FIRST AMENDMENT TO EMPLOYMENT AGREEMENT
EXHIBIT
10.34a
FIRST
AMENDMENT
TO
This amendment (the “First Amendment”)
is made the 4th day of August, 2008, between UIL Holdings Corporation, a
Connecticut Corporation (the “Company”) and Xxxxx X. Xxxxxxx (the
“Executive”).
WHEREAS, the Company previously entered
into an Employment Agreement with the Executive dated as of February 28, 2007
(the “Agreement”); and
WHEREAS, in light of changes to the law
concerning severance and deferred compensation, including Internal Revenue Code
Section 409A and related Treasury Regulations, the Company and the Executive
wish to amend the Agreement by this First Amendment to clarify certain
provisions in the event the Executive’s employment is involuntarily terminated,
and to make other minor, clarifying revisions to the Agreement,
NOW THEREFORE, the following Sections
of the Agreement are hereby amended as follows:
1. The
third sentence of Section (1)(b) of the Agreement is deleted.
2. The
last paragraph of Section (4)(b) of the Agreement is revised to read as
follows:
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 she 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 she had been employed by the
Company on the last day of the year including her Date of Termination, based on
actual performance with respect to the achievement of UIL and Company 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. 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.
3. The
first sentence of Section (4)(c) of the Agreement is revised to provide as
follows:
The
Executive shall be designated by the UIL Board as an individual covered by the
UIL Holdings Corporation Change in Control Severance Plan II of the Company (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.
4. Section
(5)(d) of the Agreement is hereby revised in its entirety to provide as
follows:
(d) Termination
by Executive
(i) Breach by the Company, not
during Change of Control Protective Period. If the Executive
is not in default of any of the Executive’s obligations under Section (2), (9),
(10) or (11) hereof, the Executive may terminate employment hereunder on account
of a Constructive Termination in accordance with this Section
(5)(d)(i). For purposes of this Agreement, a Constructive Termination
means:
(1) a
Separation from Service (as defined for purposes of the UIL CIC Plan II) within
ninety (90) days of the initial occurrence of one of the following events
arising without the consent of the Executive (a “Constructive Termination
Event”):
(A) A
material diminution in the Executive’s annual base salary rate, unless such
reduction is part of, and consistent with, a general reduction of the
compensation rates of all employees of the Company or of the Executive’s
business unit;
(B)
Except as provided in Section (2)(b), a material diminution in the Executive’s
authority, duties, or responsibilities, including the assignment of duties
materially inconsistent in any adverse respect with such Executive’s position,
duties, responsibilities and status with the Company immediately prior thereto,
or diminishment in such Executive’s management responsibilities, duties or
powers as in effect immediately prior thereto, or the removal from or failure to
re-elect such Executive to any such position or office;
(C) A
requirement that the Executive relocate her principal place of employment by
more than fifty (50) miles from the Company’s current executive offices in New
Haven, Connecticut; or
(D) Any
other action or inaction that constitutes a material breach by the Company of
the Agreement, including (1) a failure to include the Executive in the
management salary compensation programs then in effect on substantially the same
terms and conditions as that applicable to the other officers or similarly
situated executives of the Company; (2) a failure to continue the Executive’s
participation in the material benefit plans of the Company on substantially the
same basis, both in terms of the amount of benefits provided (other than due to
the Company’s stock price performance, provided such performance is a
relevant
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criterion
in determining the amount of benefits) and the level of the Executive’s
participation relative to other officers or similarly situated executives of
such Company, as that in effect immediately
prior
thereto; or (3) a failure to renew the Executive’s Employment Agreement at
the time such Agreement expires, provided that the Executive was willing and
able to execute a new Agreement providing terms and conditions substantially
similar to those in the expiring Agreement and to continue working for the
Company; and
(2) The
Executive has given notice to the UIL Board stating that in the Executive’s
opinion at least one of the Constructive Termination Events has occurred and
setting forth in reasonable detail the relevant facts, and such notice was given
within thirty-one (31) days of the occurrence of the Constructive Termination
Event; and
(3) The
Company shall have failed to remedy or otherwise cure the situation within
thirty-one (31) days after receipt of the notice.
(ii) Breach by the Company,
during Change of Control Protective Period. If the Executive
is not in default of any of the Executive’s obligations under Section (2), (9),
(10) or (11) hereof, the Executive may terminate employment hereunder on account
of a Constructive Termination in accordance with the UIL CIC Plan
II.
(iii) In the absence of Breach by
the Company. If the Executive is not in default of any of the
Executive’s obligations under Section (2), (9), (10) or (11) hereof, the
Executive may terminate employment in the absence of a Breach by the Company,
effective upon at least ninety (90) days prior written notice.
5. The
initial paragraph of Section (6)(c) of the Agreement is hereby revised to
provide as follows:
(c) Upon
Termination Without Cause or a Constructive Termination prior to a Change in
Control. If the Company
terminates the Executive’s employment hereunder without Cause or if the
Executive terminates the Executive’s employment hereunder on account of a
Constructive Termination, and in either case the termination constitutes an
Involuntary Separation from Service within the meaning of Treasury Regulations
Section 1.409A-1(n) and 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, all of the following:
6. The
initial phrase of Subsection (6)(c)(iv) of the Agreement is hereby revised to
provide as follows:
(iv) lump sum severance
equal to one (1) times the sum of:
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7. Subsection
(6)(c)(v) of the Agreement is hereby revised in its entirety to provide as
follows:
(v) benefits under the
Company’s healthcare plans during the COBRA continuation period on the same
terms as are then available to active employees of the Company.
8. Section
(6)(c) of the Agreement is hereby revised by the addition of a new paragraph at
the end thereof, after subsection (6)(c)(v), as follows:
Notwithstanding
the foregoing, in the event the Involuntary Separation from Service is due to a
non-renewal of this Agreement, (A) the lump sum severance amount payable under
subsection (iv) shall not be paid, but, in lieu thereof, lump sum severance
equal to six (6) months of the Executive’s annual Base Salary rate in effect
immediately prior to the Executive’s Date of Termination shall be paid, and (B)
the subsidized medical and dental benefits of subsection (v) shall not be
provided.
9. Subsection
(6)(d) of the Agreement is hereby revised in its entirety to provide as
follows:
(d) Separation
from Service. Notwithstanding
anything herein to the contrary, no compensation constituting severance or
deferred compensation shall be paid under the Agreement upon a termination of
employment or termination of service unless such termination of employment or
termination of service constitutes a Separation from Service as defined in the
UIL CIC Plan II.
10. Subsection
(6)(e) of the Agreement is hereby revised in its entirety to provide as
follows:
(e) Timing of
Payment. Any cash amount
that is due and owing to the Executive upon a termination of service pursuant to
Section (6) or Section (7) (other than pursuant to the UIL CIC Plan II)
will be paid on the thirtieth (30th) day
following the Executive’s Separation from Service and in no event may the
Executive designate the timing or year of payment. Notwithstanding
the foregoing, however, (i) any Stub-Period Incentive Compensation shall be
calculated in accordance with the terms of the applicable plan or program and
such incentive compensation and that portion of any severance payment that is
based on such incentive compensation shall be paid at the same time that such
incentive compensation generally would be payable to all other employees, but in
no event later than March 15th of the
calendar year following the end of the performance period to which such
incentive compensation relates; (ii) any long-term incentive compensation shall
be calculated in accordance with the terms of the applicable plan or program and
such incentive compensation shall be paid at the same time that such incentive
compensation generally would be payable to all other employees, but in no event
later than March 15th of the
calendar year following the end of the performance period to which such
compensation relates; and (iii) any qualified or non-qualified deferred
compensation payable pursuant to the terms of a plan of the Company shall be
paid in accordance with the terms of the applicable plan.
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11. The
first paragraph of Section (7)(a) of the Employment Agreement is hereby revised
in its entirety to provide as follows:
(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 similar terms, or if the
Executive terminates the Executive’s employment on account of a Constructive
Termination (as defined in the UIL CIC Plan II), and in any such case the
termination constitutes an Involuntary Separation from Service within the
meaning of Treasury Regulations Section 1.409A-1(n), then the Executive shall be
entitled to the following:
12. Subsection
(7)(a)(iv) of the Agreement is hereby revised in its entirety to provide as
follows:
(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 the UIL CIC Plan II shall be
controlling and shall supplant the payments and benefits to which the Executive
would be otherwise be entitled under Section (6)(c)(iv) and (v) of this
Agreement; expressly provided, however, that if the severance benefit provided
for in Section (6)(c)(iv) exceeds the value of the analogous severance benefit
provided under the UIL CIC Plan II, then the amount of the severance benefit
paid under the UIL CIC Plan II shall be determined as provided in Section
(6)(c)(iv) hereof.
13. Section
(8) of the Agreement is hereby revised in its entirety to provide as
follows:
(8) GROSS
UP FOR EXCISE TAX
Notwithstanding anything to the
contrary in the UIL CIC Plan II, and 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, 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, the UIL CIC Plan II or
otherwise, would constitute an “excess parachute payment” within the meaning of
Section 280G of the Internal Revenue Code subject to an excise tax under Code
Section 4999 (or any successor provisions) (the “Excise Tax”), the Executive
shall be paid an additional amount (the “Gross-Up Payment”) which shall be
calculated as the amount needed to reimburse the Executive for the Excise Tax
and the additional excise, income and employment taxes imposed on the Executive
due to the Company’s payment of the Excise Tax, so that the net amount retained
by the Executive after deduction of any Excise Tax, and any federal, state or
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
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the
Executive would be entitled absent the Excise Tax, but net of all applicable
federal, state and local taxes. Unless otherwise agreed to by the
Executive, the calculation and
administration
of the Gross-Up Payment shall be in accordance with the terms of the UIL CIC
Plan II as in effect on August 4, 2008, and applicable Treasury
regulations.
14. Section
(10) of the Agreement is hereby revised by designating the existing provisions
as subsection (a), designating the existing paragraphs (a), (b) and (c) as
paragraphs (1), (2) and (3) respectively, and adding new subsection (b) as
follows:
(b) In the event that
benefits shall become payable under the UIL CIC Plan II on account of an
Involuntary Separation from Service, the Executive acknowledges and agrees that,
in addition to such amounts as may become payable under the UIL CIC
Plan II, an amount equal to one (1) times the Executive’s Target Total
Remuneration (or, if less, the lump sum severance amount that would be payable
to the Executive under the UIL CIC Plan II absent the deduction equal to
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. The Executive acknowledges and agrees that the amount
attributable to this covenant shall be paid out in twelve (12) equal, fixed
monthly installments beginning with the month following the month in which the
Executive’s Separation from Service occurs. In addition and paid at
the same time as the fixed monthly installments, the Executive shall be entitled
to simple interest on the amount attributable to this covenant that has not yet
been paid. Notwithstanding the foregoing, if the value of the monthly
payments to be made in accordance with this Section (10)(b) exceeds two times
the lesser of the Executive’s annualized compensation or the maximum amount that
may be taken into account for qualified plan purposes (in each case determined
in accordance with Treasury Regulations §1.409A-1(b)(9)(iii)(A)), the excess
shall not be paid prior to the first business day of the month following the
date that is six months after the Executive’s Separation from Service date, at
which time that portion of the excess amount that would have otherwise been paid
in the preceding six months, plus interest, shall be paid in a single lump
sum. Interest shall be credited at the prime rate of Citibank, N.A,
its successor, or any other bank approved by the Board for such purpose, in
effect on the first day of the month of payment.
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 long-term incentive award.
In no
event may the Executive designate the timing or year of any payment made
pursuant to this Section (10)(b) or accelerate or delay any such payment, nor
shall any such payment be made later than the last day of the second taxable
year of the Executive following the taxable year in which occurs the Executive’s
Separation from Service. In the event of the Executive’s death,
amounts otherwise payable hereunder shall be paid to the Executive’s
estate.
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15. Section
(12)(c) of the Agreement is hereby revised in its entirety to provide as
follows:
(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. 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 (12)(c) or which otherwise becomes bound by all the
terms and provisions of this Agreement by operation of law.
(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 and 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.
16. Subsection
(12)(f) is hereby is hereby revised in its entirety to provide as
follows:
(f) Code
Section 409A Compliance. The parties
hereto recognize that certain provisions of this Agreement may be affected by
Section 409A of the Internal Revenue Code and guidance issued thereunder, and
agree to amend this Agreement, or take such other action as may be necessary or
advisable, to comply with Section 409A. It is intended that all
payments hereunder shall comply with Section 409A and the regulations
promulgated thereunder so as to not subject the Executive to payment of interest
or any additional tax under Section 409A. In furtherance thereof, if
payment or provision of any amount or benefit hereunder that is subject to
Section 409A at the time specified herein would subject such amount or benefit
to any additional tax under Section 409A, the payment or provision of such
amount or benefit shall be postponed to the earliest date on which the payment
or provision of such amount or benefit could be made without incurring such
additional tax. In addition, to the extent that any regulations or
other guidance issued under Section 409A (after application of the previous
provisions of this Section (12)(f)) would result in the Executive’s being
subject to the payment of interest or any additional tax under Section 409A, the
parties agree, to the extent reasonably possible, to amend this Agreement in
order to avoid the imposition of any such interest or additional tax under
Section 409A, which amendment shall have the minimum economic effect necessary
and be reasonably determined in good faith by the Company and the
Executive.
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Notwithstanding
anything herein to the contrary, it is expressly understood that at any time the
Company (or any related employer treated with the Company as the service
recipient for purposes of Code Section 409A) is publicly traded on an
established securities market (as defined for purposes of Code Section 409A), if
a payment or provision of an amount or benefit constituting a deferral of
compensation is to be made pursuant to the terms of this Agreement to the
Executive on account of a Separation from Service (as defined under the UIL CIC
Plan II) at a time when the Executive is a Specified Employee (as defined for
purposes of Code Section 409A(a)(2)(B)(i)), such deferred compensation shall not
be paid to the Executive prior to the date that is six (6) months after the
Separation from Service. In the event this restriction applies, the
deferred compensation that the Executive would have otherwise been entitled to
during the restriction period will be accumulated and paid (without adjustment
for the delay in payment) on the first business day of the seventh month
following the date of the Executive’s Separation from Service.
The
parties hereto intend that the Agreement, as amended, be consistent with IRS
Notice 2007-78, IRS Notice 2007-86 and other Code Section 409A transition
relief, and it shall be interpreted accordingly.
All of
the other terms and conditions of the Agreement shall remain in full force and
effect.
UIL HOLDINGS
CORPORATION
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Attest:
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By /s/ Xxxxx X. Xxxxxxxxx
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/s/
Xxxxx Xxxxx
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Xxxxx X.
Xxxxxxxxx
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UIL Holdings Corporation,
President and
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Chief Financial
Officer
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The United Illuminating
Company
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Chief Executive
Officer
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/s/ Xxxxx X.
Xxxxxxx
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Xxxxx X.
Xxxxxxx
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