AMENDED AND RESTATED EMPLOYMENT AGREEMENT
EXHIBIT
10.4
AMENDED
AND RESTATED
THIS
AGREEMENT ( the “Agreement”) is
made
as of the first day of March, 2005, between The United Illuminating Company,
a
Connecticut Corporation (the “Company”) and Xxxxxxx X. Xxxxxxxx (the
“Executive”),
WITNESSETH
THAT
WHEREAS,
the Executive previously has been employed by the Company as its Vice President,
Finance and Chief Financial Officer of the Company, and is covered by the terms
of a certain employment agreement with The United Illuminating Company, dated
as
of March 22, 2004, as amended by a First Amendment thereto; and
WHEREAS,
the Company desires to continue to employ the Executive as its Vice President,
Finance and Chief Financial Officer, and to reflect the appointment of the
Executive, effective as of March 1, 2005, as the Executive Vice President and
Chief Financial Officer of UIL Holdings Corporation (“UIL”), and the parties
desire to be bound by the terms of this revised employment Agreement (the
“Agreement”), which shall supersede and replace all provisions of the prior
employment agreement;
NOW
THEREFORE, in consideration of the foregoing and the respective covenants and
agreements of the parties herein contained, and the services to be rendered
to
the Company pursuant hereto, the parties hereby agree as follows:
(1) EMPLOYMENT;
TERM
(a) The
Company hereby agrees to employ the Executive, and the Executive hereby agrees
to serve the Company, at the pleasure of the Board of Directors of the Company
(the “Company Board”) and the Board of Directors of UIL Holdings Corporation
(the “UIL Board”), all upon the terms and conditions set forth
herein.
(b) The
term
of this Agreement shall be for a period commencing on the date first stated
above and ending on the second anniversary of that date, unless this Agreement
is earlier terminated as provided in Section 5 (the “Initial Term”). Unless the
Company has provided the Executive with at least ninety (90) days prior written
notice of its decision not to renew this Agreement after the Initial Term or
any
subsequent term, this Agreement shall be automatically renewed for a successive
one year term (the Initial Term and any renewal term being referred to as the
“Term”). For
purposes of this Agreement, a non-renewal at the election of the Company at
the
end of a Term shall constitute a termination of this Agreement without cause,
and shall be governed by the provisions of Section 6(c). In no event shall
the
Company give notice of a non-renewal from the time that an impending Change
in
Control (as hereinafter defined) is announced through the date of the
consummation of such Change in Control.
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(2) POSITION
AND DUTIES
(a)
The
Executive shall be employed by the Company as its Vice President, Finance and
Chief Financial Officer, and shall also serve as the Executive Vice President
and Chief Financial Officer of UIL or in such other equivalent or higher
position as the UIL Board may determine. The Executive shall:
(i)
accept such employment and perform and discharge, faithfully, diligently and
to
the best of the Executive's abilities, the duties and obligations of the
Executive's office and such other duties as may from time to time be assigned
to
the Executive by, or at the direction of, the Company Board and UIL Board or
the
President and Chief Executive Officer of UIL; and
(ii)
devote substantially all of the Executive's working time and efforts to the
business and affairs of the Company and UIL.
(b)
Prior
to a Change in Control, in the event that the Executive is named by the UIL
Board to a position higher in rank or compensation than that applicable at
the
commencement of the Initial Term, nothing in this Agreement shall obligate
the
Company or UIL to continue such Executive in such higher position; and the
Company shall not be deemed in “Breach” of the Agreement (as defined in Section
5(d)) for failure to continue the Executive in such higher
position.
(c)
If
the Executive is a participant in the UIL Holdings Corporation Change in Control
Severance Plan (the “UIL CIC Plan II”) as of a Change in Control as therein
defined, then for the twenty-four month period after such Change in Control,
the
Company’s employment of the Executive shall be without diminishment in the
Executive's management responsibilities, duties or powers. In the event that
the
Executive’s employment is not so continued, the Executive may claim to have
suffered a Constructive Termination, in accordance with the terms of the UIL
CIC
Plan II.
(3) PLACE
OF PERFORMANCE
In
his
employment by the Company, the Executive shall be based within a fifty (50)-mile
radius of the current executive offices of the Company in New Haven,
Connecticut.
(4) COMPENSATION
(a)
Base
Salary.
During
the Initial Term of the Executive's employment hereunder, the Executive shall
receive a base salary (“Base Salary”) at an annual rate of Two Hundred Twenty
Seven Thousand Dollars ($227,000.00) effective April 1, 2005 and One Hundred
Ninety Seven Thousand Dollars ($197,000.00) before that date, payable in
accordance with the then customary payroll practices of the Company. The
Executive's performance and Base Salary shall be reviewed by the UIL Board
at
least annually, and may be revised upward as a result of any such review. The
Executive’s Base Salary may be revised downward by the UIL Board
contemporaneously with any general reduction of the salary rates of the
Company’s other officers.
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(b)
Incentive
Compensation.
During
the Term of the Executive’s employment hereunder, the Executive shall be
eligible to be designated by the Company Board, or by the UIL Board in the
event
that the plan is a UIL plan, as a participant in each annual short-term
incentive compensation program, and any long-term incentive program, maintained
for management employees of the Company; provided, however, that entitlement
to
participation, and continued participation, in any long-term equity incentive
program shall be conditioned upon the Executive fully complying with any stock
ownership and retention guidelines from time to time established and promulgated
by the UIL Board.
For
purposes of this Agreement, the Executive’s “Accrued
Incentive Compensation”
shall
mean the amount of any annual short-term incentive compensation earned with
respect to the calendar year ended prior to the Date of Termination (as defined
in Section 5) but not yet paid as of the Executive’s Date of
Termination.
The
Executive’s “Stub-Period
Incentive Compensation”
shall
mean the annual short-term incentive compensation being earned in the year
in
which the Executive terminates employment, pro-rated for the year in which
he
terminates service, and shall be equal to that short-term annual incentive
compensation payment to which the Executive would be entitled, if any, under
the
terms of the Company’s executive incentive compensation plan, calculated as if
he had been employed by the Company on the last day of the year including his
Date of Termination, and had achieved personal goals ‘at target’, but based on
actual performance with respect to the achievement of UIL and Company financial
goals (collectively referred to as “Company goals”), multiplied by a fraction,
the numerator of which is the number of days which have elapsed in such year
through the Date of Termination and the denominator of which is 365. UIL shall
determine in its discretion the composition of the Executive’s scorecard, and
what constitutes a ‘personal goal’ and ‘Company goal’; provided generally that
an Executive’s ‘personal goals’ shall include, for example, his strategic
opportunities, leadership, and balance scorecard goals, other than business
unit
and UIL total financial goals, and Company goals shall include, for example,
UIL
and business unit financial goals based on earnings per share, cash flow, and
all other goals not defined as personal goals. In the event that the ‘gate’, if
any, is not achieved with respect to Company goals, then no Stub-Period
Incentive Compensation will be paid. Any Stub-Period Incentive Compensation
payable upon termination of the Executive shall be paid in accordance with
Section 6(e) of this Agreement.
(c)
Change
in Control Severance Plan. The
Executive has been designated by the UIL Board as an individual covered by
the
UIL Holdings Corporation Change in Control Severance Plan II (the “UIL CIC Plan
II”), subject to all of the terms and provisions of the UIL CIC Plan II as it
may be amended from time to time. For purposes of this Agreement, “Change in
Control” shall have the meaning set forth in the UIL CIC Plan II and the
Executive’s level of benefits under said Plan II shall be determined by his
classification as Chief Financial Officer of UIL Holdings Corporation for so
long as Executive holds such office.
Nothing
in this subsection, however, shall entitle the Executive to continued
participation in such Plan should the UIL Board determine otherwise in
accordance with the terms of that Plan.
(d)
Business
Expenses.
During
the Term, the Executive shall be entitled to receive prompt reimbursement for
all reasonable employment- related business expenses incurred by the Executive,
in accordance with the policies and procedures established by the Company Board
from time to time for all of the Company's officers, provided that the Executive
properly accounts therefor.
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(e)
Benefit
Programs.
During
the Term of the Executive's employment hereunder and to the extent he meets
the
applicable eligibility requirements, the Executive shall be entitled to
participate in and receive benefits under all of the Company's employee benefit
plans, programs and arrangements for its similarly situated officers on the
same
terms and conditions that apply to such officers, including, without limitation,
any plan or program of an affiliated company in which the Company is a
participating employer, but only for so long as the Company remains a
participating employer. Except as otherwise expressly provided, nothing paid
to
the Executive under any such plan, program or arrangement presently in effect
or
made available by the Company in the future shall be deemed to be in lieu of
compensation to the Executive under any other Section of this Agreement.
Nothing
in this Agreement shall require the Company to maintain a particular benefit
plan or program, or preclude the Company from amending or terminating any such
plans, programs or arrangements, including its participation therein, or
eliminating, reducing or otherwise changing any benefit provided thereunder,
so
long as such change similarly affects all similarly situated employees of the
Company and is in compliance with applicable law.
(f)
Vacations
and Holidays.
The
Executive shall be entitled to that number of weeks of paid vacation in each
calendar year determined by the Company Board from time to time to be available
to similarly situated Company officers (up to a maximum of five (5) weeks in
each calendar year), and shall also be entitled to all paid holidays afforded
by
the Company to its management employees.
(5) TERMINATION
(a)
Death
or Disability.
The
Executive's employment hereunder shall terminate upon the Executive's death
or
termination due to disability (as described in Section 6(a) of this
Agreement).
(b)
Termination
by Company for Cause.
The
Company may at any time by written notice to the Executive terminate the
Executive’s employment for Cause in accordance with the following provisions:
(i)
Termination
for Cause Prior to a Change in Control.
Prior
to the date of a Change in Control, the Company shall be deemed to have “Cause”
to terminate the Executive’s employment hereunder only upon the Executive’s:
(1)
failure to comply with any material term of this Agreement, or to perform and
discharge the duties or obligations of the Executive’s office, or such other
duties as may from time to time be assigned to the Executive by, or at the
direction of, the UIL Board, faithfully, diligently, and competently, in the
opinion of a majority of the members of the UIL Board, unless any such failure
is cured in all material respects to the reasonable satisfaction of the UIL
Board within sixty (60) days after the Executive receives written notice of
such
failure; or
(2)
failure to devote substantially all of his working time and efforts to the
business and affairs of the Company unless any such failure is cured in all
material respects to the reasonable satisfaction of the UIL Board within sixty
(60) days after the Executive receives written notice of such failure;
or
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(3)
misconduct that is demonstrably injurious to the interests of the Company or
its
Affiliates (as that term is defined in Section 10) unless such misconduct is
rectified in all material respects to the reasonable satisfaction of the UIL
Board within thirty (30) days after the Executive receives written notice of
such misconduct; or
(4)
commission of a serious crime, such as an act of fraud, misappropriation of
funds, embezzlement, or a crime involving personal dishonesty or moral
turpitude.
(ii)
Termination
for Cause After a Change in Control.
During
the period that commences on a Change in Control and for twenty-four (24) months
thereafter (the “Change in Control Protective Period”), and subject to the same
notice and cure provisions specified above, the Company (or its successor or
other entity employing the Executive following such Change in Control) shall
be
deemed to have Cause to terminate the Executive’s employment hereunder only upon
the Executive’s:
(1)
commission of a serious crime, such as an act of fraud, misappropriation of
funds, embezzlement, or a crime involving personal dishonesty or moral
turpitude; or
(2)
misconduct that is demonstrably injurious to the interests of the Company or
its
Affiliates; or
(3)
willful failure of the Executive to substantially perform his duties (other
than
by reason of incapacity due to physical or mental illness or
injury).
(c) Termination
by Company without Cause.
The
Company may terminate the Executive’s employment at any time, without cause,
upon ninety (90) days prior written notice to the Executive.
(d) Termination
by Executive.
(i) If
the
Executive is not in default of any of the Executive’s obligations under Sections
(2), (9), (10), (11) or (12) hereof, the Executive may terminate employment
hereunder upon at least thirty (30) days’ prior notice, for failure of the
Company to observe and perform one or more of its obligations under Sections
(2), (3) and/or (4) hereof, which failure the Company fails to remedy within
such notice period (a “Breach by the Company”).
(ii) If
the
Executive is not in default of any of the Executive’s obligations under Sections
(2), (9), (10), (11) or (12) hereof, the Executive may terminate employment
hereunder in the absence of a Breach by the Company, effective upon at least
ninety
(90) days prior
written notice.
(e) Date
of Termination.
For
purposes of this Agreement, the “Date of Termination” is defined as (i) the
Executive’s date of death, in the event of his death; or the date of his
termination due to disability, in the case of disability, or (ii) the date
specified in the notice
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of
termination, in the case of the Executive’s termination pursuant to Sections
(5)(b), (5)(c), 5(d) hereof.
(6) CONSEQUENCES
OF TERMINATION OR NON-RENEWAL.
(a)
Termination
on Death, Disability or Retirement; or by the Executive in the Absence of a
Breach by the Company upon Adequate Notice.
If the
Executive’s employment terminates by reason of the Executive’s death, or his
total or partial physical or mental disability such
that
the Executive becomes entitled to long-term disability benefits under the
Company’s long-term disability plan,
or if
the Executive retires on or after becoming eligible to retire under the terms
of
the Company’s Pension Plan, or terminates employment hereunder in the absence of
a Breach by the Company upon ninety (90) days prior written notice, the Company
shall pay to the Executive or, in the event of death or disability, the
Executive’s personal representative and/or spouse:
(i)
the
Executive’s Base Salary earned, but unpaid, as of the Date of Termination and
Accrued Incentive Compensation (as defined in Section 4(b));
(ii)
Stub-Period Incentive Compensation (as defined in Section 4(b)) earned, but
unpaid, as of the Date of Termination, but only in the case of the Executive’s
death or termination due to disability, or retirement (as hereinbefore defined),
and not in case of his voluntary termination other than on account of such
retirement; plus
(iii)
any
amounts payable pursuant to (4)(d) (unreimbursed business expenses), (4)(e)
(employee benefits due and owing), and 4(f) (accrued, but unpaid vacation or
holidays); plus
(iv)
any
benefits or amounts payable on account of the Executive’s (A) participation in
any long-term incentive compensation plan and equity compensation plan or
arrangement, and (B) participation in any deferred compensation plan in which
he
was a participant as of his termination of service, all as determined in
accordance with the terms and conditions of such plans and arrangements.
Pending
a
determination that the Executive is entitled to long-term disability benefits,
the Executive’s short-term disability benefits shall be extended, as necessary
at 50% of Base Salary, if his length of employment with the Company is of such
short duration that his short term disability benefits would otherwise expire
before his entitlement to long-term disability benefits is
determined.
Upon
payment of these amounts, the Company shall have no further obligation to the
Executive, the Executive’s personal representative and/or spouse under this
Agreement or on account of, or arising out of, the termination of the
Executive’s employment.
(b)
Upon
Termination for Cause; or by the Executive on fewer than 90 days
notice.
If the
Company terminates the Executive’s employment for Cause, or the Executive
terminates employment hereunder in the absence of a Breach by the Company and
upon fewer than ninety
(90) days prior
written notice, the Company shall pay to the Executive:
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(i)
the
Executive’s Base Salary earned, but unpaid, as of the Date of Termination;
plus
(ii)
any
amounts payable pursuant to Sections (4)(d), (4)(e), and 4(f) hereof, and
(iii)
any
benefits payable under any elective non-qualified deferred compensation plan
in
which the Executive had been a participant, other than any benefit under any
supplemental executive retirement plan of the Company or an Affiliate,
whereupon
the Company shall have no further obligation to the Executive under this
Agreement or on account of, or arising out of, the termination of the
Executive’s employment.
(c)
Upon
Termination Without Cause, or Upon Breach by the Company, not on account of
a
Change in Control.
If the
Company terminates the Executive's employment hereunder without Cause (including
by non-renewal
of this Agreement at the election of the Company at the end of a
Term),
or if
the Executive terminates the Executive's employment hereunder on account of
a
Breach by the Company, and in either case the termination is not upon a Change
in Control or within the Change in Control Protective Period, the Company shall
pay or provide (as applicable) to the Executive, the following:
(i)
the
Executive’s Base Salary, Accrued Incentive Compensation and Stub-Period
Incentive Compensation earned, but unpaid, as of the Date of Termination;
plus
(ii)
any
amounts payable pursuant to Sections 4(d), 4(e), and 4(f); plus
(iii)
any
benefits or amounts payable on account of the Executive’s (A) participation in
any long-term incentive compensation plan and equity compensation plan or
arrangement, and (B) participation in any deferred compensation plan in which
he
was a participant as of his termination of service, all as determined in
accordance with the terms and conditions of such plans and arrangements;
plus
(iv)
lump
sum severance equal to two (2) times the
sum
of:
(1)
the
Executive’s annual Base Salary rate in effect immediately prior to the
Executive’s Date of Termination, as determined by the UIL Board’s most recent
review of salary rates pursuant to Section 4(a); and
(2)
the
short-term annual incentive compensation payment to which the Executive would
be
entitled, calculated as if he had been employed by the Company on the last
day
of the year of his Termination, and as both personal goals and Company goals
had
been achieved ‘at target’, without pro-ration for the fact that the Executive
was employed only a portion of such year. Except for the assumption that such
goals shall have been achieved at target, personal and Company goals shall
be
defined and determined as set forth in Section 4(b) of this
Agreement.
(v)
for
the period ending on the second anniversary of the date of the Executive’s Date
of Termination, continued participation in the medical and dental plans and
programs in
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which
he
was a participant as of his Date of Termination on the same basis as if he
remained an active employee, provided that such participation is possible under
the terms and provisions of such plans and programs and applicable law. In
the
case of continuation in the Company’s medical and dental plans, such period of
continued participation shall run concurrently with, and reduce day- for-day,
any obligation that the Company or any Affiliate would have to provide “COBRA”
continuation coverage with respect to the Executive’s termination of employment.
If the Executive’s participation in any such plan or program is barred as a
result of the Executive’s termination, the Company shall arrange to provide the
Executive with benefits substantially similar on an after-tax basis to those
that the Executive would have been entitled to receive under such plan or
program, provided that with respect to any benefit to be provided on an insured
basis, the value of such coverage shall be based on the present value of the
premiums expected to be paid for such coverage, and with respect to other
benefits, such value shall be the present value of the expected cost to the
Company of providing such benefits; and
(vi)
the
addition of two (2) years of service deemed as an Employee of the Company in
the
calculation of the entitlement to and benefits payable under the Company’s
retiree medical benefit plan and in the calculation of benefits payable under
the Company’s Pension Plan, which amount shall be paid as a non-qualified
supplemental retirement benefit.
(d)
Upon
Non-renewal of Agreement at end of Term.
If the
Executive’s employment hereunder is terminated due to non-renewal of this
Agreement, the Company shall pay or provide (as applicable) to the Executive
the
same payments and benefits to which the Executive would have been entitled
had
he been terminated without cause in accordance with Section 6(c) of this
Agreement.
(e)
Timing
of Payment.
Any
cash
amount that is due and owing to the Executive upon his termination of service
pursuant to Section 6 will be paid as soon as administratively feasible
following the effective date (including any revocation period) of the Release
provided for in Section 6(f); provided, however, that (i) any Stub-Period
Incentive Compensation, and (ii) that portion of any severance payment that
is
based on annual short-term incentive compensation shall be paid following the
close of the year in which the Date of Termination occurs, at the same time
that
incentive compensation generally would be payable upon authorization of the
UIL
Board to all other employees.
(f)
Release.
All
payments and obligations of the Company under Section (6), (7), (8) and (9)
shall be conditioned upon the execution and delivery by Executive to the Company
of a full and effective release by Executive of any liability by the Company
to
Executive in form and substance reasonably satisfactory to the
Company.
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(7) CHANGE
IN CONTROL
(a)
If
on, or within twenty-four (24) months following a Change in Control, the Company
(or its successor or other entity employing the Executive following such Change
in Control) either terminates the Executive's employment hereunder without
Cause
or fails to renew this Agreement on substantially identical terms, or if the
Executive terminates the Executive's employment on account of a Constructive
Termination (as defined in the UIL CIC Plan II), then the Executive shall be
entitled to the following:
(i)
the
Executive’s Base Salary, Accrued Incentive Compensation and Stub-Period
Incentive Compensation earned, but unpaid, prior to the Date of Termination;
plus
(ii)
any
amounts payable pursuant to Sections 4(d), 4(e), and 4(f) hereof;
plus
(iii)
any
benefits or amounts payable on account of the Executive’s (A) participation in
any long-term incentive compensation plan and equity compensation plan or
arrangement, and (B) participation in any deferred compensation plan in which
he
was a participant as of his termination of service, all as determined in
accordance with the terms and conditions of such plans and arrangements;
plus
(iv)
those payments, and benefits, if any, to which the Executive is entitled by
reason of having been designated a Participant in the UIL CIC Plan II. The
severance payments, pension supplements and other benefit provisions under
such
Plan (the “Total UIL CIC Plan Package”) shall be controlling and shall supplant
the payments and benefits to which the Executive would be entitled assuming
the
Executive were terminated without Cause pursuant to the terms of this Agreement,
including without limitation any severance benefits, supplemental retirement
benefits, short-term incentive compensation and other compensation and benefits
(other than long term incentive compensation) under this Agreement (the
“Employment Agreement Termination Package”); expressly provided, however, that
in the event that the Employment Agreement Termination Package exceeds the
value
of the Total UIL CIC Plan Package, then the Executive shall be entitled to
select one or the other Package, but shall not be entitled to both, and shall
not be entitled to select among compensation elements in each
Package.
Notwithstanding
the foregoing, in the event a Change in Control (as defined in the UIL CIC
Plan
II) occurs on or before October 24, 2008, and the Executive is an employee
in
good standing under a CIC plan of the Company or UIL at the time of such Change
in Control, the Executive shall be entitled, in lieu of the severance under
such
CIC plan, to a grandfathered severance benefit under such plan, based on the
severance formula in effect under the CIC Plan I as of October 23, 2003 in
the
amount of Four Hundred Eighty Nine Thousand, Seven Hundred Six Dollars
($489,706.00), if such amount would be greater than the amount of the severance
benefit to which the Executive otherwise would be entitled under the CIC II
Plan, or such other CIC plan as may be in effect with respect to the Executive
at such time.
(b)
For
purposes of this Agreement, Change in Control shall mean “Change in Control” as
defined with respect to the Company employing the Executive in the UIL CIC
Plan
II, as amended from time to time.
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(c)
Payment of benefits under this Section 7 shall be subject to, and conditioned
upon, the provisions of Section 6(e) and (f) hereof.
(8)
ADDITIONAL CONSEQUENCES OF A CHANGE IN CONTROL
(a)
Payments
to Executive.
In the
event that a Change in Control has been approved by all necessary shareholder,
creditor and regulatory actions, then, the Company will pay to the Trustee
of
the UIL Holdings Corporation Supplemental Retirement Benefit Rabbi Trust, as
the
same may be amended or superseded, for the benefit of the Executive, cash equal
to that amount, calculated by the Company’s independent certified public
accountants, to be reasonably sufficient to pay and discharge the Company’s
future obligations, if any, to the Executive and/or his personal representative
and/or spouse, under Section 7 and (11) hereof, but only if (i) the Executive’s
employment has been terminated or will be terminated prior to the date of the
Change in Control and (ii) the Company does not make such payment directly
to
the Executive.
In
the
event that the Executive’s employment has not been terminated prior to the date
of the Change in Control, but subsequently is terminated other than for Cause
during the Change in Control Protective Period, then as of the date that notice
of Date of Termination is given to the Executive (or that it is finally
determined that there is a Constructive Termination, in the case of termination
by the Executive), the Company’s Successor (as defined in the UIL CIC Plan)
shall deposit a sum, calculated by such Successor’s independent certified public
accountants, reasonably sufficient to pay and discharge such Successor’s
obligations to the Executive under Section 7 and (11) hereof.
(b) Reduction
of Salary.
During
the Change in Control Protective Period, the Executive’s Base Salary may not be
reduced to an annual rate less than the Base Salary rate fixed by the UIL Board
as a result of its most recent review of salary rates, unless such reduction
is
part of, and consistent with, a general reduction of the compensation rates
of
all employees of the Company, its successor, or purchaser of assets, as the
case
may be.
(9)
GROSS
UP FOR EXCISE TAX.
(a) Anything
in this Agreement to the contrary notwithstanding, in the event that it shall
be
determined that any payment made and benefits provided by the Company or UIL
to
or for the Executive, whether paid or payable or distributed or distributable
pursuant to the terms of this Agreement or otherwise, would constitute an
“excess parachute payment” within the meaning of Section 280G of the Internal
Revenue Code of 1986 subject to an excise tax under Section 4999 of the Internal
Revenue Code of 1986 as amended (the “Code”) or any successor provision (the
“Excise Tax”), the Executive shall be paid an additional amount (the “Gross-Up
Payment”) such that the net amount retained by Executive after deduction of any
Excise Tax, and any federal, state and local income and employment tax
(including any Excise Tax imposed upon the Gross-Up Payment itself) shall be
equal to the total amount of all payments and benefits to which the Executive
would be entitled pursuant to this Agreement absent the Excise Tax, but net
of
all applicable federal, state and local taxes. For purposes of determining
the
amount of the Gross-Up Payment, Executive shall be deemed to pay federal income
tax and employment taxes at the highest marginal rate of federal income and
employment taxation in the calendar year in which the Gross-Up Payment is to
be
made and state and local income taxes at the highest marginal rate of taxation
in the state and locality of
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Executive’s
residence in the calendar year in which the Gross-Up Payment is to be made,
net
of the maximum reduction in federal income taxes that may be obtained from
the
deduction of state and local taxes.
(b) The
Gross-Up Payment, if any, shall be paid to the Executive or, at the discretion
of the Company, directly to governmental authorities through tax withholding
on
the Executive’s behalf, as soon as practicable following the payment of the
excess parachute payment, but in any event not later than 30 business days
immediately following such payment; provided that any Gross-up Payment under
this Section 9, including Section 9(d) shall be conditioned upon the Executive
providing the release called for in Section 6(f) and complying with the
confidentiality and non-compete provisions of this Agreement.
(c) Subject
to the provisions of Section 9(d), all determinations required to be made under
this Section 9, including whether and when a Gross-Up Payment is required and
the amount of such Gross-Up Payment and the assumptions to be utilized in
arriving at such determination, shall be made by tax counsel appointed by the
Company (the "Tax Counsel"), which shall provide its determinations and any
supporting calculations both to the Company and Executive within 10 business
days of having made such determination. The Tax Counsel shall consult with
the
Company’s benefit consultants and counsel in determining which payments to, or
for the benefit of, the Executive are to be deemed to be ‘parachute payments’
within the meaning of Section 280G(b)(2) of the Code. Any
such
determination by the Tax Counsel shall be final and binding upon the Company
and
Executive. All fees and expenses of the Tax Counsel (and, if applicable benefits
consultants or other counsel) shall be borne solely by the Company. As a result
of the uncertainty in the application of Section 4999 of the Code at the time
of
the initial determination by the Tax Counsel hereunder, it is possible that
Gross-Up Payments, which will not have been made by the Company, should have
been made ("Underpayment"). In the event that it is ultimately determined in
accordance with the procedures set forth in Section 9(d) that the Executive
is
required to make a payment of Excise Tax, the Tax Counsel shall determine the
amount of the Underpayment that has occurred, and any such Underpayment shall
be
promptly paid by the Company to or for the benefit of the
Executive.
(d) The
Executive shall notify the Company in writing of any claims by the Internal
Revenue Service that, if successful, would require the payment by the Company
of
any, or any additional, Gross-Up Payment. Such notification shall be given
as
soon as practicable but no later than 30 days after the Executive actually
receives notice in writing of such claim and shall apprise the Company of the
nature of such claim and the date on which such claim is requested to be paid.
The Executive shall not pay such claim prior to the expiration of the 30-day
period following the date on which he gives such notice to the Company (or
such
shorter period ending on the date that any payment of taxes with respect to
such
claim is due). If the Company notifies the Executive in writing prior to the
expiration of such period that it desires to contest such claim, the Executive
shall:
(1)
give
the Company any information reasonably requested by the Company relating to
such
claim;
(2)
take
such action in connection with contesting such claim as the Company shall
reasonably request in writing from time to time, including, without limitation,
accepting legal representation with respect to such claim by an attorney
selected by the Company and
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reasonably
acceptable to the Executive;
(3)
cooperate with the Company in good faith in order to contest such claim
effectively; and
(4)
if
the Company elects not to assume and control the defense of such claim, permit
the Company to participate in any proceedings relating to such
claim;
provided,
however, that the Company shall bear and pay directly all costs and expenses
(including additional interest and penalties) incurred in connection with such
contest and shall indemnify and hold the Executive harmless, on an after-tax
basis, for any Excise Tax (including interest and penalties with respect
thereto) imposed as a result of such representation and payment of costs and
expenses. Without limitation on the foregoing provisions of this Section 9(d),
the Company shall have the right, at its sole option, to assume the defense
of
and control all proceedings in connection with such contest, in which case
it
may pursue or forego any and all administrative appeals, proceedings, hearings
and conferences with the taxing authority in respect of such claim and may
either direct the Executive to pay the tax claimed and xxx for a refund or
contest the claim in any permissible manner, and the Executive agrees to
prosecute such contest to a determination before any administrative tribunal,
in
a court of initial jurisdiction and in one or more appellate courts, as the
Company shall determine; provided, however, that if the Company directs the
Executive to pay such claim and xxx for a refund, the Company shall advance
the
amount of such payment to the Executive, on an interest-free basis, and shall
indemnify and hold the Executive harmless, on an after-tax basis, from any
Excise Tax (including interest or penalties with respect thereto) imposed with
respect to such advance or with respect to any imputed income with respect
to
such advance; and further provided, that any extension of the statute of
limitations relating to payment of taxes for the taxable year of the Executive
with respect to which such contested amount is claimed to be due is limited
solely to such contested amount. Furthermore, the Company's right to assume
the
defense of and control the contest shall be limited to issues with respect
to
which a Gross-Up Payment would be payable hereunder, and the Executive shall
be
entitled to settle or contest, as the case may be, any other issue raised by
the
Internal Revenue Service or any other taxing authority.
(e) If,
after
the receipt by the Executive of an amount advanced by the Company pursuant
to
Section 9(d), the Executive becomes entitled to receive any refund with respect
to such claim, the Executive shall (subject to the Company's complying with
the
requirements of Section 9(d)) promptly pay to the Company the amount of such
refund (together with any interest paid or credited thereon after taxes
applicable thereto). If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 9(d), a determination is made that
the Executive shall not be entitled to any refund with respect to such claim,
and the Company does not notify the Executive in writing of its intent to
contest such denial of refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall not be required
to
be repaid, and the amount of such advance shall offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid.
(10)
CONFIDENTIAL INFORMATION
The
Executive recognizes that the Executive’s employment by the Company is one of
highest trust and confidence by reason of his access to certain trade secrets,
confidential business
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practices,
and proprietary information concerning the Company or any person or entity
that
directly, or indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with, the Company (an “Affiliate”),
including, without limitation, the Company’s methods of doing business,
marketing and strategic business plans, employees’ compensation and contract
terms, customer lists and customer characteristics (collectively referred to
as
“Proprietary Information”). The Executive agrees and covenants to exercise
utmost diligence to protect and safeguard the trade secrets, confidential
business practices and Proprietary Information concerning the Company and any
Affiliate. The Executive further agrees and covenants that, except with the
prior written consent of the Company, he will not, either during the Term hereof
or thereafter, directly or indirectly, use for his own benefit or for the
benefit of any other person or organization, or disclose, disseminate or
distribute to any other person or organization, any of the Proprietary
Information (whether or not acquired, learned, obtained or developed by the
Executive alone or in conjunction with another), unless and until such
Proprietary Information has become a matter of public knowledge through no
action or fault of the Executive or unless otherwise required by court order
to
comply with legal process. All memoranda, notes, records, drawings, documents
or
other writings whatsoever made, compiled, acquired or received by the Executive
during the Term hereof arising out of, in connection with, or related to any
activity or business of the Company are and shall continue to be the sole and
exclusive property of the Company, and shall, together with all copies thereof,
be returned and delivered to the Company by the Executive immediately, when
he
ceases to be employed by the Company, or at any other time upon the Company’s
demand.
(11)
NON-COMPETITION
(a)
The
Executive agrees and covenants that, during the Term of this Agreement and
for a
period of twelve (12) months following the month during which the Executive
ceases to be employed by the Company and its Affiliates (the “time in
question”), the Executive will not, in any capacity, directly or
indirectly,
whether
as a consultant, employee, officer, director, partner, member, principal,
shareholder, or otherwise:
(i)
become employed by, enter into a consulting arrangement with, or otherwise
perform services for, manage, acquire an ownership in, or participate in the
management or ownership of, a Competitor; or
(ii)
directly or indirectly divert or attempt to divert from the Company or any
Affiliate any business in which the Company or any Affiliate has been actively
engaged during the Term hereof, or in any way interfere with the relationships
that the Corporation or any Affiliate has with its sources of supply or
customers; or
(iii)
directly or indirectly interfere or attempt to interfere with the relationship
between the Company or any Affiliate and any of such entity’s employees;
unless
the Company has granted prior written approval which may be withheld for any
reason.
For
purposes of this Section “Competitor” means any person or entity (a ‘business’)
that sells goods or services that are directly competitive with those goods
or
services sold or provided by the Company or any Affiliate in a geographic area
in which the Company or Affiliate is doing business and such Competitor is
also
doing business at the time in question, and such goods or services were being
sold or provided at the Date of Termination, and, for the Company’s
most
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recently
completed fiscal year ending with, or immediately prior to, the Date of
Termination, contributed more than 10% of the revenue of the Company and its
Affiliates. Notwithstanding anything to the contrary in this Section, a business
shall not deemed to be a Competitor with the Company if the Executive is
employed by, or otherwise associated with such business and that business has
a
unit that is in competition with the Company or an Affiliate but the Executive
does not have direct or indirect responsibilities for the services or goods
involved in the competition.
Nothing
in this Section shall be construed to prohibit the ownership by the Executive
of
less than five percent (5%) of any class of securities of any entity that is
engaged in any of the foregoing businesses having a class of securities
registered pursuant to the Securities Exchange Act of 1934 (the “Exchange Act”),
provided that such ownership represents a passive investment and that neither
the Executive, nor any group of persons including the Executive, in any way,
directly or indirectly, manages or exercises control of such entity, guarantees
any of its financial obligations, or otherwise takes any part in its business,
other than through exercising the Executive’s rights as a
shareholder.
For
purposes of this Section “Affiliate” means any entity that directly or
indirectly controls, is controlled by, or is under common control with the
Company.
As
used
in Sections 10-12, the term the “Company” shall mean UIL Holdings Corporation,
The United Illuminating Company and any successor to, or acquirer of, the
business or assets of either of them.
(b)
The
Executive acknowledges and agrees that, of the total payments and benefits
to
which he would be entitled under Sections 6(c) (termination of the Executive
without cause), Section 6(d) (non-renewal), and Section 7 (termination in
connection with a Change in Control) of this Agreement, as applicable, an amount
equal to one (1) times his ‘Target Total Remuneration’, as hereinafter defined,
shall be deemed to be on account of, and paid as consideration for, the covenant
not to compete provided in this Section. Executive acknowledges and agrees
that
1/12 of the amount attributable to this covenant shall be paid out on a monthly
basis during the 12 month period that this covenant is in force following his
termination of service from the Company and its Affiliates, and that such amount
shall be deducted from, and not be in addition to, the amounts otherwise payable
under Section 6(c), 6(d) or 7 of this Agreement, as applicable. Target Total
Remuneration shall be defined as the sum of the following components of the
Executive’s remuneration as most recently approved by the Compensation and
Executive Development Committee of the Board prior to the date of the
Executive’s termination: (1) Base Salary, (2) target annual short-term incentive
award, and (3) target annual long-term incentive award. In the event that the
Company determines that this covenant has been violated, no further payments
shall be made under this Section, the Executive shall be obligated immediately
to repay any amounts paid hereunder, and the Company shall have all of the
rights and remedies provided under Section 13 of this Agreement. Payments
hereunder shall be subject to the rabbi trust deposit requirements of Section
8.
In
the
event that payments under the Change in Control Plan II would exceed those
otherwise payable under this Agreement under Section 7 on account of a Change
in
Control, then such payments are expressly conditioned upon compliance with
Section 11(a) and (b) of this Agreement and, of such Change in Control payments,
an amount equal to one (1) times the Executive’s Target Total Remuneration shall
be deemed to be on account of, and paid as
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consideration
for, the covenant not to compete provided in this Section, and shall be paid
ratably over the 12 month period hereinbefore provided.
(12)
DISCLOSURE AND ASSIGNMENT OF INVENTIONS AND DISCOVERIES
(a)
Disclosure
of Inventions.
The
Executive agrees to make prompt and complete disclosure to the Company of all
inventions and discoveries made or conceived by him, alone or with others,
while
this Agreement is in effect, or within a reasonable time thereafter, which
arise
out of or relate to the services rendered pursuant to this Agreement. The
Executive also agrees to keep necessary records, including notes, sketches,
drawings, models and data supporting all such
inventions and discoveries made by him, alone or with others, during the course
of performing the services pursuant to this Agreement, and the Executive agrees
to furnish the Company, upon request, all such records.
(b)
Assignment
of Inventions and Discoveries.
The
Executive also agrees that he will assign to the Company all inventions and
discoveries made by him which arise out of and pertain to the services rendered
pursuant to this Agreement, together with all domestic and foreign patents
as
may be obtained on these inventions and discoveries. The Executive further
agrees that, upon request of the Company, he will execute all necessary papers
and cooperate in the fullest degree with the Company in securing, maintaining
and enforcing any such patents which arise out of his services under this
Agreement. It is understood, however, that these obligations undertaken by
Executive will be at no expense to him.
(13)
MISCELLANEOUS.
(a)
Equitable
Remedies.
The
Executive acknowledges that the restrictions provided for in Sections (10)
through (12) are reasonable and necessary in order to protect the legitimate
interests of the Company and its Affiliates, and that any violation thereof
would result in serious damage and irreparable injury to the Company and its
Affiliates. Further, the
Executive acknowledges that the services to be rendered by him are of such
unique and extraordinary nature, and the resulting injury to the Company from
a
breach of Sections (10) through (12), inclusive, by the Executive would be
of
such a nature, that an action at law for the collection of damages would not
provide adequate relief to the Company for the enforcement of its rights in
the
event of an actual or threatened violation by the Executive of his commitments
and obligations under Sections (10) through (12). The Executive agrees that
upon
the actual or threatened breach
or
violation of any of the commitments under Section (10) through (12), the Company
shall be entitled to both preliminary and permanent injunctive relief, in any
action or proceeding brought in an appropriate court having jurisdiction over
the Executive, to restrain him from committing any violation of any such
commitments and obligations.
(b)
Effect
Of Breach.
All
payments and other benefits payable but not yet distributed to Executive under
Sections (6), (7) or (8) shall be forfeited and discontinued in the event that
the Executive violates Sections (10) through (12) of this Agreement, or
willfully engages in conduct which is materially injurious to the Company,
monetarily or otherwise, all as determined in the sole discretion of the
Company.
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(c)
Successors;
Binding Agreement; Assignment.
(i)
The
Company will require the acquirer of all or substantially all of the business
or
assets of the Company (whether directly or indirectly, by purchase of stock
or
assets, merger, consolidation or otherwise), by agreement in form and substance
reasonably satisfactory to the Executive, to expressly assume and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken place.
If the Company fails to obtain such agreement prior to the effective date of
any
such succession, the Executive may terminate his employment with in thirty
(30)
days of such succession and treat such termination as a Breach by the Company
and termination without cause on account of a Change in Control entitling the
Executive to payments and benefits under Section 7 of this Agreement. For
purposes of implementing the foregoing, the date on which any such succession
becomes effective shall be deemed the Date of Termination.
(ii) This
Agreement, and the Executive’s rights and obligations hereunder, may not be
assigned by the Executive. Any attempted assignment of this Agreement by the
Executive shall be void and of no force or effect. This
Agreement and all rights of the Executive hereunder shall inure to the benefit
of and be enforceable by the Executive’s personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees and
legatees.
As
used
in this Section, the term the “Company” shall include The
United Illuminating Company, UIL Holdings Corporation, and any successor to,
or
acquirer of, the business or assets of the Company that executes and delivers
the agreement provided for in this Section (13)(c) or which otherwise becomes
bound by all the terms and provisions of this Agreement by operation of
law.
(d) Notices.
For the
purpose of this Agreement, notices and all other communications to either party
hereunder provided for in the Agreement shall be in writing and shall be deemed
to have been duly given when delivered or mailed by United States certified
or
registered mail, return receipt requested, postage prepaid, addressed, in the
case of the Company, to the Secretary of the Company at 000 Xxxxxx Xxxxxx,
Xxx
Xxxxx, Xxxxxxxxxxx 00000, or, in the case of the Executive, to the Executive
at
his residence, or to such other address as either party shall designate by
giving written notice of such change to the other party.
(e) Waiver;
Amendment.
No
provision of this Agreement may be modified, waived or discharged unless such
waiver, modification or discharge is approved by the UIL Board and agreed to
in
a writing signed by the Executive and the Company. No waiver by either party
hereto at any time of any breach by the other party hereto of, or compliance
with, any condition or provision of this Agreement to be performed by such
other
party shall be deemed a waiver of any similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party that are not set forth
expressly in this Agreement.
(f)
Governing
Law; Severability.
The
validity, interpretation, construction and performance of this Agreement shall
be governed by the laws of the State of Connecticut. The validity or
unenforceability of any provision or provisions of this Agreement shall not
affect the validity or enforceability of any other provision of this Agreement,
which shall remain in full force and effect. In the event one or more of the
provisions of this Agreement should, for any
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16
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reason,
be held to be invalid, illegal or unenforceable in any respect, the parties
agree that such provisions shall be legally enforceable to the extent permitted
by applicable law, and that any court of competent jurisdiction shall so enforce
such provision, or shall have the authority hereunder to modify it to make
it
enforceable to the greatest extent permitted by law.
(g) No
Conflict.
The
Executive hereby represents and warrants to the Company that neither the
execution nor the delivery of this Agreement, nor the employment of the
Executive by the Company will result in the breach of any agreement to which
the
Executive is a party.
(h) Survival.
The
provisions of this Agreement shall not survive the termination of this Agreement
or of the Executive’s employment hereunder, except that the provisions of
Sections (6) through (13) hereof shall survive such termination and shall be
binding upon the Executive, the Executive’s personal representative and/or
spouse, the Company, and the Company’s successors and assigns.
(i) Counterparts;
Facsimile Execution.
This
Agreement may be executed in two or more counterparts, each of which shall
be
deemed an original but all of which together shall constitute one and the same
instrument. Facsimile execution and delivery of this Agreement is legal, valid
and binding execution and delivery for all purposes.
IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day
and year first above written.
|
Date:
|
July
8, 2005
|
THE
UNITED ILLUMINATING COMPANY
Attest:
|
/s/
Xxxxx X. Xxxxx
|
By:
|
/s/
Xxxxxxxxx X. Xxxxxxx
|
|
|
Xxxxx
X. Xxxxx
|
Xxxxxxxxx
X. Xxxxxxx
|
||
|
Its
Chairman and Chief Executive
Officer
|
|
/s/
Xxxxxxx X. Xxxxxxxx
|
||
|
Xxxxxxx
X. Xxxxxxxx
|
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