Document:

exv10w1

 

 Exhibit
10.1

WGL HOLDINGS, INC. and WASHINGTON

LIGHT GAS COMPANY

CHANGE IN CONTROL SEVERANCE PLAN FOR

CERTAIN EXECUTIVES

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Page	 
	ARTICLE 1	 	BACKGROUND, PURPOSE AND TERM OF PLAN	 	 	1	 
	 
	 	 	 	 	 	 	 	 	 	 
	 
	 	1.1	 	 	 	Purpose of the Plan	 	 	1	 
	 
	 	 	 	 	 	 	 	 	 	 
	 
	 	1.2	 	 	 	Term of the Plan	 	 	1	 
	 
	 	 	 	 	 	 	 	 	 	 
	ARTICLE 2	 	DEFINITIONS	 	 	2	 
	 
	 	 	 	 	 	 	 	 	 	 
	 
	 	2.1	 	 	 	“Affiliate Company”	 	 	2	 
	 
	 	 	 	 	 	 	 	 	 	 
	 
	 	2.2	 	 	 	“Annual Bonus”	 	 	2	 
	 
	 	 	 	 	 	 	 	 	 	 
	 
	 	2.3	 	 	 	“Base Salary	 	 	2	 
	 
	 	 	 	 	 	 	 	 	 	 
	 
	 	2.4	 	 	 	“Board”	 	 	2	 
	 
	 	 	 	 	 	 	 	 	 	 
	 
	 	2.5	 	 	 	“Cause”	 	 	2	 
	 
	 	 	 	 	 	 	 	 	 	 
	 
	 	2.6	 	 	 	“Change in Control”	 	 	2	 
	 
	 	 	 	 	 	 	 	 	 	 
	 
	 	2.7	 	 	 	“Change in Control Termination”	 	 	2	 
	 
	 	 	 	 	 	 	 	 	 	 
	 
	 	2.8	 	 	 	“COBRA”	 	 	2	 
	 
	 	 	 	 	 	 	 	 	 	 
	 
	 	2.9	 	 	 	“Code”	 	 	2	 
	 
	 	 	 	 	 	 	 	 	 	 
	 
	 	2.10	 	 	 	“Committee”	 	 	3	 
	 
	 	 	 	 	 	 	 	 	 	 
	 
	 	2.11	 	 	 	“Company”	 	 	3	 
	 
	 	 	 	 	 	 	 	 	 	 
	 
	 	2.12	 	 	 	“Effective Date”	 	 	3	 
	 
	 	 	 	 	 	 	 	 	 	 
	 
	 	2.13	 	 	 	“Eligible Employee”	 	 	3	 
	 
	 	 	 	 	 	 	 	 	 	 
	 
	 	2.14	 	 	 	“Employee”	 	 	3	 
	 
	 	 	 	 	 	 	 	 	 	 
	 
	 	2.15	 	 	 	“Employer”	 	 	3	 
	 
	 	 	 	 	 	 	 	 	 	 
	 
	 	2.16	 	 	 	“ERISA”	 	 	3	 
	 
	 	 	 	 	 	 	 	 	 	 
	 
	 	2.17	 	 	 	“Good Reason Resignation”	 	 	3	 
	 
	 	 	 	 	 	 	 	 	 	 
	 
	 	2.18	 	 	 	“Involuntary Termination”	 	 	4	 
	 
	 	 	 	 	 	 	 	 	 	 
	 
	 	2.19	 	 	 	“Participant”	 	 	4	 
	 
	 	 	 	 	 	 	 	 	 	 
	 
	 	2.20	 	 	 	“Permanent Disability”	 	 	4	 
	 
	 	 	 	 	 	 	 	 	 	 
	 
	 	2.21	 	 	 	“Plan”	 	 	4	 
	 
	 	 	 	 	 	 	 	 	 	 
	 
	 	2.22	 	 	 	“Plan Administrator”	 	 	4	 
	 
	 	 	 	 	 	 	 	 	 	 
	 
	 	2.23	 	 	 	“Release”	 	 	4	 
	 
	 	 	 	 	 	 	 	 	 	 
	 
	 	2.24	 	 	 	“Severance Benefit”	 	 	4	 
	 
	 	 	 	 	 	 	 	 	 	 
	 
	 	2.25	 	 	 	“Specified Employee”	 	 	5	 
	 
	 	 	 	 	 	 	 	 	 	 
	 
	 	2.26	 	 	 	“Successor”	 	 	5	 

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	 	2.27	 	 	 	“Termination Date”	 	 	5	 
	 
	 	 	 	 	 	 	 	 	 	 
	 
	 	2.28	 	 	 	“Voluntary Resignation”	 	 	5	 
	 
	 	 	 	 	 	 	 	 	 	 
	ARTICLE 3	 	PARTICIPATION AND ELIGIBILITY FOR BENEFITS	 	 	6	 
	 
	 	 	 	 	 	 	 	 	 	 
	 
	 	3.1	 	 	 	Participation	 	 	6	 
	 
	 	 	 	 	 	 	 	 	 	 
	 
	 	3.2	 	 	 	Conditions	 	 	6	 
	 
	 	 	 	 	 	 	 	 	 	 
	ARTICLE 4	 	DETERMINATION OF SEVERANCE BENEFITS	 	 	8	 
	 
	 	 	 	 	 	 	 	 	 	 
	 
	 	4.1	 	 	 	Amount of Severance Benefits Upon Involuntary Termination and Good Reason Resignation	 	 	8	 
	 
	 	 	 	 	 	 	 	 	 	 
	 
	 	4.2	 	 	 	Voluntary Resignation; Termination for Death or Permanent Disability	 	 	9	 
	 
	 	 	 	 	 	 	 	 	 	 
	 
	 	4.3	 	 	 	Termination for Cause	 	 	9	 
	 
	 	 	 	 	 	 	 	 	 	 
	 
	 	4.4	 	 	 	Reduction of Severance Benefits	 	 	9	 
	 
	 	 	 	 	 	 	 	 	 	 
	 
	 	4.5	 	 	 	Additional Benefits	 	 	9	 
	 
	 	 	 	 	 	 	 	 	 	 
	 
	 	4.6	 	 	 	Legal Expense Reimbursement	 	 	10	 
	 
	 	 	 	 	 	 	 	 	 	 
	ARTICLE 5	 	METHOD, DURATION AND LIMITATION OF SEVERANCE BENEFIT PAYMENTS	 	 	11	 
	 
	 	 	 	 	 	 	 	 	 	 
	 
	 	5.1	 	 	 	Method of Payment	 	 	11	 
	 
	 	 	 	 	 	 	 	 	 	 
	 
	 	5.2	 	 	 	Other Arrangements	 	 	11	 
	 
	 	 	 	 	 	 	 	 	 	 
	 
	 	5.3	 	 	 	Termination of Eligibility for Benefits	 	 	11	 
	 
	 	 	 	 	 	 	 	 	 	 
	ARTICLE 6	 	CONFIDENTIALITY, COVENANT NOT TO COMPETE AND NOT TO SOLICIT	 	 	13	 
	 
	 	 	 	 	 	 	 	 	 	 
	 
	 	6.1	 	 	 	Post-Employment Restrictions	 	 	13	 
	 
	 	 	 	 	 	 	 	 	 	 
	 
	 	6.2	 	 	 	Equitable Relief	 	 	13	 
	 
	 	 	 	 	 	 	 	 	 	 
	 
	 	6.3	 	 	 	Survival of Provisions	 	 	14	 
	 
	 	 	 	 	 	 	 	 	 	 
	ARTICLE 7	 	THE PLAN ADMINISTRATOR	 	 	15	 
	 
	 	 	 	 	 	 	 	 	 	 
	 
	 	7.1	 	 	 	Authority and Duties	 	 	15	 
	 
	 	 	 	 	 	 	 	 	 	 
	 
	 	7.2	 	 	 	Compensation of the Plan Administrator	 	 	15	 
	 
	 	 	 	 	 	 	 	 	 	 
	 
	 	7.3	 	 	 	Records, Reporting and Disclosure	 	 	15	 
	 
	 	 	 	 	 	 	 	 	 	 
	ARTICLE 8	 	AMENDMENT, TERMINATION AND DURATION	 	 	16	 
	 
	 	 	 	 	 	 	 	 	 	 
	 
	 	8.1	 	 	 	Amendment, Suspension and Termination	 	 	16	 
	 
	 	 	 	 	 	 	 	 	 	 
	 
	 	8.2	 	 	 	Duration	 	 	16	 

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	ARTICLE 9	 	DUTIES OF THE COMPANY, THE COMMITTEE, AND THE PLAN ADMINISTRATOR	 	 	17	 
	 
	 	 	 	 	 	 	 	 	 	 
	 
	 	9.1	 	 	 	Records	 	 	17	 
	 
	 	 	 	 	 	 	 	 	 	 
	 
	 	9.2	 	 	 	Payment	 	 	17	 
	 
	 	 	 	 	 	 	 	 	 	 
	 
	 	9.3	 	 	 	Discretion	 	 	17	 
	 
	 	 	 	 	 	 	 	 	 	 
	ARTICLE 10	 	CLAIMS PROCEDURES	 	 	18	 
	 
	 	 	 	 	 	 	 	 	 	 
	 
	 	10.1	 	 	 	Claim	 	 	18	 
	 
	 	 	 	 	 	 	 	 	 	 
	 
	 	10.2	 	 	 	Initial Claim	 	 	18	 
	 
	 	 	 	 	 	 	 	 	 	 
	 
	 	10.3	 	 	 	Appeals of Denied Administrative Claims	 	 	18	 
	 
	 	 	 	 	 	 	 	 	 	 
	 
	 	10.4	 	 	 	Appointment of the Named Appeals Fiduciary	 	 	18	 
	 
	 	 	 	 	 	 	 	 	 	 
	ARTICLE 11	 	MISCELLANEOUS	 	 	20	 
	 
	 	 	 	 	 	 	 	 	 	 
	 
	 	11.1	 	 	 	Nonalienation of Benefits	 	 	20	 
	 
	 	 	 	 	 	 	 	 	 	 
	 
	 	11.2	 	 	 	Notices	 	 	20	 
	 
	 	 	 	 	 	 	 	 	 	 
	 
	 	11.3	 	 	 	Successors	 	 	20	 
	 
	 	 	 	 	 	 	 	 	 	 
	 
	 	11.4	 	 	 	Other Payments	 	 	20	 
	 
	 	 	 	 	 	 	 	 	 	 
	 
	 	11.5	 	 	 	No Contract of Employment	 	 	20	 
	 
	 	 	 	 	 	 	 	 	 	 
	 
	 	11.6	 	 	 	Severability of Provisions	 	 	20	 
	 
	 	 	 	 	 	 	 	 	 	 
	 
	 	11.7	 	 	 	Heirs, Assigns, and Personal Representatives	 	 	20	 
	 
	 	 	 	 	 	 	 	 	 	 
	 
	 	11.8	 	 	 	Headings and Captions	 	 	20	 
	 
	 	 	 	 	 	 	 	 	 	 
	 
	 	11.9	 	 	 	Gender and Number	 	 	21	 
	 
	 	 	 	 	 	 	 	 	 	 
	 
	 	11.10	 	 	 	Unfunded Plan	 	 	21	 
	 
	 	 	 	 	 	 	 	 	 	 
	 
	 	11.11	 	 	 	Payments to Incompetent Persons	 	 	21	 
	 
	 	 	 	 	 	 	 	 	 	 
	 
	 	11.12	 	 	 	Lost Payees	 	 	21	 
	 
	 	 	 	 	 	 	 	 	 	 
	 
	 	11.13	 	 	 	Controlling Law	 	 	21	 
	 
	 	 	 	 	 	 	 	 	 	 
	SCHEDULE A	 	EXECUTIVE TIERS	 	 	22	 
	 
	 	 	 	 	 	 	 	 	 	 
	SCHEDULE B	 	MULTIPLIER	 	 	23	 
	 
	 	 	 	 	 	 	 	 	 	 
	EXHIBIT 1	 	 	 	 	 	 	24	 
	 
	 	 	 	 	 	 	 	 	 	 
	EXHIBIT 2	 	 	 	 	 	 	25	 

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ARTICLE 1

BACKGROUND, PURPOSE AND TERM OF PLAN

1.1 Purpose of the Plan. The purpose of the Plan is to provide a select group of the
Company’s management and highly compensated employees with certain compensation and benefits as set
forth in the Plan in the event of the Participant’s termination of employment with the Company in
connection with to a Change in Control. It is intended that the Plan shall at all times be
maintained on an unfunded basis for federal income tax purposes under the Code. The Plan is
intended to constitute a plan described under section 201(2) of the ERISA, and, as such, to be
exempt from all of the provisions of Parts 2, 3, and 4 of Title I of ERISA.

1.2 Term of the Plan. The Plan shall generally be effective as of the Effective Date.
This Plan is intended to supersede any other plan, program, arrangement or agreement providing a
Participant with severance or related benefits in the case of a Participant’s Change in Control
Termination. The Plan shall continue until terminated pursuant to Article 8 of the Plan.

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ARTICLE 2

DEFINITIONS

2.1 “Affiliate Company”” shall mean any person or entity that controls, is controlled by or
is under common control with the Company. For this purpose, “control” means the possession, direct
or indirect, of the power to direct or cause the direction of the management and policies of a
person or entity, whether through the ownership of voting shares, by contract or otherwise.

2.2 “Annual Bonus” shall mean 100% of the Participant’s target annual incentive bonus for
the fiscal year.

2.3 “Base Salary” shall mean the Participant’s highest annual base salary rate in effect
during the period beginning twelve (12) months immediately preceding a Change in Control and ending
on the date of a Change in Control Termination.

2.4 “Board” shall mean the Board of Directors of the Company, or any successor thereto.

2.5 “Cause” shall mean (1) the willful and continued failure of the Participant to perform
substantially his duties with the Company or (other than any such failure from incapacity due to
physical or mental illness) after a written demand for substantial performance is delivered to the
Participant by the Board or, with respect to officers other than the Chief Executive Officer, by
the Chief Executive Officer, which specifically identifies the manner in which the Board believes
the Participant has not substantially performed such duties, (2) the willful engaging by the
Participant in illegal conduct or gross misconduct which is materially and demonstrably injurious
to the Company. For purposes of this definition, no act or failure to act shall be considered
“willful” unless it is done, or omitted to be done, by the Participant in bad faith or without
reasonable belief that the action or omission was in the best interests of the Company. An act may
be determined to be injurious to the Company even it if causes no monetary injury. 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 conclusively presumed to be done, or omitted
to be done, in good faith and in the best interests of the Company; (3) engaging in reckless
misconduct resulting in material financial or non-financial harm to the Company; or (4) the
conviction of, or a guilty or nolo contendere plea to, a crime involving the personal enrichment of
the Participant (including but not limited to securities violations).

2.6 “Change in Control” shall have the meaning set forth in the WGL Holdings, Inc. and
Washington Gas Light Company Change in Control Policy as of the date of the Change in Control,
which is incorporated herein by reference, and a copy of which is attached at Exhibit 1.

2.7 “Change in Control Termination” shall mean a Participant’s Involuntary Termination or
Good Reason Resignation that occurs during the period beginning one year prior to the date of a
Change in Control and ending two years after the date of such Change in Control.

2.8 COBRA” shall mean the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended.

2.9 “Code” shall mean the Internal Revenue Code of 1986, as amended.

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2.10 “Committee” shall mean the Human Resources Committee of the Board or such other
committee appointed by the Board to assist the Company in making determinations required under the
Plan in accordance with its terms. The “Committee” may delegate its authority under the Plan to an
individual or another committee.

2.11 “Company” shall mean Washington Gas Light Company.

2.12 “Effective Date” shall mean December 15, 2006.

2.13 “Eligible Employee” shall mean an Employee of the Company or an Affiliate Company who
is highly compensated or holds a management position and is selected for participation by the
Committee.

2.14 “Employee” shall mean an individual employed by the Company.

2.15 “Employer” shall mean the Company.

2.16 “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended,
and regulations thereunder.

2.17 “Good Reason Resignation” shall mean any termination of employment by a Participant
that is not initiated by the Company and that is caused by any one or more of the following events
which occurs during the period beginning on the date of a Change in Control and ending two years
after the date of such Change in Control:

     (1.A) For a Participant who is a Tier 1 Executive under Schedule A of the Plan: Without the
Participant’s written consent, assignment to the Participant of any duties inconsistent in any
material respect with the Participant’s then current position (including having that position at
the most senior resulting entity following the Change in Control), authority, duties or
responsibilities, or any other action by the Company which, in the reasonable judgment of the
Participant, would cause him to violate his ethical or professional obligations (after written
notice of such judgment has been provided by the Participant to the Board’s Human Resources
Committee and the Company has been given a 30-day period within which to cure such action), or
which results in a significant diminution in such position, authority, duties or responsibilities.

     (1.B) For a Participant who is a Tier 2 Executive under Schedule A of the Plan: Without the
Participant’s written consent, assignment to the Participant of any duties inconsistent in any
material respect with the Participant’s then current position, duties or responsibilities, or any
other action by the Company which, in the reasonable judgment of the Participant, would cause him
to violate his ethical or professional obligations (after written notice of such judgment has been
provided by the Participant to the Board’s Human Resources Committee and the Company has been given
a 30-day period within which to cure such action), or which results in a significant diminution in
such position, duties or responsibilities.

     (2) Without the Participant’s written consent, the Participant’s being required to relocate
to a principal place of employment that is both more than thirty-five (35) miles from his existing
principal place of employment, and farther from Participant’s current residence than his existing
principal place of employment.

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     (3) Without the Participant’s written consent, the Company materially reduces the
Participant’s base salary rate or target bonus opportunity (although the setting of goals that are
perceived to be more difficult will not be considered such a reduction), or materially reduces the
aggregate value of other incentives and retirement opportunity as determined by a third party
consulting firm of international stature based on accepted methodologies for determining such
value, or fails to allow the Participant to participate in all welfare benefit plans, incentive,
savings and retirement plan, fringe benefit plans and vacation benefits applicable to other senior
executives; or

     (4) The Company fails to obtain a satisfactory agreement from any Successor to assume and
agree to perform the Company’s obligations to the Participant under this Plan, as contemplated in
Section 11.3 herein; provided, that if the Participant remains in employment for more than ninety
(90) days following the occurrence of (or, if later, the Participant’s gaining knowledge of) any
event set forth in Section 2.17 herein, any subsequent termination of employment by a Participant
that is not initiated by the Company shall not constitute a Good Reason Resignation.

2.18 “Involuntary Termination” shall mean a termination of the Participant initiated by the
Company or an Affiliate Company for any reason other than Cause, Permanent Disability or death, as
provided under and subject to the conditions of Article 3.

2.19 “Participant” shall mean any Eligible Employee who meets the requirements of Article 3
and thereby becomes eligible for salary continuation and other benefits under the Plan.

2.20 “Permanent Disability” Permanent Disability means, to the extent consistent with Code
section 409A, a mental or physical condition which constitutes a “Disability” as set forth in the
Washington Gas Light Company Employees’ Pension Plan, provided such disability is expected to
result in death or can be expected to last for a continuous period of not less than 12 months.

2.21 “Plan” means the WGL Holdings, Inc. and Washington Gas Light Company Change in Control
Severance Plan for Certain Executives as set forth herein, and as the same may from time to time be
amended.

2.22 “Plan Administrator” shall mean the individual(s) appointed by the Committee to
administer the terms of the Plan as set forth herein and if no individual is appointed by the
Committee to serve as the Plan Administrator for the Plan, the Plan Administrator shall be the
Company’s Vice President and Chief Financial Officer and Vice President, Human Resources and
Organizational Development. Notwithstanding the preceding sentence, in the event the Plan
Administrator is entitled to a Severance Benefit under the Plan, the Committee or its delegate
shall act as the Plan Administrator for purposes of administering the terms of the Plan with
respect to the Plan Administrator. The Plan Administrator may delegate all or any portion of its
authority under the Plan to any other person(s).

2.23 “Release” shall mean the Separation of Employment Agreement and General Release, as
provided by the Company.

2.24 “Severance Benefit” shall mean the benefits to which a Participant is entitled to
receive under this Plan.

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2.25 “Specified Employee” shall mean a key employee within the meaning of Code section
416(i) (without regard to paragraph 5 thereof) or as otherwise defined in Code section 409A.

2.26 “Successor” shall mean any other corporation or unincorporated entity or group of
corporations or unincorporated entities which acquires ownership, directly or indirectly, through
merger, consolidation, purchase or otherwise, of all or substantially all of the assets of the
Company.

2.27 “Termination Date” shall mean the date on which the active employment of the
Participant by the Company is severed by reason of an Involuntary Termination or a Good Reason
Resignation.

2.28 “Voluntary Resignation” shall mean any termination of employment that is not initiated
by the Company other than a Good Reason Resignation.

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ARTICLE 3

PARTICIPATION AND ELIGIBILITY FOR BENEFITS

3.1 Participation. Each Participant in the Plan who incurs a Change in Control Termination
and who satisfies the conditions of Section 3.2 shall be eligible to receive the Severance Benefits
described in the Plan.

3.2 Conditions.

     (a) Eligibility for any Severance Benefit is expressly conditioned on (i) execution by the
Participant of a Release in the form provided by the Company; (ii) compliance by the Participant
with all the terms and conditions of such Release; and (iii) the Participant’s written agreement to
the confidentiality and non-solicitation provisions in Article 6 after the Participant’s employment
with the Company. If the Plan Administrator determines, in its sole discretion, that the
Participant is not eligible for or has not fully complied with any of the terms of the Plan, the
Plan Administrator may deny Severance Benefits not yet in pay status or discontinue the payment of
the Participant’s Severance Benefit and may require the Participant, by providing written notice of
such repayment obligation to the Participant, to repay any portion of the Severance Benefit already
received under the Plan. If the Plan Administrator notifies a Participant that repayment of all or
any portion of the Severance Benefit received under the Plan is required, such amounts shall be
repaid within thirty (30) calendar days of the date the written notice is sent. Any remedy under
this subsection (a) shall be in addition to, and not in place of, any other remedy, including
injunctive relief, that the Company may have.

     (b) A Participant will not be eligible to receive Severance Benefits under any of the
following circumstances:

          (1) The Participant’s Voluntary Resignation;

          (2) The Participant resigns employment (other than a Good Reason Resignation) before the
job-end date specified by the Company or while the Company still desires the Participant’s
services;

          (3) The Participant’s employment is terminated for Cause;

          (4) The Participant voluntarily retires (other than a Good Reason Resignation);

          
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          (5) The Participant’s employment is terminated due to the Participant’s death or Permanent
Disability;

          (6) The Participant does not return to work within six (6) months of the onset of an approved
leave of absence, other than a personal or military leave and/or as otherwise required by
applicable statute;

          (7) The Participant does not return to work within three (3) months of the onset of an
educational leave of absence;

          (8) The Participant continues in employment with the Company for more than ninety (90) days
following the occurrence of an event or events that would permit a Good Reason Resignation; or

          (9) The Participant’s employment with the Company terminates as a result of a Change in
Control and the Participant accepts employment, or has the opportunity to continue employment, with
a Successor (other than under terms and conditions which would permit a Good Reason Resignation).

     (c) The Plan Administrator has the sole discretion to determine a Participant’s eligibility to
receive Severance Benefits.

     (d) A Participant returning from approved military leave during the period beginning one year
before a Change in Control and ending two years after a Change in Control will be eligible for
Severance Benefits if: (i) he is eligible for reemployment under the provisions of the Uniformed
Services Employment and Reemployment Rights Act (USERRA); (ii) his pre-military leave job is
eliminated; and (iii) the Employer’s circumstances are changed so as to make reemployment in
another position impossible or unreasonable, or re-employment would create an undue hardship for
the Employer. If the Participant returning from military leave qualifies for Severance Benefits,
his Severance Benefits will be calculated as if he had remained continuously employed from the date
he began his military leave. The Participant must also satisfy any other relevant conditions for
payment or repayment, including execution of a Release.

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ARTICLE 4

DETERMINATION OF SEVERANCE BENEFITS

4.1 Amount of Severance Benefits Upon Involuntary Termination and Good Reason Resignation .
The Severance Benefit to be provided to an Participant who incurs a Change in Control Termination
and is determined to be eligible for Severance Benefits shall be as follows:

     (a) Salary Replacement Benefits. Salary Replacement Benefits shall be the aggregate
of:

(1) The sum of (i) Participant’s Base Salary through his termination date to the
extent not theretofore paid; (ii) the product of the Participants Annual Bonus in
the fiscal year that includes the Participant’s Termination Date and (y) a fraction,
the numerator of which is the number of days in the current fiscal year through the
Participant’s Termination Date, and the denominator of which is 365, and (3) any
accrued vacation pay, to the extent not theretofore paid; and

(2) an amount equal to the product of (x) the sum of (i) the Participant’s Base
Salary plus (ii) the Participant’s Annual Bonus, and (y) the multiplier applicable
to the Participant set forth under Schedule B to the Plan.

     (b) Medical and Dental Replacement Benefits.

          (1) The Participant shall continue to be eligible to participate in the medical, dental
coverage in effect at the date of his or her Termination Date (or generally comparable coverage)
for himself or herself and, where applicable, his or her spouse and dependents, as the same may be
changed from time to time for employees of the Company generally, as if Participant had continued
in employment during the period described in Section 4908B(f) of the Code (the “COBRA Continuation
Coverage Period”). The Company shall be responsible for the payment of the employee portion of the
medical and dental contributions that are required during the COBRA Continuation Period, or if a
lesser period, for the number of months remaining in the period of years equal to the multiplier
applicable to the Participant set forth under Schedule B to the Plan (the “Multiplier Period”).
Any payment under this paragraph that is includible in the Participant’s gross income shall be
increased by an additional amount equal to the Federal income tax applicable to such payment
determined by applying the highest marginal Federal tax rate in effect at the payment date.

          (2) To the extent that the COBRA Continuation Period is shorter than Multiplier Period, the
Company will pay to the Participant an amount equal to 102% of the Company’s cost of providing the
Participant (and where applicable under the terms of coverage at the Termination Date, his spouse
and dependents) coverage to that provided under the Company’s medical and dental plans for the
period of time between the end of the COBRA Continuation Coverage Period and end of the Multiplier
Period. Any payment under this paragraph shall be increased by an additional amount equal to the
Federal income tax applicable to such payment determined by applying the highest marginal Federal
tax rate in effect at the payment date.

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     (c) 2005 SERP Credit. The Company shall credit the Participant with up to an
additional number of years of benefit service (but shall not credit such additional years in
determining the Participant’s age) under the 2005 SERP, which number of years shall be equal to the
multiplier applicable to such Participant under Schedule B, but in no event shall such additional
years of benefit service, when added to the Participant’s years of benefit service under the 2005
SERP, exceed the maximum under the 2005 SERP;

     (d) Outplacement Service. The Company shall, at its sole expense as incurred, provide
the Participant with up to $25,000 in outplacements services, the scope and provider of which shall
be selected by the Participant; provided such outplacement services shall not be paid by the
Company if incurred more that twelve (12) months after the Participant’s Termination Date.

     (e) Other Amounts. To the extent not theretofore paid of provided, the Company shall
timely pay or provide the Participant with any other amounts or benefits required to be paid or
provided or which the Participant is eligible to receive under any plan, program, policy, practice,
contract or agreement of the Company.

4.2 Voluntary Resignation; Termination for Death or Permanent Disability. If the
Participant’s employment terminates on account of (i) the Participant’s Voluntary Resignation, (ii)
retirement, (iii) death, or (iv) Permanent Disability, then the Participant shall not be entitled
to receive Severance Benefits under this Plan and shall be entitled only to those benefits (if any)
as may be available under the Company’s then-existing benefit plans and policies at the time of
such termination.

4.3 Termination for Cause. If any Participant’s employment terminates on account of
termination by the Company for Cause, the Participant shall not be entitled to receive Severance
Benefits under this Plan and shall be entitled only to those benefits that are legally required to
be provided to the Participant. Notwithstanding any other provision of the Plan to the contrary,
if the Plan Administrator determines that a Participant has engaged in conduct that constitutes
Cause at any time prior to the Participant’s Termination Date, any entitlement to a Severance
Benefit payable to the Participant under Section 4.1 of the Plan shall immediately cease. The
Company may withhold paying Severance Benefits under the Plan pending resolution of an inquiry that
could lead to a finding resulting in Cause. If the Company has offset other payments owed to the
Participant under any other plan or program, it may, in its sole discretion, waive its repayment
right solely with respect to the amount of the offset so credited.

4.4 Reduction of Severance Benefits. The Plan Administrator reserves the right to make
deductions in accordance with applicable law for any monies owed to the Company by the Participant
or the value of Company property that the Participant has retained in his possession.

4.5 Additional Benefits.

     (a) Anything in this Plan to the contrary notwithstanding, in the event it shall be determined
that any payment or distribution by the Company to or for the benefit of a Participant (whether
paid or provided pursuant to the terms of this Plan or otherwise) (a “Payment”) would exceed the
limit for deductible payments under Code section 280G by 10% or more, the Participant shall be
entitled to receive an additional payment (“Gross-up Payment”). The Gross-

9

 

up Payment shall be an
amount such that, after payment by the Participant of (i) all income taxes,
including, any interest and penalties imposed with respect thereto, and (ii) the excise tax
imposed by Code section 4999 and any interest or penalties with respect thereto (such excise tax,
together with any interest and penalties, collectively “Excise Tax”) imposed upon the Gross-up
Payment, the Participant retains an amount of the Gross-up Payment equal to the Excise Tax imposed
upon the Payment.

     (b) Anything in this Plan to the contrary notwithstanding, in the event it shall be determined
that any Payment or distribution by the Company to or for the benefit of a Participant would exceed
the limit for deductible payments under Code Section 280G by less than 10%, then the aggregate
present value of the benefits provided to the Participant pursuant to the rights granted under this
Plan (such benefits are hereinafter referred to as “Plan Payments”) shall be reduced to the Reduced
Amount. The “Reduced Amount” shall be an amount expressed in present value which maximizes the
aggregate present value of Plan Payments without causing any Payment to be nondeductible by the
Company because of Section 280G of the Code. For purposes of this Section 4.5(b), present value
shall be determined in accordance with Section 280G(d)(4) of the Code. If Plan Payments are to be
reduced, the Participant shall determine which Plan Payments shall be reduced to comply with this
Section 4.5(b).

     (c) All determinations required to be made under Section 4.5(a) shall be made by the
accounting firm (or other company whose regular business includes the performance of such
calculations) that the Company selects (the “Determining Firm”), which shall provide detailed
supporting calculations both to the Company and the Participant as soon as practicable after the
participant’s Termination Date. Any such determination by the Determining Firm shall be binding
upon the Company and the Participant.

     (d) All payments due under section 4.5(a) shall be made by the Company in a lump sum within
five (5) business days of the determination by the Determining Firm, in accordance with the terms
of section 5.1. Notwithstanding anything in Plan to the contrary, to the extent required for
compliance with Code section 409A, payment of Severance Benefits to a Participant who is a
Specified Employee shall not be paid before the date that is six months from his Termination Date
(or date of death if earlier). In no event will interest be credited on the unpaid balance for
which a Participant may become eligible.

4.6 Legal Expense Reimbursement. Anything in this Plan to the contrary notwithstanding, in
the event that a Participant litigates any denial of benefits under this Plan and a court enters a
final order requiring the Plan to pay benefits, then the Company will reimburse the Participant for
his or her legal expenses associated with this litigation, provided that the lifetime aggregate
maximum legal expense reimbursement for any Participant under the Plan shall be $150,000.00.
Payment of any legal expense reimbursement shall be made to the Participant on the first business
day of the month next following the Company’s receipt of notification of the final court order and
evidence, satisfactory to the Company, of the Participant’s legal expenses eligible for
reimbursement under this Section 4.6.

10

 

ARTICLE 5

METHOD, DURATION AND LIMITATION OF SEVERANCE BENEFIT PAYMENTS

5.1 Method of Payment. The cash Severance Benefits to which a Participant is entitled, as
determined pursuant to Article 4, shall be paid in a single lump sum payment. Payment shall be
made by mailing to the last address provided by the Participant to the Company or such other
reasonable method as determined by the Plan Administrator. In general, the payment shall be made
as promptly as practicable after the Participant’s Termination Date, the execution of the Release
required under Section 3.2, and the expiration of the required revocation period specified in the
Release. All payments of Severance Benefits are subject to applicable federal, state and local
taxes and withholdings. In the event of the Participant’s death prior to payment being made, the
amount of such payment shall be paid to the Participant’s estate. Notwithstanding the preceding,
to the extent required for compliance with Code section 409A, payment of Severance Benefits to a
Participant who is a Specified Employee shall not be paid before the date that is six months from
his Termination Date (or date of death if earlier). In no event will interest be credited on the
unpaid balance for which a Participant may become eligible.

5.2 Other Arrangements. The Severance Benefits under this Plan are not additive or
cumulative to severance or termination benefits that a Participant might also be entitled to
receive under the terms of a written employment agreement, a severance agreement or any other
arrangement with the Company, including, without limitation, the Executive Severance Plan. As a
condition of participating in the Plan, the Participant must expressly agree that this Plan
supersedes all prior plans or agreements providing for severance benefits upon a Change in Control
Termination, other than benefits (i) specified in the WGL Holdings, Inc. and Washington Gas Light
Company Change in Control Policy, or (ii) provided under an Award granted under the WGL Holdings,
Inc. 1999 Incentive Compensation Plan prior to the Effective Date of this Plan, and sets forth the
entire Severance Benefit the Participant is entitled to while a Participant in the Plan. The
provisions of this Plan may provide for payments to the Participant under certain compensation or
bonus plans under circumstances where such plans would not provide for payment thereof. It is the
specific intention of the Company that the provisions of this Plan shall supersede any provisions
to the contrary in such plans, to the extent permitted by applicable law, and such plans shall be
deemed to be have been amended to correspond with this Plan without further action by the Company
or the Board.

5.3 Termination of Eligibility for Benefits.

     (a) All Participants shall cease to be eligible to participate in the Plan, and all Severance
Benefit payments shall cease upon the occurrence of the earlier of:

          (1) Subject to Article 8, termination or modification of the Plan; or

          (2) Completion of payment to the Participant of the Severance Benefit for which the
Participant is eligible under Article 4.

11

 

     (b) Notwithstanding anything herein to the contrary, the Company shall have the right to cease
all Severance Benefit payments and to recover payments previously made to the Participant should
the Participant at any time breach the Participant’s undertakings under the terms of the Plan, the
Release the Participant executed to obtain the Severance Benefits under the Plan or the
confidentiality and non-solicitation provisions of Article 6.

12

 

ARTICLE 6

CONFIDENTIALITY, COVENANT NOT TO COMPETE AND NOT TO SOLICIT

6.1 Post-Employment Restrictions. All Severance Benefits payable under this Plan are
subject to the Participant’s compliance with the Company’s Post-Employment Restriction Policy as of
the date of the Change in Control, which is incorporated herein by reference, and a copy of which
is attached as Exhibit 2.

6.2 Equitable Relief.

     (a) By participating in the Plan, the Participant acknowledges that the restrictions contained
in the Post-Employment Restriction Policy are reasonable and necessary to protect the legitimate
interests of the Company, that the Company would not have established this Plan in the absence of
such restrictions, and that any violation of any provision of this Article will result in
irreparable injury to the Company. By agreeing to participate in the Plan, the Participant
represents that his experience and capabilities are such that the restrictions of the
Post-Employment Restriction Policy will not prevent the Participant from obtaining employment or
otherwise earning a living at the same general level of economic benefit as is currently the case.
The Participant further represents and acknowledges that (i) he or she has been advised by the
Company to consult his own legal counsel in respect of this Plan, and (ii) that he or she has had
full opportunity, prior to agreeing to participate in this Plan, to review thoroughly this Plan
with his counsel.

     (b) The Participant agrees that the Company shall be entitled to preliminary and permanent
injunctive relief, without the necessity of proving actual damages, as well as an equitable
accounting of all earnings, profits and other benefits arising from any violation of this Article
6, which rights shall be cumulative and in addition to any other rights or remedies to which the
Company may be entitled. In the event that any of the provisions of this Article 6 should ever be
adjudicated to exceed the time, geographic, service, or other limitations permitted by applicable
law in any jurisdiction, then such provisions shall be deemed reformed in such jurisdiction to the
maximum time, geographic, service, or other limitations permitted by applicable law.

     (c) The Participant irrevocably and unconditionally (i) agrees that any suit, action or other
legal proceeding arising out of this Article 6, including without limitation, any action commenced
by the Company for preliminary and permanent injunctive relief or other equitable relief, may be
brought in the United States District Court for the District of Columbia, or if such court does not
have jurisdiction or will not accept jurisdiction, in any court of general jurisdiction in the
District of Columbia or the Commonwealth of Virginia, (ii) consents to the non-exclusive
jurisdiction of any such court in any such suit, action or proceeding, (iii) waives any objection
which Participant may have to the laying of venue of any such suit, action or proceeding in any
such court, and (iv) agrees to waive any right to a jury trial. Participant also irrevocably and
unconditionally consents to the service of any process, pleadings, notices or other papers in a
manner permitted by the notice provisions of Section 11.2.

13

 

6.3 Survival of Provisions. The obligations contained in this Article 6 shall survive the
termination of Participant’s employment with the Company and shall be fully enforceable
thereafter.

14

 

ARTICLE 7

THE PLAN ADMINISTRATOR

7.1 Authority and Duties. It shall be the duty of the Plan Administrator, on the basis of
information supplied to it by the Company and the Committee, to properly administer the Plan. The
Plan Administrator shall have the full power, authority and discretion to construe, interpret and
administer the Plan, to make factual determinations, to correct deficiencies therein, and to supply
omissions. All decisions, actions and interpretations of the Plan Administrator shall be final,
binding and conclusive upon the parties, subject only to determinations by the Named Appeals
Fiduciary (as defined in Section 10.4), with respect to denied claims for Severance Benefits. The
Plan Administrator may adopt such rules and regulations and may make such decisions as it deems
necessary or desirable for the proper administration of the Plan.

7.2 Compensation of the Plan Administrator. The Plan Administrator shall receive no
compensation for services as such. However, all reasonable expenses of the Plan Administrator
shall be paid or reimbursed by the Company upon proper documentation. The Plan Administrator shall
be indemnified by the Company against personal liability for actions taken in good faith in the
discharge of the Plan Administrator’s duties.

7.3 Records, Reporting and Disclosure. The Plan Administrator shall keep a copy of all
records relating to the payment of Severance Benefits to Participants and former Participants and
all other records necessary for the proper operation of the Plan. All Plan records shall be made
available to the Committee, the Company and to each Participant for examination during business
hours except that a Participant shall examine only such records as pertain exclusively to the
examining Participant and to the Plan. The Plan Administrator shall prepare and shall file as
required by law or regulation all reports, forms, documents and other items required by ERISA, the
Code, and every other relevant statute, each as amended, and all regulations thereunder (except
that the Company, as payor of the Severance Benefits, shall prepare and distribute to the proper
recipients all forms relating to withholding of income or wage taxes, Social Security taxes, and
other amounts that may be similarly reportable).

15

 

ARTICLE 8

AMENDMENT, TERMINATION AND DURATION

8.1 Amendment, Suspension and Termination. Except as otherwise provided in this Section
8.1, the Board or its delegee shall have the right, at any time and from time to time, to amend,
suspend or terminate the Plan in whole or in part, for any reason or without reason, and without
either the consent of or the prior notification to any Participant, by a formal written action. No
such amendment shall give the Company the right to recover any amount paid to a Participant prior
to the date of such amendment or to cause the cessation of any Severance Benefit already approved
for a Participant who has executed a Release as required under Section 3.2. Notwithstanding the
foregoing, no Plan amendment that reduces any Severance Benefit payable under this Plan, and no
Plan termination or suspension shall be effective for a period beginning one year prior to a Change
in Control and ending two years after a Change in Control. In addition, no Participant may be
removed as a Participant during such period with respect to any Severance Benefit payable with
respect to that Change in Control, although a Participant may be removed during such period with
respect to a subsequent Change in Control.

8.2 Duration. The Plan shall continue in full force and effect until termination of the
Plan pursuant to Section 8.1; provided, however, that after the termination of the Plan, if a
Participant’ employment is terminated on account of a Change in Control Termination prior to the
termination of the Plan, the Plan shall remain in effect until all of the obligations of the
Company hereunder are satisfied with respect to such Participants.

16

 

ARTICLE 9

DUTIES OF THE COMPANY, THE COMMITTEE, AND THE PLAN ADMINISTRATOR

9.1 Records. The Company shall supply to the Plan Administrator all records and
information necessary to the performance of the Plan Administrator’s duties.

9.2 Payment. Payments of Severance Benefits to Participants shall be made in such amount as
determined by the Plan Administrator under Article 4, from the Company’s general assets or from a
supplemental unemployment benefits trust, in accordance with the terms of the Plan, as directed by
the Committee.

9.3 Discretion. Any decisions, actions or interpretations to be made under the Plan by the
Board, the Committee and the Plan Administrator, acting on behalf of either, shall be made in each
of their respective sole discretion, not in any fiduciary capacity and need not be uniformly
applied to similarly situated individuals and such decisions, actions or interpretations shall be
final, binding and conclusive upon all parties. As a condition of participating in the Plan, the
Participant acknowledges that all decisions and determinations of the Board, the Committee and the
Plan Administrator shall be final and binding on the Participant, his beneficiaries and any other
person having or claiming an interest under the Plan on his behalf.

17

 

ARTICLE 10

CLAIMS PROCEDURES

10.1 Claim. Each Participant under this Plan may contest only the administration of the
Severance Benefits awarded by completing and filing with the Plan Administrator a written request
for review in the manner specified by the Plan Administrator. No appeal is permissible as to a
Participant’s eligibility for or amount of the Severance Benefit, which are decisions made solely
within the discretion of the Company, and the Committee acting on behalf of the Company. No person
may bring an action for any alleged wrongful denial of Plan benefits in a court of law unless the
claims procedures described in this Article 10 are exhausted and a final determination is made by
the Plan Administrator and/or the Named Appeals Fiduciary. If the terminated Participant or
interested person challenges a decision by the Plan Administrator and/or Named Appeals Fiduciary, a
review by the court of law will be limited to the facts, evidence and issues presented to the Plan
Administrator during the claims procedure set forth in this Article 10. Facts and evidence that
become known to the terminated Participant or other interested person after having exhausted the
claims procedure must be brought to the attention of the Plan Administrator for reconsideration of
the claims administrator. Issues not raised with the Plan Administrator and/or Named Appeals
Fiduciary will be deemed waived.

10.2 Initial Claim. Before the date on which payment of a Severance Benefit commences,
each such application must be supported by such information as the Plan Administrator deems
relevant and appropriate. In the event that any claim relating to the administration of Severance
Benefits is denied in whole or in part, the terminated Participant or his beneficiary (“claimant”)
whose claim has been so denied shall be notified of such denial in writing by the Plan
Administrator within ninety (90) days after the receipt of the claim for benefits. This period may
be extended an additional ninety (90) days if the Plan Administrator determines such extension is
necessary and the Plan Administrator provides notice of extension to the claimant prior to the end
of the initial ninety (90) day period. The notice advising of the denial shall specify the
following: (i) the reason or reasons for denial, (ii) make specific reference to the Plan
provisions on which the determination was based, (iii) describe any additional material or
information necessary for the claimant to perfect the claim (explaining why such material or
information is needed), and (iv) describe the Plan’s review procedures and the time limits
applicable to such procedures, including a statement of the claimant’s right to bring a civil
action under section 502(a) of ERISA following an adverse benefit determination on review.

10.3 Appeals of Denied Administrative Claims. All appeals shall be made by the following
procedure:

     (a) A claimant whose claim has been denied shall file with the Plan Administrator a notice of
appeal of the denial. Such notice shall be filed within sixty (60) calendar days of notification
by the Plan Administrator of the denial of a claim, shall be made in writing, and shall set forth
all of the facts upon which the appeal is based. Appeals not timely filed shall be barred.

     (b) The Named Appeals Fiduciary shall consider the merits of the claimant’s written
presentations, the merits of any facts or evidence in support of the denial of benefits, and such
other facts and circumstances as the Named Appeals Fiduciary shall deem relevant.

18

 

     (c) The Named Appeals Fiduciary shall render a determination upon the appealed claim which
determination shall be accompanied by a written statement as to the reasons therefore. The
determination shall be made to the claimant within sixty (60) days of the claimant’s request for
review, unless the Names Appeals Fiduciary determines that special circumstances requires an
extension of time for processing the claim. In such case, the Named Appeals Fiduciary shall notify
the claimant of the need for an extension of time to render its decision prior to the end of the
initial sixty (60) day period, and the Named Appeals Fiduciary shall have an additional sixty (60)
day period to make its determination. The determination so rendered shall be binding upon all
parties. If the determination is adverse to the claimant, the notice shall provide (i) the reason
or reasons for denial, (ii) make specific reference to the Plan provisions on which the
determination was based, (iii) a statement that the claimant is entitled to receive, upon request
and free of charge, reasonable access to, and copies of, all documents, records and other
information relevant to a the claimant’s claim for benefits, and (iv) state that the claimant has
the right to bring an action under section 502(a) of ERISA.

10.4 Appointment of the Named Appeals Fiduciary. The Named Appeals Fiduciary shall be the
person or persons named as such by the Board or Committee, or, if no such person or persons be
named, then the person or persons named by the Plan Administrator as the Named Appeals Fiduciary.
Named Appeals Fiduciaries may at any time be removed by the Board or Committee, and any Named
Appeals Fiduciary named by the Plan Administrator may be removed by the Plan Administrator. All
such removals may be with or without cause and shall be effective on the date stated in the notice
of removal. The Named Appeals Fiduciary shall be a “Named Fiduciary” within the meaning of ERISA,
and unless appointed to other fiduciary responsibilities, shall have no authority, responsibility,
or liability with respect to any matter other than the proper discharge of the functions of the
Named Appeals Fiduciary as set forth herein.

19

 

ARTICLE 11

MISCELLANEOUS

11.1 Nonalienation of Benefits. None of the payments, benefits or rights of any
Participant shall be subject to any claim of any creditor of any Participant, and, in particular,
to the fullest extent permitted by law, all such payments, benefits and rights shall be free from
attachment, garnishment (if permitted under applicable law), trustee’s process, or any other legal
or equitable process available to any creditor of such Participant. No Participant shall have the
right to alienate, anticipate, commute, plead, encumber or assign any of the benefits or payments
that he may expect to receive, continently or otherwise, under this Plan, except for the
designation of a beneficiary as set forth in Section 5.1.

11.2 Notices. All notices and other communications required hereunder shall be in writing
and shall be delivered personally or mailed by registered or certified mail, return receipt
requested, or by overnight express courier service. In the case of the Participant, mailed notices
shall be addressed to him or her at the home address which he or she most recently communicated to
the Company in writing. In the case of the Company, mailed notices shall be addressed to the Plan
Administrator.

11.3 Successors. Any Successor shall assume the obligations under this Plan and expressly
agree to perform the obligations under this Plan.

11.4 Other Payments. Except as otherwise provided in this Plan, no Participant shall be
entitled to any cash payments or other severance benefits under any of the Company’s then current
severance pay policies for a termination that is covered by this Plan for the Participant.

11.5 No Contract of Employment. Neither the establishment of the Plan, nor any
modification thereof, nor the creation of any fund, trust or account, nor the payment of any
benefits shall be construed as giving any Participant or any person whosoever, the right to be
retained in the service of the Company, and all Participants shall remain subject to discharge to
the same extent as if the Plan had never been adopted.

11.6 Severability of Provisions. If any provision of this Plan shall be held invalid or
unenforceable by a court of competent jurisdiction, such invalidity or unenforceability shall not
affect any other provisions hereof, and this Plan shall be construed and enforced as if such
provisions had not been included.

11.7 Heirs, Assigns, and Personal Representatives. This Plan shall be binding upon the
heirs, executors, administrators, successors and assigns of the parties, including each
Participant, present and future.

11.8 Headings and Captions. The headings and captions herein are provided for reference
and convenience only, shall not be considered part of the Plan, and shall not be employed in the
construction of the Plan.

20

 

11.9 Gender and Number. Where the context admits: words in any gender shall include any
other gender, and, except where otherwise clearly indicated by context, the singular shall include
the plural, and vice-versa.

11.10 Unfunded Plan. The Plan shall not be funded. No Participant shall have any right
to, or interest in, any assets of the Company that may be applied by the Company to the payment of
Severance Benefits.

11.11 Payments to Incompetent Persons. Any benefit payable to or for the benefit of a
minor, an incompetent person or other person incapable of receipting therefore shall be deemed paid
when paid to such person’s guardian or to the party providing or reasonably appearing to provide
for the care of such person, and such payment shall fully discharge the Company, the Committee and
all other parties with respect thereto.

11.12 Lost Payees. A benefit shall be deemed forfeited if the Plan Administrator is unable
to locate a Participant to whom a Severance Benefit is due. Such Severance Benefit shall be
reinstated if application is made by the Participant for the forfeited Severance Benefit while this
Plan is in operation.

11.13 Controlling Law. This Plan shall be construed and enforced according to the laws of
the Commonwealth of Virginia to the extent not superseded by Federal law.

21

 

SCHEDULE A

Executive Tiers

Tier 1

Tier 2

 

 

SCHEDULE B

MULTIPLIER

	 	 	 
	 	 	Multiplier
	 
	 	3 X
	 
	 	 
	 
	 	 
	 
	 	 
	 
	 	 
	 
	 	 
	 
	 	 
	 
	 	 
	 
	 	 
	 
	 	 
	 
	 	2 X
	 
	 	 
	 
	 	 
	 
	 	 

 

 

EXHIBIT 1

WGL Holdings, Inc. and Washington Gas Light Company

Change In Control Policy

	I.	 	Purpose. The Change in Control Policy will define a Change in Control for purposes of
determining when Change in Control actions occur under the various WGL Holdings,
Inc./Washington Gas Light Company benefit plans. Establishing this policy is intended to
facilitate the Policy administrator’s review and modification, if and as desired, to the
definition of a Change in Control, and to ensure consistency in such definition with respect
to all plans and programs that accelerate vesting or otherwise provide for payments triggered
by a Change in Control.
	 
	II.	 	Effective Date. This Change in Control Policy is effective December 15, 2006.
	 
	III.	 	Application.

	 	A.	 	The policy will apply to the following plans and arrangements:

	 	1.	 	The Washington Gas Light Company 2005 Supplemental Executive
Retirement Plan
	 
	 	2.	 	The Washington Gas Light Company Executive Severance Plan
	 
	 	3.	 	The WGL Holdings, Inc. Omnibus Incentive Compensation Plan (for
new awards)
	 
	 	4.	 	Any future plans or arrangements established with a Change in
Control vesting trigger.

	 	B.	 	The effect of a Change in Control on the current plans and arrangements is as
follows:

	 	1.	 	The Washington Gas Light Company 2005 Supplemental Executive
Retirement Plan – full and immediate vesting upon a Change in Control
	 
	 	2.	 	The Washington Gas Light Company Change in Control Severance
Plan for Certain Executives– triggers payment of Change in Control benefits for
involuntary termination or voluntary termination with good reason
	 
	 	3.	 	The WGL Holdings, Inc. Omnibus Incentive Compensation Plan -
unless otherwise provided by the Committee in award agreements

	 	a.	 	Stock Options granted on or after December 15,
2006:

	 	(i)	 	50% of each grant of unvested
options will fully vest

 

 

	 	(ii)	 	50% of each grant of unvested
options will vest according to terms of option agreement:

	 	(a)	 	if WGL is
surviving entity and publicly traded (NYSE or NASDAQ)

	 	(1)	 	full vesting if option holder is terminated
	 
	 	(2)	 	continue current vesting if no termination of
employment

	 	(b)	 	if WGL is not
surviving entity or not publicly traded – full vesting
(and conversion to acquiror stock, or if not possible,
cash out of option spread)

	 	b.	 	Stock Options granted prior to December 15,
2006 shall be governed by their terms.
	 
	 	c.	 	Performance stock awards granted on or after
December 15, 2006:

	 	(i)	 	50% of each grant of performance
stock will fully vest upon a Change in Control
	 
	 	(ii)	 	50% of each grant of performance
stock will vest according to terms of award:

	 	(a)	 	if WGL is
surviving entity and publicly traded (NYSE or NASDAQ)

	 	(1)	 	full cash out at target performance if employee
is terminated
	 
	 	(2)	 	full cash out at performance if plan is
terminated and awards are not replaced with
equitable arrangement
	 
	 	(3)	 	vesting continues under current award if plan
continues and employment continues

	 	(b)	 	if WGL is not
surviving entity or not publicly traded the plan will
terminate with full cash out at target performance– full
vesting (and conversion to acquiror stock, or if not
possible, cash out of option spread)

	 	d.	 	Performance stock awards granted prior to
December 15, 2006, 2006 shall be governed by their terms.

 

 

	IV.	 	Administration.

	 	A.	 	The Policy will be administered by the HR Committee of the Board, or such other
committee identified by the Board
	 
	 	B.	 	The Committee will have the full and final authority to modify, amend or
otherwise change any part of all of the definition of a Change in Control; provided no
such change shall be effective sooner than 12-months after it is adopted

	V.	 	Change in Control.

	 	A.	 	Overview. The definition of Change in Control under the Policy will be the
definition currently set forth in the SERP, the WGL Holdings, Inc. Omnibus Incentive
Compensation Plan and the Washington Gas Light Company Employment Agreements, except
that a merger, consolidation or sale of all or substantially all of the assets of the
WGL Holdings, Inc. or the Washington Gas Light Company will not trigger a Change in
Control if a change in the ownership of WGL Holdings, Inc. or Washington Gas Light
Company is less than 67% of the pre-change ownership (instead of the current 50%);
specifically:

	 	1.	 	“Change of Control” means:

	 	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 definition;
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 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 definition;
	 
	 	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 67% 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 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 67% 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.

 

 

EXHIBIT 2

Washington Gas Light Company

Policy of Post-Employment Restrictions 

	I.	 	Purpose. The policy on post-employment restrictions is to define the scope of restrictions
that will apply to post-employment actions undertaken by executives who receive benefits under
the various WGL Holdings, Inc./Washington Gas Light Company benefit plans. This policy is
intended to assist WGL Holdings, Inc. and Washington Gas Light Company protect (i)
confidential information belonging to such companies that its executives have had access to
and posses due to the nature of their positions, and (ii) the competitive business operations
of such companies.
	 
	II.	 	Application.

	 	A.	 	The policy will apply to and be incorporated by reference into the following
plans and arrangements:

	 	1.	 	The Washington Gas Light Company Executive Severance Plan
	 
	 	2.	 	Any future plans or arrangements established with
reference to this policy.

	III.	 	Post-Employment Restrictions:

	 	A.	 	Restricted Period. The Restrictions on Activities set forth in this policy
shall apply for a period of one year following the executive’s termination of
employment date regardless of cause.
	 
	 	B.	 	Restriction on Activities. Except as specifically permitted, in writing by
the HR Committee of the Board of WGL Holdings, Inc., and Washington Gas Light Company
(the “Board”), this policy shall prohibit:

	 	1.	 	Solicitation of Employees. The direct or indirect
recruitment, solicitation, inducement or hiring of any person or entity who
during the period within one year prior to the executive’s termination of
employment was an employee or independent contractor of WGL Holdings, Inc.
and/or Washington Gas Light Company, to leave or cease employment or other
relationship with WGL Holdings, Inc. and/or Washington Gas Light Company,
provided this restriction shall not apply to the hiring of any persons or
entities to perform personal services that are not directly or indirectly in
competition with WGL Holdings, Inc, or Washington Gas Light Company.
	 
	 	2.	 	Solicitation of Customers. The solicitation or initiation
of communications or contacts with any customer or prospective customer of
WGL Holdings, Inc. and/or Washington Gas Light Company with the intent of
soliciting 

 

 

	 	 	 	business or diverting business from WGL Holdings, Inc. and/or
Washington Gas Light Company.

	 	3.	 	Disclosure of Confidential Information. For purposes of
this paragraph “Confidential Information” shall mean confidential
information the disclosure of which or use of which may damage WGL Holdings,
Inc. and/or Washington Gas Light Company. Confidential Information shall
include, but not be limited to non-public information regarding computer
programs, discoveries or improvements, marketing, manufacturing, or
organizational research and development, or business plans; sales forecasts;
personnel information, including the identity of employees, their
responsibilities, competence, abilities, and compensation; pricing and
financial information; current and prospective customer lists and
information on customers or their employees; information concerning planned
or pending acquisitions or divestitures; and information concerning
purchases of major equipment or property. Confidential Information does not
include information which is or enters the public domain through no action
or inaction of the executive, is obtained by the executive from a third
party having the legal right to use and disclose same, or was in the
possession of the executive before his employment with WGL Holdings, Inc. or
Washington Gas Light Company.

	IV.	 	Administration.

	 	A.	 	The Policy will be administered by the HR Committee of the Board, or such
other committee identified by the Board
	 
	 	B.	 	The Committee will have the full and final authority to modify, amend or
otherwise change any part of all of the policy.exv10w2

 

Exhibit 10.2

WGL HOLDINGS, INC.

OMNIBUS INCENTIVE COMPENSATION PLAN,

SECTION 1

PURPOSE

Purpose. The purpose of this WGL Holdings, Inc. Omnibus Incentive Compensation Plan (the “Plan”)
of WGL Holdings, Inc., a Virginia corporation (the “Company”), is to advance the interests of the
Company and its shareholders by providing for incentive compensation triggered by factors related
to operational excellence, customer service, utility reliability and others as 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 shareholders. 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. Further, the terms of the Plan are intended to meet the
requirements of Section 409A of the Code.

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.

 

 

- 2 -

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

(d) “Change of Control” means for all purposes of this Plan the meaning ascribed to such term in
the Company’s Change in Control Severance Plan for Certain Executives, dated December 15, 2006,
or any successor to such plan.

     (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) “Effective Date” means the date that the Plan is approved by the Company’s
shareholders.

     (h) “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.

     (i) “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.

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

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

     (l) “Plan” means the WGL Holdings, Inc. Omnibus Incentive Compensation Plan.

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

     (n) “Prior Plan” means the WGL Holdings, Inc. 1999 Incentive Compensation
Plan as Amended and Restated as of March 5, 2003.

     (o) “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.

     (p) “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(d).

 

 

- 3 -

     (q) “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 include the Utility. The term shall also refer to any entity designated as such by the
Board for purposes of the Plan.

     (r) “Utility” means Washington Gas Light Company.

SECTION 3

ADMINISTRATION

     (a) Authority of the Committee. The Plan shall be administered by the Committee and the
Committee shall make and administer all Awards in compliance with the provisions of Section 409A of
the Code, including, but not limited to, rules related to the election, timing and deferral of
Awards. 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(e) 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

 

 

 - 4 -

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.

     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 shareholders, 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 Sections 4(d) and 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(e), 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

 

 

- 5 -

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(d), the total
number of shares of Stock reserved and available for delivery pursuant to Awards shall be:

     (i) One million seven hundred thousand (1,700,000) shares of Stock; plus

     (ii) (A) the number of shares of Stock (not to exceed one hundred twenty-five thousand
(125,000)) which remained available for grant under the Company’s Prior Plan as of the Effective
Date; and (B) the number of shares of Stock (not to exceed one million eight hundred forty-five
thousand (1,845,000)), subject to outstanding awards as of the Effective Date under the Prior Plan
that on or after the Effective Date cease for any reason to be subject to such awards (other than
by reason of exercise or settlement of the awards to the extent they are exercised for or settled
in vested and nonforfeitable shares of Stock).

     (b). Shares subject to any Award which is canceled, expired, forfeited, settled in cash or
otherwise terminated without delivery of fully tradeable shares of Stock to the Participant (or
Beneficiary), including, without limitation, shares of Restricted Stock that are forfeited and
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 delivery pursuant to Awards. Notwithstanding the foregoing, the number
of shares that may be delivered upon the exercise of ISOs shall be one million eight hundred
twenty-five thousand (1,825,000), subject to adjustment as provided in Section 4(d). 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.

     (c) Annual Per-Participant Limitations. During any Plan Year, no Participant may be granted
Awards relating to more than 400,000 shares of Stock, subject to adjustment as provided in Section
4(d). 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 greater of the Fair Market Value of
the number of shares of Stock set forth in the preceding sentence or five million dollars
($5,000,000), 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.

     (d) Adjustments. In the event that the Committee shall determine that any

 

 

- 6 -

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 delivery pursuant to
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(c), (iii) the number and kind of shares of Stock relating to
outstanding Restricted Stock or other Awards in 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. Notwithstanding anything herein to the contrary, without the prior
approval of the shareholders of the Company, Options or SARs issued under this Plan will not be
repriced, replaced, repurchased for cash at any time or regranted through cancellation or by
lowering the exercise price, and no material amendment of this Plan shall be made without
shareholder approval if shareholder approval is required by law, regulation, or stock exchange
rule. The exercise price of a previously granted Option or the grant prince of a previously issued
SAR may not be lowered at any time following the grant of such Option or SAR.

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.

 

 

- 7 -

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) Option Grants. Options may be granted to Participants in such number, and upon such
terms, and at any time and from time to time as shall be determined by the Committee, in its
sole discretion.

     (ii) Exercise Price. The exercise price per share of Stock purchasable under an Option
shall be determined by the Committee and specified in the
Award Agreement; 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.

     (iii) Time and Method of Exercise. Each Option shall be exercisable during and over such
period ending not later than ten years from the date it was granted, as may be determined by the
Committee and stated in the Award Agreement. 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 and 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.

     (iv) 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.

     (v) 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,

 

 

- 8 -

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”):

     (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. The terms and conditions relating to any SAR will be
set forth in an Award Agreement that is in compliance with the provisions of Section 409A of the
Code.

     (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 shareholder, 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.

 

 

- 9 -

     (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. Notwithstanding the foregoing, the
terms and conditions relating to any deferred dividends payable with respect to Restricted Stock
will be set forth in an Award Agreement that is in compliance with the provisions of Section
409A of the Code.

     (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 Agreement 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 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

 

 

 - 10 -

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. Notwithstanding the foregoing, the terms and conditions relating to Dividend Equivalents
will be set forth in an Award Agreement that is in compliance with the provisions of Section
409A of the Code.

     (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.

 

 

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     (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). Except for the automatic acceleration and payout resulting from
a Change of Control under Section 7(f), 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.

     (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.

     (iii) Compliance with Code Section 409A. The terms and conditions of any Awards will
comply in all applicable respects with the requirements of Code section 409A. Notwithstanding
anything to the contrary herein, no term of the Plan or of any

 

 

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Award Agreement will be
interpreted or amended, nor shall any discretion or authority granted hereunder be exercised, so
as to cause such Awards to violate the provisions of Code section 409A.

     (e) 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(e) 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(e),
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

 

 

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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).

     (f) 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 granted prior to December 15, 2006, shall immediately lapse upon
a Change of Control, and all such Awards shall be immediately paid or settled; provided, however,
that such lapse shall not occur if the Committee determines that such lapse shall not occur.
Awards granted on or after December 15, 2006, will vest upon a Change in Control in accordance with
the terms of the WGL Holdings, Inc./Washington Gas Light Company Change in Control Policy.

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

 

 

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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 shareholders or Participants, except that any such Board action shall be subject
to the approval of the Company’s shareholders at or before the next annual meeting of shareholders
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 shareholder 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 shareholders 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).

     (f) No Rights to Awards; No Shareholder 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 shareholder 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

 

 

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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 shareholders 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.

     (l) Effective Date; Plan Termination. The Plan shall become effective as of the date of its
approval by the Company’s shareholders, and shall continue in effect for ten (10) years from the
Effective Date, unless sooner terminated by the Board.

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