def14a
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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Filed by the Registrant þ |
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Filed by a Party other than the Registrant o |
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o Preliminary Proxy Statement
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o Confidential, for Use of the Commission Only (as
permitted
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þ Definitive Proxy Statement |
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o Definitive Additional Materials |
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o Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12 |
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WGL Holdings, Inc.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
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Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): |
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Fee paid previously with preliminary materials. |
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Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing. |
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Form, schedule or registration statement no.: |
WGL
Holdings, Inc.
101 Constitution Ave.,
N.W.
Washington, D.C.
20080
NOTICE OF ANNUAL
MEETING OF SHAREHOLDERS
The annual meeting of shareholders of WGL Holdings, Inc. will be
held at the National Press Club, 529 14th St., N.W.;
Washington, D.C. 20045 on Thursday, March 5, 2009, at
10:00 a.m., Eastern Standard Time, for the following
purposes, as more fully set forth in the annexed proxy statement:
(1) To elect nine directors;
(2) To ratify the appointment of Deloitte &
Touche LLP as independent public accountants for fiscal year
2009;
(3) To consider and act on a shareholder proposal relating
to cumulative voting, if this proposal is brought before the
meeting; and
(4) To transact any other business properly brought before
the meeting and any adjournment thereof.
Only holders of record of the common stock of WGL Holdings, Inc.
at the close of business on January 5, 2009, the record
date fixed by the board of directors, will be entitled to vote
on each matter submitted to a vote of shareholders at the
meeting. To assure your representation at the annual meeting,
you are urged to cast your vote, as instructed in the Notice of
Internet Availability of Proxy Materials, over the Internet or
by telephone as promptly as possible. You may also request a
paper proxy card to submit your vote by mail, if you prefer.
Any shareholder of record attending the annual meeting may vote
in person, even if she or he has voted over the Internet, by
telephone or returned a completed proxy card. Please note,
however, that if your shares are held of record by a broker,
bank or other nominee and you wish to vote at the meeting, you
must obtain a valid form issued in your name from that record
holder. Each holder of common stock is entitled to one vote for
each share of that stock standing in the name of the holder on
the records of WGL Holdings, Inc. at the close of business on
January 5, 2009.
By order of the board of directors,
Douglas V. Pope
Secretary
January 20, 2009
IMPORTANT
NOTICE
YOUR VOTE IS
IMPORTANT. TO ASSURE YOUR REPRESENTATION AT THE ANNUAL MEETING,
YOU ARE REQUESTED TO VOTE YOUR SHARES AS PROMPTLY AS POSSIBLE.
PLEASE VOTE OVER THE INTERNET AT WWW.PROXYVOTE.COM OR BY
TELEPHONE AT
1-800-690-6903.
ALTERNATIVELY, YOU MAY REQUEST A PAPER PROXY CARD, WHICH YOU MAY
COMPLETE, SIGN AND RETURN BY MAIL.
ADMISSION
PROCEDURES
Admission to the annual meeting will be limited to persons
who: (a) are listed on WGL Holdings, Inc.s records as
shareholders as of January 5, 2009 (the record
date), or (b) bring documentation to the meeting that
demonstrates their beneficial ownership of WGL Holdings, Inc.
common stock through a broker, bank or other institution as of
the record date.
Proxy
Statement
January 20,
2009
Table of
Contents
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i
PROXY
STATEMENT
WGL HOLDINGS, INC.
101 Constitution Ave., N.W.
Washington, D.C. 20080
January 20, 2009
INFORMATION REGARDING THE ANNUAL MEETING
This proxy statement is provided in connection with a
solicitation of proxies by the board of directors of WGL
Holdings, Inc. to be used at the annual meeting of shareholders
to be held on Thursday, March 5, 2009 at 10:00 a.m.,
Eastern Standard Time, and at any adjournment thereof. The
annual meeting will be held at the National Press Club, 529
14th St., N.W.; Washington, D.C. 20045. This proxy
statement is first being provided to our shareholders on or
about January 20, 2009. Throughout this proxy statement,
WGL Holdings, the Company,
we, our or us are intended
to refer to WGL Holdings, Inc. and its consolidated
subsidiaries, unless specifically indicated otherwise.
You are invited to attend the annual meeting, and we request
that you vote on the proposals described in this proxy
statement. You do not need to attend the meeting to vote your
shares. If you have received a printed copy of these materials
by mail, you may complete, sign and return your proxy card
or follow the instructions below to submit your proxy by
telephone or over the Internet. If you did not receive a printed
copy of these materials by mail and are accessing them on the
Internet, you may follow the instructions below to submit your
proxy over the Internet or by telephone.
Notice Regarding
the Availability of Proxy Materials
In accordance with rules and regulations adopted by the
Securities and Exchange Commission, instead of mailing a printed
copy of our proxy materials to each shareholder of record, we
may now furnish proxy materials via the Internet. We intend to
mail a printed copy of this proxy statement and a paper
proxy card to certain shareholders of record entitled to vote at
the annual meeting. All other shareholders will receive a Notice
Regarding the Availability of Proxy Materials (sometimes
referred to in this proxy statement as the Notice).
The Notice will be mailed on or about January 20, 2009.
On the date of mailing of the Notice, shareholders will be able
to access all of the proxy materials on a web site referred to
in the Notice. The proxy materials will be available free of
charge. The Notice will instruct you as to how you may access
and review all of the important information contained in the
proxy materials (including our Annual Report to shareholders)
over the Internet. The Notice also instructs you as to how you
may submit your proxy over the Internet. If you received a
Notice and would like to receive printed copies of the proxy
materials, you should follow the instructions for requesting
such materials included in the Notice.
Washington Gas
Light Company Savings and Capital Appreciation Plans
If you participate in either the Washington Gas Light Company
Savings or Capital Appreciation Plan (401(k) plans) and you own
WGL Holdings common stock in one of those plans, your proxy card
will serve as a voting instruction to the 401(k) plan trustee.
If you are also a shareholder of record outside of the 401(k)
plans, your proxy card (or Internet or telephone vote) will vote
both your record shares and your 401(k) plan shares, as long as
your registration information is identical in both accounts. For
example, if your registered stock account is in your single name
and also lists the same address as your 401(k) account, you
should receive one proxy card, or Notice for both the 401(k)
plan shares and for the shares held by our transfer agent.
However, if your shares held by the transfer agent are in joint
names, or at a different address, you will receive separate
proxy materials for each account. To allow sufficient time for
voting by the administrator of the 401(k) plans, your voting
instructions must be received by 11:59 pm Eastern Standard Time
on March 2, 2009.
1
One Vote For Each
Share Held
At the annual meeting, each holder of WGL Holdings common stock
will be entitled to one vote for each share of common stock
standing in the name of the holder on the records of WGL
Holdings at the close of business on January 5, 2009.
Outstanding voting securities as of January 5, 2009,
consisted of 50,124,429 shares of common stock.
Shareholders of
Record and Beneficial Owners
Most of our shareholders hold their shares through a broker,
bank or other nominee rather than directly in their own name. As
summarized below, there are some distinctions between shares
held of record and those owned beneficially.
Shareholders of
Record
If your shares are registered directly in your name with Bank of
New York Mellon, our transfer agent, you are considered, with
respect to those shares, the shareholder of record, and the
Notice or this proxy statement is being sent directly to you by
our agent. As the shareholder of record, you have the right to
vote by proxy or to vote in person at the annual meeting.
Beneficial
Owners
If your shares are held in a brokerage account or by a bank or
other nominee, you are considered the beneficial owner of shares
held in street name, and the Notice or this proxy
statement and voting instruction form will be forwarded to you
by your broker or nominee. The broker or nominee is considered,
with respect to those shares, the shareholder of record. As the
beneficial owner, you have the right to direct your broker how
to vote. Beneficial owners that received a Notice by mail from
the shareholder of record should follow the instructions
included in the Notice to view the proxy statement and transmit
voting instructions. Beneficial owners that receive a printed
copy of the proxy materials also may receive a voting
instruction form and voting instructions. Those beneficial
owners may mail the voting instruction form, or may vote by
telephone or over the Internet as instructed by that broker or
nominee in the voting form.
Voting Methods
and Procedures
Shareholders of record may vote in any one of four ways:
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by telephone;
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over the Internet;
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in person at the annual meeting; or
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by proxy card, if you received a printed copy of the proxy
materials by mail.
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The procedures for voting by proxy are as follows:
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To vote by proxy on the Internet, go to www.proxyvote.com to
complete an electronic proxy card.
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To vote by proxy using the enclosed proxy card (if you received
a paper copy of the proxy materials), complete, sign and date
your proxy card and return it promptly in the envelope provided.
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To vote by proxy over the telephone dial,
1-800-690-6903
using a touch-tone phone and follow the recorded instructions.
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If you vote via Internet or telephone, your vote must be
received by 11:59 p.m. Eastern Standard Time on
March 4, 2009 to be counted. Proxy cards must be received
before 4:00 p.m. Eastern Standard Time on March 4,
2009 or delivered at the annual meeting to be counted.
2
We provide Internet proxy voting to allow you to vote your
shares on-line, with procedures designed to ensure the
authenticity and correctness of your proxy vote instructions.
However, please be aware that you must bear any costs associated
with your Internet access, such as usage charges from Internet
access providers and telephone companies.
Receipt of More
Than One Notice or Proxy Card
If you received more than one Notice or proxy card, your shares
are probably registered in more than one name or are registered
in different accounts. Please follow the voting instructions
included in each Notice and proxy card to ensure that all of
your shares are voted.
Voting Shares in
Person at the Annual Meeting
Shares held directly in your name as the shareholder of record
may be voted in person at the annual meeting. In order to vote
at the annual meeting, shareholders of record must bring their
Notice or proof of ownership. Beneficial owners must obtain a
valid proxy from the record owner to vote in person at the
annual meeting. Beneficial owners should follow the instructions
provided by their broker or contact their broker to request the
requisite proxy form. Even if you currently plan to attend the
annual meeting, we recommend that you also submit your proxy as
described above so that your vote will be counted if you later
decide not to attend the meeting. You may still attend the
meeting and vote in person if you have already voted by proxy.
Consideration of
Proposals Presented at the Annual Meeting
Other than the election of directors and the two other proposals
described in this proxy statement, we do not expect any matters
to be presented for a vote at the annual meeting. If you grant a
proxy, James H. DeGraffenreidt, Jr., Chairman and Chief
Executive Officer, Terry D. McCallister, President and Chief
Operating Officer, and Vincent L. Ammann, Jr., Vice
President and Chief Financial Officer (collectively referred to
as the proxyholders) will have the discretion to
vote your shares on any additional matters properly presented
for a vote at the annual meeting. Under our bylaws, the deadline
for notifying us of any additional proposals to be presented at
the annual meeting has passed and, accordingly, shareholders may
not present any additional proposals at the annual meeting.
Quorum and Vote
Tabulation
As provided in our bylaws, a majority of the shares entitled to
vote at the annual meeting, present in person or represented by
proxy, will constitute a quorum for the meeting.
On Proposal (1), the election of directors, you may either vote
FOR all the nominees to the Board of Directors or
you may WITHHOLD your vote from any or all nominees.
On Proposal (2), the ratification of the appointment of
Deloitte & Touche LLP, and on Proposal
(3) relating to cumulative voting and any other matter to
be voted on at the annual meeting, you may vote FOR,
AGAINST or ABSTAIN from voting.
All valid proxies properly executed and received by us will be
voted in accordance with the instructions specified in the
proxy. If a proxy is submitted without instructions, shares will
be voted: (1) FOR the election of each
of the named nominees for director, (2) FOR
ratification of the appointment of Deloitte &
Touche LLP as independent public accountants for fiscal year
2009, and (3) AGAINST the shareholder
proposal relating to cumulative voting.
At the annual meeting:
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The nine director nominees receiving the greatest number of
votes will be elected:
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All other proposals must receive more votes cast in favor of
each than the number of votes cast against each in order to be
approved. Broker shares not voted (sometimes called broker
non-votes) and abstentions have no effect on the final
vote counted on these matters. A broker
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non-vote occurs when a shareholder of record, such as a
broker, holding shares for a beneficial owner does not vote on a
particular item because the shareholder of record does not have
discretionary voting power with respect to that item and has not
received voting instructions from the beneficial owner.
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Shares withheld and broker non-votes will have no effect on the
election of directors.
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Abstentions and broker non-votes will be counted in determining
a quorum for the meeting.
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Adjournments
We currently expect to take votes and close the polls on all
proposals at the annual meeting. However, we may:
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keep the polls open to facilitate additional proxy solicitation
with regard to any or all proposals; and/or
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allow the inspectors of election to count and report on votes
that have been cast after the polls have closed.
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If any of the above occurs, we could propose one or more
adjournments of the annual meeting. For any adjournment to be
approved, the votes cast in favor of it must represent a
majority of the total number of votes cast by the shareholders
present at the meeting in person or by proxy.
Proxies that we have solicited will be voted in favor of any
adjournment that we propose. If any adjournment is properly
proposed at the meeting on behalf of anyone else, the persons
named as proxies, acting in that capacity, will have discretion
to vote on the adjournment in accordance with their best
judgment.
Solicitation of
Proxies
The solicitation of proxies is being made on behalf of the board
of directors, and the cost will be borne by WGL Holdings.
Brokerage houses and other custodians will be reimbursed by WGL
Holdings for their expenses in forwarding proxy materials to the
beneficial owners of shares held in their name. Further
solicitation of proxies may be made by telephone or other
communication by regular employees of WGL Holdings.
Morrow & Co., LLC, 470 West Avenue, Stamford,
Connecticut, has been retained by WGL Holdings for a fee of
$4,500, plus expenses, to assist in the solicitation of proxies.
Revocation of
Proxies
You may revoke your proxy at any time before the final vote at
the meeting. You may revoke your proxy in any one of three ways:
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If you received a printed copy of the proxy materials by mail,
you may submit another properly completed proxy card with a
later date.
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You may send a written notice that you are revoking your proxy
to: Corporate Secretary, WGL Holdings, Inc., 101 Constitution
Avenue, N.W., Washington, DC 20080.
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You may attend the annual meeting and vote in person. However,
simply attending the annual meeting will not, by itself, revoke
your proxy.
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PROPOSAL 1
ELECTION OF
DIRECTORS
At the annual meeting, nine directors are to be elected; this is
an increase in the number of directors from eight to nine
effective with the date of the annual meeting. All of the
nominees, except Mr. McCallister, are presently members of
the Board of Directors.
4
With the exception of Mr. DeGraffenreidt, all nominees will
be elected to serve until the next annual meeting of
shareholders of the Company. Mr. DeGraffenreidt has
announced he will retire from the Company and from the Board of
Directors effective on October 1, 2009. At that time, the
number of directors will return to eight persons and
Mr. McCallister will be elected Chairman and Chief
Executive Officer of the Company.
It is the intention of the proxy holders to vote proxies for the
election of the nominees named below, unless such authority is
withheld. The Company does not contemplate that any of such
nominees will become unavailable for any reason, but if that
should occur before the meeting, the proxies received for that
nominee will be voted for another nominee or other nominees, to
be selected by the board of directors in their discretion.
The board of directors recommends a vote FOR the
election of each of the following nominees:
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Michael D. Barnes, age 65, is Senior Of Counsel to the
law firm of Covington & Burling LLP. He was President of
The Brady Campaign and Brady Center to Prevent Gun Violence from
2000 through June 2006. He was previously a partner in the
law firm of Hogan & Hartson LLP. Mr. Barnes was United
States Representative from Marylands
8th Congressional District from 1979 to 1987. Mr. Barnes
has been a director of Washington Gas Light Company since 1991,
a director of WGL Holdings since November 2000 and serves as
Chairman of the Governance Committee. As Chairman of the
Governance Committee, Mr. Barnes also serves as Lead Director
for the Board of Directors.
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George P. Clancy, Jr., age 65, is Executive Vice
President and Chief Lending Officer of Chevy Chase Bank, FSB, a
position he has held since 1995. Mr. Clancy has an extensive
career in banking which includes serving as President and Chief
Operating Officer of The Riggs National Corporation (1985-1986)
and President and Chief Executive Officer Signet
Bank, N.A. (1988-1995). Mr. Clancy is active in several
community and civic organizations, including serving as: the
Founding and immediate past Chairman and currently as a Member
of the Board of Directors of the Catholic Charities Foundation,
Member of the Board of Trustees of the University System of
Maryland Foundation, Inc., a Member of the Board of Trustees of
the University of Maryland College Park Foundation and is on the
Executive Committee of the Washington D.C. Police Foundation.
Mr. Clancy has been a director of Washington Gas Light Company
and a director of WGL Holdings since December 2000.
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James H. DeGraffenreidt, Jr., age 55, is Chairman and
Chief Executive Officer of the Company and of Washington Gas
Light Company. Mr. DeGraffenreidt previously served as President
and Chief Operating Officer of Washington Gas Light Company
(1994-1998); President and Chief Executive Officer (1998);
Chairman and Chief Executive Officer (1998-2000); Chairman,
President and Chief Executive Officer of the Company and of
Washington Gas Light Company (2000-2001), and was elected to his
present position effective October 1, 2001. Mr. DeGraffenreidt
serves on the boards of Harbor Bankshares Corporation, Mass
Mutual Financial Group, the American Gas Association (Chairman
from January 1, 2007 to December 31, 2007) and the Alliance to
Save Energy (Co-Chairman from January 2005 through December
2006). He has been a member of the Board of Directors of
Washington Gas Light Company since 1994 and a director of WGL
Holdings since January 2000.
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James W. Dyke, Jr., age 62, is a partner in the Virginia
law firm of McGuire Woods LLP, where he specializes in
corporate, education, voting rights, government relations and
municipal law. He has been a partner with the firm since 1993.
In addition to his legal career, Mr. Dyke has extensive
professional experience in government and public relations.
Among other appointments, he served as Secretary of Education
for the Commonwealth of Virginia from 1990 to 1993 and as
Domestic Policy Advisor to former Vice President Walter Mondale.
Mr. Dyke has assumed leadership positions in several
business and community organizations, including serving as
former Chairman of the Fairfax County, Virginia, Chamber of
Commerce, the Northern Virginia Business Roundtable and the
Emerging Business Forum. He is also Chair-elect of the Greater
Washington Board of Trade for 2009. Mr. Dyke has been a
director of Washington Gas Light Company and of WGL Holdings
since September 2003.
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Melvyn J. Estrin, age 66, is Chairman of the Board and
Chief Executive Officer of Human Service Group, Inc. trading as
Estrin International (1983-present) and is Chief Executive
Officer of University Research Co., LLC. Mr. Estrin is a
Director of ChemLink, LLC; Eagle Hospitality LLC; Armed Forces
Lodging LLC and HHB Inc. Mr. Estrin has served as Chairman and
Chief Executive Officer of two Fortune 500 companies and
has been a principal in numerous business enterprises. Mr.
Estrin has been appointed by the President as a Trustee of the
John F. Kennedy Center for the Performing Arts. Mr. Estrin
was a Commissioner of the National Capital Planning Commission
(Jan. 1997-Dec. 2000). He also served as a Trustee of the
University of Pennsylvania (Oct. 1986-1991), has been a director
of Washington Gas Light Company since 1991, a director of WGL
Holdings since November 2000 and serves as Chairman of the Human
Resources Committee.
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James F. Lafond, age 66, is the retired Area Managing
partner for the greater Washington, D.C. area for
PricewaterhouseCoopers LLP. He is a Certified Public Accountant
with extensive experience serving in leadership positions with
PricewaterhouseCoopers and with its predecessor, Coopers &
Lybrand LLP. He has been active in several civic and non-profit
organizations. Among other recognitions, he has received the
Lifetime Achievement Award from the Leukemia and Lymphoma
Society. He is currently a director of VSE Corporation as well
as several not-for-profit entities. Mr. Lafond has been a
director of Washington Gas Light Company and of WGL Holdings
since September 2003.
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Debra L. Lee, age 54, is Chairman and Chief Executive
Officer of BET Holdings, Inc., a global multi-media company that
owns and operates Black Entertainment Television and several
other ventures. Ms. Lee previously was Executive Vice President
and General Counsel of BET Holdings (1992-1995), President and
Chief Operating Officer (1995-May 2005), President and Chief
Executive Officer (June 2005-January 2006), and was elected to
her present position in January 2006. Ms. Lee serves on the
boards of Girls, Inc., Alvin Ailey American Dance Theater and
the National Cable Television Association. Ms. Lee is also on
the Boards of Directors of Eastman Kodak Company, Marriott
International, Inc. and Revlon, Inc. Ms. Lee has been a director
of Washington Gas Light Company since July 2000 and a director
of WGL Holdings since November 2000.
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Terry D. McCallister, age 53, is President and Chief
Operating Officer of the Company, a position he has held since
October 2001. Mr. McCallister joined Washington Gas Light
Company in April 2000 as Vice President of Operations. He was
previously with Southern Natural Gas, where he served as Vice
President and Director of Operations and with Atlantic Richfield
Company, where he held various leadership positions. Mr.
McCallister has a bachelors degree in engineering
management from the University of Missouri at Rolla and is a
graduate of the Darden Business School Executive Program.
Mr. McCallister serves on the Leadership Council of the
American Gas Association, is Vice Chairman of the Board of
Directors of the Southern Gas Association and is a member of the
Board of Directors of the Gas Technology Institute. He also
serves on the boards of several business and community
organizations, including, among others, the Greater Washington
Board of Trade, the Boys and Girls Clubs of Greater Washington,
Northern Virginia Family Services and the INOVA Health System
Foundation.
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Karen Hastie Williams, age 64, retired in 2004 as a
Partner with the Washington, D.C. law firm of Crowell
& Moring, where she specialized in public contract law.
Prior to joining Crowell & Moring, Ms. Williams served as
Administrator for the Office of Federal Procurement Policy at
the Office of Management and Budget (1980-1981) and Chief
Counsel of the Senate Committee on the Budget (1977-1980). Ms.
Williams is a director of SunTrust Banks, Inc., Continental
Airlines Company, Gannett Co. and The Chubb Corporation. Ms.
Williams has been a director of Washington Gas Light Company
since 1992, a director of WGL Holdings since November 2000 and
serves as Chair of the Audit Committee.
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7
BOARD OF
DIRECTORS AND COMMITTEES OF THE BOARD
The following information relates to board and board committee
meetings during the fiscal year ended September 30, 2008.
The board of directors of WGL Holdings held seven meetings
during fiscal year 2008. Each current board member attended 75%
or more of the meetings of the board, and the committees on
which he or she served, that were held during the period for
which he or she was a director or committee member.
The board of directors has established four standing committees:
1) the Executive Committee; 2) the Audit Committee;
3) the Governance Committee, and 4) the Human
Resources Committee. Each of these committees is described in
more detail below.
Executive
Committee
The Executive Committee members are: James H.
DeGraffenreidt, Jr. (Chairman), Michael D. Barnes, Melvyn
J. Estrin, and Karen Hastie Williams. There are four alternate
members: George P. Clancy, Jr., James W. Dyke, Jr.,
James F. Lafond and Debra L. Lee. This committee may exercise
all of the authority of the board of directors when the board is
not in session. This committee did not meet during fiscal year
2008.
Audit
Committee
The Audit Committee members are: Karen Hastie
Williams (Chair), Melvyn J. Estrin, George P. Clancy, Jr.
and James F. Lafond. Members of the Audit Committee are
independent under the rules of the Securities and Exchange
Commission (SEC) and the New York Stock Exchange (NYSE). The
board of directors has determined that Messrs. Clancy,
Estrin and Lafond meet the qualifications of an audit
committee financial expert, as that term is defined by
rules of the SEC.* As provided in its charter, functions of the
Audit Committee include the appointment, compensation and
oversight of independent public accountants, reviewing with
management and the independent public accountants the financial
statements, the accompanying report of the independent
accountants and reviewing the system of internal controls and
the adequacy of the internal audit program. The Audit Committee
Report, which appears later in this proxy statement and the
audit committee charter, provide a further description of the
responsibilities of this committee. The Audit Committee held six
meetings during fiscal year 2008.
Mrs. Williams, the Chair of the Audit Committee,
simultaneously serves on the audit committees of four other
public companies. Neither our bylaws nor the audit committee
charter limit the number of audit committees that our directors
may join. The Board has evaluated and reviewed the existing
workload demands of her committee memberships in light of the
time commitment necessary for her to fulfill her obligations as
an effective audit committee member. Based on that evaluation
and review, the Board determined that her simultaneous service
would not impair the ability of Mrs. Williams to serve
effectively on the audit committee of WGL Holdings.
Governance
Committee
The Governance Committee members are: Michael
D. Barnes (Chairman), James W. Dyke, Jr., and Karen Hastie
Williams. Members of the Governance Committee are independent
under the rules of the NYSE. As provided in its charter,
functions of the Governance Committee include consideration of
criteria for selection of candidates for election to the board
of directors and committees of the board and adoption of
policies and principles concerning board service and corporate
governance. This committee also considers criteria for oversight
and evaluation of the board and management and the
* In accordance with rules of
the SEC, persons determined to be audit committee financial
experts will not be deemed an expert for any purpose, including,
without limitation for purposes of Section 11 of the
Securities Act of 1933, as a result of being so designated. The
designation or identification of a person as an audit committee
financial expert does not impose on such person any duties,
obligations or liabilities that are greater than those imposed
on such person as a member of the audit committee and the board
of directors in the absence of such designation or
identification.
8
adoption of a code of conduct. The Governance Committee will
consider nominees recommended by shareholders. Those
recommendations should be sent to the Chair of the Governance
Committee,
c/o the
Corporate Secretary of WGL Holdings, Inc; 101 Constitution Ave.,
N.W.; Washington, D.C. 20080. This committee held four
meetings during fiscal year 2008.
Governance
Committee Processes
The Governance Committee will consider board nominees
recommended by shareholders. Those recommendations should be
sent to the Chair of the Governance Committee,
c/o the
Corporate Secretary of WGL Holdings, Inc.; 101 Constitution
Ave., N.W.; Washington D.C. 20080. As provided in its charter,
the Governance Committee will follow procedures which it deems
reasonable and appropriate in the identification of candidates
for election to the Board and evaluating the background and
qualifications of those candidates. Those processes include
consideration of nominees suggested by an outside search firm,
by incumbent board members and by shareholders. The Governance
Committee will seek candidates having experience and abilities
relevant to serving as a director of the Company and who
represent the best interests of shareholders as a whole and not
any specific interest group or constituency. The Governance
Committee will evaluate the qualifications of candidates
recommended by shareholders using the same criteria as used for
other board candidates. The Governance Committee from time to
time engages the service of a professional search firm to
identify and to evaluate potential nominees.
Human Resources
Committee
The Human Resources Committee (the HR
Committee) members are: Melvyn J. Estrin
(Chairman), George P. Clancy, Jr. and Debra L. Lee. Members
of the Human Resources Committee are independent under the rules
of the NYSE. The HR Committee met two times in fiscal year 2008.
The HR Committee discharges the Boards responsibilities
relating to compensation of our executive officers. As provided
in its charter, primary functions of the HR Committee include
setting corporate goals and objectives relevant to compensation
of the Chief Executive Officer (CEO), evaluating the CEOs
performance and setting the CEOs compensation based on
this evaluation. The HR Committee also recommends compensation
levels, sets performance targets and evaluates the performance
of our other executive officers and determines any incentive and
equity-based compensation to be awarded to those officers. The
HR Committee also considers succession planning for WGL
Holdings leadership positions.
The HR Committee may, in accordance with its charter,
delegate authority to act upon specific matters within
specified parameters to a subcommittee consisting of one or more
members, or to management. Any such delegates are required
to report any action to the full HR Committee at its next
meeting. Please see the discussion under the Compensation
Discussion & Analysis section below for information
relating to processes and procedures for the consideration and
determination of executive compensation.
Governance. The HR Committee focuses on good
governance practices in its operation. In fiscal year 2008 this
included, among other matters:
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Reviewing tally sheets prepared by its independent consultant
regarding the Chief Executive Officer, Chief Financial Officer,
and the next three most highly compensated officers (the
Named Executive Officers). Tally sheets identify the
material elements of such executives compensation, show
the cumulative impact of prior grants of long-term incentive
awards, and quantify severance and other payouts to which the
executive would be entitled under various employment termination
scenarios. The tally sheets reviewed by the HR Committee
indicated that cumulative pay was reasonable, and that no
changes needed to be made to the Companys pay philosophy.
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9
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Considering compensation for the Named Executive Officers in the
context of all of the components of total compensation, and not
allowing the sum of the components to exceed market levels of
total compensation opportunity.
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Receiving meeting materials several days in advance of meetings.
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Having regular executive sessions of HR Committee members.
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Having direct access to an outside executive compensation
consultant.
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Compensation Consultant. The HR Committee has
the sole authority to retain and terminate any compensation
consultant engaged to assist the HR Committee in the evaluation
of the compensation of our executive officers, including all of
the Named Executive Officers. During fiscal year 2008, the HR
Committee retained Hewitt Associates (Hewitt) as its independent
consulting firm. A principal of Hewitt attended both of the HR
Committee meetings held during fiscal year 2008.
Hewitt provided data and information to the HR Committee, but
did not make recommendations with respect to specific levels of
compensation. Hewitts services to the HR Committee during
fiscal year 2008 included the following:
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Development of market data in line with the Companys
compensation philosophy. Please review the discussion under the
Compensation Discussion & Analysis (CD&A) section
of this proxy statement for further information regarding the
market data developed with Hewitts assistance in
connection with the compensation of our executive officers;
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Pay and performance comparisons;
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Tally sheet development;
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Assistance with FAS 123R expense calculations;
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Review of the CD&A;
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Preparation of total compensation statements; and
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Director pay review (conducted in fiscal year 2008 for fiscal
year 2009 implementation).
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Consultant Independence. It is important for
the HR Committee to receive advice from an independent source.
The following information describes the independence of Hewitt
and the individual Hewitt consultant that provides advice to the
HR Committee.
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The HR Committee retains the individual consultant and
consulting firm, and the consultant reports directly to the HR
Committee.
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The individual consultant (a principal of Hewitt) was retained
initially in 1998. The selection of the individual consultant
was a combined decision of the CEO at the time (now retired) and
the HR Committee at the time (the HR Committee is now composed
of entirely different directors).
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The consultant, by being affiliated with a large firm, provides
resources, data and perspectives that help WGL Holdings and the
HR Committee make informed business judgments with respect to
executive pay;
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In order to promote independence, the consultants firm
compensates its executive compensation consultants solely for
executive compensation consulting services, with no aspect of
pay being dependent on whether or to what extent WGL Holdings or
Washington Gas uses other services of that firm;
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Fees paid by WGL Holdings to Hewitt represent less than 1% of
the aggregate fees that Hewitt billed all of its clients for
services during Hewitts 2008 fiscal year;
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Hewitt has no service contracts with senior management of WGL
Holdings or its subsidiaries;
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10
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The individual consultant has no other public company clients at
which an executive officer of WGL Holdings or Washington Gas
serves as a director; and
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Hewitt has no employees that are executive officers or family
members of any executive officer of WGL Holdings or its
subsidiaries.
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Given the above factors, the HR Committee has concluded that the
individual consultant and consulting firm are independent and
that the HR Committee can rely on the consultants advice.
Human Resources
Committee Interlocks and Insider Participation
As previously described, the Human Resources Committee currently
is composed of three independent, non-employee directors. Each
such director served as a member of the HR Committee during the
entire 2008 fiscal year. No member of the HR Committee has ever
been an officer or employee of WGL Holdings or any of its
subsidiaries. No member of the board or HR Committee has served,
at any time since October 1, 2007, as an executive officer
of any entity that at such time had one or more of WGL
Holdings executive officers serving as a member of that
entitys board or compensation committee. Please see
No Material Related Person Transactions During Fiscal Year
2008 below for related person transaction information
regarding a member of the HR Committee.
Director
Independence and Corporate Governance Practices
The board of directors has determined that all of the current
directors, except Mr. DeGraffenreidt, and each of the
nominees for election as director, except
Messrs. DeGraffenreidt and McCallister, are independent
within the meaning of NYSE rules. In determining independence,
the board of directors considered the specific criteria for
independence under the NYSE rules and also the facts and
circumstances of any other relationships of individual directors
with the Company.
The Audit, Governance and Human Resources Committees have each
adopted a charter for their respective committees. These
charters may be viewed on our web site, www.wglholdings.com, and
copies may be obtained by request to the Secretary of the
Company. Those requests should be sent to: Corporate Secretary;
WGL Holdings, Inc.; 101 Constitution Ave., N.W.;
Washington, D.C. 20080.
Our corporate governance guidelines and bylaws establish a Lead
Director of the Board and designate the Chair of the Governance
Committee to serve in that position. Among other powers and
responsibilities, the Lead Director will:
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preside at all meetings of the Board at which the Chairman is
not present, including independent executive sessions of the
independent directors;
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approve information sent to the board;
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approve meeting agendas for the board;
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approve meeting schedules to assure that there is sufficient
time for discussion of all agenda items;
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have the authority to convene meetings of the independent
directors;
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be available to communicate or meet with any shareholder
controlling at least five percent of the outstanding voting
stock of the Company; and
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function as a liaison between the Chairman of the Board and
independent directors, as necessary.
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The board and board committees regularly meet in executive
sessions without the presence of any management representatives.
The Lead Director presides in those executive sessions. If the
executive session includes or is devoted to a report of a board
committee, the chair of that committee presides in that portion
of the executive session.
11
The board has also adopted a Code of Conduct. The corporate
governance guidelines, bylaws and the Code of Conduct may be
viewed on our web site, www.wglholdings.com, and copies may be
obtained by request to the Secretary of the Company. Those
requests should be sent to: Corporate Secretary; WGL Holdings,
Inc.; 101 Constitution Ave., N.W.; Washington, D.C. 20080.
The board of directors has a policy under which directors who
are not employees of the Company and its subsidiaries may not
stand for re-election after reaching the age of 72. Also, under
this policy, directors who are employees of the Company must
retire from the board upon their retirement from the Company.
This policy can be changed at any time by action of the board of
directors.
The Company expects all board members to attend the annual
meeting of shareholders, but from time to time, other
commitments may prevent all directors from attending each annual
meeting. All directors attended the most recent annual meeting
of shareholders, which was held on March 6, 2008.
DIRECTOR
COMPENSATION
Director Annual
Retainer and Meeting Fees
Compensation for directors during fiscal year 2008 consisted of
an annual retainer, fees for attending meetings, and an annual
equity award. Directors were offered the opportunity to receive
all of their cash compensation on a deferred basis under the WGL
Holdings and Washington Gas Light Companys Deferred
Compensation Plan for Outside Directors described later in this
proxy statement. Mr. DeGraffenreidt, our Chairman and Chief
Executive Officer, does not receive compensation for his service
as a director.
The non-employee directors currently receive 1,800 shares
of WGL Holdings common stock annually in accordance with the
Directors Stock Compensation Plan in addition to a
retainer paid in cash. Non-employee directors of WGL Holdings
also serve as directors of its utility subsidiary, Washington
Gas Light Company (Washington Gas). The directors serve on the
same committees of each Board. Non-employee directors receive
only one cash retainer which is payable by Washington Gas.
Usually, the board meetings of WGL Holdings and Washington Gas
are held consecutively. The fiscal year 2008 compensation
arrangements of non-employee directors were coordinated as
described below:
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Washington Gas
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Light Company
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WGL Holdings, Inc.
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Description of fees paid to non-employee Directors*
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Dollar Amount
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Dollar Amount
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On days when both boards meet
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$
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1,000
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$
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500
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On days when both committees meet
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$
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1,000
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$
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500
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On days when only one board meets
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$
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1,200
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$
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1,200
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On days when only one committee meets
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$
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1,200
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$
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1,200
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Each day a Director attends a Director Education Program
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$
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1,000
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$
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500
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Annual Meeting attendance fee
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$
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1,000
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$
|
500
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Annual cash retainer (paid on quarterly basis)
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$
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35,000
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0
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Annual retainer to chair of Governance Committee
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$
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5,000
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|
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0
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Annual retainer to chair of Human Resources Committee
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$
|
5,000
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|
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0
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Annual retainer to chair of Audit Committee
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$
|
10,000
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|
|
0
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Lead Director annual retainer
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$
|
5,000
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|
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0
|
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*
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Allocation based on approximate
time required for board responsibilities for each company (1/3
WGL Holdings; 2/3 Washington Gas). On September 24, 2008,
the board of directors voted to increase the annual cash
retainer and the retainers for the chairs of the Governance and
Human Resources Committees. Accordingly, effective
October 1, 2008, the annual cash retainer was increased to
$50,000 and the retainers for the Governance and Human Resources
Committees chairs were each increased to $7,500.
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12
The following table presents information regarding the
compensation paid during fiscal year 2008 to the non-employee
directors of WGL Holdings.
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Change in
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Pension
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Value and
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Non-
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Non-
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qualified
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Fees
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Equity
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Deferred
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Earned
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Incentive
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Compensa-
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or Paid
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Stock
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Option
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Plan
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tion
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All Other
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in Cash
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Awards(1)
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Awards
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Compen-
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Earnings(2)
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Compensation
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Total
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Name
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($)
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|
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($)
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|
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($)
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sation ($)
|
|
|
($)
|
|
|
($)
|
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($)
|
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(a)
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(b)
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(c)
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(d)
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(e)
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(f)
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(g)
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(h)
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Michael D. Barnes
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$
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78,000
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$
|
58,590
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|
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0
|
|
|
|
0
|
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|
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0
|
|
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0
|
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$
|
136,590
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George P. Clancy
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$
|
61,700
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$
|
58,590
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|
|
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0
|
|
|
|
0
|
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$
|
22,218
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|
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0
|
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$
|
142,508
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James W. Dyke, Jr.(3)
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$
|
29,500
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$
|
58,590
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0
|
|
|
|
0
|
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|
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0
|
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0
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$
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89,090
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Melvyn J. Estrin
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$
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66,700
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$
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58,590
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0
|
|
|
|
0
|
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$
|
53,379
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0
|
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$
|
178,669
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James F. Lafond
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|
$
|
61,700
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$
|
58,590
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0
|
|
|
|
0
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$
|
22,364
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|
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0
|
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$
|
142,954
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Debra L. Lee
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$
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61,700
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$
|
58,590
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|
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0
|
|
|
|
0
|
|
|
|
0
|
|
|
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0
|
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$
|
120,290
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Karen Hastie Williams
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$
|
73,500
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$
|
58,590
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0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
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$
|
132,090
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(1)
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On January 2, 2008, each of
the non-employee directors received an award of
1,800 shares of WGL Holdings common stock in accordance
with the terms of the WGL Holdings, Inc. Directors Stock
Compensation Plan. The amounts reported for stock awards reflect
the aggregate dollar amounts recognized in accordance with
Statement of Financial Accounting Standards No. 123R for
financial statement reporting purposes for fiscal year 2008. The
grant date fair value of each equity award computed in
accordance with FAS 123R was $32.55 per share.
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(2)
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Amounts in this column only reflect
earnings on non-qualified deferred compensation. None of the
directors have any retirement benefits except for
Mr. Barnes, Mr. Estrin and Mrs. Williams. As
described below under, DIRECTOR COMPENSATION
Director Retirement Plan, the retirement benefits for
these three directors are frozen and, therefore, there is no
change in pension value.
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(3)
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Mr. Dyke is a partner of the
law firm, McGuire Woods LLP. Under the arrangement Mr. Dyke
has with his law firm, McGuire Woods is entitled to receive:
1) all of the compensation Mr. Dyke is paid for board
meeting fees; 2) a portion of his annual cash retainer; and
3) half of the fees paid to Mr. Dyke for any director
education seminar he attends. Accordingly, during fiscal year
2008, we paid McGuire Woods $36,000 in board meeting, retainer
and seminar fees in connection with Mr. Dykes service
on our board of directors. McGuire Woods provided the Company no
legal services and received no other fees from the Company
during fiscal year 2008.
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Non-Employee
Director Compensation
All non-employee directors are compensated similarly in
accordance with the terms of our director compensation program.
Usually, the board reviews the level of compensation it receives
for its service every two years. In connection with this review,
Hewitt Associates, the boards executive compensation
consulting firm, conducts a director pay review survey every two
years to identify board compensation practices of a peer group
of companies. The most recent study was conducted during fiscal
year 2008. The board takes this survey information into
consideration when determining the meeting fees, retainers and
other forms of compensation it will be paid. The board may take
action at any time to amend the amount or type of compensation
it receives. Directors employed by the Company do not receive
compensation for their role as a director. The executive
officers of the Company do not have a role in determining or
recommending the amount or form of director compensation. Other
than conducting the director pay review previously mentioned,
Hewitt Associates has no role in determining the compensation of
the board of directors.
Director Deferred
Compensation Plan
Non-employee directors of WGL Holdings are eligible to defer up
to 100% of their cash board compensation under the WGL Holdings
and Washington Gas Light Company Deferred Compensation Plan for
Outside Directors, as amended and restated (the Director
Deferred Compensation Plan). This includes the deferral of
the payment of a non-employee directors annual board and
committee
13
cash retainer, board meeting fees, committee meeting fees, fees
for attendance at annual and special shareholder meetings and
fees paid by the Company for attending director education
programs. Deferrals are set at percentage increments of 10%.
Interest is earned on deferred amounts, compounded quarterly, at
a rate equal to the weekly average yield to maturity for
10-year U.S.
Government fixed interest rate securities issued at the time of
the deferral, with a minimum rate of 8% per year. Non-employee
directors may elect to defer distribution of their compensation
for a minimum period of one year following the end of the year
in which compensation is deferred or until the directors
retirement from the board. Compensation deferred under the
Director Deferred Compensation Plan may be distributed earlier
than the time period specified by a director in the event of the
directors retirement, disability, death or upon the
occurrence of a severe financial hardship. Non-employee
directors may elect to receive payment of deferred amounts in a
lump sum or in up to ten annual installments. Non-employee
directors must elect the time and method of distribution at the
same time they submit a deferral application. Payments commence
within 30 days of the event which triggers payout.
The amount of early withdrawals or accelerated payments made in
connection with a severe financial hardship are limited in
accordance with applicable tax laws. The Administrator of the
Director Deferred Compensation Plan has the sole discretion to
determine whether such an early withdrawal or accelerated
payment in the event of a severe financial hardship will be
permitted.
Directors
Stock Compensation Plan
Pursuant to the terms of the WGL Holdings, Inc. Directors
Stock Compensation Plan, as amended and restated
(Directors Stock Plan), 1,800 shares of
WGL Holdings common stock are currently awarded to each
non-employee director annually. During fiscal year 2008, the
award was made on January 2, 2008. The Directors
Stock Plan is administered by the Human Resources Committee of
the Board. Employee directors are not eligible to participate in
this plan. The shares of common stock awarded under the plan are
immediately vested and non-forfeitable. The Directors
Stock Plan is unfunded and will expire on March 5, 2013, if
not previously terminated by the board or by the shareholders.
Director
Retirement Plan
A retirement plan for non-employee directors of Washington Gas
adopted in 1995 was terminated by the Board of Washington Gas
effective January 1, 1998, subject to vesting of benefits
earned by the directors as of that date. Of the current
directors, only Messrs. Barnes and Estrin and
Mrs. Williams have vested benefits under this plan. The
benefits are frozen and will be paid out in a fixed amount per
year to each of them for a ten-year period commencing after
their retirement from the board. Under the plan,
Messrs. Barnes and Estrin will receive $10,200 per year and
Mrs. Williams will receive $8,500 per year during the
ten-year payout period.
Donations to
Civic Organizations and Charities
Washington Gas has a long-standing tradition of supporting
charitable and civic organizations within the Washington, DC
metropolitan area by contributing financial donations and
employee volunteer resources. None of the donations made by
Washington Gas during fiscal year 2008 was made in the name of a
director of WGL Holdings or Washington Gas.
Communications
with the Board
Shareholders and all other interested parties may send
communications to board members by either sending a
communication to the board
and/or a
particular board member care of the Corporate Secretary of WGL
Holdings, Inc. at 101 Constitution Ave., N.W.;
Washington, D.C. 20080, or by using the toll-free number
established for that purpose, which is
1-800-249-5360.
14
Board of
Directors Stock Ownership Guidelines
The board of directors has stock ownership guidelines pursuant
to which each board member should own shares of WGL Holdings
having a value of at least five times the amount of his or her
annual cash retainer. Current directors have until September
2011 (five years from the adoption of the guidelines in
September 2006) to acquire this level of ownership. New
directors will have five years from the date of their election
to the board of directors to acquire this level of ownership.
Based on the closing price of the common stock of WGL Holdings
on January 5, 2009, each of the current directors owned
shares in excess of the minimum value set forth in the stock
ownership guidelines.
Security
Ownership of Management and Certain Beneficial Owners
The following table sets forth the information as of
January 5, 2009, regarding outstanding common stock of WGL
Holdings beneficially owned by each director, each nominee for
election as a director, the executive officers named in the
Summary Compensation Table in this proxy statement, and all
directors, nominees and executive officers as a group. Each of
the individuals listed, as well as all directors and executive
officers as a group, beneficially owned less than 1% of the
Companys outstanding common stock.
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|
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Shares Which
|
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|
|
|
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May Be Acquired
|
|
|
|
Amount and Nature
|
|
|
Within 60 Days
|
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|
|
of Beneficial
|
|
|
By Exercise of
|
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Name of Beneficial Owner
|
|
Ownership(1)
|
|
|
Stock Options
|
|
|
Vincent L. Ammann, Jr.
|
|
|
5,494
|
|
|
|
16,881
|
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Michael D. Barnes
|
|
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15,306
|
|
|
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0
|
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Beverly J. Burke
|
|
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19,420
|
|
|
|
21,342
|
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Adrian P. Chapman
|
|
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16,128
|
|
|
|
0
|
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George P. Clancy, Jr.
|
|
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12,100
|
|
|
|
0
|
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James H. DeGraffenreidt, Jr.
|
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114,926
|
|
|
|
87,635
|
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James W. Dyke, Jr.
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9,774
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0
|
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Melvyn J. Estrin
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19,850
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|
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0
|
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James F. Lafond
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10,990
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0
|
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Debra L. Lee
|
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14,268
|
|
|
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0
|
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Terry D. McCallister
|
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31,430
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128,674
|
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Karen Hastie Williams
|
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16,691
|
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0
|
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All directors, nominees and executive officers as a group:
|
|
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336,674
|
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|
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389,210
|
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(1)
|
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All shares are directly owned by
persons shown in this table except 8,684 shares are held
indirectly by executive officers in the Washington Gas Light
Company Savings Plan for Management Employees.
|
The following table sets forth information regarding any person
who is known to WGL Holdings to be the beneficial owner of more
than five percent of WGL Holdings common stock. This information
is as of September 30, 2008, which was the date of the most
recent publicly available information at the time of preparation
of this proxy statement.
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Name and Address
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Amount and Nature
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Percent
|
of Beneficial Owner
|
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of Beneficial Ownership
|
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of Class
|
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American Century Investment Management, Inc.
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3,547,467
|
(1)
|
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7.11%
|
430 West 7th Street
Kansas City, MO
64105-1407
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|
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|
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Barclays Global Investors NA(CA)
|
|
|
3,200,969
|
(2)
|
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6.41%
|
45 Fremont Street
San Francisco, CA
94105-2228
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State Street Global Advisors
|
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2,504,508
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(3)
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5.02%
|
1 Lincoln Street
Boston, MA
02111-2900
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15
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(1)
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This information is based on a
Form 13F, for the quarter ending September 30, 2008,
filed with the SEC by American Century Investment Management,
Inc., which reported that it had sole voting authority and sole
investment authority over the shares.
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(2)
|
|
This information is based on a
Form 13F, for the quarter ending September 30, 2008,
filed with the SEC by Barclays Global Investors NA(CA), which
reported that it had sole voting authority and sole investment
authority over the shares.
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(3)
|
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This information is based on a
Form 13F, for the quarter ending September 30, 2008,
filed with the SEC by State Street Global Advisors, which
reported that it had sole voting authority and sole investment
authority over the shares.
|
Section 16(a)
Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 as
amended, requires our executive officers and directors to file
reports of securities ownership and changes in such ownership
with the SEC. Based on our records and information, in fiscal
year 2008, all of our directors and executive officers met the
applicable reporting requirements under Section 16(a),
except Marcellous Frye, a Vice President of Washington Gas Light
Company. A Statement of Change in Beneficial Ownership on
Form 4 regarding the purchase of 100 shares of WGL
Holdings common stock by Mr. Frye was not filed timely
during fiscal year 2008.
Policies and
Procedures for Review, Approval or Ratification of
Related-Person Transactions
Our policies and procedures for the review, approval or
ratification of related person transactions are set forth in our
Related Person Transactions Policy. In summary, a related person
transaction is a consummated or currently proposed transaction
in which we were or are to be a participant and the amount
involved exceeds $120,000, and in which a related person (i.e.,
any director or executive officer or nominee for director, or
any member of the immediate family of such person) has or will
have a direct or indirect material interest.
The Governance Committee of the Board of Directors is
responsible for reviewing and approving all material
transactions with any related person. This obligation is set
forth in writing in the Governance Committee Charter. A copy of
the Governance Committee charter is available at
www.wglholdings.com.
To identify related party transactions, each year we submit and
require our directors and officers to complete Director and
Officer Questionnaires identifying any transactions with us in
which the officer or director or their family members have an
interest. We also distribute questionnaires to directors,
executive officers and others within the Company to identify
related party transactions for purposes of meeting accounting
and disclosure requirements under the Statement of Financial
Accounting Standard No. 57 (SFAS 57). We review
related party transactions due to the potential for a conflict
of interest. A conflict of interest occurs when an
individuals private interest interferes, or appears to
interfere, in any way with the Companys interests. Our
Code of Conduct requires all directors, officers and employees
who may have a potential or apparent conflict of interest to
notify their supervisor or the Chief Compliance Officer.
We expect our directors, officers and employees to act and make
decisions that are in the Companys best interests and
encourage them to avoid situations which present a conflict
between our interests and their own personal interests. Our
directors, officers and employees are prohibited from taking any
action that may make it difficult for them to perform their
duties, responsibilities and services to WGL Holdings in an
objective and fair manner. In addition, we are prohibited from
extending personal loans to, or guaranteeing the personal
obligations of, any director or officer.
No Material
Related Person Transactions During Fiscal Year 2008
We did not have any material related person transactions during
fiscal year 2008. However, the rules of the Securities and
Exchange Commission require disclosure of transactions that we
considered in
16
connection with our related person transaction policy. ASB
Capital Management, Inc. is an investment advisor to the
Washington Gas Employees Pension Plan. ASB Capital
Management, Inc. is a wholly-owned subsidiary of Chevy Chase
Asset Management Co., which in turn is a wholly-owned subsidiary
of Chevy Chase Bank, FSB. Mr. Clancy is an Executive Vice
President of Chevy Chase Bank, FSB. He is neither an officer nor
director of ASB Capital Management, Inc. or Chevy Chase Asset
Management Co. The board has reviewed the facts and
circumstances of this relationship and determined that
Mr. Clancy does not have either a direct or indirect
material interest in this relationship. Accordingly, the
transaction did not require review or approval under the related
person transaction policy in fiscal year 2008.
HUMAN RESOURCES
COMMITTEE REPORT*
The following Compensation Discussion and Analysis section has
been prepared by the management of WGL Holdings. WGL Holdings is
responsible for the Compensation Discussion and Analysis and for
the disclosure controls relating to executive compensation. The
Compensation Discussion and Analysis is not a report or
disclosure of the Human Resources Committee.
The Human Resources Committee has reviewed and discussed with
management the Compensation Discussion and Analysis section of
this proxy statement. Based upon this review and its
discussions, the Human Resources Committee recommended to the
Board of Directors that the following Compensation Discussion
and Analysis section be included in this proxy statement.
HUMAN RESOURCES COMMITTEE
Melvyn J. Estrin (Chairman)
George P. Clancy, Jr.
Debra L. Lee
COMPENSATION
DISCUSSION AND ANALYSIS
This Compensation Discussion and Analysis (CD&A) contains a
discussion of the material elements of compensation awarded to,
earned by, or paid to the principal executive officer, the
principal financial officer, and the other three most highly
compensated executive officers of WGL Holdings and Washington
Gas. These individuals are listed in the Summary Compensation
Table (Summary Compensation Table) provided later in this proxy
statement and are referred to in this CD&A as the
Named Executive Officers. References to the HR
Committee are to the Human Resources Committee of the
Board of Directors. None of the Named Executive Officers are
members of the HR Committee.
Objectives of
Executive Compensation Program
The HR Committees philosophy is that total compensation
for each of our executive officers should be competitive with
executives with similar experience and responsibility. This
compensation also should reflect the individual performance of
each officer as well as corporate performance.
The executive compensation program of WGL Holdings is intended
to achieve three fundamental objectives:
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attract and retain qualified executives;
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focus executives attention on specific strategic and
operating objectives of WGL Holdings; and
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align executives interests with the long-term interests of
WGL Holdings shareholders and the customers of its
regulated utility, Washington Gas.
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* Notwithstanding anything to
the contrary set forth in any of the Companys filings
under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, that might incorporate other
filings with the SEC, including this proxy statement, in whole
or in part, the following Human Resources Committee Report shall
not be deemed to be incorporated by reference into any such
filings.
17
We provide the Named Executive Officers a competitive total
compensation program that is based on the size-adjusted
50th
percentile of the range of compensation paid by similar utility
industry companies for similar positions, with actual pay that
reflects WGL Holdings short and long-term performance and
the individuals performance. The program aligns the
short-term and long-term interests of management with that of
our shareholders to maximize shareholder value. The
programs performance goals and factors also align
managements interests with utility company customers by
rewarding the provision of a safe and reliable gas supply to
customers at a reasonable cost. Several of these performance
goals and factors are discussed below. The programs in place for
fiscal year 2008 support our
pay-for-performance
philosophy.
Elements of
Executive Compensation Program
In 2008*, our compensation program for our executive officers,
including the Named Executive Officers, consisted of several
compensation elements, each of which is discussed in more detail
below. Each element of the executive compensation program is
appropriately structured to help achieve one or more of the
compensation objectives described above. Decisions with respect
to one element of pay tend not to impact other elements of pay,
but are made in the context of total compensation. The following
are the material elements of our executive compensation program:
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base salary;
|
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short-term incentives;
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long-term incentives;
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retirement benefits;
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change in control protection, and
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perquisites.
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Mix of
Pay
Cash compensation and non-cash compensation are appropriate
elements of a total rewards program. Cash compensation is
current compensation (i.e., base salary and annual
bonuses) while non-cash compensation is generally long-term
compensation (i.e., equity based incentive compensation).
A significant percentage of total compensation is allocated to
short-term and long-term incentives as a result of the
philosophy mentioned above. There is no pre-established policy
or target for the allocation between either cash and non-cash or
short-term and long-term compensation. Rather, the HR Committee
uses market data to determine the appropriate level and mix of
incentive compensation. The allocation between current and
long-term compensation is based primarily on competitive market
practices relative to base salaries, annual incentive awards and
long-term incentive award values.
Market Data
and Peer Groups
During 2007, as background to compensation decisions for 2008,
Hewitt Associates (Hewitt), the HR Committees
independent executive compensation consultant, collected and
analyzed comprehensive market data on base salary, short and
long-term incentives, and the sum of those components. To
develop market pay figures for our executive officers, including
the Named Executive Officers, Hewitt compared compensation
opportunities for comparable positions at comparable companies
of comparable revenue size, using various statistical techniques
to adjust the market data to be appropriate for our particular
revenue size. The elements of pay were benchmarked both
individually and in total to the same peer companies.
* Unless stated otherwise,
references to the year 2008 in this CD&A mean
our fiscal year 2008 which began on October 1, 2007 and
ended on September 30, 2008.
18
The total compensation peer group of companies used as
background to 2008 pay decisions is shown below. The list is
subject to change each year depending on the availability of the
companies data through Hewitts database, and the
continued appropriateness of the companies. All companies
included are utility companies, consistent with our philosophy
of paying at the size-adjusted
50th
percentile of the utilities market. While we periodically review
market data of general industry companies, to date it has not
impacted our actual pay levels or practices.
Total
Compensation Peer Group
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AGL Resources
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DTE Energy Company
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NStar
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Allegheny Energy
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Duquesne Light Holdings
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Pepco Holdings, Inc.
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Ameren Corporation
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El Paso Electric Company
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Piedmont Natural Gas
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Aquila, Inc.
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Energy East
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Pioneer Natural Resources Co.
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Atmos Energy
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Integrys
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|
PNM Resources
|
Black Hills Corporation
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Laclede Group
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Portland General Electric Co.
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CH Energy
|
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Nicor Inc.
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PPL Corporation
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Cleco Corporation
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|
NiSource Inc.
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SCANA Corporation
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CMS Energy Corporation
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Northwest Natural Gas
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Sempra
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Consolidated Edison
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Base
Salary
Base salary levels of executive officers (which includes the
Chairman and Chief Executive Officer), in 2008 and for the last
several years, were set at a level approximately equal to the
size-adjusted
50th percentile of the utility market for officers of similar
experience and responsibility. The HR Committee utilized
comprehensive executive compensation data provided by Hewitt in
determining these market levels and in establishing a
competitive level of compensation for all of our officers. This
approach was taken to place base salaries at overall market
rates, and to leave the opportunity for each officer to achieve
or exceed total target compensation through incentive pay. This
continuing practice is designed to encourage higher levels of
performance by the officers. It also is seen as a way to align
the interests of the officers of WGL Holdings, Inc. and
Washington Gas more closely with the interests of the
shareholders.
The compensation data compiled by Hewitt demonstrated a higher
level of market base pay for the Chairman and Chief Executive
Officer position as compared to other executive officers.
Therefore, the HR Committee granted Mr. DeGraffenreidt
higher levels of short and long-term compensation than other
officers. Short-term and long-term incentive opportunities for
the Chairman and Chief Executive Officer and for the other
executive officers were established based on considerations of
market data and internal pay equity.
Our Chairman and Chief Executive Officer made specific
recommendations for 2008 salary adjustments for all officers
except himself, considering the data provided by the HR
Committees consultant on industry compensation levels, the
scope of each Named Executive Officers role, and the Named
Executive Officers sustained individual performance,
results, and time in position.
These recommendations were presented to the HR Committee for
discussion and recommendation to the Board at the
September 21, 2007 HR Committee meeting. The HR Committee
consulted with Hewitt in executive session at that meeting to
consider Mr. DeGraffenreidts base salary and target
incentives for fiscal year 2008, which it has sole authority to
approve. Based on the market data, the HR Committee decided to
keep the base salary and target incentives for
Mr. DeGraffenreidt at then-current levels, with no change.
The other named executive officers received increases in base
salary. Two of those increases, for Messrs. Chapman and
Ammann were substantial (12.7% and 18.5% respectively) in order
to close significant gaps between their base salaries and the
market for their positions. Base salary increases were effective
on October 1, 2007.
19
The base salary that was paid to each Named Executive Officer in
2008 is the amount reported for such officer in column
(c) of the Summary Compensation Table that appears later in
this proxy statement.
Omnibus
Incentive Compensation Plan
The WGL Holdings, Inc. Omnibus Incentive Compensation Plan
(Omnibus Plan) provides the opportunity for
short-term and long-term incentive compensation of our executive
officers, including the Named Executive Officers. Short-term
incentive compensation is at risk, in that payment
of any of this compensation depends upon performance of the
individual officer and our company performance. Long-term
incentive compensation is also at risk in that it
relates directly to the performance of our common stock against
that of other utilities.
Short-Term
Incentive Compensation
Purpose of
Short-Term Incentives
The short-term incentive program is designed to encourage and to
recognize high levels of performance by officers of WGL Holdings
and its subsidiaries.
Short-Term
Incentive Awards
The 2008 short-term incentive program set target percentages of
base salary that may be earned for the achievement of corporate
and individual performance goals. Payouts may be higher or lower
than target depending on 2008 corporate and individual
performance. Payouts may range from 0% to 172.5% of target per
the scale below.
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Item
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Corporate
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Individual
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Total
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Weighting
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75%
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25%
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100%
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Corporate or Individual Factor, as applicable
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maximum 1.5
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maximum 1.5
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Individual Factor applied again to the Corporate Portion
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maximum 1.2
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Maximum payout as % of target
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135%
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37.5%
|
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172.5%
|
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The amounts listed in columns (c), (d) and (e) of the
Grants of Plan-Based Awards table in this proxy
statement show the potential range of short-term cash awards for
2008 for each Named Executive Officer.
At its September 21, 2007 meeting, the HR Committee set
2008 target short-term incentive award opportunities for each
Named Executive Officer at or near the size-adjusted
50th percentile of the market data provided by Hewitt. It
also approved 2008 performance factors and goals that governed
payout under the plan.
The performance factors recognize that shareholders in a
regulated utility achieve their investing goals when customers
are well served through efficient operations. The 2008
performance goals, targets and results are set forth below.
For the Company:
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A return on equity threshold of 9%, which, if not met, would
lead to a zero payout of the Corporate Portion of the plan.
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20
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Corporate performance measures in four categories as shown below
(these measures comprise what is referred to as our
corporate scorecard). Performance against these
goals resulted in a Corporate Factor determined by the HR
Committee. The determination of the Corporate Factor is
discretionary, not formulaic, and the measures below were set at
challenging degrees of difficulty that target significant
achievement and are not weighted in any particular manner.
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Corporate Goals
|
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Fiscal Year 2008
Target
|
|
Fiscal Year 2008
Results
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1.
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Foster High Performance
|
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Employee Work Safety
|
|
Less than or equal to 5.3 incidents per 100 employees
|
|
4.37 incidents per
100 employees
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Employee Engagement
|
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100% of plan, greater than or equal to 70% effective
|
|
96% of plan, 77% effective
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2.
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Improve Processes
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BPO* Service Level Achievement
|
|
Greater than or equal to 90%
|
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77%
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BPO Cost Alignment
|
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Less than or equal to 100%
|
|
99%
|
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Construction Unit Cost Attainment
|
|
Less than or equal to 100% of planned budget
|
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103%
|
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O & M Per Customer
|
|
Less than or equal to $242
|
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$239
|
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3.
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Win Customers
|
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New Therm Growth
|
|
Greater than or equal to 17.1 million therms
|
|
25.2 million therms
|
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Damage Prevention Success
|
|
Less than or equal to 2.25 damages per 1,000 locate requests
|
|
2.0 damages per 1000
|
|
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Customer Satisfaction
|
|
Greater than or equal to 82% satisfied customers
|
|
85%
|
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System Reliability
|
|
Less than or equal to 120 outages per 100,000 meters
|
|
81 outages per
100,000 meters
|
|
4.
|
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Reward Investors
|
|
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|
|
|
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|
Utility Return on Equity
|
|
Greater than or equal to 10%
|
|
12.4%
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Non-Utility Earnings
|
|
100% of targeted earnings levels
|
|
73%
|
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*
|
|
Note to above chart:
BPO means the business process outsourcing plan
which is an agreement whereby a service provider will perform
certain functions that have historically been performed
internally by the company.
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For 2008, the return on common equity threshold and other
performance criteria were met and as a result the Chairman and
Chief Executive Officer (CEO) made recommendations to the HR
Committee of payouts based on the corporate goals achievements
noted above. Based on his evaluation of 2008 results, some of
which were above target and some of which were below target, the
CEO recommended, and the HR Committee approved, a Corporate
Factor of 130% for 2008. The HR Committee considered the amount
and basis for this recommendation in consultation with Hewitt.
Individual goals for the Named Executive Officers encompassed:
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success in meeting established corporate and departmental goals;
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managing resources within established departmental budgets;
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effectiveness in areas of leadership, planning and
teamwork; and
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evaluations by peers and others.
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21
The CEO, after an in-depth performance appraisal of each
executive officer and a review of their achievement of the
personal goals which had been set for them, recommended to the
HR Committee an Individual Factor specific to each Named
Executive Officer other than himself. The Individual Factors for
each of the Named Executive Officers were set at certain
percentages of the target level in order to reflect excellent
leadership in the face of specific challenges during the year,
including business process outsourcing, a rate case, labor
issues, safety and reliability objectives and culture
transformation. The HR Committee discussed and approved the
Individual Factors recommended by the CEO for the Named
Executive Officers other than himself and, in executive session,
developed an Individual Factor for the CEO of 150%.
The 2008 Individual Factor for Mr. DeGraffenreidt
recognized several of our significant achievements during the
year under his executive leadership. His performance was
measured by the results of the corporate scorecard which are
described on the previous page and by the Committees
determination of his personal effectiveness.
The Companys progress in the abovementioned areas continue
to strengthen our ability to grow and to provide a competitive
return for investors while maintaining a safe, reliable natural
gas distribution system that provides sustainable value for our
customers.
For tax purposes, the HR Committee set a limitation on 2008
short-term incentive payouts for Messrs. DeGraffenreidt and
McCallister of 1.04% and 0.59% of 2008 net income,
respectively. The HR Committee then used negative discretion as
provided under Section 162(m) of the Internal Revenue Code
to arrive at actual, lower 2008 payouts based on our performance
for the year.
The amounts of short-term incentive awards relating to the 2008
fiscal year were paid in December, 2008 and are set forth under
column (g) entitled Non-Equity Incentive Plan Compensation
in the Summary Compensation Table. The amounts of such
short-term incentive awards range from 152% to 155% of target.
Long-Term
Incentive Compensation
Purpose of
Long-Term Incentive Awards
The 2008 long-term incentive program was designed to achieve the
following goals:
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Align executives interests with shareholder
interests. For example, performance share and
performance unit payouts are dependent on our common
stocks performance compared to companies in our peer
group. Performance share awards also rise and fall in value with
the price of our stock during the performance period.
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Match market practice: the majority of
regulated utility companies use plans similar to our performance
share and performance unit programs and use similar performance
measures.
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Promote common stock ownership: payout of
earned performance share awards is made 100% in common stock.
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Encourage retention: vesting provisions in the
performance share and performance unit programs provide
incentive for executives to stay with us and manage the company
in the
long-term
interests of the Company, its shareholders and customers.
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Stock
Options
The Outstanding Equity Awards at Fiscal 2008 Year
End table shows the prices at which those stock options
were granted. When our stock price is above the exercise price
of an option, the option has value to the executive. When our
stock price is below the exercise price of an option, the option
is worth $0 to the executive at that point.
The Option Exercises and Stock Vested in Fiscal Year
2008 table shows the extent to which the Named Executive
Officers exercised vested options in 2008 at prices above the
exercise price,and recognized value. Executives only recognize
value from stock options when our price has risen from the date
the options were granted.
22
Change in Program
for Fiscal Year 2008
For fiscal year 2007, we provided long-term incentive
compensation in the form of performance share and stock option
awards in a 60%-40% ratio. Those stock options were issued at
100% of the fair market value on the grant date with three-year
cliff vesting and a ten-year term.
For fiscal year 2008, we changed the program to eliminate the
granting of stock options and to grant performance shares and
performance units in a 50%-50% ratio. In both cases, the
combinations were chosen as the best to motivate executive
officers to generate, and reward them for, shareholder value
creation. The performance units are earned on the same basis as
the performance shares. The program change was done in order to
achieve the same goals listed above, while lowering the dilutive
effect of the program and bringing it more in line with
competitive practice.
How 2008 Award
Sizes Were Determined
The target values of the long-term incentive awards for Named
Executive Officers are determined by the HR Committee based on
the size-adjusted 50th percentile of the market data
provided by Hewitt and on internal pay equity. To arrive at the
actual award sizes for performance shares and performance units,
we divide the executive officers target value applicable
to performance units (50% of the total) by the value of one
performance unit on the date of grant, and the target value
applicable to performance shares (50% of the total) by the value
of one performance share on the date of grant, both as
calculated by Hewitt.
Performance
Share and Performance Unit Awards
Performance share awards are denominated in shares of WGL
Holdings common stock and are paid out in shares of WGL Holdings
stock. Performance unit awards are denominated in dollars and
are paid out in cash. In all other respects, the two awards are
the same.
Performance shares and performance units will be paid out at the
end of the performance period if certain long-term performance
criteria are achieved and the Named Executive Officer remains an
employee. If the Named Executive Officer leaves the Company
before the performance period has ended, he or she will forfeit
any payouts for all open performance periods. Upon retirement,
death or disability, however, the HR Committee has discretion to
prorate awards based on the number of months worked in the
performance period.
The measure of performance for performance shares and
performance units is Total Shareholder Return relative to a
specified peer group. Total Shareholder Return is calculated as
follows:
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Total Shareholder Return
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=
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Change in stock price + dividends paid
Beginning
stock price
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Performance/Payout
Relationship
The table below shows the performance and payout scale for
performance share and performance unit awards.
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Payout of
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Performance in Total
Shareholder
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Performance Shares or Units
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Return vs. Peers
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(% of Target Awarded)
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90th percentile+
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200%
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70th percentile
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150%
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50th percentile
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100%
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30th percentile
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50%
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Less than
30th percentile
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0% (No payout)
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Generally, the percentile rank will not fall directly on one of
the ranks listed in the left column. When this occurs,
performance must be interpolated between the percentiles listed
in the columns.
23
Peer Group
Selection
As noted in the performance/payout relationship table above,
grants made in 2008 (i.e., on October 1, 2007) measure
our
2008-2010
Total Shareholder Return against peer companies. The
2008-2010
performance period runs from October 1, 2007 through
September 30, 2010. The
2008-2010
peer companies were approved at the HR Committees
November 7, 2007 meeting based on the following criteria:
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classification as an energy related company under the Standard
Industrialization Classification codes;
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public equity ownership and headquarters in the United States;
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no announced merger plans;
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annual net revenues greater than $175 million;
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at least 75% of assets related to U.S. natural gas
distribution;
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no significant exploration and production or electric generation
assets;
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no significant energy trading operations; and
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an investment grade credit rating by Standard &
Poors and Moodys.
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The companies chosen using that criteria were as follows:
2008
2010 Performance Share and Performance Unit Peer Group
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AGL Resources
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Nicor Inc.
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Piedmont Natural Gas
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Atmos Energy
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Northeast Utilities
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South Jersey Industries
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CH Energy Group
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Northwest Natural Gas
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Southwest Gas
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Consolidated Edison, Inc.
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NSTAR
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UIL Holdings Corp.
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Laclede Group Inc.
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Pepco Holdings, Inc.
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Vectren Corporation
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New Jersey Resources
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Payout of
2006-2008
Performance Share Awards
In September 2005, the HR Committee awarded performance shares
for the
2006-2008
performance period (the
2006-2008
performance period). The
2006-2008
performance period ran from October 1, 2005 through
September 30, 2008. The awards for the
2006-2008
performance period were made on the same terms as described
above.
The
2006-2008
peer group was developed using the same criteria listed above
under Peer Group Selection, except that the credit
rating factor was not used as a criterion and companies were
excluded based on having unregulated generation assets rather
than electric generation assets. The peer group used for the
2006-2008
period is shown below.
2006
2008 Performance Share Peer Group
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AGL Resources
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Energy East
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Piedmont Natural Gas
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Alliant Energy
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Laclede Group Inc.
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Pinnacle West Capital Corporation
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Ameren
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MGE Energy Inc.
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Puget Energy
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Atmos Energy
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New Jersey Resources
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SCANA Corporation
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Centerpoint Energy, Inc.
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Nicor Inc.
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Sierra Pacific Resources
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CH Energy Group
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Northwest Natural Gas
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South Jersey Industries
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Consolidated Edison, Inc.
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Northwestern Corp.
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Southwest Gas Corp.
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DTE Energy Company
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NSTAR
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UIL Holdings Corp.
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DQE Inc.
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Peoples Energy Corp.
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Vectren Corporation
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El Paso Electric
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Pepco Holdings, Inc.
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Westar Energy
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24
The
2006-2008
performance shares vested and were paid out on October 1,
2008 at 105% of target. This was the result of our Total
Shareholder Return performance at the 52nd percentile of
the peer group during
2006-2008.
Other Prior
Year Awards
Performance share awards also were made for the
2007-2009
performance period which runs from October 1, 2006 through
September 30, 2009. The terms of those awards are the same
as described above.
Analysis
Key Analytic
Tools
The HR Committee uses specific analytic tools as well as its
seasoned business judgment in forming recommendations and
decisions on executive compensation matters. For fiscal year
2008, key tools used by the HR Committee included studies
prepared for the HR Committee by Hewitt. These tools included an
executive compensation market study, compensation tally sheets
prepared for each executive, data on executive compensation
trends and information on peer group practices. These materials
were all delivered to the HR Committee members in advance of HR
Committee meetings and were the subject of in-depth discussion
between HR Committee members and Hewitt.
In addition, the HR Committee received and considered extensive
reports from management on corporate and individual executive
performance. Corporate performance was specifically discussed
with the HR Committee at the time our financial results for
fiscal year 2008 were being released to the public. The HR
Committee considered our corporate performance as measured by
our reported financial results for fiscal year 2008, the
corporate scorecard for fiscal year 2008 and in comparison to
our five-year financial goals. Details regarding the targets and
results for our corporate scorecard are reported elsewhere in
this CD&A.
Individual performance is measured each year by the HR Committee
and our management in part by the use of a multi-rater survey of
our executives. This multi-rater survey is prepared and
administered by a separate consultant to the company and the HR
Committee. The HR Committee members also have direct knowledge
of the performance of several of the executives through regular
and special reports by these executives to the board of
directors and board committees. In addition, our Chairman and
Chief Executive Officer discusses the performance of our other
executives in detail with the HR Committee.
Several specific corporate performance factors and leadership
performance factors were considered by the HR Committee in
establishing the compensation of our Named Executive Officers
for fiscal year 2008. Those corporate and leadership performance
factors are specifically described elsewhere in this proxy
statement.
Retirement
Benefits
We provide retirement benefits to the Named Executive Officers
under the terms of qualified and non-qualified defined-benefit
and defined-contribution retirement plans. Retirement benefits
provide post-employment security to our employees. They are an
essential part of a total compensation package that is
competitive with those offered by other companies, particularly
other gas and electric utilities. There are two primary
retirement benefit programs applicable to the Named Executive
Officers:
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employee benefits that are available to all of our employees,
including the Washington Gas Light Company Savings Plan for
Management Employees, and the tax-qualified Washington Gas Light
Company Employees Pension Plan; and
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the Supplemental Executive Retirement Plan (SERP).
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25
The Washington Gas Light Company Employees Pension Plan
(Pension Plan) is a qualified, trusteed,
non-contributory pension plan covering all active employees
(including executive officers) and vested former employees of
Washington Gas. The Washington Gas Light Company Savings Plan
for Management Employees (401(k) Plan) is also a
tax-qualified retirement plan in which the Named Executive
Officers participate on the same terms as our other
participating employees.
The SERP allows accrual of a higher benefit than the qualified
plan, but vests it more slowly. This plan allows us to:
i) attract mid-career executive hires by replacing foregone
pension benefits at former employers, and ii) be
competitive with pensions provided to executives at peer
companies which aids in the retention of our executive officers.
Severance/Change
in Control Protections
Our policy regarding severance protection for Named Executive
Officers stems from its importance in recruiting and retaining
executives in a competitive environment where executives are
commonly being recruited from well-compensated positions in
other companies or considering attractive opportunities with
other companies.
We offer certain benefits to executive officers in the event of
a change in control of WGL Holdings or Washington Gas. The
occurrence, or potential occurrence, of a change in control
transaction would create uncertainty regarding the continued
employment of each Named Executive Officer. This uncertainty
would result from the fact that many change in control
transactions result in significant organizational changes,
particularly at the senior executive level. Providing limited
protections to the Named Executive Officers upon a change in
control is in our shareholders best interests because
doing so serves to promote a stable executive team during the
transition process and is helpful in hiring executives into the
company.
To encourage the Named Executive Officers to remain employed
with us during a time when their prospects for continued
employment following the transaction would be uncertain, and to
permit them to remain focused on shareholders and
customers interests during the change in control, the
Named Executive Officers would be provided with severance
benefits which include the value of two or three years
worth of target-level compensation if their employment were
actually or constructively terminated without cause in
connection with a change in control.
Named Executive Officers should not be entitled to receive cash
severance benefits merely because a change in control
transaction occurs. Therefore, the WGL Holdings, Inc. and
Washington Gas Light Company Change in Control Severance Plan
for Certain Executives (the CIC Plan) provides for
the payment of severance benefits upon a dual
trigger event. A dual trigger event used in
this context means that cash payments and vesting/payouts of
one-half the outstanding long-term incentive awards happen only
upon the occurrence of both a change in control and either:
(i) an involuntary termination of employment or (ii) a
voluntary termination with good reason.
Given that none of the Named Executive Officers has an
employment agreement that provides for fixed positions or
duties, or for a fixed base salary or actual or target annual
bonus, we have concluded that a constructive termination
severance trigger is appropriate to prevent potential acquirers
from having an incentive to cause constructive termination of a
Named Executive Officers employment to avoid paying any
severance benefits at all. Without a constructive termination
severance trigger, following a change in control, an acquirer
could materially demote a Named Executive Officer, materially
reduce his or her salary and reduce or eliminate his or her
annual bonus opportunity in order to force the Named Executive
Officer to terminate his or her own employment and thereby avoid
paying severance. Thus, the CIC Plan provides certain benefits
for Named Executive Officers in the event of a qualified
termination.
Levels of
change-in-control
payments were developed in prior years and were either
reaffirmed or adjusted after a thorough reevaluation of such
protection by the HR Committee in 2006. That
re-evaluation
included input from Hewitt and considered both market practice
and best practice.
26
See Potential
Payments Upon Termination Or Change In
Control Change in Control Severance Plan
for Certain Executives later in this proxy statement
for a discussion of the other aspects of the CIC Plan.
Perquisites
We provide limited perquisites to the Named Executive Officers.
In general, we will provide Named Executive Officers with a
specific perquisite only when the perquisite provides
competitive value and promotes retention of executives, or when
the perquisite provides shareholder value.
We have a program of income tax, estate and financial planning
services for our executive officers. We pay the actual cost of
these services provided to the executive officer up to a
pre-determined ceiling depending on the level of the executive
officer. We also pay the cost of certain other perquisites for
executive officers, including parking at our headquarters
building, a vehicle allowance and an annual physical
examination. We have memberships at three clubs held in the
names of the Chairman and Chief Executive Officer and the
President and Chief Operating Officer that are for use in
business purposes. We also have rights to the use of a suite at
a sports arena that is available for use for business purposes
by employees. Other benefits available to the Named Executive
Officers are noted in footnotes to the Summary Compensation
Table.
The values of perquisites provided to each Named Executive
Officer in 2008 are reported in Column (i) of the Summary
Compensation Table in this proxy statement.
Timing of
Compensation
Under our current policy, long-term incentive awards are granted
effective each October 1, the first day of the fiscal year.
Short-term awards are generally made in November. The HR
Committee has the discretion to make awards at any time.
Following is a discussion of the timing of compensation
decisions for fiscal year 2008:
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Base salary changes for 2008 were determined at the
September 21, 2007 HR Committee and September 26, 2007
board meetings;
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Short and long-term incentive goals for 2008 were set at the
September 21, 2007 HR Committee meeting;
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Performance share and performance unit grants to the Named
Executive Officers were approved at the September 21, 2007
HR Committee meeting for grant effective on October 1,
2007, and;
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Short-term incentive payments for 2008 were approved at the HR
Committee and Board meetings held on November 13, 2008.
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Impact of
Prior Compensation
Amounts realizable from prior compensation did not serve to
increase or decrease 2008 compensation amounts. The HR
Committees primary focus was on achieving market-level
compensation opportunities.
Factors
Considered in Decisions to Increase or Decrease Compensation
Materially
As described above in this CD&A, market data, retention
needs, performance and internal pay equity have been the primary
factors considered in decisions to increase or decrease
compensation opportunities materially. Corporate and individual
performances are the primary factors in determining the ultimate
value of those compensation opportunities.
27
Role of
Executive Officers
The Chairman and Chief Executive Officer
(Mr. DeGraffenreidt) recommended to the HR Committee
compensation for the other Named Executive Officers.
Mr. DeGraffenreidt was not involved in determining his own
compensation. None of the other Named Executive Officers have
any role in determining their executive compensation.
Company Policy
Regarding the Economic Risk of Common Stock
Ownership
Our Code of Conduct prohibits executive officers, directors and
other individuals with material non-public information from
engaging in purchase, sale or option exercises with respect to
our common stock outside of certain window periods, except in
accordance with established SEC
Rule 10b5-1
plans.
Stock
Ownership Guidelines
The Board has a policy of encouraging our executive officers to
accumulate an amount of shares equal in value to at least one
times such executive officers base salary.
Other
Compensation Matters
We do not have any written or unwritten employment agreements
with any of the Named Executive Officers. Each Named Executive
Officer is an employee at will.
All elements of executive compensation are regularly benchmarked
against executive compensation in peer companies. Base salary,
annual bonus, and long-term incentive compensation are
benchmarked annually while other employee benefits and
perquisites are benchmarked every two years.
COMPENSATION OF
EXECUTIVE OFFICERS
The following tables and related footnotes and discussion
present information about compensation for the Chief Executive
Officer, the Chief Financial Officer and the three other most
highly compensated executive officers of WGL Holdings and its
subsidiaries (the Named Executive Officers). The
Summary Compensation Table below quantifies the
value of the different forms of compensation earned by or paid
to Named Executive Officers in fiscal years 2007 and 2008. The
primary elements of each Named Executive Officers total
compensation reported in the table are base salary, a bonus
contingent on performance, a long-term equity incentive
opportunity consisting of non-qualified stock options,
performance shares, and accumulated retirement pension benefits.
Named Executive Officers also earned the other compensation
listed in Column (i) of the Summary Compensation Table.
The Summary Compensation Table should be read in connection with
the tables and narrative descriptions that follow. The
Grants of Plan-Based Awards in Fiscal 2008 table,
and the description of the material terms of the non-qualified
options and performance shares granted in fiscal year 2008 that
follows it, provide information regarding the long-term equity
incentives awarded to Named Executive Officers that are reported
in the Summary Compensation Table. The Outstanding Equity
Awards at Fiscal 2008 Year End and Option
Exercises and Stock Vested in Fiscal Year 2008 tables
provide further information on the Named Executive
Officers potential realizable value and actual value
realized with respect to their equity awards.
The Pension Benefits table and related description
of the material terms of the retirement plans describe each
Named Executive Officers retirement benefits to provide
context to the amounts listed in the Summary Compensation Table.
The discussion in the section Potential Payments Upon
Termination or Change in Control explains the potential
future payments that may become payable to the Named Executive
Officers under certain circumstances.
28
SUMMARY
COMPENSATION TABLE
The following table presents information about compensation for
the Named Executive Officers. It includes all compensation
awarded to, earned by or paid to the Named Executive Officers
during fiscal years 2007 and 2008. Each of the below-named
individuals was also an executive officer of Washington Gas
Light Company (Washington Gas), our utility subsidiary. The
compensation shown in the following table was paid to the
individual by Washington Gas.
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Change in
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Pension
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Value and
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Non-Equity
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Non-qualified
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Incentive
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Deferred
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All Other
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Name and
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Stock
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Option
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Compensation
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Compensation
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Compensation
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Principal Position (1)
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Year
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Salary
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Bonus
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Awards (2)
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Awards (2)
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($) (3)
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Earnings($) (4)
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($) (5)
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Total($)
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(a)
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(b)
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(c)
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(d)
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(e)
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(f)
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(g)
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(h)
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(i)
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(j)
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James H. DeGraffenreidt, Jr.
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2008
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$
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730,000
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0
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$
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997,358
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$
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341,969
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$
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789,495
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$
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$
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39,166
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$
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2,897,988
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Chairman of the Board and
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2007
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$
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730,000
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0
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$
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852,615
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$
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614,075
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$
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638,750
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$
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311,595
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$
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37,723
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$
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3,184,758
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Chief Executive Officer
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Vincent L. Ammann, Jr.
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2008
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$
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320,000
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0
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$
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222,786
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$
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60,410
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$
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243,200
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$
|
35,734
|
|
|
$
|
26,176
|
|
|
$
|
908,306
|
|
Vice President and
|
|
|
2007
|
|
|
$
|
270,000
|
|
|
|
0
|
|
|
$
|
128,728
|
|
|
$
|
71,767
|
|
|
$
|
168,750
|
|
|
$
|
64,925
|
|
|
$
|
26,506
|
|
|
$
|
730,676
|
|
Chief Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Terry D. McCallister
|
|
|
2008
|
|
|
$
|
460,000
|
|
|
|
0
|
|
|
$
|
481,216
|
|
|
$
|
165,349
|
|
|
$
|
422,970
|
|
|
$
|
|
|
|
$
|
46,746
|
|
|
$
|
1,576,281
|
|
President and
|
|
|
2007
|
|
|
$
|
455,000
|
|
|
|
0
|
|
|
$
|
404,056
|
|
|
$
|
211,423
|
|
|
$
|
341,250
|
|
|
$
|
176,471
|
|
|
$
|
46,591
|
|
|
$
|
1,634,791
|
|
Chief Operating Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beverly J. Burke
|
|
|
2008
|
|
|
$
|
310,000
|
|
|
|
0
|
|
|
$
|
247,543
|
|
|
$
|
0
|
|
|
$
|
212,040
|
|
|
$
|
42,728
|
|
|
$
|
25,026
|
|
|
$
|
837,337
|
|
Vice President and
|
|
|
2007
|
|
|
$
|
305,000
|
|
|
|
0
|
|
|
$
|
210,043
|
|
|
$
|
162,142
|
|
|
$
|
171,550
|
|
|
$
|
174,841
|
|
|
$
|
24,609
|
|
|
$
|
1,048,185
|
|
General Counsel
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adrian P. Chapman
|
|
|
2008
|
|
|
$
|
310,000
|
|
|
|
0
|
|
|
$
|
241,830
|
|
|
$
|
73,407
|
|
|
$
|
212,040
|
|
|
$
|
|
|
|
$
|
30,474
|
|
|
$
|
867,751
|
|
Vice President of
Washington Gas
|
|
|
2007
|
|
|
$
|
275,000
|
|
|
|
0
|
|
|
$
|
172,088
|
|
|
$
|
91,578
|
|
|
$
|
154,650
|
|
|
$
|
80,884
|
|
|
$
|
31,294
|
|
|
$
|
805,494
|
|
|
|
|
(1)
|
|
The principal positions shown are
as of September 30, 2008.
|
|
(2)
|
|
Stock awards consist of performance
shares, performance units and stock options. We did not grant
stock options during fiscal year 2008 due to our decision to
grant a mix of performance shares and performance units. The
amounts in column (e) include the sum of the values for
performance shares and performance units. The following Named
Executive Officers were granted the corresponding target value
of performance units in fiscal year 2008:
Mr. DeGraffenreidt $199,168;
Mr. Ammann $58,204;
Mr. McCallister $97,613;
Ms. Burke $50,120; and
Mr. Chapman $56,385. Performance share,
performance unit and option values reflect the aggregate dollar
amounts expensed during fiscal years 2007 and 2008 as determined
under FAS 123R for financial statement reporting purposes
for all outstanding grants disregarding any estimate of
forfeitures related to service-based vesting conditions. For a
discussion of the assumptions and methodologies used to
calculate these amounts, see the discussion of performance
shares, performance units and options contained in Note 12
(Stock-Based Compensation) to the WGL Holdings Consolidated
Financial Statements, included as part of the Companys
2008 Annual Report on
Form 10-K
filed with the SEC and incorporated herein by reference. There
were no forfeitures of performance shares, performance units or
option awards by any Named Executive Officer in fiscal year 2007
or 2008. We caution that the actual amount ultimately realized
by a Named Executive Officer from the disclosed equity awards
listed under columns (e) and (f) will likely vary
based on a number of factors, including our actual operating
performance, stock price fluctuations, differences from the
valuation assumptions used and the timing of exercise or
applicable vesting.
|
|
|
|
The terms of stock option awards
provide for accelerated vesting upon retirement, death or
disability. In accordance with applicable accounting rules, we
record stock option expense over the lesser of the three-year
vesting period, or the period until an employee is retirement
eligible. Since Ms. Burke was retirement eligible on
September 30, 2008, the FAS 123R value of her stock
options is zero, as reported in the above table. Performance
shares and performance units do not provide for accelerated
vesting.
|
|
(3)
|
|
The amounts shown in this column
constitute the short-term incentive payouts made to the Named
Executive Officers as described in the CD&A. The short-term
incentive payout amounts were paid on December 5, 2008.
|
|
(4)
|
|
None of the Named Executive
Officers, except Ms. Burke, have any non-qualified deferred
compensation, therefore, this column only reflects pension
accruals for the officers, except Ms. Burke. There are no
above market or preferential earnings on compensation deferred
on a basis that are not tax-qualified, including such earnings
on non-qualified contribution plans. The 2008 fiscal pension
accrual amounts represent the difference between the
September 30, 2007 and September 30, 2008 present
value of the age 65 accrued pension (or the current benefit
if older) under the Pension Plan and Supplemental Executive
Retirement Plan, based
|
29
|
|
|
|
|
on the pension plan assumptions for
each year as shown in the text following the Pension
Benefits table set forth later in this proxy statement.
|
|
|
|
During fiscal year 2008, the change
in pension values for Messrs. DeGraffenreidt, McCallister
and Chapman were each negative. The change in pension values for
Messrs. DeGraffenreidt, McCallister and Chapman were:
($612,009), ($44,436) and ($121,866), respectively. Pursuant to
SEC rules, companies are not allowed to use these negative
figures in tabulating the total reported in column (j) of the
Summary Compensation Table.
|
|
(5)
|
|
The amounts in column
(i) represent the values of perquisites and matching
contributions under the Washington Gas Light Companys
Savings Plan for Management Employees (the 401(k) Savings
Plan). The value of perquisites is set forth in the
following table. The following Named Executive Officers received
the corresponding amounts as matching contributions under the
401(k) Savings Plan during fiscal year 2007:
Mr. DeGraffenreidt $8,985;
Mr. Ammann $10,338;
Mr. McCallister $9,000;
Ms. Burke $8,915; and
Mr. Chapman $9,652. The following Named
Executive Officers received the corresponding amounts as
matching contributions under the 401(k) Savings Plan during
fiscal year 2008: Mr. DeGraffenreidt $8,985;
Mr. Ammann $9,892;
Mr. McCallister $9,131;
Ms. Burke $9,061; and
Mr. Chapman $9,511.
|
Perquisites
We have a program of income tax, estate and financial planning
services for our executive officers. We pay the actual cost of
these services provided to the executive up to a pre-determined
ceiling depending on the level of the executive officer. The
highest amount provided to any executive under the income tax,
estate and financial planning program is $10,000 per year. We
also pay the cost of certain other perquisites for executive
officers, including: parking at our headquarters building, a
gasoline allowance and an annual physical examination. We have
memberships at three clubs held in the names of the Chairman and
Chief Executive Officer
and/or the
President
and/or Chief
Operating Officer that are for use for business purposes. We
also have rights to the use of a suite at a sports and
entertainment facility that is available for use in business
purposes by employees and directors. These suites generally are
maintained for business entertainment, but may be used for
personal use. The entire amount has been included in the table
below, although we believe that only a portion of this cost
represents a perquisite.
The following table sets forth the incremental value of
perquisites for the Named Executive Officers in 2007 and 2008
included in the All Other Compensation column
(i) of the Summary Compensation Table above.
Fiscal Year 2007
and 2008 Incremental Cost of Perquisites
Provided to Named Executive Officers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax and
|
|
|
Vehicle
|
|
|
|
|
|
|
|
|
|
|
|
Tax
|
|
|
Club
|
|
|
|
|
Name and
|
|
|
|
|
Financial
|
|
|
Allowance
|
|
|
Parking
|
|
|
Physical
|
|
|
Insurance
|
|
|
Gross-up
|
|
|
Dues
|
|
|
Total
|
|
Principal Position
|
|
Year
|
|
|
Counseling ($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
James H. DeGraffenreidt, Jr.
|
|
|
2008
|
|
|
$
|
0
|
|
|
$
|
8,400
|
|
|
$
|
6,000
|
|
|
$
|
0
|
|
|
$
|
4,722
|
|
|
$
|
1,557
|
|
|
|
$ 9,502
|
|
|
$
|
30,181
|
|
Chairman of the Board and
|
|
|
2007
|
|
|
$
|
0
|
|
|
$
|
8,400
|
|
|
$
|
6,000
|
|
|
$
|
0
|
|
|
$
|
4,920
|
|
|
$
|
991
|
|
|
|
$ 8,427
|
|
|
$
|
28,738
|
|
Chief Executive Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vincent L. Ammann, Jr.
|
|
|
2008
|
|
|
$
|
0
|
|
|
$
|
8,400
|
|
|
$
|
3,000
|
|
|
$
|
1,714
|
|
|
$
|
2,886
|
|
|
$
|
284
|
|
|
|
$ 0
|
|
|
$
|
16,284
|
|
Vice President and
|
|
|
2007
|
|
|
$
|
0
|
|
|
$
|
8,400
|
|
|
$
|
3,000
|
|
|
$
|
1,714
|
|
|
$
|
2,903
|
|
|
$
|
151
|
|
|
|
$ 0
|
|
|
$
|
16,168
|
|
Chief Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Terry D. McCallister
|
|
|
2008
|
|
|
$
|
0
|
|
|
$
|
8,400
|
|
|
$
|
6,000
|
|
|
$
|
1,792
|
|
|
$
|
3,532
|
|
|
$
|
715
|
|
|
|
$17,176
|
|
|
$
|
37,615
|
|
President and
|
|
|
2007
|
|
|
$
|
1,473
|
|
|
$
|
8,400
|
|
|
$
|
6,000
|
|
|
$
|
2,642
|
|
|
$
|
3,730
|
|
|
$
|
579
|
|
|
|
$14,767
|
|
|
$
|
37,591
|
|
Chief Operating Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beverly J. Burke
|
|
|
2008
|
|
|
$
|
0
|
|
|
$
|
8,400
|
|
|
$
|
3,000
|
|
|
$
|
0
|
|
|
$
|
3,716
|
|
|
$
|
849
|
|
|
|
$ 0
|
|
|
$
|
15,965
|
|
Vice President and
|
|
|
2007
|
|
|
$
|
0
|
|
|
$
|
8,400
|
|
|
$
|
3,000
|
|
|
$
|
0
|
|
|
$
|
3,683
|
|
|
$
|
611
|
|
|
|
$ 0
|
|
|
$
|
15,694
|
|
General Counsel
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adrian P. Chapman
|
|
|
2008
|
|
|
$
|
4,500
|
|
|
$
|
8,400
|
|
|
$
|
3,000
|
|
|
$
|
1,526
|
|
|
$
|
3,118
|
|
|
$
|
419
|
|
|
|
$ 0
|
|
|
$
|
20,963
|
|
Vice President of
Washington Gas
|
|
|
2007
|
|
|
$
|
5,300
|
|
|
$
|
8,400
|
|
|
$
|
3,000
|
|
|
$
|
1,656
|
|
|
$
|
3,064
|
|
|
$
|
222
|
|
|
|
$ 0
|
|
|
$
|
21,642
|
|
The amounts set forth in the tax
gross-up
column in the above table represent the amount of taxes paid by
the Company on behalf of officers relating to life insurance
coverage with benefits in
30
excess of $50,000. We provide the executive officers (and all
employees) life insurance equal to one times the employees
salary. Under the Internal Revenue Code, the cost of the first
$50,000 of life insurance paid by us is not taxable income to
the employee. However, the premiums we paid for insurance in
excess of $50,000 is taxable income (imputed income) to the
employee. The Company grosses up the income of the
Named Executive Officers for the taxes on this imputed income
(i.e., we pay the taxes for the Named Executive Officers on this
imputed income). The imputed income amount and the amount of the
tax gross up are both taxable income to the Named Executive
Officer.
The amounts under the column entitled, insurance in
the above table represent the premiums paid by the Company for
the respective Named Executive Officers long term care and
imputed income for life insurance.
GRANTS OF
PLAN-BASED AWARDS IN FISCAL YEAR 2008
The following Grants of Plan-Based Awards table sets forth
information concerning the range of short-term incentive
opportunities and opportunities under grants of performance
shares and units to our Named Executive Officers during the
fiscal year ended September 30, 2008. The grants in the
following table were made under the Omnibus Incentive
Compensation Plan.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Future Payouts
|
|
|
|
|
|
|
|
|
|
Estimated Future Payouts
|
|
|
Under Equity
|
|
|
|
|
|
|
|
|
|
Under Non-Equity
|
|
|
Incentive Plan Awards(1)
|
|
|
|
|
|
|
|
|
|
Incentive Plan Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
|
|
|
Number
|
|
|
Number
|
|
|
Grant Date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of Shares
|
|
|
of Shares
|
|
|
of Shares
|
|
|
Fair Value
|
|
|
|
Grant
|
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
of Stock
|
|
|
of Stock
|
|
|
of Stock
|
|
|
of Stock(2)
|
|
Name
|
|
Date
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
(#)
|
|
|
(#)
|
|
|
(#)
|
|
|
($)
|
|
(a)
|
|
(b)
|
|
|
(c)
|
|
|
(d)
|
|
|
(e)
|
|
|
(f)
|
|
|
(g)
|
|
|
(h)
|
|
|
(l)
|
|
|
James H. DeGraffenreidt, Jr.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term Incentive
|
|
|
N/A
|
|
|
$
|
159,688
|
|
|
$
|
511,000
|
|
|
$
|
881,475
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Share Program
|
|
|
10/1/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,521
|
|
|
|
21,042
|
|
|
|
42,083
|
|
|
$
|
34.01
|
|
Performance Unit Program
|
|
|
10/1/2007
|
|
|
$
|
356,548
|
|
|
$
|
713,097
|
|
|
$
|
1,426,194
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1.02
|
|
Vincent L. Ammann, Jr.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term Incentive
|
|
|
N/A
|
|
|
$
|
50,000
|
|
|
$
|
160,000
|
|
|
$
|
276,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Share Program
|
|
|
10/1/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,075
|
|
|
|
6,149
|
|
|
|
12,298
|
|
|
$
|
34.01
|
|
Performance Unit Program
|
|
|
10/1/2007
|
|
|
$
|
104,197
|
|
|
$
|
208,394
|
|
|
|
416,787
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1.02
|
|
Terry D. McCallister
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term Incentive
|
|
|
N/A
|
|
|
$
|
86,250
|
|
|
$
|
276,000
|
|
|
$
|
476,100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Share Program
|
|
|
10/1/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,156
|
|
|
|
10,313
|
|
|
|
20,626
|
|
|
$
|
34.01
|
|
Performance Unit Program
|
|
|
10/1/2007
|
|
|
$
|
174,747
|
|
|
$
|
349,493
|
|
|
$
|
698,987
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1.02
|
|
Beverly J. Burke
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term Incentive
|
|
|
N/A
|
|
|
$
|
43,594
|
|
|
$
|
139,500
|
|
|
$
|
240,638
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Share Program
|
|
|
10/1/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,648
|
|
|
|
5,295
|
|
|
|
10,590
|
|
|
$
|
34.01
|
|
Performance Unit Program
|
|
|
10/1/2007
|
|
|
$
|
89,725
|
|
|
$
|
179,450
|
|
|
$
|
358,900
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1.02
|
|
Adrian P. Chapman
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term Incentive
|
|
|
N/A
|
|
|
$
|
43,594
|
|
|
$
|
139,500
|
|
|
$
|
240,638
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Share Program
|
|
|
10/1/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,978
|
|
|
|
5,957
|
|
|
|
11,914
|
|
|
$
|
34.01
|
|
Performance Unit Program
|
|
|
10/1/2007
|
|
|
$
|
100,941
|
|
|
$
|
201,881
|
|
|
$
|
403,763
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1.02
|
|
|
|
|
|
|
Note that columns:
(i) All Other Stock Awards, (j) All
Other Option Awards: Number of Securities, and
(k) Exercise Price of Option Awards, have been
omitted in accordance with SEC rules because no such
compensation was awarded to, earned by, or paid to the Named
Executive Officers during fiscal year 2008.
|
|
|
|
No consideration was paid by any of
the Named Executive Officers for the awards listed in the
Grants of Plan-Based Awards table.
|
|
(1)
|
|
Amounts in these columns represent
the threshold, target and maximum payouts under our Performance
Share Program for the
36-month
performance period from October 1, 2007 through
September 30, 2010.
|
|
(2)
|
|
Numbers in this column represent
the grant date fair value, as determined in accordance with
Financial Accounting Standard 123R, of performance units and
performance share awards granted during fiscal year 2008. For a
discussion of the assumptions and methodologies used to
calculate the amounts reported, see the discussion of stock
options and performance shares contained in Note 12 (Stock
Based Compensation) to the Companys Consolidated Financial
Statements, included as part of WGL Holdings 2008 Annual
Report on
Form 10-K
filed with the Securities and Exchange Commission and
incorporated herein by reference.
|
31
No Employment
Agreements with Named Executive Officers
None of the Named Executive Officers have employment agreements
with the Company.
Performance
Shares and Performance Units
Performance share awards are denominated and paid out in shares
of WGL Holdings common stock. Performance unit awards are
denominated in dollars and are paid out in cash. In all other
respects, the two awards are the same.
The vesting of performance share and performance unit awards is
conditioned upon the performance of the Company and the
officers continued employment. As long as each Named
Executive Officer continues to remain an employee, performance
shares and units become earned and vested based on WGL
Holdings comparative total shareholder return over a
designated
three-year
performance period. Performance share award grantees do not have
the rights of shareholders until the performance shares fully
vest. Therefore, performance share grantees do not receive
dividends or other earnings on the performance share until it
fully vests. Since the performance units pay out in cash once
vested, performance unit grantees do not receive dividends or
other rights of shareholders.
For further information regarding the performance share and
performance unit payout peer groups and the total shareholder
return necessary for the vesting of performance shares, please
see the discussion under the heading, Long-Term Incentive
Compensation-Performance Share and Performance Unit Awards
in the Compensation Discussion & Analysis section of
this proxy statement.
Awards are converted to cash for shares to the extent necessary
to satisfy minimum tax withholding or any governmental levies.
Performance shares and performance units are generally forfeited
for no value if a Named Executive Officers employment
terminates prior to the end of the performance period. However,
a Named Executive Officer, subject to the sole discretion of the
HR Committee of the WGL Holdings Board of Directors, may vest in
all or a portion of his or her outstanding performance shares or
performance units if his or her employment terminates as a
result of retirement, death, or disability. In the event of a
change in control, the target number of performance shares
granted prior to December 15, 2006 will automatically vest
as of the effective date of the change of control, and
will be settled in stock as soon as practicable following the
effective date of the change in control. Under certain
circumstances, following a change in control, between 50% to
100% of an officers outstanding performance share or
performance unit awards granted on or after December 15,
2006 would become fully vested at target levels.
32
OUTSTANDING
EQUITY AWARDS AT FISCAL 2008 YEAR-END
The following table summarizes the equity awards we have made to
our Named Executive Officers which were outstanding as of
September 30, 2008. Outstanding equity awards at fiscal
year-end consist of non-qualified stock options, performance
shares and performance units.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
|
Stock Awards
|
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
Plan
|
|
|
Equity
|
|
|
Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
Awards:
|
|
|
Incentive
|
|
|
Awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan
|
|
|
Market or
|
|
|
Plan
|
|
|
Market or
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
|
Payout
|
|
|
Awards:
|
|
|
Payout
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Value of
|
|
|
Number of
|
|
|
Value of
|
|
|
|
Number of
|
|
|
Number of
|
|
|
|
|
|
|
|
|
|
Unearned
|
|
|
Unearned
|
|
|
Unearned
|
|
|
Unearned
|
|
|
|
Securities
|
|
|
Securities
|
|
|
|
|
|
|
|
|
|
Shares or
|
|
|
Shares or
|
|
|
Shares or
|
|
|
Shares or
|
|
|
|
Underlying
|
|
|
Underlying
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
Other
|
|
|
Other
|
|
|
Other
|
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
Option
|
|
|
Option
|
|
|
|
Rights That
|
|
|
Rights That
|
|
|
Rights That
|
|
|
Rights That
|
|
|
|
Options
|
|
|
Options
|
|
|
Exercise
|
|
|
Expiration
|
|
|
|
Have Not
|
|
|
Have Not
|
|
|
Have Not
|
|
|
Have Not
|
|
Name
|
|
Exercisable(1)(#)
|
|
|
Unexercisable(2)(#)
|
|
|
Price($)
|
|
|
Date(1)(2)
|
|
|
|
Vested(3)(#)
|
|
|
Vested(3)($)
|
|
|
Vested(4)(#)
|
|
|
Vested(4)($)
|
|
(a)
|
|
(b)
|
|
|
(c)
|
|
|
(e)
|
|
|
(f)
|
|
|
|
(i)
|
|
|
(j)
|
|
|
(k)
|
|
|
(l)
|
|
James H. DeGraffenreidt, Jr.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awarded
10-1-05
|
|
|
|
|
|
|
87,635
|
|
|
$
|
32.13
|
|
|
|
10/1/2015
|
|
|
|
|
13,259
|
|
|
$
|
430,255
|
|
|
|
|
|
|
|
|
|
Awarded
10-1-06
|
|
|
|
|
|
|
116,465
|
|
|
$
|
31.34
|
|
|
|
10/1/2016
|
|
|
|
|
13,712
|
|
|
$
|
444,954
|
|
|
|
|
|
|
|
|
|
Awarded
10-1-07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,042
|
|
|
$
|
682,813
|
|
|
|
713,097
|
|
|
$
|
713,097
|
|
Vincent L. Ammann, Jr.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awarded
10-1-04
|
|
|
11,121
|
|
|
|
|
|
|
$
|
28.26
|
|
|
|
10/1/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awarded
10-1-05
|
|
|
|
|
|
|
10,760
|
|
|
$
|
32.13
|
|
|
|
10/1/2015
|
|
|
|
|
1,628
|
|
|
$
|
52,829
|
|
|
|
|
|
|
|
|
|
Awarded
10-1-06
|
|
|
|
|
|
|
25,526
|
|
|
$
|
31.34
|
|
|
|
10/1/2016
|
|
|
|
|
3,006
|
|
|
$
|
97,545
|
|
|
|
|
|
|
|
|
|
Awarded
10-1-07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,149
|
|
|
$
|
199,535
|
|
|
|
208,394
|
|
|
$
|
208,394
|
|
Terry D. McCallister
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awarded
10-1-03
|
|
|
42,474
|
|
|
|
|
|
|
$
|
27.58
|
|
|
|
10/1/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awarded
10-1-04
|
|
|
45,117
|
|
|
|
|
|
|
$
|
28.26
|
|
|
|
10/1/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awarded
10-1-05
|
|
|
|
|
|
|
41,083
|
|
|
$
|
32.13
|
|
|
|
10/1/2015
|
|
|
|
|
6,215
|
|
|
$
|
201,677
|
|
|
|
|
|
|
|
|
|
Awarded
10-1-06
|
|
|
|
|
|
|
56,460
|
|
|
$
|
31.34
|
|
|
|
10/1/2016
|
|
|
|
|
6,647
|
|
|
$
|
215,695
|
|
|
|
|
|
|
|
|
|
Awarded
10-1-07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,313
|
|
|
$
|
334,657
|
|
|
|
349,493
|
|
|
$
|
349,493
|
|
Beverly J. Burke
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awarded
10-1-05
|
|
|
|
|
|
|
21,342
|
|
|
$
|
32.13
|
|
|
|
10/1/2015
|
|
|
|
|
3,229
|
|
|
$
|
104,781
|
|
|
|
|
|
|
|
|
|
Awarded
10-1-06
|
|
|
|
|
|
|
28,835
|
|
|
$
|
31.34
|
|
|
|
10/1/2016
|
|
|
|
|
3,395
|
|
|
$
|
110,168
|
|
|
|
|
|
|
|
|
|
Awarded
10-1-07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,295
|
|
|
$
|
171,823
|
|
|
|
179,450
|
|
|
$
|
179,450
|
|
Adrian P. Chapman
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awarded
10-1-03
|
|
|
16,305
|
|
|
|
|
|
|
$
|
27.58
|
|
|
|
10/1/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awarded
10-1-04
|
|
|
17,794
|
|
|
|
|
|
|
$
|
28.26
|
|
|
|
10/1/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awarded
10-1-05
|
|
|
|
|
|
|
17,429
|
|
|
$
|
32.13
|
|
|
|
10/1/2015
|
|
|
|
|
2,637
|
|
|
$
|
85,571
|
|
|
|
|
|
|
|
|
|
Awarded
10-1-06
|
|
|
|
|
|
|
25,999
|
|
|
$
|
31.34
|
|
|
|
10/1/2016
|
|
|
|
|
3,061
|
|
|
$
|
99,329
|
|
|
|
|
|
|
|
|
|
Awarded
10-1-07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,957
|
|
|
$
|
193,305
|
|
|
|
201,881
|
|
|
$
|
201,881
|
|
|
|
|
(1)
|
|
Subject to each Named Executive
Officers continued employment, each stock option grant
becomes vested on the third anniversary of the date of grant.
All exercisable options are currently vested. Please see the
text under the heading Options below for a
description of the vesting conditions of stock options.
|
|
(2)
|
|
The unexercisable options are
unvested. Subject to each Named Executive Officers
continued employment, each unvested stock option grant becomes
vested on the third anniversary of the date of grant. Please see
the text under the heading Options below for a
description of the vesting conditions of stock options.
|
|
(3)
|
|
Columns (i) and
(j) relate to performance shares. Performance shares become
earned and vested at the end of a three-year performance period,
subject to: i) such officers continued employment and
ii) the comparative total shareholder return of WGL
Holdings as compared to the total shareholder return of a peer
group of companies during the three year performance period. The
number of performance shares shown in the Awarded
10-1-07 row for each Named Executive Officer in column
(i) of the Outstanding Equity Awards at Fiscal
2008 Year-End table is the target number of shares
that may become earned if WGL Holdings total shareholder return
is at the 50th percentile of its peer group of companies.
The value shown in column (j) of the table is the number of
shares shown in column (i) times the closing price of WGL
Holdings common stock on September 30, 2008 ($32.45), the
last trading day of fiscal year 2008.
|
|
(4)
|
|
Columns (k) and
(l) relate to performance units. We granted performance
units for the first time on October 1, 2007. Therefore,
only the row Awarded
10-1-07
contains corresponding values for the number and payout value,
respectively, for performance units that have not yet vested.
Performance units become earned and vested at the end of a
three-year performance period, subject to: i) such
officers continued employment and ii) the comparative
total shareholder return of WGL Holdings as compared to the
total shareholder return of a
|
33
|
|
|
|
|
peer group of companies during the
three year performance period. The number of performance units
shown for each Named Executive Officer in column (k) of the
Outstanding Equity Awards at Fiscal
2008 Year-End table in the Awarded
10-1-07 row is the target number of units that may be
earned if WGL Holdings total shareholder return is at the
50th percentile of its peer group of companies. The value
shown in column (l) of the table is the number of units
shown in column (k) multiplied by $1.00 which is the value
of each performance share unit.
|
Options
Each option award is a non-qualified option that may be
exercised to purchase one share of WGL Holdings common stock at
an exercise price equal to the fair market value of the
underlying common stock on the grant date. The fair market value
is the closing price of one share of WGL Holdings common stock,
as reported on the New York Stock Exchange composite tape on the
grant date, or if the common stock was not traded on such day,
then on the next preceding day that the common stock was traded.
The exercise price of options may be paid in cash, by delivery
of already-owned shares of common stock of WGL Holdings or by
any other method approved by the HR Committee, which administers
the 1999 Plan. Awards are converted to cash to the extent
necessary to satisfy minimum tax withholding or any governmental
levies. Holders of option awards do not have the rights of
shareholders until the option is exercised. Therefore, option
holders do not receive dividends or other earnings on the
underlying stock until the option is exercised.
Each Named Executive Officers stock option award has a
three-year vesting period. Subject to each Named Executive
Officers continued employment, 100% of his or her stock
option award will vest and become exercisable on the third
anniversary of the grant date. Options expire on the tenth
anniversary of the date of grant. Each Named Executive
Officers stock option award may also become vested
depending on the circumstances of his or her termination of
employment, if such termination occurs prior to the vesting of
options. If a Named Executive Officer terminates employment
because of death, permanent and total disability, or retirement,
his or her stock option award will immediately vest and become
exercisable. If a Named Executive Officers employment
terminates for any other reason, the unvested portion of his or
her stock option award will immediately terminate. All options
immediately become exercisable upon a change in control. If a
Named Executive Officer is terminated for cause, then all
unexercised options, whether or not vested, will expire as of
the employment termination date. Stock option awards are
generally only transferable to a beneficiary of a Named
Executive Officer upon his or her death.
OPTION EXERCISES
AND STOCK VESTED IN FISCAL YEAR 2008
The following Option Exercises and Stock Vested table provides
additional information about the value realized by the Named
Executive Officers on option award exercises and stock award
vesting during the year ended September 30, 2008.
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Option Awards
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Stock Awards
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|
Number of
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|
|
Number of
|
|
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Shares
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|
|
|
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Shares Acquired
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Value Realized
|
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Shares Acquired
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Withheld
|
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|
Value Realized
|
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Name
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on Exercise (#)
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on Exercise(1)($)
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on Vesting (#)
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to Cover
|
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|
on Vesting ($)(2)
|
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(a)
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(b)
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(c)
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(d)
|
|
|
Taxes (#)
|
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(e)
|
|
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James H. DeGraffenreidt, Jr.
|
|
|
316,387
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|
|
$
|
2,755,124
|
|
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29,673
|
|
|
|
10,164
|
|
|
$
|
1,005,618
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Vincent L. Ammann, Jr.
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0
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|
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$
|
0
|
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3,429
|
|
|
|
1,105
|
|
|
$
|
116,209
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Terry D. McCallister
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29,129
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|
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$
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323,041
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13,913
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4,480
|
|
|
$
|
471,512
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|
Beverly J. Burke
|
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|
46,003
|
|
|
$
|
332,638
|
|
|
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7,358
|
|
|
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2,587
|
|
|
$
|
249,363
|
|
Adrian P. Chapman
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|
|
17,477
|
|
|
$
|
155,809
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|
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5,487
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|
|
|
1,767
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|
|
$
|
185,954
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(1)
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The amounts shown in the column,
value realized on exercise equal the differences
between (i) the market price of WGL Holdings common stock
on the exercise date and (ii) the exercise price of those
options, multiplied by the corresponding amount set forth in
column (b).
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(2)
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The amounts shown in the column,
value realized on vesting equal the product of:
(i) the closing market price of WGL Holdings common stock
on the last day of the performance share vesting period
multiplied by (ii) the number of shares acquired upon
vesting as set forth in column (d).
|
34
PENSION
BENEFITS
The following table and related discussion describes the present
value of accumulated benefits payable to each of our Named
Executive Officers under our Washington Gas Light Company
Employees Pension Plan (a qualified plan) and the
Washington Gas Light Company Supplemental Executive Retirement
Plan (a non-qualified plan).
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Number of
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Present Value
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|
|
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Years
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of
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Credited
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Accumulated
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Service
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Benefit
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Name
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Plan Name
|
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(#)
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($)
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(a)
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(b)
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(c)
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(d)
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James H. DeGraffenreidt, Jr.
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Washington Gas Light Company Pension Plan
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22.5
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$
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346,602
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Washington Gas Light Company
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|
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|
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Supplemental Executive Retirement Plan
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30.0
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$
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3,406,666
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Vincent L. Ammann, Jr.
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Washington Gas Light Company Pension Plan
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5.0
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$
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45,079
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Washington Gas Light Company
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|
|
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|
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|
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Supplemental Executive Retirement Plan
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8.0
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$
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137,973
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Terry D. McCallister
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Washington Gas Light Company Pension Plan
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8.5
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$
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111,656
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Washington Gas Light Company
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|
|
|
|
|
|
|
|
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Supplemental Executive Retirement Plan
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16.5
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$
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872,426
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Beverly J. Burke
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Washington Gas Light Company Pension Plan
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|
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16.0
|
|
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$
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309,908
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Washington Gas Light Company
|
|
|
|
|
|
|
|
|
|
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Supplemental Executive Retirement Plan
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26.0
|
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$
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1,050,309
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Adrian P. Chapman
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Washington Gas Light Company Pension Plan
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27.0
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$
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294,845
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Washington Gas Light Company
|
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|
|
|
|
|
|
|
|
|
Supplemental Executive Retirement Plan
|
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30.0
|
|
|
$
|
536,726
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|
Note that column (e) Payments During Last Fiscal
Year has been omitted in accordance with SEC rules because
no such payments were made during fiscal year 2008.
The following actuarial assumptions were used in determining the
amounts set forth in the Pension Benefits table:
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September 30,
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September 30,
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Measurement Date
|
|
2008
|
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2007
|
|
Discount Rate
|
|
7.5%
|
|
6.00%
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Pre-retirement Mortality
|
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None
|
|
None
|
Postretirement Mortality
|
|
RP 2000
|
|
RP 2000
|
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Combined Healthy
|
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Combined Healthy
|
Retirement Age
|
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65
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65
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For a discussion of the assumptions and methodologies used to
calculate the amounts reported in the Pension
Benefits table above, see the discussion contained in
Note 11 (Pension and other Post-Retirement Benefit Plans)
to the Companys Consolidated Financial Statements, and
Managements Discussion and Analysis of Financial Condition
and Results of Operations included as part of WGL Holdings
2008 Annual Report on
Form 10-K
filed with the SEC and incorporated herein by reference.
Pension and other
Retirement Benefits
Washington Gas provides retirement benefits to the Named
Executive Officers under the terms of qualified and
non-qualified defined-benefit and defined-contribution
retirement plans. Retirement benefits provide post-employment
security to our employees. There are three primary retirement
benefit programs applicable to the Named Executive Officers:
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the Washington Gas Light Company Savings Plan for Management
Employees (401(k) Plan), a tax-qualified defined
contribution plan in which the Named Executive Officers
participate on the same terms as our other participating
employees;
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35
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the Washington Gas Light Company Employees Pension Plan
(Pension Plan), a qualified, trusteed,
non-contributory pension plan covering all active employees
(including executive officers) and vested former employees of
Washington Gas; and
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the Washington Gas Light Company Supplemental Executive
Retirement Plan (SERP), a non-qualified
defined-benefit retirement plan which provides the Named
Executive Officers a benefit up to 60% of the individuals
final average compensation, as determined under that plan.
|
Pension
Plan
The Named Executive Officers each participate in the Pension
Plan. All employees of Washington Gas, including part-time
employees, automatically become participants in the Pension Plan
on the first day of the month immediately following their
employment commencement date. However, no employee first-hired
on or after January 1, 2009 and covered by the collective
bargaining agreement between Washington Gas and the
International Brotherhood of Teamsters, Local 96 will be
eligible to participate in the Pension Plan. Effective
October 1, 2008, Washington Gas began a three year contract
with the Office and Professional Employees International Union
Local 2 (Local 2). Pursuant to this contract, Local
2 union employees hired after November 2009 will not participate
in the Pension Plan. Instead, Washington Gas will make
contributions to those employees defined tax-qualified
retirement accounts.
The Pension Plan is a tax-qualified defined benefit retirement
plan. The Pension Plan provides an unreduced retirement benefit
at termination of employment at the normal retirement age of 65.
A participant must have five years of accredited service under
the Pension Plan to vest in a pension benefit.
The Pension Plan accrued benefit is calculated using a formula
based on accredited service and final average compensation.
Final average compensation is the average of the employees
rate of annual basic compensation on December 31 of each of the
three calendar years of accredited service preceding the
employees normal retirement date, early or disability
retirement date, actual date of retirement or date of
termination of employment, whichever is applicable. Annual basic
compensation consists of the regular annual salary or wages of
an employee, excluding bonuses, compensation for overtime or
other extra or special compensation, but including commissions,
bonuses and other forms of incentive compensation paid to
salesmen. The rate of final average compensation is multiplied
by the percentage rate that applies to the participants
years of accredited service. Bargaining units representing
certain Washington Gas employees have negotiated different
percentages for their members.
An early retirement benefit, discounted for age, is available to
employees at age 55 with 5 years of accredited
service. Employees having any combination of age and accredited
service that equals 90 or more and employees with 30 years
of accredited service may retire early without discounting their
pension for age. As of the date of this proxy statement, two
Named Executive Officers, James H. DeGraffenreidt, Jr., our
Chairman and Chief Executive Officer, and Beverly J. Burke, our
Vice President and General Counsel, are currently eligible to
receive an early retirement benefit.
The normal form of pension benefit is a joint and survivor
annuity for a married employee and a single-life annuity for an
unmarried employee. Participants may elect among various payment
options that will be the actuarial equivalent of the normal form
of retirement benefit. There is no lump sum optional form of
payment under the current Pension Plan.
Supplemental
Executive Retirement Plan
The Named Executive Officers participate the SERP which is a
non-qualified, unfunded defined benefit retirement plan. The
purpose of the SERP is to provide an additional incentive to
attract and retain key employees designated by the Board of
Directors. The Board of Directors of Washington Gas designates
participants in the SERP.
36
The SERP provides a retirement benefit that supplements the
benefit payable under the Pension Plan. The benefit amount is
based on years of benefit service and the average of the
participants highest rates of annual basic compensation,
including any short-term incentive awards, on December 31
of the three years out of the final five years of the
participants service as a participant. Benefit service
under the SERP consists of years of accredited service under the
Pension Plan plus the number of years of plan service under
SERP, to a maximum of 30 years. There is a vesting schedule
for the benefit that varies depending upon the point in time the
individual became a participant in the SERP.
At normal retirement, the SERP participant is entitled to an
annual benefit equal to the participants vested percentage
of an amount equal to 2% of final average compensation
multiplied by the number of years of benefit service, reduced by
the amount of the normal retirement benefit paid under the
Pension Plan and the amount of any other supplemental pension
benefit provided by Washington Gas. Participants in the WGL
Holdings, Inc. and Washington Gas Light Company Change in
Control Severance Plan for Certain Executives, described
elsewhere in this proxy statement, may earn extra years of
benefit service under the SERP in certain events of termination
following a change in control, up to the maximum of
30 years of benefit service.
The SERP provides an unreduced retirement benefit at termination
of employment at the normal retirement age of 65. An early
retirement benefit, discounted for age, is available to
participants at age 55 with 10 years of benefit
service. Two Named Executive Officers, James H.
DeGraffenreidt, Jr., our Chairman and Chief Executive
Officer, and Beverly J. Burke, our Vice President and General
Counsel, are currently eligible to receive an early retirement
benefit under the SERP.
A participant in the SERP can elect the same forms of benefit
available under the Pension Plan, and in addition can elect a
lump sum payment form. For SERP benefits earned through
December 31, 2004, the lump sum amount is limited to the
amount of the benefit attributable to short-term incentive
compensation. For benefits earned on and after January 1,
2005, participants may elect a lump sum benefit in any
percentage. The lump sum amount is an actuarial determination
based on the participants life expectancy discounted using
the yield on the zero-coupon U.S. Treasury security with
maturity equal to the maturity of each years payment. The
lump sum shall equal the sum of the discounted payments.
Clawback
Provision
The SERP includes a clawback provision that requires
a participant to forfeit SERP benefit payments under certain
circumstances. Under this clawback provision, if a SERP
participant willfully performs any act or willfully fails to
perform any act that may result in material discredit or
substantial detriment to Washington Gas, then upon a majority
vote of the board of directors, the participant, his or her
surviving spouse and any beneficiary of those persons, will
forfeit any benefit payments owing on and after a date fixed by
the board of directors. After this fixed date, Washington Gas
will have no further obligation under the SERP to the
participant, his or her spouse or any beneficiary. Also under
this clawback provision, if a participant has received a
lump-sum benefit under the SERP, the participant or the
surviving spouse would be required to return a proportionate
share of that lump sum payment to Washington Gas, as calculated
under the SERP.
37
NON-QUALIFIED
DEFERRED COMPENSATION
The following table presents information regarding the
contributions to and earnings on the Named Executive
Officers deferred compensation balances during fiscal year
2008, and also shows the total deferred amounts for the Named
Executive Officers at the end of fiscal year 2008.
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate
|
|
|
Aggregate
|
|
|
Aggregate
|
|
|
|
|
|
|
Executive
|
|
|
Registrant
|
|
|
Earnings
|
|
|
Withdrawals/
|
|
|
Balance
|
|
|
|
|
|
|
Contributions
|
|
|
Contributions
|
|
|
in Last FY
|
|
|
Distributions
|
|
|
at Last FYE
|
|
Name
|
|
|
|
|
in Last FY
|
|
|
in Last FY ($)
|
|
|
($)(1)
|
|
|
($)
|
|
|
($)
|
|
(a)
|
|
Plan
|
|
|
(b)
|
|
|
(c)
|
|
|
(d)
|
|
|
(e)
|
|
|
(f)
|
|
|
James H. DeGraffenreidt, Jr.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vincent L. Ammann, Jr.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Terry D. McCallister
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beverly J. Burke
|
|
|
Executive Incentive
Compensation Plan
|
|
|
|
0
|
|
|
|
0
|
|
|
$
|
1,444
|
|
|
|
0
|
|
|
$
|
38,831
|
|
Adrian P. Chapman
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
No deferrals of compensation were
made during the 2008 fiscal year. The amount set forth in the
above table for Ms. Burke reflects a deferral made on a
bonus in the amount of $28,500 during fiscal year 2001. The
quarterly interest rate is equal to weekly average yield to
maturity for five-year U.S. Treasury fixed interest rate
securities (adjusted to a constant maturity of five years). This
deferral was made under the Washington Gas Light Company
Executive Incentive Compensation Plan which is currently
inactive. The amount reported in column (d) in the above
table is also included in the amount shown for Ms. Burke in
column (h) of the Summary Compensation Table in this proxy
statement.
|
POTENTIAL
PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
Change in Control
Severance Plan for Certain Executives
Each of the Named Executive Officers listed in the Summary
Compensation Table in this proxy statement participates in
the WGL Holdings, Inc. and Washington Gas Light Company Change
in Control Severance Plan for Certain Executives (the CIC
Plan). Change in control protections provide
severance pay and, in some situations, vesting or payment of
long-term incentive awards, upon a change in control. The change
in control provisions under the CIC Plan are effective during
the period of one year prior to, and two years following, a
change in control of WGL Holdings or Washington Gas Light
Company. The CIC Plan incorporates the definition of a change in
control as defined in the WGL Holdings, Inc. and Washington Gas
Light Company Change in Control Policy (CIC Policy).
A change in control generally will occur under the CIC Policy in
the event of:
|
|
|
|
|
an acquisition of 30% or more of the voting stock of WGL
Holdings or Washington Gas;
|
|
|
|
a change in the majority of the board of directors of WGL
Holdings; or
|
|
|
|
a merger, reorganization, consolidation or sale of all or
substantially all of the assets of WGL Holdings or Washington
Gas.
|
Generally, during the one year prior and two years following a
change in control the executive is entitled to base salary,
annual incentives, savings and retirement plans, welfare benefit
plans, expenses, fringe benefits, office and vacation,
consistent with those in place prior to the change in control or
available after the change in control if more beneficial.
Annual base salary is defined as the amount equal to the highest
base salary rate in effect during the period beginning twelve
months immediately preceding a change in control and ending on
the date of the Named Executive Officers termination. The
annual incentive bonus is equal to each executives target
annual bonus for the fiscal year in which the Named Executive
Officers employment is terminated.
With respect to all the Named Executive Officers, if the Named
Executive Officer is terminated during the effective period for
reasons other than cause, or if the Named Executive Officer
resigns for
38
good reason, the Named Executive Officer is entitled to certain
severance benefits. These benefits include:
|
|
|
|
|
salary replacement benefits equal to the sum of the
executives annual base salary plus annual incentive bonus
multiplied by three for Messrs. DeGraffenreidt, McCallister
and Ammann, and Ms. Burke and by two for Mr. Chapman;
|
|
|
|
the sum of any unpaid base salary and vacation pay through the
termination date and the product of the executives annual
bonus and a fraction, the numerator of which is the number of
days in the current fiscal year through the termination date,
and the denominator of which is 365;
|
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|
|
medical and dental replacement benefits for three years for
Messrs. DeGraffenreidt, McCallister and Ammann, and
Ms. Burke, and for two years for Mr. Chapman;
|
|
|
|
an additional three years of benefit service under the SERP for
Messrs. DeGraffenreidt, McCallister and Ammann, and
Ms. Burke and two years for Mr. Chapman, provided, in
no event shall such additional service when added to the
executives SERP benefit service credit exceed the maximum
of 30 years; and
|
|
|
|
outplacement services of up to $25,000; provided such services
must be incurred by the executive within 12 months of his
or her termination.
|
If a change in control payment exceeds the limit for deductible
payments under Section 280G of the Internal Revenue Code by
10% or more, reimbursement will be made for the full amount of
any excise taxes imposed on severance payments and any other
payments under Section 4999 of the Internal Revenue Code
and for all taxes due on the amount of that reimbursement. This
excise tax
gross-up
provision is intended to preserve the level of
change-in-control
severance protections that we have determined to be appropriate.
Following a change in control: (i) 50% of a Named
Executive Officers outstanding options would become
immediately vested and exercisable, and the remaining 50% would
become immediately vested and exercisable upon certain qualified
terminations of employment, and (ii) 50% of such
officers outstanding awards that had performance based
vesting conditions would become immediately fully vested at
target levels, with the other 50% becoming vested at target
levels upon certain qualified terminations of employment.
Together, the CIC Plan and the CIC Policy provide that a
qualified termination triggers the receipt of
severance benefits. Generally, a qualified
termination means any termination of employment by a
participant in the CIC Plan that is not initiated by the Company
and that is caused by any one or more of the following events,
if such event occurs during the change in control effective
period:
|
|
|
|
|
assignment to the participant, without his or her consent, of
duties inconsistent in any material respect with the
executives then current position or duties (including, for
Messrs. DeGraffenreidt, McCallister, Ammann and
Ms. Burke, not having their current position at the most
senior resulting entity following the change in control), or any
other action by the company which would cause him or her to
violate ethical or professional obligations, or which results in
a significant diminution in such position or duties;
|
|
|
|
the participant, without his or her consent, being required to
relocate to a principal place of employment that is both more
than 35 miles from his or her existing principal place of
employment, and farther from the participants current
residence than his or her existing principal place of employment;
|
|
|
|
the Company materially reduces, without his or her consent, the
participants base salary rate or target bonus opportunity,
or materially reduces the aggregate value of other incentives
and retirement opportunity, or fails to allow the participant to
participate in all welfare benefit plans,
|
39
|
|
|
|
|
incentive, savings and retirement plan, fringe benefit plans and
vacation benefits applicable to other senior executives; or
|
|
|
|
|
|
the Company fails to obtain a satisfactory agreement from any
successor entity to assume and agree to perform the
Companys obligations to the Named Executive Officer under
the CIC Plan.
|
A Named Executive Officer will not be able to receive severance
benefits for a qualified termination if the executive continues
in employment with the Company for more than 90 days
following the later of the occurrence or knowledge of an event
or events that would constitute a qualified termination. Also,
the Named Executive Officer will not be entitled to receive
severance benefits under the CIC Plan if the Named Executive
Officers employment with the Company terminates because of
a change in control and the Named Executive Officer accepts
employment, or has the opportunity to continue employment, with
a successor entity (other than under terms and conditions which
would constitute a qualified termination).
The levels of
change-in-control
payments were developed in prior years and were either
reaffirmed or adjusted after a thorough reevaluation of such
protection by the Human Resources Committee of the Board of
Directors (the HR Committee) in 2006. That
reevaluation included input from the HR Committees
executive compensation consultant and considered both market
practice and best practice. The circumstances and payments of
compensation following a change in control are provided by the
CIC Plan. In approving the CIC Plan, the HR Committee considered
data provided by its consultant regarding competitive market
practices regarding
change-in-control
benefits for senior executives. The HR Committee also considered
the corporate and shareholder value of retaining certain
executives following a
change-in-control.
The multiples of pay for various levels of officers reflect the
HR Committees judgment that those levels are fair,
appropriate and reasonable for each officer.
In determining the appropriate payment and benefit levels under
the CIC Plan, the HR Committee also considered the potential
importance of retaining certain executives following a
change-in-control
to assist in a successful transition to a new organization and
management. The CIC Plan is intended in part to provide some
protection of employment and benefits for executives who agree
to remain with a new organization following a
change-in-control.
The CIC Plan is a material part of our total compensation
program. Each component of this program, including base salary,
incentives, retirement benefits and the CIC Plan, has been
designed to meet certain unique purposes. In the absence of a
CIC Plan, it is unlikely that other elements of the total
compensation program would have been different to offset the
risk posed by the lack of a CIC Plan. The reason for this is
that no other element of compensation can achieve the aims of
the CIC Plan.
The severance benefits available under the CIC Plan are not
additive or cumulative to severance or termination benefits that
a Named Executive Officer might also be entitled to receive
under the terms of any other arrangement or agreement with the
Company. As a condition of participating in the CIC Plan, the
Named Executive Officer must expressly agree that the CIC Plan
supersedes all prior plans or agreements providing for severance
benefits.
40
The following table lists the amounts the Named Executive
Officers were eligible to receive from the Company under the CIC
Plan if a change in control had occurred and the Named Executive
Officers employment was terminated either involuntarily
without cause or as a result of a good reason termination
effective as of September 30, 2008, the end of our 2008
fiscal year. The amounts would be payable in a single lump sum
and, to the extent required to comply with Section 409A of
the Internal Revenue Code, would not be paid to the Named
Executive Officer prior to the date that is six months from
the date of termination. The calculations in the table below are
based on a common stock price equal to $32.45 per share which
was the closing price of WGL Holdings common stock on
September 30, 2008, which was the last trading day of
fiscal 2008.
Incremental
Payments Due to
Change-In-Control*
(assuming termination of employment on September 30,
2008)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DeGraffenreidt
|
|
|
Ammann
|
|
|
McCallister
|
|
|
Burke
|
|
|
Chapman
|
|
|
Cash severance
|
|
$
|
3,229,000
|
|
|
$
|
1,440,000
|
|
|
$
|
2,208,000
|
|
|
$
|
1,348,500
|
|
|
$
|
899,000
|
|
Additional value due to vesting of unvested options
|
|
$
|
129,276
|
|
|
$
|
28,334
|
|
|
$
|
62,671
|
|
|
$
|
32,007
|
|
|
$
|
28,589
|
|
Additional value due to vesting of unvested performance shares
and units
|
|
$
|
2,285,786
|
|
|
$
|
602,986
|
|
|
$
|
1,115,540
|
|
|
$
|
571,609
|
|
|
$
|
593,845
|
|
Additional SERP amount due to vesting
|
|
$
|
0
|
|
|
$
|
245,723
|
|
|
$
|
599,416
|
|
|
$
|
0
|
|
|
$
|
144,720
|
|
Additional SERP amount due to service credit
|
|
$
|
0
|
|
|
$
|
119,462
|
|
|
$
|
311,387
|
|
|
$
|
239,221
|
|
|
$
|
0
|
|
Medical and dental continuation
|
|
$
|
73,007
|
|
|
$
|
73,007
|
|
|
$
|
50,014
|
|
|
$
|
73,007
|
|
|
$
|
33,343
|
|
Outplacement (maximum)
|
|
$
|
25,000
|
|
|
$
|
25,000
|
|
|
$
|
25,000
|
|
|
$
|
25,000
|
|
|
$
|
25,000
|
|
Sec 280(G) excise tax and related
gross-up**
|
|
$
|
0
|
|
|
$
|
1,128,500
|
|
|
$
|
1,744,500
|
|
|
$
|
874,000
|
|
|
$
|
662,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
5,742,069
|
|
|
$
|
3,663,012
|
|
|
$
|
6,116,529
|
|
|
$
|
3,163,344
|
|
|
$
|
2,387,167
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
SERP calculations were made using a
7.5% discount rate. Medical and dental continuation amounts are
estimates. As a result, the Section 280G excise tax and
related
gross-up
amounts have been rounded.
|
|
**
|
|
This amount represents a
reimbursement to the executive to cover the excise tax paid to
the Internal Revenue Service on the
change-in-control
benefits.
|
All severance benefits payable under the CIC Plan are subject to
each participants compliance with a post-employment
restrictions policy. The policy defines the scope of
restrictions that will apply to post-employment actions
undertaken by executives who receive severance benefits
following a termination of employment. The policy is intended to
protect (i) confidential information belonging to the
Company that the executive had access to and possesses due to
the nature of his or her position and (ii) the competitive
business operations of the Company. The restrictions under the
policy last for one year following the executives date of
termination. The policy prohibits any terminated Named Executive
Officer that receives the severance benefits described above
from soliciting employees or customers and disclosing
confidential information. For the purposes of the
policy, confidential information includes, but is
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.
41
Incremental
Payments Due to Retirement
(assuming termination of employment on September 30,
2008)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DeGraffenreidt
|
|
|
Ammann
|
|
|
McCallister
|
|
|
Burke
|
|
|
Chapman
|
|
|
Additional value due to vesting of unvested options
|
|
$
|
129,276
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
32,007
|
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
129,276
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
248,341
|
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vesting of performance shares and units upon retirement is at
the Human Resources Committees discretion, so no amounts
are shown above.
EQUITY
COMPENSATION PLAN INFORMATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of securities
|
|
|
|
|
|
|
|
|
|
remaining available
|
|
|
|
|
|
|
|
|
|
for future issuance
|
|
|
|
Number of securities
|
|
|
Weighted-average
|
|
|
under equity
|
|
|
|
to be issued upon
|
|
|
exercise price of
|
|
|
compensation plans
|
|
|
|
exercise of
|
|
|
outstanding
|
|
|
(excluding
|
|
|
|
outstanding options,
|
|
|
options, warrants
|
|
|
securities reflected
|
|
|
|
warrants and rights
|
|
|
and rights
|
|
|
in column (a))
|
|
Plan Category
|
|
(a)
|
|
|
(b)
|
|
|
(c)*
|
|
|
Equity compensation plans approved by security holders
|
|
|
1,017,177
|
|
|
$
|
30.57
|
|
|
|
1,355,068
|
|
Equity compensation plans not approved by security holders
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Total
|
|
|
1,017,177
|
|
|
$
|
30.57
|
|
|
|
1,355,068
|
|
|
|
*
|
The number of securities remaining
available for future issuance under the 1999 Incentive
Compensation Plan is reduced upon the issuance of securities,
not at the time of grant.
|
The above table presents information regarding compensation
plans under which common stock may be issued to employees and
non-employees as compensation. The Company currently has three
such plans: the Directors Stock Compensation Plan, the
1999 Incentive Compensation Plan and the WGL Holdings Omnibus
Incentive Compensation Plan. Effective March 1, 2007, no
further awards will be made under the 1999 Incentive
Compensation Plan. Total shares shown in the above table include
32,183 shares available for future issuance under the
Directors Stock Compensation Plan, 640,062 shares
available upon the vesting of performance shares and exercise of
stock options shares under the 1999 Plan and
1,700,000 shares available for future issuance under the
Omnibus Incentive Compensation. Performance shares that may be
issued under the Omnibus Incentive Compensation Plan are
calculated under a formula that enables a determination of the
minimum and maximum number of performance shares that may be
issued. This formula is further described above in this proxy
statement in the Compensation Discussion and Analysis section
under the caption, Long-Term Incentive Compensation.
42
AUDIT COMMITTEE
REPORT
The Audit Committee of the Board of Directors of the Company is
composed of four directors who are not employees of the Company.
Members of the committee are independent under rules of the
Securities and Exchange Commission and the New York Stock
Exchange. The names of the members of this committee as of the
date of this proxy statement appear at the end of this report.
The Audit Committee oversees the Companys financial
reporting process on behalf of the Companys Board of
Directors and is directly responsible for the appointment,
compensation and oversight of the Companys independent
public accountants. The committee maintains a charter that
outlines its responsibilities. The committee met six times
during fiscal year 2008.
The Audit Committee has implemented the requirements of the
Sarbanes-Oxley Act of 2002 and rules of the New York Stock
Exchange with respect to the responsibilities of audit
committees of public companies. Among other matters, the Audit
Committee reviews procedures on internal control over financial
reporting with management and with the Companys
independent public accountants. The Audit Committee and the
Companys full board of directors are committed to
compliance with all provisions of that statute and related
regulations. Further actions have been taken by the Audit
Committee and the board of directors as statutory and regulatory
provisions became effective for audit committees and independent
auditors.
The Audit Committee reviewed and discussed the Companys
audited financial statements with management of the Company and
the independent public accountants. The Audit Committee
discussed with the Companys internal auditor and the
independent public accountants the overall scope and specific
plans for their respective audits and the adequacy of the
Companys internal controls.
The Audit Committee discussed with the independent public
accountants those matters required to be discussed by Statement
on Auditing Standards No. 61, as amended (AICPA,
Professional Standards, Vol. 1, AU section 380), as adopted
by the Public Company Accounting Oversight Board in
Rule 3200T). The committee received the written disclosures
and the letter from the independent public accountants required
by the applicable requirements of the Public Company Accounting
Oversight Board regarding the independent accountants
communications with the audit committee concerning independence.
Based on the review and discussions referred to above, the Audit
Committee recommended to the Board of Directors that the audited
financial statements be included in the Companys Annual
Report on
Form 10-K
for the year ended September 30, 2008, for filing with the
Securities and Exchange Commission.
AUDIT COMMITTEE
Karen Hastie Williams (Chair)
George P. Clancy, Jr.
Melvyn J. Estrin
James F. Lafond
43
FISCAL YEARS 2008
AND 2007 AUDIT FIRM FEE SUMMARY
During fiscal years 2008 and 2007, the Companys
independent registered public accounting firm for each of those
years, Deloitte & Touche LLP (Deloitte),
billed the Company the following fees:
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
Audit Fees
|
|
$
|
1,999,634
|
|
|
$
|
1,946,189
|
|
Audit Related Fees
|
|
|
0
|
|
|
|
0
|
|
Tax Fees
|
|
|
24,000
|
|
|
|
22,000
|
|
All Other Fees
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
Total Fees
|
|
$
|
2,023,634
|
|
|
$
|
1,968,189
|
|
|
|
|
|
|
|
|
|
|
Services Provided
by Deloitte
All services rendered by Deloitte are permissible under
applicable laws and regulations and were pre-approved by the
Audit Committee, or by the Chair of the Audit Committee by
delegated authority as required by law. The fees paid to
Deloitte for services are described in the above table under the
categories listed below.
|
|
|
|
1)
|
Audit Fees These are fees for professional services
performed by Deloitte for the audit of the Companys annual
financial statements and review of financial statements included
in the Companys quarterly filings on
Form 10-Q,
and services that are normally provided in connection with
statutory and regulatory filings or engagements. For fiscal
years 2008, and 2007 the total audit fees include $710,526 and
$771,625 respectively, to perform an assessment of the
Companys internal control over financial reporting as
required by Section 404 of the Sarbanes-Oxley Act of 2002.
|
|
|
2)
|
Audit-Related Fees These are fees for services
performed by Deloitte related to the audit.
|
|
|
3)
|
Tax Fees These are fees for professional services
performed by Deloitte with respect to tax compliance, tax advice
and tax planning. This includes review of tax returns for the
Company and its consolidated subsidiaries.
|
|
|
4)
|
All Other Fees These are fees for other permissible
work performed by Deloitte that does not meet the above category
descriptions.
|
These services are actively monitored (as to both spending level
and work content) by the Audit Committee to maintain the
appropriate objectivity and independence in Deloittes core
work, which is the audit of the Companys consolidated
financial statements and the assessment of internal controls in
accordance with Section 404 of the Sarbanes-Oxley Act of
2002.
Pre-approval
policy for audit and non-audit services
In accordance with provisions of the Sarbanes-Oxley Act of 2002,
all audit and non-audit services provided to the Company by its
independent auditors must be pre-approved by the Audit
Committee. As authorized by that statute, the Audit Committee
has delegated authority to the Chair of the Audit Committee to
pre-approve up to $100,000 in audit and non-audit services. This
authority may be exercised when the Audit Committee is not in
session. Any decisions by the Chair of the Audit Committee under
this delegated authority are reported at the next meeting of the
Audit Committee. All services reported in the schedule shown
above for fiscal years 2008 and 2007 were pre-approved by the
full Audit Committee or by the Chair of the Audit Committee, by
delegated authority.
44
PROPOSAL 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC
ACCOUNTANTS
At a meeting held on November 24, 2008, the audit committee
of the board of directors appointed the firm of
Deloitte & Touche LLP, independent public accountants,
to audit the books, records and accounts of the Company for
fiscal year 2009. The board of directors recommends that the
shareholders ratify this appointment.
Representatives of Deloitte & Touche LLP will be
present at the annual meeting with the opportunity to make a
statement if they desire to do so, and will be available to
respond to appropriate questions.
The board of
directors recommends a vote FOR this
proposal.
PROPOSAL 3
SHAREHOLDER PROPOSAL
Mrs. Evelyn Y. Davis, whose address is The Watergate Office
Building, 2600 Virginia Ave., N.W., Suite 215,
Washington, D.C. 20037, has given notice of her intention
to present a proposal for consideration by the shareholders at
the annual meeting. The proposal of Mrs. Davis, who is
owner of record of 280 shares of common stock of the
Company, is set forth below in the form of a resolution along
with her supporting statement.
Your board of directors opposes the adoption of the following
proposal for the reasons stated after the proposal and,
therefore, recommends that shareholders vote AGAINST
the proposal.
RESOLVED, That the stockholders of WGL Holdings assembled
in Annual Meeting in person and by proxy, hereby request the
Board of Directors to take the necessary steps to provide for
cumulative voting in the election of directors, which means each
stockholder shall be entitled to as many votes as shall equal
the number of shares he or she owns multiplied by the number of
directors to be elected, and he or she may cast all of such
votes for a single candidate, or any two or more of them as he
or she may see fit.
REASONS: Many states have mandatory cumulative voting, so
do National Banks. In addition, many corporations
have adopted cumulative voting.
Last year the owners of 13,041,737 shares,
representing approximately 45.7% of the shares voting, voted FOR
my proposal.
If you AGREE, please mark your proxy FOR this
resolution.
Board of Directors Recommendation The board
of directors recommends that shareholders vote
AGAINST this shareholder proposal for the following
reasons:
Your board of directors believes it is important for each member
of the board to represent all shareholders, not just a
particular interest group or faction.
Persons serving on the Companys board of directors have
wide experience in law, accounting, business and finance.
Directors are not elected to represent a particular viewpoint,
and the directors do not believe it is desirable to select
candidates for election in that manner.
These objectives of your directors are fundamentally different
from the objectives of a cumulative voting procedure. Cumulative
voting could permit a relatively small group of shareholders to
elect a particular director. A director elected through
cumulative voting might therefore become (or appear to become)
an advocate for a particular shareholder or shareholders. This
result could be directly opposite to the purpose of having each
member of your board of directors represent all shareholders.
Cumulative voting for directors could also result in factions
and interest groups being created in the board, causing
significant interference with the board deliberative process.
45
For these reasons, the board of directors and the management
oppose the proposed resolution.
Mrs. Davis has submitted substantially the same proposal
each year since 1986 and it has been defeated by our
shareholders each year.
For the above reasons, the board of directors recommends that
shareholders vote AGAINST proposal #3.
OTHER
MATTERS
The board of directors knows of no other matters to be brought
before the annual meeting. However, if any other matters come
before the meeting, it is the intention of the persons named in
the enclosed proxy card to vote in accordance with their best
judgment on such matters.
The annual report for fiscal year 2008, including financial
statements, was posted to our web site www.wglholdings.com on
January 20, 2009.
Upon written request, the Company will furnish without charge a
copy of its most recent annual report on
Form 10-K.
Please direct these requests to: Robert Dennis,
Director Investor Relations, WGL Holdings, Inc., 101
Constitution Ave., N.W., Washington, D.C. 20080.
SHAREHOLDER
PROPOSALS FOR THE NEXT ANNUAL MEETING
Any shareholder who wishes to submit a proposal for printing in
the Companys proxy statement for the annual meeting of
shareholders to be held in year 2010 (expected to be held in
March 2010) must submit that proposal so it is received by
the Companys corporate secretary no later than the close
of business on September 22, 2009. To be included in the
Companys proxy statement, the shareholder proposal must
meet the requirements of the applicable rules of the Securities
and Exchange Commission. Proposals should be addressed to the
Corporate Secretary, WGL Holdings, Inc., 101 Constitution Ave.,
N.W., Washington, D.C. 20080.
Other business matters to be brought by shareholders, including
any nominations for board membership, can only be considered at
the shareholder meeting in accordance with advance notice
provisions of the Companys bylaws. Notice of these matters
must be received by the Companys corporate secretary not
less than sixty (60) calendar days prior to the scheduled
date of the next annual meeting of shareholders, or
January 4, 2010, assuming the next annual meeting of
shareholders is held on March 4, 2010. Notice of such
matters should be addressed to the corporate secretary, WGL
Holdings, Inc., 101 Constitution Ave., N.W.,
Washington, D.C. 20080. A copy of the corporate bylaws
which describes the advance notice procedures can be obtained
from the corporate secretary at the address shown in this
paragraph.
By order of the board of directors,
Douglas V. Pope
Secretary
January 20, 2009
46
101 CONSTITUTION AVENUE, NW
WASHINGTON, DC 20080
VOTE BY INTERNET - www.proxyvote.com
Use the Internet to transmit your voting instructions
and for electronic delivery of information up until
11:59 P.M. Eastern Time on March 4, 2009. Have your
proxy card in hand when you access the web site and
follow the instructions to obtain your records and to
create an electronic voting instruction form.
ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS
If you would like to reduce the costs incurred by our
company in mailing proxy materials, you can consent
to receiving all future proxy statements, proxy cards
and annual reports electronically via e-mail or the
Internet. To sign up for electronic delivery, please
follow the instructions above to vote using the
Internet and, when prompted, indicate that you agree
to receive or access proxy materials electronically
in future years.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting
instructions up until 11:59 P.M. Eastern Time on
March 4, 2009. Have your proxy card in hand when you
call and then follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in
the postage-paid envelope we have provided or return
it to Vote Processing, c/o Broadridge, 51 Mercedes
Way, Edgewood, NY 11717.
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|
|
|
|
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: |
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WGLHD1
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KEEP THIS PORTION FOR YOUR RECORDS |
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THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
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DETACH AND RETURN THIS PORTION ONLY |
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WGL HOLDINGS, INC. |
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1 AND 2, AND AGAINST ITEM 3. |
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Vote on Directors |
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For All |
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Withhold All |
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For All Except |
1. |
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Elect Directors of WGL Holdings, Inc. |
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Nominees: |
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01 |
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Michael D. Barnes |
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06 |
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James F. Lafond |
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02 |
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George P. Clancy, Jr. |
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07 |
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Debra L. Lee |
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03 |
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James H. DeGraffenreidt, Jr. |
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08 |
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Terry D. McCallister |
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04 |
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James W. Dyke, Jr. |
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09 |
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Karen Hastie Williams |
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05 |
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Melvyn J. Estrin |
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To withhold authority to vote for any individual |
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nominee(s), mark For All Except and write the
number(s) of the nominee(s) on the line below. |
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For
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Against
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Abstain |
Vote on Proposals |
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2.
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Proposal to ratify the appointment of Deloitte & Touche LLP as independent public accountants for fiscal year 2009.
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3.
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Proposal to provide for cumulative voting in the election of directors.
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4.
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In their discretion, upon such other matters that may properly come before the meeting or any adjournment or adjournments thereof.
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For address changes and/or comments, please check this box and write them on the back where indicated. |
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The shares represented by this proxy, when properly executed, will be voted in the manner directed herein by
the undersigned Shareholder(s). If no direction is made, this proxy will be voted FOR items 1 and 2, and AGAINST
item 3. If any other matters properly come before the meeting, the persons named in this proxy will vote in their discretion.
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Signature [PLEASE SIGN WITHIN BOX]
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Date
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Signature (Joint Owners)
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Important Notice Regarding Internet Availability of
Proxy Materials for the Annual Meeting:
The Notice and Proxy Statement and Annual Report are available at www.proxyvote.com.
WGLHD2
WGL HOLDINGS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ANNUAL MEETING OF SHAREHOLDERS
MARCH 5, 2009
The shareholder(s) hereby appoint(s) James H. DeGraffenreidt, Jr.,
Terry D. McCallister and Vincent
L. Ammann, Jr., or any of them, as proxies, each with the power to appoint his substitute, and
hereby authorizes them to represent and to vote, as designated on the reverse side of this proxy,
all of the shares of common stock of WGL Holdings, Inc. that the shareholder(s) is/ are entitled to
vote at the Annual Meeting of Shareholders to be held at 10:00 a.m., Eastern Standard Time on March
5, 2009, at the National Press Club, 529 14th St., NW, Washington, DC 20045, and any adjournment or
postponement thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED BY THE SHAREHOLDER(S). IF NO
SUCH DIRECTIONS ARE MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE NOMINEES LISTED ON THE
REVERSE SIDE FOR THE BOARD OF DIRECTORS, FOR PROPOSAL 2 AND AGAINST PROPOSAL 3.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING
THE ENCLOSED REPLY ENVELOPE
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Address Changes/Comments: |
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(If you noted any Address Changes/Comments above, please mark
corresponding box on the reverse side.)
CONTINUED AND TO BE SIGNED ON REVERSE SIDE