Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory
Arrangements of Certain Officers.
On July 6, 2018, Terry D. McCallister retired from his officer positions of Chairman of the
Company Board, Chairman of the Washington Gas Board and Chief Executive Officer of each of the Company and Washington Gas. Mr. McCallister will continue to serve as Chairman of the Company Board in a
non-officer
capacity through July 20, 2018 to assist with the transition following the Merger, pursuant to a service agreement entered into with Washington Gas on July 6, 2018, which provides him
with a lump sum cash payment of $34,231
as compensation for such transition services. In connection with his retirement, Mr. McCallister also entered into a Separation Agreement and General Release with Washington Gas, which
provides that Mr. McCallisters retirement constitutes a Good Reason Resignation under the WGL Holdings, Inc. and Washington Gas Light Company Change in Control Severance Plan for Certain Executives (as amended, the
CIC Severance Plan
). In connection with his Good Reason Resignation, Mr. McCallister will receive, under the CIC Severance Plan, the following, provided he does not exercise his revocation right under the Separation Agreement
and General Release as provided therein: (i) a cash severance payment of $5,685,284, which amount equals the sum of (A) three (3) times the sum of his base salary and target short-term incentive, plus (B) a
pro-rata
target short-term incentive payment (with such proration based on the number of days of his employment with the Company from October 1, 2017 through July 6, 2018); (ii) continued medical and
dental coverage under the Companys plan(s) for the
18-month
period following his retirement date (at the Companys cost) and a medical and dental benefit continuation payment to cover the cost of
such coverage for the next
18-month
period, together with additional cash payments to compensate Mr. McCallister for any income taxes payable in connection with such medical and dental benefits; and
(iii) reimbursement for up to $25,000 in outplacement services. Additionally, pursuant to the terms set forth in the Company Disclosure Schedules to the Merger Agreement, the vesting of Mr. McCallisters Post-Signing Company Equity
Awards (as defined in the Merger Agreement) was accelerated upon his retirement.
On July 6, 2018, the Company Board and the
Washington Gas Board appointed Adrian P. Chapman Chief Executive Officer of the Company and Washington Gas, respectively. Mr. Chapman retained his title as President of each of the Company and Washington Gas. In connection with his
appointments, Mr. Chapman entered into a letter agreement with Washington Gas providing,
inter alia
, for an annual base salary of $630,000, a retention bonus of $3,059,500, payable within the
30-day
period immediately following the Closing Date (the
Chapman Retention Bonus
), eligibility to receive certain short- and long-term incentive awards during his tenure and, upon his
retirement, accelerated vesting of the long-term incentive awards granted to him in October 2017 (to the extent still outstanding and unvested) (the
Equity Acceleration
). Payment of the Chapman Retention Bonus is subject to
Mr. Chapmans timely execution (and
non-revocation)
of a general release of claims and Mr. Chapmans compliance with Washington Gass Policy of Post-Employment Restrictions. In
exchange for the Chapman Retention Bonus, pursuant to the letter agreement, Mr. Chapman relinquished certain rights he had under the CIC Severance Plan. Pursuant to the letter agreement, Mr. Chapmans annual bonus will have a target
amount equal to 85% of his then-current base salary, and it is expected that Mr. Chapmans annual long-term incentive award grant will have an aggregate grant date value equal to 180% of his then-current base salary. Mr. Chapman is 60
years old and has served as President and Chief Operating Officer of each of the Company and Washington Gas since October 1, 2009. In connection with the commitments made in the regulatory proceedings related to the Merger, on July 6,
2018, Mr. Chapman was also appointed to serve on the Washington Gas Board. Mr. Chapman also serves as a director of several of the Companys wholly-owned subsidiaries. In addition, Mr. Chapman serves as Chief Executive Officer of
Wrangler 1 LLC, a Delaware limited liability company and an indirect wholly-owned subsidiary of Parent (
Wrangler 1
), President and Chief Executive Officer of AltaGas Utility Holdings (U.S.) Inc., a Delaware corporation and an
indirect wholly-owned subsidiary of Parent (
AUHUS
), and Executive Vice President of AltaGas Services (U.S.) Inc., a Delaware corporation and a direct wholly-owned subsidiary of Parent (
ASUS
).
On July 6, 2018, the Company Board and the Washington Gas Board appointed Vincent L. Ammann, Jr. Executive Vice President of the Company
and Washington Gas, respectively. Mr. Ammann also retains his title as Chief Financial Officer of each of the Company and Washington Gas. In connection with his appointments, Mr. Ammann also entered into a letter agreement with Washington
Gas with substantially similar terms to the letter agreement entered into by Mr. Chapman, except that Mr. Ammanns letter agreement provides for (i) an annual base salary of $525,000, (ii) a retention bonus of $2,348,200, (iii) a
target annual bonus amount equal to 70% of Mr. Ammanns then-current base salary and (iv) an expected annual long-term incentive award grant with an aggregate grant date value equal to 130% of Mr. Ammanns then-current base
salary. Mr. Ammann is not entitled to the Equity Acceleration, and his outstanding long-term incentive awards will be governed by the award agreements pursuant to which such awards were granted. Mr. Ammann is 58 years old and previously
served as the Senior Vice President and Chief Financial Officer of each of the Company and Washington Gas since 2013 and, prior to that, as Vice President and Chief Financial Officer of each of the Company and Washington Gas from 2006 to 2013. On
July 6, 2018, Mr. Ammann was appointed to serve on the Company Board. Mr. Ammann also serves as a director of several of the Companys wholly-owned subsidiaries. In addition, Mr. Ammann serves as Executive Vice President and
Chief Financial Officer of Wrangler 1, Chief Financial Officer of AUHUS and Executive Vice President Finance of ASUS.
On July 6,
2018, the Company Board and the Washington Gas Board appointed Luanne S. Gutermuth Executive Vice President and Chief Administrative Officer of the Company and Washington Gas, respectively. On July 11, 2018, Ms. Gutermuth also entered into a letter
agreement with Washington Gas.
Ms. Gutermuths letter agreement is substantially similar to those entered into by Messrs. Chapman and Ammann, except that it provides for (i) an annual base salary of $479,000, (ii) a
retention bonus of $1,557,800, payable in two installments on the first and second anniversaries of the Closing Date, (iii) a target annual bonus amount equal to 60% of Ms. Gutermuths then-current base salary and (iv) an
expected annual long-term incentive award grant with an aggregate grant date value equal to 110% of Ms. Gutermuths then-current base salary. Ms. Gutermuth is not entitled to the Equity Acceleration, and her outstanding long-term
incentive awards will be governed by the award agreements pursuant to which such awards were granted. Ms. Gutermuth is 55 years old and has previously served as the Senior Vice President and Chief Human Resource Officer of each of the Company
and Washington Gas.
On July 6, 2018, Leslie T. Thornton, Senior Vice President, General Counsel and Corporate Secretary of each of
the Company and Washington Gas, entered into a letter agreement to extend the
90-day
period during which she must tender her resignation in order for such resignation to be considered a Good Reason Resignation
(as defined in the CIC Severance Plan) through November 30, 2018. Prior to her resignation, Ms. Thornton initially will remain in her current roles and help transition her duties to her successor, including working with the search firm on
its external search for her successor. Ms. Thornton plans to retire from her positions with the Company and Washington Gas on or before November 30, 2018. If Ms. Thornton tenders her Good Reason Resignation on or prior to
November 30, 2018, she will be eligible to receive the payments and benefits she was eligible to receive under the CIC Severance Plan in connection with a Good Reason Resignation and accelerated vesting of her Post-Signing Company Awards.
The foregoing descriptions of the service agreement and Separation Agreement and General Release entered into by Mr. McCallister and the
letter agreements entered into by Messrs. Chapman and Ammann and Mses. Gutermuth and Thornton are summaries, do not purport to be complete and are qualified in their entirety by reference to the complete text of the agreements, copies of which will
be included as exhibits to the Companys Annual Report on Form
10-K
for fiscal year ended September 30, 2018.
On July 6, 2018, in accordance with the Merger Agreement, (1) each of Michael D. Barnes, George P. Clancy, Jr., James W. Dyke, Jr.,
Linda R. Gooden, James F. Lafond, Debra L. Lee and Dale S. Rosenthal, each a member of the Company Board immediately prior to the Effective Time, submitted his or her resignation from the Company Board, effective immediately prior to the Effective
Time, and (2) Wrangler 2 LLC, a Delaware limited liability company and an indirect wholly-owned subsidiary of Parent (
Wrangler 2
), as the sole shareholder of the Company immediately following the Merger, elected each of
Vincent L. Ammann, Jr., David M. Harris, Nancy C. Floyd and Terry D. McCallister to serve on the Company Board, effective as of the Effective Time, until his or her respective successor is elected and qualified. As discussed above, Messrs. Ammann
and McCallister were employees of Washington Gas prior to the Merger, and Mr. Ammann continues to be an employee of Washington Gas following the Merger. Ms. Floyd also serves as a director of certain of Parents wholly-owned
subsidiaries.
Other than as set forth above, the Company is not aware of any arrangements or understandings between the foregoing
persons, on the one hand, and any other person, on the other hand, pursuant to which they were selected to their new positions with the Company. Other than as set forth above, the Company is not aware of any transaction in which the foregoing
persons have an interest requiring disclosure under Item 404(a) of Regulation
S-K.
In addition,
on July 6, 2018, (1) each of Michael D. Barnes, George P. Clancy, Jr., Nancy C. Floyd, James F. Lafond, Debra L. Lee and Terry D. McCallister, each a member of the Washington Gas Board immediately prior to the Effective Time, submitted his or
her resignation from the Washington Gas Board, effective immediately prior to the Effective Time, and (2) the Washington Gas Board appointed each of Adrian P. Chapman, John E. Lowe, David M. Harris and John F. Stark to serve on the Washington
Gas Board, effective immediately following the Effective Time. James W. Dyke, Jr., Linda R. Gooden and Dale S. Rosenthal, each a member of the Washington Gas Board immediately prior to the Effective Time, will continue to serve on the Washington Gas
Board. Mr. Stark was appointed to serve as Chairman of the Washington Gas Board. As discussed above, Mr. Chapman was an employee of Washington Gas prior to the Merger and continues to be an employee of Washington Gas following the Merger.
Messrs. Harris and Lowe were employees of Parent prior to the Merger, serving as President and Chief Executive Officer and Executive Vice President, respectively, and continue to serve in such capacities following the Merger. The current composition
of the Washington Gas Board is consistent with the commitments made in the regulatory proceedings related to the Merger and in accordance with the Stockholder Agreement.
Other than as set forth above, Washington Gas is not aware of any arrangements or understandings
between the foregoing persons, on the one hand, and any other person, on the other hand, pursuant to which they were selected to their new positions with Washington Gas. Other than as set forth above, Washington Gas is not aware of any transaction
in which the foregoing persons have an interest requiring disclosure under Item 404(a) of Regulation
S-K.
The director resignations discussed above were not the result of any disagreements with the Company or Washington Gas.
In connection with the Merger, the Executive, Governance and Human Resources Committees of the Company Board have been dissolved. The Company
Board appointed Ms. Floyd to serve as Chair of the Audit Committee for the Company Board. Mr. McCallister was also appointed to serve on the Audit Committee of the Company Board.
Also in connection with the Merger, the Executive Committee of the Washington Gas Board was dissolved. The Governance Committee of the
Washington Gas Board became the Governance & Environment, Health and Safety Committee (
Governance
& EHS Committee
). The Washington Gas Board appointed Mr. Dyke to serve as Chairman of the
Governance & EHS Committee. Other directors appointed to the Governance & EHS Committee were Messrs. Lowe and Stark. The Washington Gas Board appointed Ms. Rosenthal to serve as Chair of the Audit Committee of the Washington
Gas Board. Other directors appointed to the Audit Committee of the Washington Gas Board were Ms. Gooden and Mr. Stark. Finally, the Washington Gas Board appointed Ms. Gooden to serve as Chair of the Human Resources Committee of the
Washington Gas Board. Other directors appointed to the Human Resources Committee were Messrs. Dyke and Harris.
As compensation for the
above director appointments, Mr. Stark will receive an annual cash retainer of $200,000, and each of Mr. Dyke and Mses. Floyd, Gooden and Rosenthal will receive an annual cash retainer of $175,000, in each case, paid in equal installments
quarterly in arrears, subject to each such directors continued service on the Company Board or the Washington Gas Board, as applicable, during such quarter (with proration for any partial quarters of service). In addition, to the extent any of
the
non-executive
directors also serves on the board of directors of another subsidiary of Parent, such
non-executive
directors annual cash retainer will be
increased by $25,000.
Non-executive
directors will also be entitled to reimbursement for their reasonable
out-of-pocket
expenses
incurred while acting as directors, including travel expenses.