EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (the "Agreement") is entered into by and among
Washington Gas Light Company (the "Company") and James H. DeGraffenreidt, Jr.
(the "Executive"), as of the 15th day of March, 1999.
RECITALS
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The Board of Directors of the Company (the "Board"), has determined that it
is in the best interests of the Company and its shareholders to assure that the
Company will have the continued dedication of the Executive, notwithstanding the
possibility, threat or occurrence of a Change of Control (as defined below) of
the Company. The Board believes it is imperative to diminish the inevitable
distraction of the Executive by virtue of the personal uncertainties and risks
created by a pending or threatened Change of Control and to encourage the
Executive's full attention and dedication to the Company currently and in the
event of any threatened or pending Change of Control, and to provide the
Executive with compensation and benefits arrangements upon a Change of Control
which ensure that the compensation and benefits expectations of the Executive
will be satisfied and which are competitive with those of other corporations.
Therefore, in order to accomplish these objectives, the Board has caused the
Company to enter into this Agreement.
AGREEMENT
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NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Certain Definitions.
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(a) The "Effective Date" shall mean the first date during the Change
of Control Period (as defined in Section l(b)) on which a Change of Control
(as defined in Section 2) occurs. Anything in this Agreement to the
contrary notwithstanding, if a Change of Control occurs and if the
Executive's employment with the Company is terminated within twelve months
prior to the date on which the Change of Control occurs, and if it is
reasonably demonstrated by the Executive that such termination of
employment (i) was at the request of a third party who has taken steps
reasonably calculated to effect a Change of Control or (ii) otherwise arose
in connection with or anticipation of a Change of Control, then for all
purposes of this Agreement the "Effective Date" shall mean the date
immediately prior to the date of such termination of employment.
(b) The "Change of Control Period" shall mean the period commencing on
the date hereof and ending on the second anniversary of the Effective Date.
2. Change of Control.
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For the purpose of this Agreement, a "Change of Control" shall mean:
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(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
the Company (the "Outstanding Company Common Stock") or (ii) the combined
voting power of the then-outstanding voting securities of the Company
entitled to vote generally in the election of directors (the "Outstanding
Company Voting Securities"); provided, however, that for purposes of this
subsection (a), the following acquisitions shall not constitute a Change of
Control: (i) any acquisition directly from the Company, (ii) any
acquisition by the Company, (iii) any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by the Company or any
corporation controlled by the Company, or (iv) any acquisition by any
corporation pursuant to a transaction which complies with clauses (i), (ii)
and (iii) of subsection (c) of this Section 2; or
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority
of the Board; provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for election by
the Company's shareholders, was approved by a vote of at least a majority
of the directors then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board, but excluding,
for this purpose, any such individual whose initial assumption of office
occurs as a result of an actual or threatened election contest with respect
to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than
the Board; or
(c) Consummation of a reorganization, merger or consolidation or sale
or other disposition of all or substantially all of the assets of the
Company (a "Business Combination"), in each case, unless, following such
Business Combination, (i) all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the Outstanding
Company Common Stock and Outstanding Company Voting Securities immediately
prior to such Business Combination beneficially own, directly or
indirectly, more than 50% of, respectively, the then- outstanding shares of
common stock and the combined voting power of the then-outstanding voting
securities entitled to vote generally in the election of directors, as the
case may be, of the corporation resulting from such Business Combination
(including, without limitation, a corporation which as a result of such
transaction owns the Company or all or substantially all of the Company's
assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership, immediately prior to
such Business Combination of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be, (ii) no Person
(excluding any corporation resulting from such Business Combination or any
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employee benefit plan (or related trust) of the Company or such corporation
resulting from such Business Combination) beneficially owns, directly or
indirectly, 30% or more of, respectively, the then-outstanding shares of
common stock of the corporation resulting from such Business Combination,
or the combined voting power of the then-outstanding voting securities of
such corporation except to the extent that such ownership existed prior to
the Business Combination and (iii) at least a majority of the members of
the board of directors of the corporation resulting from such Business
Combination were members of the Incumbent Board at the time of the
execution of the initial agreement, or of the action of the Board,
providing for such Business Combination; or
(d) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
3. Employment Period.
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The Company hereby agrees to continue the Executive in its employ, and the
Executive hereby agrees to remain in the employ of the Company subject to the
terms and conditions of this Agreement, for the period commencing on the
Effective Date and ending on the second anniversary of such date (the
"Employment Period").
4. Terms of Employment.
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(a) Position and Duties.
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(i) During the Employment Period, (A) the Executive's position,
duties and responsibilities shall be at least commensurate in all
material respects with the most significant of those held, exercised
and assigned at any time during the 120-day period immediately
preceding the Effective Date and (B) the Executive's services shall be
performed at the location where the Executive was employed immediately
preceding the Effective Date or any office or location less than 35
miles from such location; and
(ii) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the
Executive agrees to devote reasonable attention and time during normal
business hours to the business and affairs of the Company and, to the
extent necessary to discharge the responsibilities assigned to the
Executive hereunder, to use the Executive's reasonable best efforts to
perform faithfully and efficiently such responsibilities. During the
Employment Period it shall not be a violation of this Agreement for
the Executive to (A) serve on corporate, civic or charitable boards or
committees, (B) deliver lectures, fulfill speaking engagements or
teach at educational institutions, and (C) manage personal
investments, so long as such activities do not significantly interfere
with the performance of the Executive's responsibilities as an
employee of the Company in accordance with this Agreement. It is
expressly understood and agreed that to the extent that any such
activities have been conducted by the Executive prior to the Effective
Date, the continued conduct of such activities (or the conduct of the
activities similar in nature and scope thereto) subsequent to the
Effective Date shall not thereafter be deemed to interfere with the
performance of the Executive's responsibilities to the Company.
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(b) Compensation.
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(i) Base Salary.
------------
During the Employment Period, the Executive shall receive an
annual base salary ("Annual Base Salary"), which shall be paid at a
monthly rate, at least equal to twelve times the highest monthly base
salary paid or payable, including any base salary which has been
earned but deferred, to the Executive by the Company and its
affiliated companies in respect of the 12-month period immediately
preceding the month in which the Effective Date occurs. As used
herein, "Annual Base Salary" will include all wages or salary paid to
the Executive and will be calculated before any salary reduction or
deferrals, including but not limited to reductions made pursuant to
Sections 125 and 401(k) of the Internal Revenue Code of 1986, as
amended. During the Employment Period, the Annual Base Salary shall be
reviewed no more than 12 months after the last salary increase awarded
to the Executive prior to the Effective Date and thereafter at least
annually. Any increase in Annual Base Salary shall not serve to limit
or reduce any other obligation to the Executive under this Agreement.
Annual Base Salary shall not be reduced after any such increase and
the term Annual Base Salary as utilized in this Agreement shall refer
to Annual Base Salary as so increased. As used in this Agreement, the
term "affiliated companies" shall include any company controlled by,
controlling or under common control with the Company.
(ii) Annual Incentive.
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In addition to Annual Base Salary, the Executive shall have the
opportunity to earn annual incentive compensation (the "Annual
Incentive") for each fiscal year ending during the Employment Period,
at least equal to that available to other peer executives of the
Company and its affiliated companies. Each such Annual Incentive shall
be paid no later than the end of the third month of the fiscal year
next following the fiscal year for which the Annual Incentive is
awarded, unless the Executive shall elect to defer the receipt of such
Annual Incentive. In the event the Executive is terminated during the
Employment Period, the Executive's Annual Incentive for the most
recent year shall be prorated for the portion of that year that the
Executive worked in the manner set forth in Section 6(a)(i)(A)(2).
(iii) Incentive, Savings and Retirement Plans.
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During the Employment Period, the Executive shall be entitled to
participate in all incentive, savings and retirement plans, practices,
policies and programs applicable generally to other peer executives of
the Company and its affiliated companies, but in no event shall such
plans, practices, policies and programs provide the Executive with
incentive opportunities (measured with respect to both regular and
special incentive opportunities, to the extent, if any, that such
distinction is applicable), savings opportunities and retirement
benefit opportunities, less favorable, in the aggregate, than the most
favorable of those provided by the Company and its affiliated
companies for the Executive under such plans, practices, policies and
programs as in effect at any time during the 120-day period
immediately preceding the Effective Date or if more favorable to the
Executive, those provided generally at any time after the Effective
Date to other peer executives of the Company and its affiliated
companies.
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(iv) Welfare Benefit Plans.
----------------------
During the Employment Period, the Executive and/or the
Executive's beneficiaries, as the case may be, shall be eligible for
participation in and shall receive all benefits under welfare benefit
plans, practices, policies and programs provided by the Company and
its affiliated companies (including, without limitation, medical,
prescription, dental, disability, employee life, group life,
accidental death and travel accident insurance plans and programs) to
the extent applicable generally to other peer executives of the
Company and its affiliated companies, but in no event shall such
plans, practices, policies and programs provide the Executive with
benefits which are less favorable, in the aggregate, than the most
favorable of such plans, practices, policies and programs in effect
for the Executive at any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to the Executive,
those provided generally at any time after the Effective Date to other
peer executives of the Company and its affiliated companies.
(v) Expenses.
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During the Employment Period, the Executive shall be entitled to
receive prompt reimbursement for all reasonable expenses incurred by
the Executive in accordance with the most favorable policies,
practices and procedures of the Company and its affiliated companies
in effect for the Executive at any time during the 120-day period
immediately preceding the Effective Date or, if more favorable to the
Executive, as in effect generally at any time thereafter with respect
to other peer executives of the Company and its affiliated companies.
(vi) Fringe Benefits.
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During the Employment Period, the Executive shall be entitled to
fringe benefits, including, without limitation, payment of club dues,
and, if applicable, use of an automobile and payment of related
expenses, in accordance with the most favorable plans, practices,
programs and policies of the Company and its affiliated companies in
effect for the Executive at any time during the 120-day period
immediately preceding the Effective Date or, if more favorable to the
Executive, as in effect generally at any time thereafter with respect
to other peer executives of the Company and its affiliated companies.
(vii) Office.
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During the Employment Period, the Executive shall be entitled to
an office at least equal to that of other peer executives of the
Company and its affiliated companies.
(viii) Vacation.
---------
During the Employment Period, the Executive shall be entitled to
paid vacation in accordance with the most favorable plans, policies,
programs and practices of the Company and its affiliated companies as
in effect for the Executive at any time during the 120-day period
immediately preceding the Effective Date or, if more favorable to the
Executive, as in effect generally at any time thereafter with respect
to other peer executives of the Company and its affiliated companies.
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5. Termination of Employment.
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(a) Death or Disability.
---------------------
The Executive's employment shall terminate automatically upon the
Executive's death during the Employment Period. If the Company
determines in good faith that the Disability of the Executive has
occurred during the Employment Period (pursuant to the definition of
Disability set forth below), it may give to the Executive written
notice in accordance with Section 12(b) of this Agreement of its
intention to terminate the Executive's employment. In such event, the
Executive's employment with the Company shall terminate effective on
the 30th day after receipt of such notice by the Executive (the
"Disability Effective Date"), provided that, within the 30 days after
such receipt, the Executive shall not have returned to full-time
performance of the Executive's duties. For purposes of this Agreement,
"Disability" shall mean the absence of the Executive from the
Executive's duties with the Company on a full-time basis for 180
consecutive business days as a result of incapacity due to mental or
physical illness which is determined to be total and permanent by a
physician selected by the Company or its insurers and acceptable to
the Executive or the Executive's legal representative.
(b) Cause.
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The Company may terminate the Executive's employment during the
Employment Period for Cause. For purposes of this Agreement, "Cause"
shall mean:
(i) the willful and continued failure of the Executive to
perform substantially the Executive's duties with the
Company or one of its affiliates (other than any such
failure from incapacity due to physical or mental illness),
after a written demand for substantial performance is
delivered to the Executive by the Board which specifically
identifies the manner in which the Board believes that the
Executive has not substantially performed the Executive's
duties, or
(ii) the willful engaging by the Executive in illegal conduct or
gross misconduct which is materially and demonstrably
injurious to the Company.
For purposes of this provision, no act or failure to act, on the
part of the Executive, shall be considered "willful" unless it is
done, or omitted to be done, by the Executive in bad faith or without
reasonable belief that the Executive's action or omission was in the
best interests of the Company. Any act, or failure to act, based upon
authority given pursuant to a resolution duly adopted by the Board or
based upon the advice of counsel for the Company shall be conclusively
presumed to be done, or omitted to be done, by the Executive in good
faith and in the best interests of the Company. The cessation of
employment of the Executive shall not be deemed to be for Cause unless
and until there shall have been delivered to the Executive a copy of a
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resolution duly adopted by the affirmative vote of not less than three
quarters of the entire membership of the Board at a meeting of the
Board called and held for such purpose (after reasonable notice is
provided to the Executive and the Executive is given an opportunity,
together with counsel, to be heard before the Board), finding that, in
the good faith opinion of the Board, the Executive is guilty of the
conduct described in subparagraph (i) or (ii) above, and specifying
the particulars thereof in detail.
(c) Good Reason.
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The Executive's employment may be terminated by the Executive for
Good Reason. For purposes of this Agreement, "Good Reason" shall mean:
(i) the assignment to the Executive of any duties inconsistent
in any material respect with the Executive's position as
contemplated by Section 4(a) of this Agreement, excluding
for this purpose an isolated, insubstantial and inadvertent
action which is remedied by the Company promptly after
receipt of notice thereof given by the Executive;
(ii) any failure by the Company to comply with any of the
provisions of Section 4(b) of this Agreement, other than an
isolated, insubstantial and inadvertent failure which is
remedied by the Company promptly after receipt of notice
thereof given by the Executive;
(iii)if there is a Change of Control, merger, acquisition or
other similar affiliation with another entity and Executive
does not continue as the Chief Executive Officer of the most
senior resulting entity;
(iv) failure by the Company to reimburse the Executive for
expenses related to a required relocation;
(v) any required relocation of the Executive more than thirty
five miles from Washington, D.C., other than on a temporary
basis (less than two months);
(vi) any purported termination by the Company of the Executive's
employment otherwise than as expressly permitted by this
Agreement; or
(vii)any failure by the Company to comply with and satisfy
Section 11 (c) of this Agreement.
(d) Notice of Termination.
----------------------
Any termination by the Company for Cause, or by the Executive for
Good Reason, shall be communicated by Notice of Termination to the
other party hereto given in accordance with Section 12(b) of this
Agreement. For purposes of this Agreement, a "Notice of Termination"
means a written notice which (i) indicates the specific termination
provision in this Agreement relied upon, (ii) to the extent
applicable, sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the
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Executive's employment under the provision so indicated and (iii) if
the Date of Termination (as defined below) is other than the date of
receipt of such notice, specifies the termination date (which date
shall be not more than 30 days after the giving of such notice). The
failure by the Executive or the Company to set forth in the Notice of
Termination any fact or circumstance which contributes to a showing of
Good Reason or Cause shall not waive any right of the Executive or the
Company, respectively, hereunder or preclude the Executive or the
Company, respectively, from asserting such fact or circumstance in
enforcing the Executive's or the Company's rights hereunder.
(e) Date of Termination.
--------------------
"Date of Termination" means (i) if the Executive's employment is
terminated by the Company for Cause, or by the Executive for Good
Reason, the date of receipt of the Notice of Termination or any later
date specified therein, as the case may be, (ii) if the Executive's
employment is terminated by the Company other than for Cause or
Disability, the Date of Termination shall be the date on which the
Company notifies the Executive of such termination and (iii) if the
Executive's employment is terminated by reason of death or Disability,
the Date of Termination shall be the date of death of the Executive or
the Disability Effective Date, as the case may be.
6. Obligations of the Company upon Termination During Employment Period.
------------------------------------------------------------------------
(a) Good Reason, Other Than for Cause, Death or Disability.
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If, during the Employment Period, the Company shall terminate the
Executive's employment other than for Cause or Disability or the
Executive shall terminate employment for Good Reason:
(i) the Company shall pay to the Executive in a lump sum in cash
within 30 days after the Date of Termination the aggregate
of the following amounts:
A. the sum of (1) the Executive's Annual Base Salary
through the Date of Termination to the extent not
theretofore paid, (2) the product of (x) the Target
Annual Incentive (as defined in the Executive
Compensation Plan of the Company) in the fiscal year of
the Executive's Termination and (y) a fraction, the
numerator of which is the number of days in the current
fiscal year through the Date of Termination, and the
denominator of which is 365 and (3) any compensation
previously deferred by the Executive (together with any
accrued interest or earnings thereon) and any accrued
vacation pay, in each case to the extent not therefore
paid (the sum of the amounts described in clauses (1),
(2), and (3) shall be hereinafter referred to as the
"Accrued Obligations"); and
B. Subject to the provisions of Section 9, the amount
equal to three times the Executive's Average Pay. For
purposes of this Agreement, Average Pay shall mean the
sum of (1) the Executive's Annual Base Salary, plus
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(2) the Executive's average Annual Incentive actually
earned for the last three full fiscal years.
(ii) for three years after the Executive's Date of Termination,
or such longer period as may be provided by the terms of the
appropriate plan, program, practice or policy, the Company
shall continue benefits to the Executive and/or the
Executive's beneficiaries at least equal to those which
would have been provided to them in accordance with the
plans, programs, practices and policies described in Section
4(b)(iv) of this Agreement if the Executive's employment had
not been terminated or, if more favorable to the Executive,
as in effect generally at any time thereafter with respect
to other peer executives of the Company and its affiliated
companies and their families, provided, however, that if the
Executive becomes reemployed with another employer and is
eligible to receive medical or other welfare benefits under
another employer-provided plan, the medical and other
welfare benefits described herein shall be secondary to
those provided under such other plan during such applicable
period of eligibility. After this three-year term, the
Executive shall immediately be eligible for COBRA benefits.
For purposes of determining eligibility (but not the time of
commencement of benefits) of the Executive for retiree
benefits pursuant to such plans, practices, programs and
policies, the Executive shall be considered to have remained
employed until three years after the Date of Termination and
to have retired on the last day of such period;
(iii)to the extent not theretofore paid or provided, the Company
shall timely pay or provide to the Executive any other
amounts or benefits required to be paid or provided or which
the Executive is eligible to receive under any plan,
program, policy or practice or contract or agreement of the
Company and its affiliated companies (such other amounts and
benefits shall be hereinafter referred to as the "Other
Benefits");
(iv) The Company shall credit the Executive with up to an
additional three years of benefit service under the
Company's Supplemental Executive Retirement Plan (the
"SERP"), but in no event shall such additional years of
benefit service result in total years of benefit service
exceeding the maximum under the SERP;
(v) the Company shall, at its sole expense as incurred, provide
the Executive with reasonable outplacement services the
scope and provider of which shall be selected by the
Executive in his sole discretion; and
(vi) immediately prior to termination of the Executive's
employment, all restricted stock grants made to the
Executive which are outstanding at the time of such event
shall be accelerated and vest.
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(b) Death.
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If the Executive's employment is terminated by reason of the
Executive's death during the Employment Period, this Agreement shall
terminate without further obligations to the Executive's legal
representatives under this Agreement, other than for payment of
Accrued Obligations and the timely payment or provision of Other
Benefits. Accrued Obligations shall be paid to the Executive's estate
or beneficiary, as applicable, in a lump sum in cash within 30 days of
the Date of Termination. With respect to the provision of Other
Benefits, the term Other Benefits as utilized in this Section 6(b)
shall include, without limitation, and the Executive's estate and/or
beneficiaries shall be entitled to receive, benefits at least equal to
the most favorable benefits provided by the Company and affiliated
companies to the estates and beneficiaries of peer executives of the
Company and such affiliated companies under such plans, programs,
practices and policies relating to death benefits, if any, as in
effect with respect to other peers and their beneficiaries at any time
during the 120-day period immediately preceding the Effective Date or,
if more favorable to the Executive's estate and/or the Executive's
beneficiaries, as in effect on the date of the Executive's death with
respect to other peer executives of the Company and its affiliated
companies and their beneficiaries.
(c) Disability.
-----------
If the Executive's employment is terminated by reason of the
Executive's Disability during the Employment Period, this Agreement
shall terminate without further obligations to the Executive, other
than for payment of Accrued Obligations and the timely payment or
provision of Other Benefits. Accrued Obligations shall be paid to the
Executive in a lump sum in cash within 30 days of the Date of
Termination. With respect to the provision of Other Benefits, the term
"Other Benefits" as utilized in this Section 6(c) shall include, and
the Executive shall be entitled after the Disability Effective Date to
receive, disability and other benefits at least equal to the most
favorable of those generally provided by the Company and its
affiliated companies to disabled executives and/or their families in
accordance with such plans, programs, practices and policies relating
to disability, if any, as in effect generally with respect to other
peer executives and their families at any time during the 120-day
period immediately preceding the Effective Date or, if more favorable
to the Executive and/or the Executive's beneficiaries, as in effect at
any time thereafter generally with respect to other peer executives of
the Company and its affiliated companies and their families.
(d) Cause: Other than for Good Reason.
----------------------------------
If the Executive's employment shall be terminated for Cause
during the Employment Period, this Agreement shall terminate without
further obligations to the Executive other than the obligation to pay
to the Executive (x) the Executive's Annual Base Salary through the
Date of Termination, (y) the amount of any compensation previously
deferred by the Executive, and (z) Other Benefits, in each case to the
extent theretofore unpaid. If the Executive voluntarily terminates
employment during the Employment Period, excluding a termination for
Good Reason, this Agreement shall terminate without further
obligations to the Executive, other than for Accrued Obligations and
the timely payment or provision of Other Benefits. In such case, all
Accrued Obligations shall be paid to the Executive in a lump sum in
cash within 30 days of the Date of Termination.
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7. Nonexclusivity of Rights.
--------------------------
Nothing in this Agreement shall prevent or limit the Executive's continuing
or future participation in any plan, program, policy or practice provided by the
Company or any of its affiliated companies and for which the Executive may
qualify, nor, subject to Section 12(f), shall anything herein limit or otherwise
affect such rights as the Executive may have under any contract or agreement
with the Company or any of its affiliated companies. Amounts which are vested
benefits or which the Executive is otherwise entitled to receive under any plan,
policy, practice or program of or any contract or agreement with the Company or
any of its affiliated companies at or subsequent to the Date of Termination
shall be payable in accordance with such plan, policy, practice or program or
contract or agreement except as explicitly modified by this Agreement.
8. Full Settlement.
-----------------
The Company's obligation to make the payments provided for in this
Agreement and otherwise to perform its obligations hereunder shall not be
affected by any set-off, counterclaim, recoupment, defense or other claim, right
or action which the Company may have against the Executive or others. In no
event shall the Executive be obligated to seek other employment or take any
other action by way of mitigation of the amounts payable to the Executive under
any of the provisions of this Agreement and such amounts shall not be reduced
whether or not the Executive obtains other employment.
9. Certain Additional Payments by the Company.
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(a) Anything in this Agreement to the contrary notwithstanding and
except as set forth below, in the event it shall be determined
that any payment or distribution by the Company to or for the
benefit of the Executive (whether paid or payable or distributed
or distributable pursuant to the terms of this Agreement or
otherwise (a "Payment") would be subject to the excise tax
imposed pursuant to Sections 280G and/or 4999 of the Code or any
interest or penalties are incurred by the Executive with respect
to such excise tax (such excise tax, together with any such
interest and penalties, are hereinafter collectively referred to
as the "Excise Tax"), then the Executive shall be entitled to
choose whether to receive (i) the amount of such Payment, or (ii)
a smaller amount equal to one dollar less than the maximum amount
that Executive may receive without having such payment be treated
as an excess parachute payment under Section 280G of the Code or
that may otherwise give rise to Excise Tax (the "Reduced
Amount"), or (iii) with respect to the payment in Section
6(a)(i)(B), an amount equal to (A) 2.0 times Average Pay, plus
(B) an amount of cash that enables the Executive to pay the
Excise tax on such amount, plus (C) an amount that enables the
Executive to pay all additional Excise Taxes that may arise due
to payments to Executive that are made for the purpose of paying
Excise Taxes.
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(b) In order to choose among the benefits described above, the
calculation of such amounts shall be computed by an accounting
firm designated by the Company (the "Accounting Firm"). Such
Accounting Firm shall provide detailed supporting calculations
both to the Company and to the Executive within 15 days of the
Date of Termination. In the event the Executive chooses the
benefit described in Section 9(a)(ii) above, the Executive shall
determine which benefits shall be eliminated or reduced
consistent with the requirements of Section 9(a)(ii). If the
Executive does not make such determination within ten days of the
receipt of the calculations made by the Accounting Firm, the
Company shall elect which and how much of the benefits shall be
eliminated or reduced consistent with the requirements of this
Section 9 and shall notify the Executive promptly of such
election. Within five days thereafter, the Company shall pay to
or distribute to or for the benefit of the Executive such amounts
as are then due to the Executive under this Agreement.
(c) In the event the Internal Revenue Service ("IRS") subsequently
challenges the Excise Tax computation herein described, then the
Executive shall notify the Company in writing of any claim by the
IRS that, if successful, would require the payment by the
Executive of additional Excise Taxes. Such notification shall be
given no later than ten days after the Executive receives written
notice of such claim. The Executive shall not pay such claim
prior to the expiration of the 30-day period following the date
on which the Executive gives notice to the Company (or such
shorter period ending on the date that any payment of taxes with
respect to such claim is due). If the Company notifies the
Executive in writing prior to the expiration of such period that
it desires to contest such claim and that it will bear the costs
and provide the indemnification as required by this sentence, the
Executive shall cooperate with the Company in good faith in order
effectively to contest such claim and permit the Company to
participate in any proceedings relating to such claim. In the
event a final determination is made with respect to the IRS
claim, or in the event the Company chooses not to further
challenge such claim, then the Company shall reimburse the
Executive for the additional Excise Tax owed to the IRS in excess
of the Excise Tax calculated by the Accounting Firm. The Company
shall also reimburse the Executive for all interest and penalties
related to the underpayment of such Excise Tax. The Company will
also reimburse the Executive for all federal and state income tax
and employment taxes thereon.
10. Confidential Information.
--------------------------
The Executive shall hold in a fiduciary capacity for the benefit of the
Company all secret or confidential information, knowledge or data relating to
the Company or any of its affiliated companies, and their respective businesses,
which shall have been obtained by the Executive during the Executive's
employment by the Company or any of its affiliated companies and which shall not
be or become public knowledge (other than by acts by the Executive or
representatives of the Executive in violation of this Agreement). After
termination of the Executive's employment with the Company, the
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Executive shall not, without the prior written consent of the Company or as may
otherwise be required by law or legal process, communicate or divulge any such
information, knowledge or data to anyone other than the Company and those
designated by it. In no event shall an asserted violation of the provisions of
this Section 10 constitute a basis for deferring or withholding any amounts
otherwise payable to the Executive under this Agreement.
11. Successors & Assigns.
----------------------
(a) This Agreement is personal to the Executive and without the prior
written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be
enforceable by the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
(c) The Company will require any successor or any party that acquires
control of the Company (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all
of the business and/or assets of the Company or any party that
acquires control of the Company to assume expressly and agree to
perform this Agreement in the same manner and to the same extent
that the Company would be required to perform it if no such
succession had taken place. As used in this Agreement, "Company"
shall mean the Company as hereinbefore defined and any successor
to its business and/or assets as aforesaid which assumes and
agrees to perform this Agreement by operation of law, or
otherwise.
12. Miscellaneous.
--------------
(a) Governing Law; Headings; Amendment.
--------------------------------------
This Agreement shall be governed by and construed in accordance
with the laws of the Commonwealth of Virginia, without reference
to principles of conflict of laws. The captions of this Agreement
are not part of the provisions hereof and shall have no force or
effect. This Agreement may not be amended or modified otherwise
than by a written agreement executed by the parties hereto or
their respective successors and legal representatives.
(b) Notices.
--------
All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or
by registered or certified mail, return receipt requested,
postage prepaid, addressed as follows:
If to the Executive:
--------------------
at the address for Executive that is on file with the Company
If to the Company:
------------------
Washington Gas Light Company
1100 H Street, N.W.
Washington, D.C. 20080
ATTN: General Counsel
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or to such other address as either party shall have furnished to
the other in writing in accordance herewith. Notice and
communications shall be effective when actually received by the
addressee.
(c) Severability.
-------------
The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any
other provision of this Agreement.
(d) Withholding.
------------
The Company may withhold from any amounts payable under this
Agreement such federal, state, local or foreign taxes as shall be
required to be withheld pursuant to any applicable law or
regulation.
(e) Waiver.
-------
The Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to
assert any right the Executive or the Company may have hereunder,
including, without limitation, the right of the Executive to
terminate employment for Good Reason pursuant to Section
5(c)(i)-(v) of this Agreement, shall not be deemed to be a waiver
of such provision or right or any other provision or right under
this Agreement.
(f) At Will Employment.
-------------------
The Executive and the Company acknowledge that, except as may
otherwise be provided under any other written agreement between
the Executive and the Company, the employment of the Executive by
the Company is "at will" and, subject to Section l(a) hereof,
prior to the Effective Date, the Executive's employment and/or
this Agreement may be terminated by either the Executive or the
Company at any time prior to the Effective Date, in which case
the Executive shall have no further rights under this Agreement.
From and after the Effective Date this Agreement shall supersede
any other agreement between the parties with respect to the
subject matter hereof.
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(g) Arbitration.
------------
In the event of any dispute between the parties regarding this
Agreement, the parties shall submit to binding arbitration,
conducted in Washington, DC or in Virginia within 25 miles of
Washington, DC. The arbitration shall be conducted pursuant to
the rules of the American Arbitration Association. Each of the
parties shall select one arbitrator, who shall not be related to,
affiliated with or employed by that party. The two arbitrators
shall, in turn, select a third arbitrator. The decision of any
two of the arbitrators shall be binding upon the parties, and
may, if necessary, be reduced to judgment in any court of
competent jurisdiction. Notwithstanding the foregoing, the
parties expressly agree that nothing herein in any way precludes
Company from seeking injunctive relief or declaratory judgment
through a court of competent jurisdiction with respect to a
breach (or an alleged breach) of any covenant not to compete or
of any confidentiality covenant contained in this Agreement. In
the event the Executive pursues arbitration pursuant to this
Section herein, the Executive shall be compensated up to $150,000
in legal costs.
(h) Pooling of Interests Accounting.
--------------------------------
In the event any provision of this Agreement would prevent the
use of pooling of interests accounting in a corporate transaction
involving the Company and such transaction is contingent upon
pooling of interests accounting, then that provision shall be
deemed amended or revoked to the extent required to preserve such
pooling of interests. The Executive will, upon advice from the
Company, take (or refrain from taking, as appropriate) all
actions necessary or desirable to ensure that pooling of
interests accounting is available.
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(i) Effect of Prior Agreements.
---------------------------
This Agreement contains the entire understanding between the
parties hereto and supersedes the Employment Agreement dated May
19, 1997 between the Company and the Executive.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
/s/ James H. DeGraffenreidt, Jr.
----------------------------------
Name: James H. DeGraffenreidt, Jr.
WASHINGTON GAS LIGHT COMPANY
/s/ Daniel J. Callahan, III
----------------------------------
By:
Title: Chairman,
Human Resources Committee
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