EMPLOYMENT AGREEMENT
THIS AGREEMENT ( THE "AGREEMENT") is made as of the 8th day of
November, 2004, between UIL Holdings Corporation, a Connecticut Corporation
(the "Company") and Xxxxx X. Xxxxxx (the "Executive"),
WITNESSETH THAT
WHEREAS, the Executive previously has been employed by the Company as
its Executive Vice President and Chief Financial Officer, and is covered by the
terms of a certain employment agreement dated as of April 22, 2002; and
WHEREAS, the Company desires to continue to employ the Executive as its
Executive Vice President and Chief Financial Officer, and the Executive desires
to be so employed by the Company, 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 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
hereof and ending on the second anniversary of the date hereof, 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.
(2) POSITION AND DUTIES
(a) The Executive shall be employed by the Company as its
Executive Vice President and Chief Financial Officer, or in such other
equivalent or higher officership position as the UIL Board may
determine. The Executive shall report directly to the President and
Chief Executive Officer of the Company and 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 UIL Board or the President and Chief Executive
Officer of the Company; and
(ii) devote substantially all of the Executive's working time
and efforts to the business and affairs of the Company.
(b) Prior to a Change in Control, in the event that the
Executive is named by the UIL Board to an officer position higher in
rank or compensation than that applicable at the commencement of the
Initial Term, nothing in this Agreement shall obligate the Company 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 officership.
(c) If the Executive is then 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 Three Hundred Five Thousand Four Hundred Dollars
($305,400.00), 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.
- 2 -
(b) INCENTIVE COMPENSATION. During the Term of the Executive's
employment hereunder, the Executive shall be eligible to be designated by the
UIL Board 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 consolidated 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 UIL total
financial goals, and Company goals shall include, for example, UIL consolidated
financial goals based on earnings per share or 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. 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
- 3 -
procedures established by the Company Board from time to time for all of the
Company's officers, provided that the Executive properly accounts therefor.
(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, and shall also be entitled to all paid holidays afforded by the
Company to its management employees.
(g) SUPPLEMENTAL EXECUTIVE RETIREMENT BENEFIT. Upon
termination of the Executive's employment with the Company and all affiliates
other than for Cause (as defined in Section 5(b) of this Agreement), a
supplemental retirement benefit shall be payable in accordance with the
provisions of this Section (4)(g). The annual supplemental retirement benefit,
expressed in the form of a single life annuity beginning at the Executive's
Normal Retirement Date as defined in The United Illuminating Company Pension
Plan (the "Company's Pension Plan"), shall be the excess, if any, of (A) less
(B), where (A) is 2.0% (.020) of the Executive's highest three-year average
Total Compensation times his number of years of service as an employee of the
Company (including any deemed service credited under this Agreement or the CIC
Plan II) at termination (not to exceed thirty), and (B) is the benefit payable
under the Company's Pension Plan expressed as a single life annuity commencing
as of the Executive's Normal Retirement Date. For purposes of this Section,
Total Compensation shall mean the Executive's Base Salary, and any amount
payable to the Executive as short-term incentive compensation pursuant to the
Company's annual executive incentive compensation plan. Subject to the
requirements of Section 6(f), distribution of the supplemental retirement
benefit shall be made in the month of January following the Executive's
termination of service with the Company and its affiliates, but in no event
earlier than six months following the Executive's termination of service. The
benefit provided in this Section 4(g) shall be paid in an actuarially equivalent
lump sum, unless the Executive shall have elected at least 12 months in advance
of such distribution date to commence distributions in one of the other
actuarially equivalent forms of benefits permitted under the Company's Pension
Plan, in which case the commencement of the supplemental executive retirement
benefit provided under this Section 4(g) shall be deferred, except in the case
- 4 -
of termination due to death or disability, for a period of at least five years
from the date on which such distribution otherwise would have been made. The
provisions of this subsection are intended to comply with all laws applicable to
the taxation of non-qualified deferred compensation, and the Company and
Executive agree to revise this subsection as necessary or advisable from time to
time in order to comply with changes in such laws. The benefits payable under
this Section 4(g) shall be calculated using the same definitions of actuarial
equivalence, and the same early retirement reduction factors that are specified
in the Pension Plan in the event that the Executive becomes entitled to payment
of the supplemental retirement benefit prior to what would have been his Normal
Retirement Date, except that, in the event that the Executive is credited with
deemed years of service, the reductions shall be based on the Executive's
service deemed as an employee of the Company. If the form of payment provides
for a death benefit, such benefit shall be payable to the Executive's estate,
unless another beneficiary has been designated by the Executive. If the
Executive dies prior to the commencement of benefit payments, then the
pre-retirement death benefit provisions of the Pension Plan shall apply to the
supplemental retirement benefit payable pursuant to this Section (4)(g).
(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
(3) misconduct that is demonstrably injurious to the
interests of the Company or its Affiliates (as that
- 5 -
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 or her 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
- 6 -
case of disability, or (ii) the date specified in the notice 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, 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) hereof, and (4)(g) (supplemental
executive retirement benefits), 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:
- 7 -
(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 or amounts payable under any elective
non-qualified deferred compensation plan in which the Executive had been a
participant, other than any SERP benefit under Section 4(g) or 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) and 4(g) 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) 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 if 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.
- 8 -
(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 plan(s) in 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. 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.
(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.
- 9 -
(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 prior to the Date of
Termination; plus
(ii) any amounts payable pursuant to Sections 4(d), 4(e), and
4(f) and 4(g) hereof; plus
(iii) any benefits or amounts payable on account of the
Executive's (A) participation in any long-term incentive compensation plan or
arrangement (including any equity compensation plan), 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.
(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.
(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
- 10 -
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 II) 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 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 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
- 11 -
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 reasonably acceptable to
the Executive;
(3) cooperate with the Company in good faith in order to
contest such claim effectively; and
- 12 -
(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 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
- 13 -
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 Company 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
- 14 -
services were being sold or provided at the Date of Termination, and, for the
Company's most 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 and any successor to, or acquirer of, the business or assets of the
Company.
(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
- 15 -
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 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) (8) and (9) shall
- 16 -
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.
(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 or
her 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.
- 17 -
(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 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.
- 18 -
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
Date: November 8, 2004
-----------------
UIL HOLDINGS CORPORATION
Attest:
/s/ Xxxxx X. Xxxxx By: /s/ Xxxxxxxxx X. Xxxxxxx
----------------------- -------------------------------
Xxxxx X. Xxxxx Xxxxxxxxx X. Xxxxxxx
Vice President Investor Relations Its Chairman, President and
Corporate Secretary & Assistant Chief Executive Officer
Treasurer
November 8, 2004 /s/ Xxxxx X. Xxxxxx
---------------- --------------------------------
Date XXXXX X. XXXXXX
