is unable to pay any benefit required
hereunder, the Participant shall have, with respect to the Company, only those
rights of an unsecured creditor.

8.4 Nonalienation of Benefits: Benefits payable under this Supplemental Plan
shall not be subject in any manner to alienation, anticipation, assignment,
charge, encumbrance, execution,

-26-

 

garnishment, pledge, sale, transfer, or levy of any kind, either voluntary or
involuntary, including any such liability which is for alimony or other
payments for the support of a spouse or former spouse, or for any other
relative of the Participant, prior to actually being received by the person
entitled to the benefit under the terms of this Supplemental Plan. Any attempt
to alienate, anticipate, assign, charge, encumber, pledge, sell, transfer, or
otherwise dispose of any right to benefits payable under this Supplemental Plan
shall be void. This Supplemental Plan shall not in any manner be liable for,
or subject to, the contracts, debts, liabilities, or torts of any person
entitled to benefits under this Supplemental Plan.

8.5 Forfeiture: Anything herein to the contrary notwithstanding, if a
Participant or retired Participant willfully performs any act or willfully
fails to perform any act of material importance to the Company, which may
result in material discredit or substantial detriment to the Company, then upon
recommendation of the Administrator and upon a majority vote of the Board of
Directors, such Participant or retired Participant or the surviving spouse of
such Participant shall forfeit any benefit payments owing on and after the date
fixed by the Board of Directors and the Company shall have no further
obligation under this Supplemental Plan to such Participant, retired
Participant, or the surviving spouse of such Participant. If a Participant
received his or her benefit in the form of a lump sum payment pursuant to
Section 6.2 hereof, then the Participant or the surviving spouse of such
Participant shall return to the Company a proportionate share of such lump sum
payment calculated as follows: The proportionate share

-27-

 

shall equal the product of the lump sum payment multiplied by a fraction, the
numerator of which is the number of full years and months which elapsed from
the time of the payment to the time of the willful act or failure to act
described herein and the denominator of which is the number of full years and
months of the Participant’s life expectancy determined as of the time of the
lump sum payment.

8.6 Governing Law: All matters relating to this Supplemental Plan shall be
governed by the laws of the state of Virginia, without regard to the principles
of conflict of laws.

-28-

 

Article 9

Appeals from Denial of Claims

     If any claim for benefits under the Plan is wholly or partially denied,
the claimant shall be given notice of the denial. This notice shall be in
writing, within a reasonable period of time after receipt of the claim by the
Committee. This period shall not exceed 90 days after receipt of the claim,
except that if special circumstances require an extension of time, written
notice of the extension shall be furnished to the claimant, and an additional
90 days will be considered reasonable.

     This notice shall be written in a manner calculated to be understood by
the claimant and shall set forth the following information:

     (a)  the specific reasons for the denial;

     (b)  specific reference to the Plan provisions on which the denial is
based;

     (c)  a description of any additional material or information necessary for
the claimant to perfect the claim and an explanation of why this material of
information is necessary;

     (d)  an explanation that a full and fair review by the Committee of the
decision denying the claims may be requested by the claimant or an authorized
representative by filing with the Committee, within 60 days after the notice
has been received, a written request for the review; and

-29-

 

     (e)  if this request is so filed, an explanation that the claimant or an
authorized representative may review pertinent documents and submit issues and
comments in writing within the same 60-day period specified in subsection (d).

     The decision of the Committee upon review shall be made promptly, and not
later than 60 days after the Committee questions receipt of the request for
review, unless specific circumstances require an extension of time for
processing. In this case the claimant shall be so notified, and a decision
shall be rendered as soon as possible, but not later than 120 days after
receipt of the request for review. If the claim is denied, wholly or in part,
the claimant shall be given a copy of the decision promptly. The decision
shall be it writing, shall include specific reasons for the denial, shall
include specific references to the pertinent Plan provisions on which the
denial is based, and shall be written in a manner calculated to be understood
by the claimant.

-30-

 

Exhibit A

Participants in the Supplemental Executive Retirement Plan as of January 1, 1999

Elizabeth M. Arnold

Beverly J. Burke

Richard J. Cook

James H. DeGraffenreidt, Jr.

Richard L. Fisher

John K. Keane, Jr.

Frederic M. Kline

Patrick J. Maher

Lisa M. Metcalfe

Douglas V. Pope

Joseph M. Schepis

Roberta W. Sims

Robert A. Sykes

Robert E. Tuoriniemi

James B. White

-31-

 

Exhibit B

Participants eligible to elect a
Full Retirement Pension or Early Retirement Pension

accordance with terms of Sections 6.5 and 6.6 of the Plan

Richard J. Cook

Richard L. Fisher

John K. Keane, Jr.

Patrick J. Maher

Douglas V. Pope

Robert A. Sykes

-32-

 

Exhibit C

Early Retirement Pension Benefit

“Legacy” Formula

	 	 	 	 	 	 	 	 	 	 
	

	 	 	 	Benefit Service
	
	 	

	Age*	 	<30 years	 	30 years
	
	 	
	 	

	 	65
	 	 	1	 	 	 	1	 
	

	 	 	
	 	 	 	
	 
	 	64
	 	 	0.98	 	 	 	1	 
	

	 	 	
	 	 	 	
	 
	 	63
	 	 	0.96	 	 	 	1	 
	

	 	 	
	 	 	 	
	 
	 	62
	 	 	0.94	 	 	 	1	 
	

	 	 	
	 	 	 	
	 
	 	61
	 	 	0.92	 	 	 	1	 
	

	 	 	
	 	 	 	
	 
	 	60
	 	 	0.90	 	 	 	1	 
	

	 	 	
	 	 	 	
	 
	 	59
	 	 	0.85	 	 	 	0.85	 
	

	 	 	
	 	 	 	
	 
	 	58
	 	 	0.80	 	 	 	0.80	 
	

	 	 	
	 	 	 	
	 
	 	57
	 	 	0.75	 	 	 	0.75	 
	

	 	 	
	 	 	 	
	 
	 	56
	 	 	0.70	 	 	 	0.70	 
	

	 	 	
	 	 	 	
	 
	 	55
	 	 	0.65	 	 	 	0.65	 
	

	 	 	
	 	 	 	
	 

•     Nearest Age of Participant (or Former Vested Participant) on date benefits
commence.

-33-

 

Exhibit D

Early Retirement Pension Benefit

“New” Formula

	 	 	 	 	 	 
	

	Age *	 	All Service Levels
	
	 	

	 	65
	 	 	1	 
	

	 	

	 	64
	 	 	0.97	 
	

	 	

	 	63
	 	 	0.94	 
	

	 	

	 	62
	 	 	0.91	 
	

	 	

	 	61
	 	 	0.88	 
	

	 	

	 	60
	 	 	0.85	 
	

	 	

	 	59
	 	 	0.82	 
	

	 	

	 	58
	 	 	0.79	 
	

	 	

	 	57
	 	 	0.76	 
	

	 	

	 	56
	 	 	0.73	 
	

	 	

	 	55
	 	 	0.70	 
	

	 	

•     Nearest Age of Participant (or Former Vested Participant) on date benefits
commence.

-34-

 

EXHIBIT E

LUMP SUM CALCULATION PROCEDURE

	1.	 	Determine the participant’s life expectancy as of the lump sum payment
date using the 1983 Group Annuity Mortality Table. Round the result up to
the next higher whole number of years.
	 
	2.	 	Determine the annual life annuity benefit, payable as of the lump sum
payment date, that is to be converted into an actuarially equivalent lump
sum.
	 
	3.	 	Assuming mid-year payment of the amount in Step (2), for each year of the
Participant’s future life expectancy, discount each year’s payment back to
the lump sum payment date using the yield on the zero-coupon US Treasury
security with maturity equal to the maturity of each year’s payment. The
lump sum shall equal the sum of the discounted payments. The U.S.
Treasury yields shall be those published for the date six months prior to
the lump sum payment date. If such date falls on day when U.S. Treasury
securities are not traded, yields for the next following business day
shall be used.

-35-

 

EXHIBIT F

Actuarial Equivalent Reduction Factors for Disability Benefits

Commencing Prior to Age 55

	 	 	 	 	 	 
	

	 	 	 	Factor by Which Age 55 Benefit is
        
	 	 	 	Multiplied to Determine Benefit at
	Nearest Age at Commencement	 	Commencement Age
	
	 	

	 	54
	 	 	0.9261	 
	

	 	

	 	53
	 	 	0.8586	 
	

	 	

	 	52
	 	 	0.7968	 
	

	 	

	 	51
	 	 	0.7402	 
	

	 	

	 	50
	 	 	0.6882	 
	

	 	

	 	49
	 	 	0.6404	 
	

	 	

	 	48
	 	 	0.5963	 
	

	 	

	 	47
	 	 	0.5557	 
	

	 	

	 	46
	 	 	0.5183	 
	

	 	

	 	45
	 	 	0.4837	 
	

	 	

	 	44
	 	 	0.4516	 
	

	 	

	 	43
	 	 	0.4220	 
	

	 	

	 	42
	 	 	0.3945	 
	

	 	

	 	41
	 	 	0.3690	 
	

	 	

	 	40
	 	 	0.3453	 
	

	 	

	 	39
	 	 	0.3233	 
	

	 	

	 	38
	 	 	0.3028	 
	

	 	

	 	37
	 	 	0.2837	 
	

	 	

	 	36
	 	 	0.2660	 
	

	 	

	 	35
	 	 	0.2494	 
	

	 	

	 	34
	 	 	0.2339	 
	

	 	

	 	33
	 	 	0.2195	 
	

	 	

	 	32
	 	 	0.2060	 
	

	 	

	 	31
	 	 	0.1934	 
	

	 	

	 	30
	 	 	0.1816	 
	

	 	

	 	29
	 	 	0.1706	 
	

	 	

	 	28
	 	 	0.1603	 
	

	 	

	 	27
	 	 	0.1507	 
	

	 	

	 	26
	 	 	0.1416	 
	

	 	

	 	25
	 	 	0.1331	 
	

	 	

-36-

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00032-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00032-of-00352.parquet"}]]