SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDING SEPTEMBER 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
-------------- ---------------
Commission file number 1-6788
THE UNITED ILLUMINATING COMPANY
(Exact name of registrant as specified in its charter)
CONNECTICUT 06-0571640
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
157 CHURCH STREET, NEW HAVEN, CONNECTICUT 06506
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 203-499-2000
NONE
(Former name, former address and former fiscal year, if changed
since last report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
--- ---
The number of shares outstanding of the issuer's only class of common
stock, as of September 30, 1997, was 14,101,291.
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<PAGE>
INDEX
PART I. FINANCIAL INFORMATION
PAGE
NUMBER
------
Item 1. Financial Statements. 3
Consolidated Statement of Income for the three and nine
months ended September 30, 1997 and 1996. 3
Consolidated Balance Sheet as of September 30, 1997 and
December 31, 1996. 4
Consolidated Statement of Cash Flows for the three and nine
months ended September 30, 1997 and 1996. 6
Notes to Consolidated Financial Statements. 7
- Statement of Accounting Policies 7
- Capitalization 8
- Income Taxes 10
- Short-term Credit Arrangements 11
- Supplementary Information 12
- Fuel Financing Obligations and Other Lease Obligations 13
- Commitments and Contingencies 13
- Capital Expenditure Program 13
- Nuclear Insurance Contingencies 13
- Other Commitments and Contingencies 14
- Connecticut Yankee 14
- Hydro-Quebec 14
- Voluntary Early Retirement and Separation Programs 14
- Property Taxes 14
- Site Decontamination, Demolition and Remediation Costs 15
- Nuclear Fuel Disposal and Nuclear Plant Decommissioning 15
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations. 17
- Major Influences on Financial Condition 17
- Capital Expenditure Program 19
- Liquidity and Capital Resources 20
- Subsidiary Operations 21
- Results of Operations 21
- Looking Forward 24
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. 30
Item 6. Exhibits and Reports on Form 8-K. 31
SIGNATURES 33
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<PAGE>
<TABLE>
PART I: FINANCIAL INFORMATION
ITEM I: FINANCIAL STATEMENTS
THE UNITED ILLUMINATING COMPANY
CONSOLIDATED STATEMENT OF INCOME
(THOUSANDS EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
OPERATING REVENUES (NOTE G) $196,563 $209,167 $540,662 $548,817
------------- ------------- ------------- ------------
OPERATING EXPENSES
Operation
Fuel and energy 44,024 48,825 137,965 114,220
Capacity purchased 8,359 11,851 30,198 33,799
Early retirement program charges - 14,946 - 23,033
Other 38,415 36,269 115,324 113,250
Maintenance 10,122 9,112 30,016 28,054
Depreciation 17,239 16,866 57,945 49,518
Amortization of cancelled nuclear project and deferred return 3,440 3,440 10,319 10,319
Income taxes (Note E) 23,101 18,449 35,128 43,722
Other taxes (Note G) 13,512 14,943 40,574 43,523
------------- ------------- ------------- ------------
Total 158,212 174,701 457,469 459,438
------------- ------------- ------------- ------------
OPERATING INCOME 38,351 34,466 83,193 89,379
------------- ------------- ------------- ------------
OTHER INCOME AND (DEDUCTIONS)
Allowance for equity funds used during construction (12) 165 330 547
Other-net (Note G) 83 (89) 1,589 (555)
Non-operating income taxes 1,981 1,669 4,920 4,487
------------- ------------- ------------- ------------
Total 2,052 1,745 6,839 4,479
------------- ------------- ------------- ------------
INCOME BEFORE INTEREST CHARGES 40,403 36,211 90,032 93,858
------------- ------------- ------------- ------------
INTEREST CHARGES
Interest on long-term debt 16,233 16,270 48,481 49,063
Interest on Seabrook obligation bonds owned by the company (1,691) - (5,073) -
Other interest (Note G) 872 483 2,490 1,761
Allowance for borrowed funds used during construction (288) (286) (1,127) (1,030)
------------- ------------- ------------- ------------
15,126 16,467 44,771 49,794
Amortization of debt expense and redemption premiums 672 637 1,998 1,947
------------- ------------- ------------- ------------
Net Interest Charges 15,798 17,104 46,769 51,741
------------- ------------- ------------- ------------
MINORITY INTEREST IN PREFERRED SECURITIES 1,203 1,203 3,609 3,609
------------- ------------- ------------- ------------
NET INCOME 23,402 17,904 39,654 38,508
Discount on preferred stock redemptions (29) (14) (48) (1,840)
Dividends on preferred stock 51 52 154 279
------------- ------------- ------------- ------------
INCOME APPLICABLE TO COMMON STOCK $23,380 $17,866 $39,548 $40,069
============= ============= ============= ============
AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 13,887 14,101 14,029 14,101
EARNINGS PER SHARE OF COMMON STOCK $1.68 $1.27 $2.82 $2.84
CASH DIVIDENDS DECLARED PER SHARE OF COMMON STOCK $0.72 $0.72 $2.16 $2.16
</TABLE>
The accompanying Notes to Consolidated Financial Statements
are an integral part of the financial statements.
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<TABLE>
THE UNITED ILLUMINATING COMPANY
CONSOLIDATED BALANCE SHEET
ASSETS
(Thousands of Dollars)
<CAPTION>
September 30, December 31,
1997 1996*
---- ----
(Unaudited)
<S> <C> <C>
Utility Plant at Original Cost
In service $1,863,176 $1,843,952
Less, accumulated provision for depreciation 634,488 585,646
--------------- ---------------
1,228,688 1,258,306
Construction work in progress 33,231 40,998
Nuclear fuel 27,073 23,010
--------------- ---------------
Net Utility Plant 1,288,992 1,322,314
--------------- ---------------
Other Property and Investments 30,836 26,081
--------------- ---------------
Current Assets
Cash and temporary cash investments 86,865 6,394
Accounts receivable
Customers, less allowance for doubtful
accounts of $1,800 and $2,300 64,138 63,722
Other 21,534 38,367
Accrued utility revenues 23,630 29,139
Fuel, materials and supplies, at average cost 20,044 22,010
Prepayments 7,886 3,608
Other 159 110
--------------- ---------------
Total 224,256 163,350
--------------- ---------------
Deferred Charges
Unamortized debt issuance expenses 6,781 6,580
Other 2,350 1,485
--------------- ---------------
Total 9,131 8,065
--------------- ---------------
Regulatory Assets (future amounts due from customers
through the ratemaking process)
Income taxes due principally to book-tax differences 279,600 289,672
Connecticut Yankee 56,830 64,851
Deferred return - Seabrook Unit 1 28,318 37,757
Unamortized redemption costs 27,458 25,063
Unamortized cancelled nuclear projects 12,417 13,297
Uranium enrichment decommissioning cost 1,281 1,377
Other 6,626 9,068
--------------- ---------------
Total 412,530 441,085
--------------- ---------------
$1,965,745 $1,960,895
=============== ===============
</TABLE>
*Derived from audited financial statements
The accompanying Notes to Consolidated Financial
Statements are an integral part of the financial statements.
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<PAGE>
<TABLE>
THE UNITED ILLUMINATING COMPANY
CONSOLIDATED BALANCE SHEET
CAPITALIZATION AND LIABILITIES
(Thousands of Dollars)
<CAPTION>
September 30, December 31,
1997 1996*
------------- ------------
(Unaudited)
<S> <C> <C>
Capitalization (Note B)
Common stock equity
Common stock $284,579 $284,579
Paid-in capital 772 772
Capital stock expense (2,182) (2,182)
Unearned employee stock ownership plan equity (10,390) -
Retained earnings 166,140 156,847
--------------- ---------------
438,919 440,016
Preferred stock 4,351 4,461
Minority interest in preferred securities 50,000 50,000
Long-term debt
Long-term debt 795,459 826,527
Investment in Seabrook obligation bonds (66,847) (66,847)
--------------- ---------------
Net Long-term debt 728,612 759,680
Total 1,221,882 1,254,157
--------------- ---------------
Noncurrent Liabilities
Pensions accrued 46,287 49,205
Connecticut Yankee contract obligation 45,731 54,752
Obligations under capital leases 16,941 17,193
Nuclear decommissioning obligation 16,168 12,851
Other 5,294 4,815
--------------- ---------------
Total 130,421 138,816
--------------- ---------------
Current Liabilities
Current portion of long-term debt 112,135 69,900
Notes payable 43,995 10,965
Accounts payable 42,886 68,058
Dividends payable 10,000 10,205
Taxes accrued 11,606 503
Interest accrued 16,443 13,835
Obligations under capital leases 333 315
Other accrued liabilities 33,771 36,091
--------------- ---------------
Total 271,169 209,872
--------------- ---------------
Customers' Advances for Construction 1,874 1,888
--------------- ---------------
Regulatory Liabilities (future amounts owed to customers
through the ratemaking process)
Accumulated deferred investment tax credits 16,576 17,147
Other 2,047 1,811
--------------- ---------------
Total 18,623 18,958
--------------- ---------------
Deferred Income Taxes (future tax liabilities owed 321,776 337,204
to taxing authorities)
Commitments and Contingencies (Note L)
--------------- ---------------
$1,965,745 $1,960,895
=============== ===============
</TABLE>
* Derived from audited financial statements
The accompanying Notes to Consolidated Financial
Statements are an integral part of the financial statements.
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<TABLE>
THE UNITED ILLUMINATING COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
(THOUSANDS OF DOLLARS)
(UNAUDITED)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $23,402 $17,904 $39,654 $38,508
------------ ----------- ------------ -------------
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 18,405 17,915 61,460 52,734
Deferred income taxes 5,609 (1,421) (5,356) (10,569)
Deferred investment tax credits - net (190) (190) (571) (571)
Amortization of nuclear fuel 1,785 1,604 4,662 4,090
Allowance for funds used during construction (276) (451) (1,457) (1,577)
Amortization of deferred return 3,146 3,146 9,439 9,439
Early retirement costs accrued - 14,946 - 23,033
Changes in:
Accounts receivable - net (6,754) (11,731) 16,417 (15,773)
Fuel, materials and supplies 1,007 815 1,966 (489)
Prepayments (3,687) (4,006) (4,278) (5,291)
Accounts payable (517) (539) (25,172) (9,652)
Interest accrued (6,529) (8,090) 2,608 1,872
Taxes accrued 9,202 6,444 11,103 11,675
Other assets and liabilities 336 19,745 (1,998) 13,870
------------ ----------- ------------ -------------
Total Adjustments 21,537 38,187 68,823 72,791
------------ ----------- ------------ -------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 44,939 56,091 108,477 111,299
------------ ----------- ------------ -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Common stock (10,390) - (10,390) 40
Long-term debt 98,500 - 98,500 7,500
Notes payable 8,354 (35,000) 33,030 -
Securities redeemed and retired:
Preferred stock (70) (33) (110) (6,078)
Long-term debt (55,749) (7,725) (88,334) (18,525)
Discount on preferred stock redemption 29 14 48 1,840
Expense of issue (1,500) (275) (1,500) (275)
Lease obligations (80) (74) (234) (216)
Dividends
Preferred stock (51) (52) (155) (358)
Common stock (10,153) (10,153) (30,459) (30,246)
------------ ----------- ------------ -------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 28,890 (53,298) 396 (46,318)
------------ ----------- ------------ -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Plant expenditures, including nuclear fuel (4,215) (12,331) (28,402) (33,865)
------------ ----------- ------------ -------------
NET CASH USED IN INVESTING ACTIVITIES (4,215) (12,331) (28,402) (33,865)
------------ ----------- ------------ -------------
CASH AND TEMPORARY CASH INVESTMENTS:
NET CHANGE FOR THE PERIOD 69,614 (9,538) 80,471 31,116
BALANCE AT BEGINNING OF PERIOD 17,251 45,724 6,394 5,070
------------ ----------- ------------ -------------
BALANCE AT END OF PERIOD $86,865 $36,186 $86,865 $36,186
============ =========== ============ =============
CASH PAID DURING THE PERIOD FOR:
Interest (net of amount capitalized) $19,819 $24,377 $40,578 $47,960
============ =========== ============ =============
Income taxes $9,000 $14,200 $26,773 $40,825
============ =========== ============ =============
</TABLE>
The accompanying Notes to Consolidated Financial Statements
are an integral part of the financial statements.
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<PAGE>
THE UNITED ILLUMINATING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The consolidated financial statements of the Company and its wholly-owned
subsidiary, United Resources, Inc., have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission. The statements reflect
all adjustments that are, in the opinion of management, necessary to a fair
statement of the results for the periods presented. All such adjustments are of
a normal recurring nature. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations. The Company believes that the disclosures are adequate to make the
information presented not misleading. These consolidated financial statements
should be read in conjunction with the consolidated financial statements and the
notes to consolidated financial statements included in the annual report on Form
10-K for the year ended December 31, 1996. Such notes are supplemented as
follows:
(A) STATEMENT OF ACCOUNTING POLICIES
ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION (AFUDC)
The weighted average AFUDC rates applied in the first nine months of 1997
and 1996 were 7.83% and 8.50%, respectively, on a before-tax basis.
CASH AND CASH EQUIVALENTS
For cash flow purposes, the Company considers all highly liquid debt
instruments with a maturity of three months or less at the date of purchase to
be cash equivalents.
NUCLEAR DECOMMISSIONING TRUSTS
External trust funds are maintained to fund the estimated future
decommissioning costs of the nuclear generating units in which the Company has
an ownership interest. These costs are accrued as a charge to depreciation
expense over the estimated service lives of the units and are recovered in rates
on a current basis. The Company paid $1.9 million and $1.6 million in the first
nine months of 1997 and 1996, respectively, into the decommissioning trust funds
for Seabrook Unit 1 and Millstone Unit 3. At September 30, 1997, the Company's
shares of the trust fund balances, which included accumulated earnings on the
funds, were $11.4 million and $4.8 million for Seabrook Unit 1 and Millstone
Unit 3, respectively. These fund balances are included in "Other Property and
Investments" and the accrued decommissioning obligation is included in
"Noncurrent Liabilities" on the Company's Consolidated Balance Sheet.
INTEREST RATE AND FUEL PRICE MANAGEMENT
The Company utilizes interest rate and fuel oil price management
instruments to manage interest rate and fuel oil price risk. Interest rate swap
agreements have been entered into that effectively convert the interest rates on
$225 million of variable rate term loan borrowings to fixed rate borrowings.
Amounts receivable or payable under these swap agreements are accrued and
charged to interest expense. The Company enters into basic fuel oil price
management instruments to help minimize fuel oil price risk by fixing the future
price for fuel oil used for generation. Amounts receivable or payable under
these instruments are recognized in income when realized.
At September 30, 1997, the Company had entered into swap agreements for
400,000 barrels of fuel oil, for the period October 1 through December 31, 1997,
at a weighted average price of $15.82 per barrel and has call options for 99,999
barrels of fuel oil at $19.25 per barrel. The Company has entered into swap
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<PAGE>
THE UNITED ILLUMINATING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
agreements for 275,000 barrels of fuel oil at a weighted average price of $16.74
and has call options for 240,000 barrels of fuel oil at a weighted average price
of $18.29 per barrel for the first three quarters of 1998.
NEW ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board issued SFAS No.
128, "Earnings per Share". This statement, which is effective for financial
statements issued for periods ending after December 15, 1997, including interim
periods, establishes simplified standards for computing and presenting earnings
per share (EPS). It requires dual presentation of basic and diluted EPS on the
face of the income statement for entities with complex capital structures and
disclosure of the calculation of each EPS amount. The Company does not
anticipate that adoption of the standard will have a significant impact on
reported EPS.
(B) CAPITALIZATION
(A) COMMON STOCK
The Company had 14,101,291 shares of its common stock, no par value,
outstanding at September 30, 1997, of which 307,700 shares were unallocated
shares held by the Company's Employee Stock Ownership Plan ("ESOP") and not
recognized as outstanding for accounting purposes.
In 1990, the Company's Board of Directors and the shareowners approved a
stock option plan for officers and key employees of the Company. The plan
provides for the awarding of options to purchase up to 750,000 shares of the
Company's common stock over periods from one to ten years following the dates
when the options are granted. The Connecticut Department of Public Utility
Control (DPUC) has approved the issuance of 500,000 shares of stock pursuant to
this plan. The exercise price of each option cannot be less than the market
value of the stock on the date of the grant. Options to purchase 17,799 shares
of stock at an exercise price of $30 per share, 188,200 shares of stock at an
exercise price of $30.75 per share, 600 shares of stock at an exercise price of
$31.1875 per share, 4,000 shares of stock at an exercise price of $35.625 per
share, 34,332 shares of stock at an exercise price of $39.5625 per share, and
5,000 shares of stock at an exercise price of $42.375 per share have been
granted by the Board of Directors and remained outstanding at September 30,
1997.
The Company has entered into an arrangement under which it will loan up to
$15 million to The United Illuminating Company ESOP. The trustee for the ESOP
will use the funds to purchase shares of the Company's common stock in open
market transactions. The shares will be allocated to employees' ESOP accounts,
as the loan is repaid, to cover a portion of the Company's required ESOP
contributions. The loan will be repaid by the ESOP over a twelve-year period,
using the Company contributions and dividends paid on the unallocated shares of
the stock held by the ESOP. As of September 30, 1997, 307,700 shares, with a
fair market value of $11.2 million, had been purchased by the ESOP and had not
been allocated to ESOP participants.
(B) RETAINED EARNINGS RESTRICTION
The indenture under which $200 million principal amount of Notes are issued
places limitations on the payment of cash dividends on common stock and on the
purchase or redemption of common stock. Retained earnings in the amount of
$107.2 million were free from such limitations at September 30, 1997.
(C) PREFERRED STOCK
In February 1997, the Company purchased at a discount on the open market,
and canceled, 403 shares of its $100 par value 4.35%, Series A preferred stock.
The shares, having a par value of $40,300, were purchased for $21,271, creating
a net gain of $19,029.
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<PAGE>
THE UNITED ILLUMINATING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
In August 1997, the Company purchased at a discount on the open market, and
canceled, 500 shares of its $100 par value 4.72%, Series B preferred stock and
200 shares of its $100 par value 4.64%, Series C preferred stock. These shares,
having a par value of $70,000, were purchased for $41,100, creating a net gain
of $28,900.
(D) LONG-TERM DEBT
On December 30, 1996, the Company transferred $51.3 million to a trustee
under an escrow agreement. The funds, which were invested in Treasury Notes,
were used to pay $50 million principal amount of 7% Notes that matured on
January 15, 1997 plus accrued interest.
On February 15, 1997, the Company repaid $10.8 million principal amount of
maturing 9.44% First Mortgage Bonds, Series B, and redeemed, at a premium of
$185,328, the remaining $21.6 million outstanding principal amount of 9.44%
First Mortgage Bonds, Series B, issued by Bridgeport Electric Company, a
wholly-owned subsidiary of the Company that was merged with and into the Company
in September 1994.
On July 30, 1997, the Company borrowed $98.5 million from the Business
Finance Authority of the State of New Hampshire (BFA), representing the proceeds
from the issuance by the BFA of $98.5 million principal amount of tax-exempt
Pollution Control Refunding Revenue Bonds (PCRRBs). The Company is obligated,
under its borrowing agreement with the BFA, to pay to a trustee for the PCRRBs'
bondholders such amounts as will pay, when due, the principal of and the
premium, if any, and interest on the PCRRBs. The PCRRBs will mature in 2027, and
their interest rate can be adjusted periodically to reflect prevailing market
conditions. The PCRRBs were issued at an initial interest rate of 3.75%, which
is being adjusted weekly. The Company has used the proceeds of this $98.5
million borrowing to cause the redemption and repayment of $25 million of 9
3/8%, 1987 Series A, Pollution Control Revenue Bonds, $43.5 million of 10 3/4%,
1987 Series B, Pollution Control Revenue Bonds, and $30 million of Adjustable
Rate, 1990 Series A, Solid Waste Disposal Revenue Bonds, three outstanding
series of tax-exempt bonds on which the Company also had a payment obligation to
a trustee for the bondholders. Expenses associated with this transaction,
including redemption premiums totaling $2,055,000 and other expenses of
approximately $1,500,000, are being borne by the Company.
On November 12, 1997, the Company refinanced the secured lease obligation
bonds that were issued in 1990 in connection with the sale and leaseback by the
Company of a portion of its ownership share in Seabrook Unit 1. All of the
outstanding $69,593,000 principal amount of 9.76% Series 2006 Seabrook Lease
Obligation Bonds (the "9.76% Bonds") and $129,055,000 principal amount of 10.24%
Series 2020 Seabrook Lease Obligation Bonds (the "10.24% Bonds") were redeemed.
The redemption premiums paid on the 9.76% Bonds and the 10.24% Bonds were
$1,884,549 and $8,589,901, respectively. The Bonds were refunded with the
proceeds from the issuance of $203,088,000 principal amount of 7.83% Seabrook
Lease Obligation Bonds due January 2, 2019 (the "7.83% Bonds") the principal of
which will be payable from time to time in installments. Transaction expenses
totaling $1,530,022 and redemption premiums totaling $8,139,978 were paid from
the proceeds of the 7.83% Bonds and will be repaid as part of the Company's
Lease payments over the remaining term of the Lease. The remainder of the
redemption premiums ($2,334,472) and transaction expenses were paid by the
Company and will be amortized over the remainder of the Lease term. The
transaction reduces the interest rate on the leaseback arrangement, which is
treated as long-term debt on the Company's Consolidated Balance Sheet, from
8.45% to 7.56%. The Company owned $16,997,000 principal amount of the 9.76%
Bonds and $49,850,000 principal amount of the 10.24% Bonds. The Company used the
proceeds from the redemption of these bonds ($70,662,688, including redemption
premiums totaling $3,815,688), plus available funds and short-term borrowings,
to purchase $101,388,000 principal amount of the 7.83% Bonds. The Company
intends to hold the 7.83% Bonds until maturity and has recognized the investment
as an offset to long-term debt on its Consolidated Balance Sheet.
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<PAGE>
<TABLE>
THE UNITED ILLUMINATING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
<CAPTION>
Three Months Ended Nine Months Ended
(E) INCOME TAXES September 30, September 30,
1997 1996 1997 1996
---- ---- ---- ----
Income tax expense consists of: (000's) (000's)
Income tax provisions:
Current
<S> <C> <C> <C> <C>
Federal $11,899 $13,887 $27,346 $37,932
State 3,802 4,504 8,789 12,443
------------ ------------ ------------ ------------
Total current 15,701 18,391 36,135 50,375
------------ ------------ ------------ ------------
Deferred
Federal 4,602 (585) (3,397) (6,265)
State 1,007 (836) (1,959) (4,304)
------------ ------------ ------------ ------------
Total deferred 5,609 (1,421) (5,356) (10,569)
------------ ------------ ------------ ------------
Investment tax credits (190) (190) (571) (571)
------------ ------------ ------------ ------------
Total income tax expense $21,120 $16,780 $30,208 $39,235
============ ============ ============ ============
Income tax components charged as follows:
Operating expenses $23,101 $18,449 $35,128 $43,722
Other income and deductions - net (1,981) (1,669) (4,920) (4,487)
------------ ------------ ------------ ------------
Total income tax expense $21,120 $16,780 $30,208 $39,235
============ ============ ============ ============
The following table details the components of the
deferred income taxes:
Fossil fuel decommissioning reserve ($142) - ($7,144) -
Conservation and load management (931) (464) (5,022) (954)
Accelerated depreciation 1,459 1,374 4,378 4,122
Tax depreciation on unrecoverable plant investment 1,232 1,244 3,695 3,732
Seabrook sale/leaseback transaction 1,486 1,575 (3,686) (3,669)
Pension benefits 1,983 (5,298) 2,092 (9,302)
Unit overhaul and replacement power costs (287) (641) 1,099 (2,651)
Deferred fossil fuel costs - (263) (686) 402
Postretirement benefits 187 126 (105) (671)
Other - net 622 926 23 (1,578)
------------ ------------ ------------ ------------
Deferred income taxes - net $5,609 ($1,421) ($5,356) ($10,569)
============ ============ ============ ============
</TABLE>
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<PAGE>
THE UNITED ILLUMINATING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(F) SHORT-TERM CREDIT ARRANGEMENTS
The Company has a revolving credit agreement with a group of banks that
currently extends to December 10, 1997. The borrowing limit of this facility is
$75 million. The facility permits the Company to borrow funds at a fluctuating
interest rate determined by the prime lending market in New York, and also
permits the Company to borrow money for fixed periods of time specified by the
Company at fixed interest rates determined by the Eurodollar interbank market in
London, or by bidding, at the Company's option. If a material adverse change in
the business, operations, affairs, assets or condition, financial or otherwise,
or prospects of the Company and its subsidiaries, on a consolidated basis,
should occur, the banks may decline to lend additional money to the Company
under this revolving credit agreement, although borrowings outstanding at the
time of such an occurrence would not then become due and payable. As of
September 30, 1997, the Company had $40 million of short-term borrowings
outstanding under this facility.
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<PAGE>
<TABLE>
THE UNITED ILLUMINATING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(G) SUPPLEMENTARY INFORMATION
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
---- ---- ---- ----
(000's) (000's)
<S> <C> <C> <C> <C>
Operating Revenues
- ------------------
Retail $177,323 $184,450 $473,848 $497,973
Wholesale - capacity 2,483 1,784 7,265 5,286
- energy 15,510 22,097 56,783 43,355
Other 1,247 836 2,766 2,203
-------------- -------------- -------------- --------------
Total Operating Revenues $196,563 $209,167 $540,662 $548,817
============== ============== ============== ==============
Sales by Class(MWH's)
- ---------------------
Retail
Residential 505,070 490,460 1,415,844 1,432,544
Commercial 613,924 609,643 1,697,625 1,719,858
Industrial 305,492 304,451 867,082 858,926
Other 12,008 11,931 36,256 35,897
-------------- -------------- -------------- --------------
1,436,494 1,416,485 4,016,807 4,047,225
Wholesale 608,754 759,416 2,104,892 1,608,917
-------------- -------------- -------------- --------------
Total Sales by Class 2,045,248 2,175,901 6,121,699 5,656,142
============== ============== ============== ==============
Other Taxes
Charged to:
Operating:
State gross earnings $6,777 $7,608 $18,005 $20,507
Local real estate and personal property 5,451 6,106 17,742 18,637
Payroll taxes 1,284 1,229 4,827 4,379
-------------- -------------- -------------- --------------
13,512 14,943 40,574 43,523
Nonoperating and other accounts 111 78 343 474
-------------- -------------- -------------- --------------
Total Other Taxes $13,623 $15,021 $40,917 $43,997
============== ============== ============== ==============
Other Income and (Deductions) - net
- -----------------------------------
Interest and dividend income $458 $283 $1,384 $924
Equity earnings from Connecticut Yankee 312 331 1,000 1,080
Loss from subsidiary companies (75) (579) (970) (2,134)
Miscellaneous other income and (deductions) - net (612) (124) 175 (425)
-------------- -------------- -------------- --------------
Total Other Income and (Deductions) - net $83 ($89) $1,589 ($555)
============== ============== ============== ==============
Other Interest Charges
- ----------------------
Notes Payable $749 $167 $1,949 $882
Other 123 316 541 879
-------------- -------------- -------------- --------------
Total Other Interest Charges $872 $483 $2,490 $1,761
============== ============== ============== ==============
</TABLE>
- 12 -
<PAGE>
THE UNITED ILLUMINATING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(K) FUEL FINANCING OBLIGATIONS AND OTHER LEASE OBLIGATIONS
The Company has a Fossil Fuel Supply Agreement with a financial institution
providing for financing up to $37.5 million of fossil fuel purchases. Under this
agreement, the financing entity may acquire and/or store natural gas, coal and
fuel oil for sale to the Company, and the Company may purchase these fossil
fuels from the financing entity at a price for each type of fuel that reimburses
the financing entity for the direct costs it has incurred in purchasing and
storing the fuel, plus a charge for maintaining an inventory of the fuel
determined by reference to the fluctuating interest rate on thirty-day,
dealer-placed commercial paper in New York. The Company is obligated to insure
the fuel inventories and to indemnify the financing entity against all
liabilities, taxes and other expenses incurred as a result of its ownership,
storage and sale of fossil fuel to the Company. This agreement currently extends
to November 1998. At September 30, 1997, approximately $21.5 million of fossil
fuel purchases were being financed under this agreement.
(L) COMMITMENTS AND CONTINGENCIES
CAPITAL EXPENDITURE PROGRAM
The Company's continuing capital expenditure program is presently estimated
at approximately $196.0 million, excluding AFUDC, for 1997 through 2001.
NUCLEAR INSURANCE CONTINGENCIES
The Price-Anderson Act, currently extended through August 1, 2002, limits
public liability resulting from a single incident at a nuclear power plant. The
first $200 million of liability coverage is provided by purchasing the maximum
amount of commercially available insurance. Additional liability coverage will
be provided by an assessment of up to $75.5 million per incident, levied on each
of the nuclear units licensed to operate in the United States, subject to a
maximum assessment of $10 million per incident per nuclear unit in any year. In
addition, if the sum of all public liability claims and legal costs resulting
from any nuclear incident exceeds the maximum amount of financial protection,
each reactor operator can be assessed an additional 5% of $75.5 million, or
$3.775 million. The maximum assessment is adjusted at least every five years to
reflect the impact of inflation. With respect to each of the three nuclear
generating units in which the Company has an interest, the Company will be
obligated to pay its ownership and/or leasehold share of any statutory
assessment resulting from a nuclear incident at any nuclear generating unit.
Based on its interests in these nuclear generating units, the Company estimates
its maximum liability would be $23.2 million per incident. However, any
assessment would be limited to $3.1 million per incident per year.
The NRC requires each nuclear generating unit to obtain property insurance
coverage in a minimum amount of $1.06 billion and to establish a system of
prioritized use of the insurance proceeds in the event of a nuclear incident.
The system requires that the first $1.06 billion of insurance proceeds be used
to stabilize the nuclear reactor to prevent any significant risk to public
health and safety and then for decontamination and cleanup operations. Only
following completion of these tasks would the balance, if any, of the segregated
insurance proceeds become available to the unit's owners. For each of the three
nuclear generating units in which the Company has an interest, the Company is
required to pay its ownership and/or leasehold share of the cost of purchasing
such insurance. Although each of these units has purchased $2.75 billion of
property insurance coverage, representing the limits of coverage currently
available from conventional nuclear insurance pools, the cost of a nuclear
incident could exceed available insurance proceeds. In addition, two of the
nuclear insurance pools that provide portions of this coverage may levy
assessments against the insured owner companies if pool losses exceed the
accumulated funds available to the pool. The maximum potential assessments
against the Company with respect to losses occurring during current policy years
are approximately $7.5 million.
- 13 -
<PAGE>
THE UNITED ILLUMINATING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
OTHER COMMITMENTS AND CONTINGENCIES
CONNECTICUT YANKEE
On December 4, 1996, the Board of Directors of the Connecticut Yankee
Atomic Power Company (Connecticut Yankee) voted unanimously to retire the
Connecticut Yankee nuclear plant (the Connecticut Yankee Unit) from commercial
operation. The Company has a 9.5% stock ownership share in Connecticut Yankee
and relied on the Connecticut Yankee Unit for approximately 3.7% of the
Company's 1995 total generating resources. The power purchase contract under
which the Company has purchased its 9.5% entitlement to the Connecticut Yankee
Unit's power output permits Connecticut Yankee to recover 9.5% of all of its
costs from UI. Connecticut Yankee has filed revised decommissioning cost
estimates and amendments to the power contracts with its owners with the Federal
Energy Regulatory Commission (FERC). The preliminary estimate of the amount of
future payments for the closing, decommissioning and recovery of the remaining
investment in the Connecticut Yankee Unit is approximately $763 million. Based
on regulatory precedent, Connecticut Yankee believes it will continue to collect
from its owners its decommissioning costs, the unrecovered investment in the
Connecticut Yankee Unit and other costs associated with the permanent shutdown
of the Connecticut Yankee Unit. UI expects that it will continue to be allowed
to recover all FERC-approved costs from its customers through retail rates. The
Company's estimate of its remaining share of costs, less return of investment
(approximately $10 million) and return on investment (approximately $7.6
million) at September 30, 1997, is approximately $45.7 million. This estimate,
which is subject to ongoing review and revision, has been recorded by the
Company as a regulatory asset and an obligation on the Consolidated Balance
Sheet.
HYDRO-QUEBEC
The Company is a participant in the Hydro-Quebec transmission intertie
facility linking New England and Quebec, Canada. Phase II of this facility, in
which UI has a 5.45% participating share, increased the capacity value of the
intertie from 690 megawatts to a maximum of 2000 megawatts in 1991. A ten-year
Firm Energy Contract, which provides for the sale of 7 million megawatt-hours
per year by Hydro-Quebec to the New England participants in the Phase II
facility, became effective on July 1, 1991. The Company is obligated to furnish
a guarantee for its participating share of the debt financing for the Phase II
facility. As of September 30, 1997, the Company's guarantee liability for this
debt was approximately $7.6 million.
VOLUNTARY EARLY RETIREMENT AND SEPARATION PROGRAMS
In July 1996, the Company offered a Voluntary Early Retirement Plan and a
Voluntary Separation Plan to virtually all of its employees. A total of 163
employees accepted one or the other of these plans. In the third quarter of
1996, the Company recognized a charge to earnings of $14.9 million ($8.7
million, after-tax) to reflect the cost of these plans. The employees accepting
the offer will terminate employment on or before December 30, 1997.
PROPERTY TAXES
On November 2, 1993, the Company received "updated" personal property tax
bills from the City of New Haven (the City) for the tax year 1991-1992,
aggregating $6.6 million, based on an audit by the City's tax assessor. On May
7, 1994, the Company received a "Certificate of Correction....to correct a
clerical omission or mistake" from the City's tax assessor relative to the
assessed value of the Company's personal property for the tax year 1994-1995,
which certificate purports to increase said assessed value by approximately 53%
above the tax assessor's valuation at February 28, 1994, generating tax claims
of approximately $3.5 million. On March 1, 1995, the Company received notices of
assessment changes relative to the assessed value of the Company's personal
property for the tax year 1995-1996, which notices purport to increase said
assessed value by approximately 48%
- 14 -
<PAGE>
THE UNITED ILLUMINATING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
over the valuation declared by the Company, generating tax claims of
approximately $3.5 million. On May 11, 1995, the Company received notices of
assessment changes relative to the assessed values of the Company's personal
property for the tax years 1992-1993 and 1993-1994, which notices purport to
increase said assessed values by approximately 45% and 49%, respectively, over
the valuations declared by the Company, generating tax claims of approximately
$4.1 million and $3.5 million, respectively. On March 8, 1996, the Company
received notices of assessment changes relative to the assessed value of the
Company's personal property for the tax year 1996-1997, which notices purport to
increase said assessed value by approximately 57% over the valuations declared
by the Company and are expected to generate tax claims of approximately $3.8
million. On March 7, 1997, the Company received notices of assessment changes
relative to the assessed value of the Company's personal property for the tax
year 1997-1998, which notices purport to increase said assessed value by
approximately 54% over the valuations declared by the Company and are expected
to generate tax claims of approximately $3.7 million. The Company is vigorously
contesting each of these actions by the City's tax assessor. In January 1996,
the Connecticut Superior Court granted the Company's motion for summary judgment
against the City relative to the earliest tax year at issue, 1991-1992, ruling
that, after January 31, 1992, the tax assessor had no statutory authority to
revalue personal property listed and valued on the Company's tax list for the
tax year 1991-1992. This Superior Court decision, which would also have been
applicable to and defeated the assessor's valuation increases for the two
subsequent tax years, 1992-1993 and 1993-1994, was appealed by the City. On
April 11, 1997, the Connecticut Supreme Court reversed the Superior Court's
decisions in this and two other companion cases involving other taxpayers,
ruling that the tax assessor had a three-year period in which to audit and
revalue personal property listed and valued on the Company's tax list for the
tax year 1991-1992. It is currently anticipated that all of the pending cases
for all of the tax years in dispute will now be scheduled for trial in the
Superior Court relative to the Company's claim that the tax assessor's increases
in personal property tax assessments for the three earliest years were unlawful
for other reasons and relative to the vigorously contested issue, for all of the
tax years, as to the reasonableness of the tax assessor's valuation method, both
as to amount and methodology. It is the present opinion of the Company that the
ultimate outcome of this dispute will not have a significant impact on the
long-term financial position of the Company.
SITE DECONTAMINATION, DEMOLITION AND REMEDIATION COSTS
The Company has estimated that the total cost of decontaminating and
demolishing its decommissioned and demolished Steel Point Station and completing
requisite environmental remediation of the site will be approximately $11.3
million, of which approximately $7.9 million had been incurred as of September
30, 1997, and that the value of the property following remediation will not
exceed $6.0 million. As a result of a 1992 Connecticut Department of Public
Utility Control retail rate decision, beginning January 1, 1993, the Company has
been recovering through retail rates $1.075 million of the remediation costs per
year. The remediation costs, property value and recovery from customers will be
subject to true-up in the Company's next retail rate proceeding based on actual
remediation costs and actual gain on the Company's disposition of the property.
(M) NUCLEAR FUEL DISPOSAL AND NUCLEAR PLANT DECOMMISSIONING
New Hampshire has enacted a law requiring the creation of a
government-managed fund to finance the decommissioning of nuclear generating
units in that state. The New Hampshire Nuclear Decommissioning Financing
Committee (NDFC) has established $451 million (in 1997 dollars) as the
decommissioning cost estimate for Seabrook Unit 1, of which the Company's share
would be approximately $79 million. This estimate assumes the prompt removal and
dismantling of the unit at the end of its estimated 36-year energy producing
life. Monthly decommissioning payments are being made to the state-managed
decommissioning trust fund. UI's share of the decommissioning payments made
during the first nine months of 1997 was $1,563,000. UI's share of the fund at
September 30, 1997 was approximately $11.4 million.
- 15 -
<PAGE>
THE UNITED ILLUMINATING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Connecticut has enacted a law requiring the operators of nuclear generating
units to file periodically with the DPUC their plans for financing the
decommissioning of the units in that state. The current decommissioning cost
estimate for Millstone Unit 3 is $463 million (in 1997 dollars), of which the
Company's share would be approximately $17 million. This estimate assumes the
prompt removal and dismantling of the unit at the end of its estimated 40-year
energy producing life. Monthly decommissioning payments, based on these cost
estimates, are being made to a decommissioning trust fund managed by Northeast
Utilities (NU). UI's share of the Millstone Unit 3 decommissioning payments made
during the first nine months of 1997 was $365,000. UI's share of the fund at
September 30, 1997 was approximately $4.8 million. The decommissioning trust
fund for the Connecticut Yankee Unit is also managed by NU. For the Company's
9.5% equity ownership in Connecticut Yankee, decommissioning costs of $1,533,000
were funded by UI during the first nine months of 1997, and UI's share of the
fund at September 30, 1997 was $23.8 million. The current decommissioning cost
estimate for the Connecticut Yankee Unit, assuming the prompt removal and
dismantling of the unit commencing in 1997, is $436 million, of which UI's share
would be $41 million.
- 16 -
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
MAJOR INFLUENCES ON FINANCIAL CONDITION
The Company's financial condition will continue to be dependent on the
level of its retail and wholesale sales and the Company's ability to control
expenses. The two primary factors that affect sales volume are economic
conditions and weather. Annual growth in total operation and maintenance
expense, excluding one-time items and cogeneration capacity purchases, has
averaged less than 1.5% during the past 5 years. The Company hopes to continue
to restrict this average to less than the rate of inflation in future years (see
"Looking Forward").
The Company's financial status and financing capability will continue to be
sensitive to many other factors, including conditions in the securities markets,
economic conditions, interest rates, the level of the Company's income and cash
flow, and legislative and regulatory developments, including the cost of
compliance with increasingly stringent environmental legislation and regulations
and competition within the electric utility industry.
A major factor affecting the Company's earnings prospects will be the
success of the Company's efforts to implement the regulatory framework ordered
by the DPUC at the end of 1996. On December 31, 1996, the DPUC completed a
financial and operational review of the Company and ordered a five-year
incentive regulation plan for the years 1997-2001. The DPUC did not change the
retail base rates charged to customers. Its order increased amortization of the
Company's conservation and load management program investments during 1997-1998,
accelerated the recovery of unspecified regulatory assets during 1999-2001,
reduced the level of conservation adjustment revenues in retail rates, provided
a reduction in customer bills through a surcredit in each of the five plan
years, and accepted the Company's proposal to modify the operation of its fossil
fuel cost rate adjustment mechanism. The Company's authorized return on common
equity was reduced from 12.4% to 11.5%. Earnings above 11.5%, on an annual
basis, are to be utilized one-third for customer bill reductions, one-third to
increase amortization of regulatory assets, and one-third for retention as
earnings. The DPUC did not order accelerated depreciation of the Company's
Seabrook Unit 1 plant investment costs and the establishment of a
performance-based regulation mechanism measured by customer satisfaction surveys
and reliability of service indices, which the Company had proposed. As a result
of the DPUC's order, customer bills are expected to be reduced on average by 3%
in 1997-1999, 4% in the year 2000, and 5% in the year 2001 (all compared to
1996). Also, earnings from utility operations will be reduced from the levels
requested by the Company, such that it appears unlikely that the Company will be
able to achieve its 4% growth goal going forward.
Federal legislation has fostered competition in the wholesale electric
power market, as has a FERC rulemaking requiring electric utilities to furnish
transmission service to all buyers and sellers in the marketplace. In its
rulemaking, the FERC stated that state regulatory commissions should address the
issue of recovery by electric utilities of the costs of existing facilities
that, on account of "retail access", become unrecoverable by the utilities
through the regulated rates charged to their service territory customers. The
legislatures and regulatory commissions in several states have considered or are
considering "retail access". This, in general terms, means the transmission by
an electric utility of energy produced by another entity over the utility's
transmission and distribution system to a retail customer in the utility's own
service territory. A retail access requirement has the effect of permitting
retail customers to purchase electric capacity and energy, at the election of
such customers, from the electric utility in whose service area they are located
or from any other electric utility, independent power producer or power
marketer. The costs of existing facilities that become unrecoverable by the
service area electric utility on account of the loss of sales to these customers
are said to be "stranded costs". In 1995, the Connecticut Legislature
established a task force to review these issues and to make recommendations on
electric industry restructuring within Connecticut. The task force concluded its
work in December 1996, and issued a report and related recommendations. In its
1997 session, the Connecticut legislature drafted, but failed to bring to a
vote, comprehensive legislation that would have introduced retail access in
Connecticut over a period of several years, with provision for the recovery of
stranded costs by service area utilities.
- 17 -
<PAGE>
Although the Company is unable to predict the future effects of competitive
forces in the electric utility industry, competition could result in a change in
the regulatory structure of the industry, and costs that have traditionally been
recoverable through the ratemaking process may not be recoverable in the future.
This effect could have a material impact on the financial condition and/or
results of operations of the Company.
Currently, the Company's electric service rates are subject to regulation
and are based on the Company's costs. Therefore, the Company, and most regulated
utilities, are subject to certain accounting standards (Statement of Financial
Accounting Standards No. 71, "Accounting for the Effects of Certain Types of
Regulation" (SFAS No. 71)) that are not applicable to other businesses in
general. These accounting rules allow regulated utilities, where appropriate, to
defer the income statement impact of certain costs that are expected to be
recovered in future regulated service rates and to establish regulatory assets
on balance sheets for such costs. The effects of competition or a change in the
cost-based regulatory structure could cause the operations of the Company, or a
portion of its assets or operations, to cease meeting the criteria for
application of these accounting rules. While the Company expects to continue to
meet these criteria in the foreseeable future, if the Company, or a portion of
its assets or operations, were to cease meeting these criteria, accounting
standards for businesses in general would become applicable and immediate
recognition of any previously deferred costs, or a portion of deferred costs,
would be required in the year in which the criteria are no longer met, if such
deferred costs are not recoverable in that portion of the business that
continues to meet the criteria for the application of SFAS No. 71. If this
change in accounting were to occur, it would have a material adverse effect on
the Company's earnings and retained earnings in that year and could have a
material adverse effect on the Company's ongoing financial condition as well.
- 18 -
<PAGE>
CAPITAL EXPENDITURE PROGRAM
The Company's 1997-2001 capital expenditure program, excluding allowance for
funds used during construction (AFUDC) and its effect on certain capital related
items, is presently budgeted as follows:
<TABLE>
<CAPTION>
1997 1998 1999 2000 2001 TOTAL
---- ---- ---- ---- ---- -----
(000's)
<S> <C> <C> <C> <C> <C> <C>
Production $9,498 $14,153 $24,332 $10,752 $17,741 $76,476
Distribution 13,060 12,588 13,041 13,298 13,059 65,046
Transmission 626 1,118 2,425 3,752 1,300 9,221
Other 6,939 3,219 1,196 997 949 13,301
---------- ---------- ---------- ---------- ---------- ----------
SUBTOTAL 30,123 31,078 40,994 28,799 33,049 164,044
Nuclear Fuel 7,612 11,208 965 11,924 221 31,930
---------- ---------- ---------- ---------- ---------- ----------
TOTAL EXPENDITURES $37,735 $42,286 $41,959 $40,723 $33,270 $195,974
======== ======== ======== ======== ======== ========
Rate Base and Other Selected Data
AFUDC (Pre-tax) 2,051 2,228 1,624 1,886 1,161
Depreciation
Book Plant 53,239 56,497 57,722 57,959 57,862
Conservation 10,223 10,223 8,906 6,312 4,332
Decommissioning 2,235 2,328 2,435 2,547 2,660
Additional Required
Amortization (pre-tax) (1)
Conservation Assets 6,400 13,000 (3,517) (6,312) (4,332)
Other Regulatory Assets 0 0 20,300 49,500 54,500
Amortization of Deferred
Return on Seabrook Unit 1
Phase-In (after tax) 12,586 12,586 12,586 0 0
Estimated Rate Base
(end of period) 1,183,674 1,132,169 1,067,561 1,026,295 958,657
</TABLE>
(1) Additional amortization of pre-1997 conservation costs and other
unspecified regulatory assets, as ordered by the DPUC in its December 31,
1996 Order, provided that common equity return on utility investment
exceeds 10.5% after recording the additional amortization.
Note: Capital Expenditures and their effect on certain capital related items
are estimates subject to change due to future events and conditions that
may be substantially different than those used in developing the
projections.
- 19 -
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1997, the Company had $86.9 million of cash and temporary
cash investments, an increase of $80.5 million from the balance at December 31,
1996. The components of this increase, which are detailed in the Consolidated
Statement of Cash Flows, are summarized as follows:
(Millions)
Balance, December 31, 1996 $ 6.4
-----
Net cash provided by operating activities 108.5
Net cash provided by (used in) financing activities:
- Financing activities, excluding dividend payments 31.0
- Dividend payments (30.6)
Cash invested in plant, including nuclear fuel (28.4)
-----
Net increase 80.5
-----
Balance, September 30, 1997 $86.9
=====
The Company's capital requirements are presently projected as follows:
<TABLE>
<CAPTION>
1997 1998 1999 2000 2001
---- ---- ---- ---- ----
(millions)
<S> <C> <C> <C> <C> <C>
Cash on Hand - Beginning of Year $ 6.4 $ 24.2 $ - $ - $ -
Internally Generated Funds less Dividends 87.9 111.0 110.9 113.5 105.9
----- ----- ----- ----- -----
Subtotal 94.3 135.2 110.9 113.5 105.9
Less:
Capital Expenditures 37.7 42.3 41.9 40.7 33.3
----- ----- ----- ----- -----
Cash Available to pay Debt Maturities and Redemptions 56.6 92.9 69.0 72.8 72.6
Less:
Maturities and Mandatory Redemptions 10.8 104.6 105.0 155.5 81.0
Optional Redemptions 21.6 - - - -
----- ----- ----- ----- -----
External Financing Requirements $(24.2) $11.7 $36.0 $82.7 $8.4
===== ===== ===== ===== =====
</TABLE>
Note: Internally Generated Funds less Dividends, Capital Expenditures and
External Financing Requirements are estimates based on current earnings
and cash flow projections and are subject to change due to future events
and conditions that may be substantially different from those used in
developing the projections.
All of the Company's capital requirements that exceed available cash will
have to be provided by external financing. Although the Company has no
commitment to provide such financing from any source of funds, other than a $75
million revolving credit agreement with a group of banks, described below, the
Company expects to be able to satisfy its external financing needs by issuing
additional short-term and long-term debt, and by issuing preferred stock or
common stock, if necessary. The continued availability of these methods of
financing will be
- 20 -
<PAGE>
dependent on many factors, including conditions in the securities markets,
economic conditions, and the level of the Company's income and cash flow.
The Company has a revolving credit agreement with a group of banks, which
currently extends to December 10, 1997. The borrowing limit of this facility is
$75 million. The facility permits the Company to borrow funds at a fluctuating
interest rate determined by the prime lending market in New York, and also
permits the Company to borrow money for fixed periods of time specified by the
Company at fixed interest rates determined by the Eurodollar interbank market in
London, or by bidding, at the Company's option. If a material adverse change in
the business, operations, affairs, assets or condition, financial or otherwise,
or prospects of the Company and its subsidiaries, on a consolidated basis,
should occur, the banks may decline to lend additional money to the Company
under this revolving credit agreement, although borrowings outstanding at the
time of such an occurrence would not then become due and payable. As of
September 30, 1997, the Company had $40 million of short-term borrowings
outstanding under this facility.
SUBSIDIARY OPERATIONS
UI has one wholly-owned subsidiary, United Resources, Inc. (URI), that
serves as the parent corporation for several unregulated businesses, each of
which is incorporated separately to participate in business ventures that will
complement and enhance UI's electric utility business and serve the interests of
the Company and its shareholders and customers.
URI has four wholly-owned subsidiaries. The largest URI subsidiary,
American Payment Systems, Inc., manages a national network of agents for the
processing of bill payments made by customers of other utilities. Another
subsidiary of URI, Thermal Energies, Inc., is participating in the development
of district heating and cooling facilities in the downtown New Haven area,
including the energy center for an office tower and participation as a 62%
partner in the energy center for a city hall and office tower complex. A third
URI subsidiary, Precision Power, Inc., provides power-related equipment and
services to the owners of commercial buildings and industrial facilities. URI's
fourth subsidiary, United Bridgeport Energy, Inc., is participating in a
merchant wholesale electric generating facility being constructed on land
proposed to be leased from UI at its Bridgeport Harbor Station generating plant.
The Board of Directors of the Company has authorized the investment of a
maximum of $27 million, in the aggregate, of the Company's assets into its
unregulated subsidiary ventures, and, at September 30, 1997, $27 million had
been so invested.
RESULTS OF OPERATIONS
THIRD QUARTER OF 1997 VS. THIRD QUARTER OF 1996
- -----------------------------------------------
Earnings for the third quarter of 1997 were $23.4 million, or $1.68 per
share, up $5.5 million, or $.41 per share, from the third quarter of 1996.
Earnings from operations, which exclude one-time items, decreased by $3.9
million, or $.25 per share, in the third quarter of 1997 compared to the third
quarter of 1996. The one-time item recorded in the third quarter of 1996 was a
charge of $8.7 million (after-tax), or $.61 per share, from early retirement and
voluntary severance programs. The one-time gain recorded in the third quarter of
1997 was $.05 per share related to subleasing office space.
Retail operating revenues decreased by about $7.1 million in the third
quarter of 1997 compared to the third quarter of 1996:
. A retail kilowatt-hour sales increase of 1.4% from the prior year
increased retail revenues by $2.6 million and sales margin (revenue less
fuel expense and revenue-based taxes) by $2.0 million. The third quarters
of both 1997 and 1996 experienced roughly the same milder than normal
temperatures. This would
- 21 -
<PAGE>
indicate that "real" (i.e. not attributable to abnormal weather)
kilowatt-hour sales increased by about 1.0 percent in the third quarter of
1997 compared to the third quarter of 1996. Normal weather in the third
quarter of 1997 would have added about $2.3 million to sales margin, or
about $.10 per share.
. Reductions in customer bills, as agreed to by the Company and the DPUC in
December 1996, decreased retail revenues by about $7.1 million, including
suspension of the fossil fuel adjustment clause (FAC) mechanism that
reduced revenues by $2.3 million. This was consistent with the Company's
expectations, as previously reported in the Company's Quarterly Report
(Form 10-Q) for the fiscal quarter ended June 30, 1997. Other reductions in
customer bills, due to rate mix, contract pricing and other pass-through
reductions, amounted to $2.6 million.
Wholesale "capacity" revenues increased $0.7 million in the third quarter
of 1997 compared to the third quarter of 1996. Wholesale "energy" revenues,
which decreased during the third quarter of 1997 compared to the third quarter
of 1996, are a direct offset to wholesale energy expense and do not contribute
to sales margin.
Retail fuel and energy expenses increased by $1.8 million in the third
quarter of 1997 compared to the third quarter of 1996. These expenses increased
by $1.1 million due to the need to purchase more expensive energy to replace
generation by the Connecticut Yankee nuclear generating unit, which was taken
out of service on July 23, 1996, to replace some generation from the Seabrook
nuclear generating unit, which ran at virtually 100 percent capacity in the
third quarter of 1996 but at 98 percent in the third quarter of 1997, and from
the write-off of some fuel assemblies related to the Seabrook unit refueling
outage in the second quarter of 1997. For more on the status of the Connecticut
Yankee and Millstone Unit 3 nuclear generating units, see the LOOKING FORWARD
section. Retail fuel and energy expenses also increased in the third quarter of
1997 compared to the third quarter of 1996 by about $0.5 million, due to higher
sales.
Operating expenses for operations, maintenance and purchased capacity
charges increased by $1.0 million in the third quarter of 1997 compared to the
third quarter of 1996:
. Purchased capacity expense decreased $3.5 million, due to declining costs
from the retired Connecticut Yankee nuclear generating unit, more than
offsetting the impact on margin from the loss of its generation.
. Operation and maintenance expense increased by $4.5 million. Some expenses
associated with the second quarter Seabrook nuclear generating unit
refueling outage were booked in the third quarter, and increased expenses
by $0.8 million. Millstone 3 nuclear generating unit expenses increased by
$1.1 million. Other power supply expenses increased by $1.2 million.
Expenses associated with the Company's re-engineering efforts increased by
a net $2.0 million. Other expenses, including conservation programs that
are expensed in 1997 compared to being capitalized in 1996, increased by
$1.4 million. These increases were partly offset by a $2.0 million
reduction in pension expense, due to changes in actuarial assumptions and
methodologies and an increase in the expected return on plan assets to 10%.
Depreciation expense, exclusive of any accelerated amortization of
conservation and load management program costs, increased by $0.4 million in the
third quarter of 1997 compared to the third quarter of 1996. Income taxes,
exclusive of the effects of one-time items, changed based on changes in taxable
income and tax rates.
Other net income increased slightly in the third quarter of 1997 compared
to the third quarter of 1996, due to a small improvement in earnings from
unregulated subsidiaries. The Company's largest unregulated subsidiary, American
Payment Systems (APS), earned about $229,000 (after-tax) in the third quarter of
1997, an improvement of $568,000 over third quarter 1996 losses, marking the
first positive earnings quarter in its history. Similar positive results are
expected going forward, and APS is currently expected to "break even" for 1997,
compared to a $2.2 million operating loss (after-tax and excluding one-time
charges) in 1996.
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<PAGE>
Interest charges continued their downward trend, decreasing by $1.3 million
in the third quarter of 1997 compared to the third quarter of 1996 as a result
of the Company's refinancing program and strong cash flow.
NINE MONTHS OF 1997 VS. NINE MONTHS OF 1996
- -------------------------------------------
Earnings for the first nine months of 1997 were $39.5 million, or $2.82 per
share, down $0.5 million, or $.02 per share, from the first nine months of 1996.
Earnings from operations, which exclude one-time items and accelerated
amortization of costs attributable to one-time items, decreased by $16.2
million, or $1.14 per share, in the first nine months of 1997 compared to the
first nine months of 1996. The one-time items recorded in the first nine months
of 1997 were: a gain from an income tax expense reduction of $6.7 million, or
$.48 per share, which makes provision for the cumulative deferred tax benefits
associated with the future decommissioning of fossil fuel generating plants, and
a $.05 per share gain related to subleasing office space. The one-time items
recorded in the first nine months of 1996, which amounted to a net loss of $0.88
per share, were: charges of $23 million ($13.4 million after-tax), or $.95 per
share, from early retirement and voluntary severance programs, a charge of $1.4
million ($0.8 million after-tax), or $.06 per share, for the cumulative loss on
an office space sublease, and a gain of $1.8 million (after-tax), or $.13 per
share, from the repurchase of preferred stock at a discount to par value.
In an order by the Connecticut Department of Public Utility Control (DPUC)
issued on December 31, 1996, the Company was instructed to accelerate the
amortization of regulatory assets by as much as $4.1 million (after-tax), or
$.29 per share, in 1997, provided that the return on utility common stock equity
exceeded 10.5 percent for the year. The Company currently projects that, with
the one-time tax benefit mentioned above, the full $4.1 million 1997
amortization amount can be charged and the 1997 return on utility common stock
equity will still equal or exceed 10.5 percent. The full amount was charged in
the second quarter of 1997. Absent one-time gains, the Company does not expect
to achieve a 10.5 percent level of return on utility common stock equity from
earnings from operations for the year. See the LOOKING FORWARD section for more
information.
Retail operating revenues decreased by about $24.1 million in the first
nine months of 1997 compared to the first nine months of 1996:
. A retail kilowatt-hour sales decrease of 0.8% from the prior year
decreased retail revenues by $3.4 million and sales margin (revenue less
fuel expense and revenue-based taxes) by $2.7 million. Sales decreased
about 0.8% from milder weather during the first nine months of 1997
compared to the mild, but less so, weather experienced during the first
nine months of 1996, and about 0.4% due to the leap year day in 1996. There
appears to be a small, about 0.5%, "real" (i.e. not attributable to
abnormal weather or leap year) kilowatt-hour sales increase in the first
nine months of 1997 compared to the first nine months of 1996.
. Reductions in customer bills, as agreed to by the Company and the DPUC in
December 1996, decreased retail revenues by about $15.1 million, including
suspension of the fossil fuel adjustment clause (FAC) mechanism that
reduced revenues by $3.6 million. This was consistent with the Company's
expectations, as previously reported in the Company's Quarterly Report
(Form 10-Q) for the fiscal quarter ended June 30, 1997. Other reductions in
customer bills, due to rate mix, contract pricing and other pass-through
reductions, decreased retail revenues by about $5.6 million.
Wholesale "capacity" revenues increased $2.0 million in the first nine
months of 1997 compared to the first nine months of 1996. Wholesale "energy"
revenues, which increased during the first nine months of 1997 compared to the
first nine months of 1996 as a result of nuclear generating unit outages in the
region, are a direct offset to wholesale energy expense and do not contribute to
sales margin.
Retail fuel and energy expenses increased by $10.3 million in the first
nine months of 1997 compared to the first nine months of 1996. These expenses
increased by $8.8 million due to the need to purchase more expensive
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energy to replace generation by nuclear generating units: for the Connecticut
Yankee unit, which ran at nearly full capacity in the first six and one-half
months of 1996, for Millstone Unit 3, which ran at nearly full capacity in the
first quarter of 1996, and for an unplanned eight-day extension of a Seabrook
nuclear generating unit refueling outage in the second quarter of 1997 that
increased the Company's replacement generation cost by about $0.7 million. The
Seabrook unit was returned to service on June 28, 1997. Millstone Unit 3 was
taken out of service on March 30, 1996 and Connecticut Yankee was taken out of
service on July 23, 1996. For more on the status of the Connecticut Yankee and
Millstone Unit 3 units, see the LOOKING FORWARD section. Retail fuel and energy
expenses increased in the first nine months of 1997 compared to the first nine
months of 1996 by about $1.8 million, due primarily to higher fossil fuel prices
over the nine-month period. Under current DPUC regulations, these costs are not
passed on to customers through the FAC.
Operating expenses for operations, maintenance and purchased capacity
charges increased by $3.1 million in the first nine months of 1997 compared to
the first nine months of 1996:
. Purchased capacity expense decreased $3.6 million, due to declining costs
from the retired Connecticut Yankee nuclear generating unit, and also due
to slightly lower cogeneration costs.
. Operation and maintenance expense increased by $6.7 million. General
expenses at the Seabrook and Millstone 3 nuclear generating units increased
by $1.7 million and $3.5 million respectively, and a refueling outage cost
overrun at the Seabrook unit increased expenses by about $0.8 million.
Expenses associated with the Company's re-engineering efforts increased by
a net $1.7 million. Other general expenses increased by about $1.0 million.
The increase at Millstone Unit 3 was partly offset by the reversal of a
portion of a 1996 provision in "Other income (deductions)"; and other
expense increases were partly offset by a $2.0 million reduction in pension
expense, due to changes in actuarial assumptions and methodologies and an
increase in the expected return on plan assets to 10%.
Depreciation expense, exclusive of any accelerated amortization of
conservation and load management program costs, increased by $2.1 million in the
first nine months of 1997 compared to the first nine months of 1996. Income
taxes, exclusive of the effects of one-time items, changed based on changes in
taxable income and tax rates.
Other net income increased by $1.5 million in the first nine months of 1997
compared to the first nine months of 1996, due to an improvement in earnings
(reduction in losses) from unregulated subsidiaries. The Company's largest
unregulated subsidiary, American Payment Systems, had losses of $197,000
(after-tax) in the first nine months of 1997, an improvement of $954,000 over
losses in the first nine months of 1996 of about $1,151,000.
Interest charges continued their significant decline, decreasing by $4.9
million, or 9 percent, in the first nine months of 1997 compared to the first
nine months of 1996 as a result of the Company's refinancing program and strong
cash flow. Also, total preferred dividends (net-of-tax) decreased slightly in
the first nine months of 1997 compared to the first nine months of 1996 as a
result of purchases of preferred stock by the Company in 1996.
LOOKING FORWARD
(THE FOLLOWING DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS, WHICH ARE SUBJECT
TO UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE
CURRENTLY EXPECTED. READERS ARE CAUTIONED THAT THE COMPANY REGARDS SPECIFIC
NUMBERS AS ONLY THE "MOST LIKELY" TO OCCUR WITHIN A RANGE OF POSSIBLE VALUES.)
Five-year rate plan
- -------------------
On December 31, 1996, the DPUC issued an order (the Order) that implemented
a 5-year rate plan that would reduce rates and accelerate the recovery of
certain "regulatory" assets beginning with deferred conservation costs. The
Order's schedule of rate reductions and accelerated amortizations was based on a
DPUC pro forma financial
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<PAGE>
analysis that anticipated the Company would earn an allowed return on common
stock equity invested in utility rate base of 11.5% over the period 1997 to
2001. The Order established a set formula to share income that produces a return
above the 11.5% level: one-third applied to customer bill reductions, one-third
applied to more rapid amortization of regulatory assets, and one-third retained
by shareowners. If the Company were to achieve an 11.5% return on common stock
equity from its utility investment, then earnings from utility operations would
be in the $3.30-$3.40 range for 1997 and succeeding years as well.
It should be noted that, although the Order was for the five-year period
1997-2001 and the Company agreed that it would begin to implement the multi-year
plan, it did not agree to commit to the five-year period. In addition, the DPUC,
in the Order, acknowledged that the Order could be revisited in the light of any
new legislation. The Connecticut legislature did not pass an electric utility
restructuring bill in the 1997 legislative session, but it is expected such
legislation will be reintroduced in 1998.
1997
- ----
There is no assurance that the Company will achieve the 11.5% return on
common stock equity from its utility investment allowed by the DPUC in the
Order. Utility income is greatly affected by weather-related sales, fossil fuel
prices, nuclear generating unit availability, and interest rates...all items
over which the Company has little control, although the Company is actively
engaged in hedging its exposure to fluctuating fuel costs and interest rates.
Absent the one-time gains recorded in the second and third quarters of
1997, the Company does not anticipate, at this time, achieving a 10.5 percent
return on utility common stock equity for the year. Even with the one-time
gains, achievement of an 11.5% return, or roughly $3.30-$3.40 per share, may not
be possible. Consistently milder than normal weather for the first three
quarters of 1997 has reduced sales margin by about $4.0-$6.0 million, or about
$.17-$.25 per share. Unanticipated retail revenue reductions due to rate mix,
possibly caused by milder weather sales patterns, have reduced sales margin by
an additional $1.4 million, or $.06 per share, with the most significant impact
in the summer months.
It is unlikely that the Company's aggressive cost control measures will be
able to overcome these impacts in the fourth quarter, where earnings are
expected to be in the $.45-$.55 per share range (assuming normal weather). Based
on these assumptions, earnings from operations for the year should be in the
neighborhood of $3.05-$3.10 per share, while total earnings would be higher
based on the level of any net one-time gains for the year.
As a result of the Order, it is anticipated that retail revenues for 1997
will decrease from 1996 levels. A reduction of about $15 million will be due to
reductions in customer bills as agreed to by the Company and the DPUC in
December 1996. (These reductions will be partially offset by about $3 million in
conservation spending reductions. New conservation spending is no longer
capitalized, and changes in conservation expense, relative to the assumptions
used by the DPUC in the Order, will be reflected in retail rates through the
operation of the Conservation Adjustment Mechanism.) Year-to-date, the Company
has experienced $11.5 million of the anticipated decline, with the remainder
expected to occur in the fourth quarter.
Also, as part of the Order, the operation of the Company's long-standing
fossil fuel adjustment clause (FAC) mechanism, that allowed recovery in retail
rates of changes in fossil fuel costs, was suspended within a broad range of
fuel prices. Revenues will decline by about $6 million in 1997 compared to 1996
due to this suspension of the FAC. While the Company stands to benefit if the
prices that the Company pays for its oil purchases fall below about $15 a
barrel, current prices are above that level. Although the Company cannot predict
the direction that fossil fuel prices will take in 1997 or 1998 and whether it
can mitigate entirely this loss of FAC revenue, it is actively engaged in
hedging transactions to limit the Company's exposure to increases in fossil fuel
prices.
The Company's revenues are also dependent on the level of retail sales. The
two primary factors that affect retail sales volume are economic conditions and
weather. Overall, 1996 weather was milder than normal;
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<PAGE>
however, 1996 also had a leap year day. These two factors were offsetting in
their impact on retail sales, and actual retail sales for 1996 of 5,340
gigawatt-hours should be considered about "normal" for that year. On this basis,
the Company experienced about 1% of "real" sales growth in 1996 (i.e. exclusive
of weather and leap year factors) over "normal" 1995 sales. A similar level of
growth in 1997 from all customer groups would have added about $6 million to
sales margin (revenue less fuel expense and revenue-based taxes). Year-to-date
net retail sales for 1997 are 0.8 percent less than those in 1996, due
principally to weather-related factors. If "normal" retail sales for the fourth
quarter of 1997 are realized, and assuming 0.5 percent real growth from 1996,
total 1997 retail gigawatt-hour sales would be 5,322 gigawatt-hours, or 0.3%
below the total 1996 sales level. On a weather-corrected basis, 1997 sales would
be 5,366 gigawatt-hours, or 0.5% above 1996 sales.
No significant change in wholesale capacity sales revenue was anticipated
for 1997. However, wholesale capacity price has strengthened in short-term
markets, due to regional outages of nuclear generating plants and changes in the
New England Power Pool capability responsibility requirements for its
participants. The Company has increased revenue by $2.1 million from such sales
in the first nine months of 1997. The strength of these markets for the
remainder of the year and into 1998 will depend on the timing of the return to
service of the nuclear units at Millstone Station and how the capacity and
energy markets perform under the new New England Power Pool bidding system when
it is implemented. Implementation of the bidding system is currently expected in
mid-1998.
The Company has dealt with the potential loss of customers as a result of
self-generation, relocation or discontinuation of operations by successfully
negotiating 60 multi-year contracts with major customers, including its largest
customer, Yale University, which is constructing a cogeneration unit that will
produce approximately one half of this customer's electricity requirements
(about 1% of the Company's total 1997 estimated retail sales) commencing
sometime in early 1998. Additional multi-year customer contracts may be signed
in the future. While providing cost reduction and price stability for customers
and helping the Company maintain its customer base for the long term, these
contracts are expected to cause reductions in retail revenue that have averaged
$2-$3 million per year, incrementally, in the recent past. Year-to-date
reductions of $3-$4 million have been experienced in 1997 compared to 1996.
The Company expects that generating output from its ownership shares in
nuclear generating units (Seabrook Unit 1, Millstone Unit 3, and Connecticut
Yankee) will be significantly less in 1997 than in 1996. Seabrook Unit 1
operated at a nearly 97% capacity factor in 1996, well above the assumed
"normal" 90% level between refueling outages. A more normal level of Seabrook
Unit 1 operation in 1997, and the downtime for a 50-day refueling outage in the
second quarter of 1997, will cause the Company to purchase or generate energy
using higher cost fuels, leading to about a $3 million increase in fuel expense
for the year, net of a replacement fuel provision accrued between scheduled
refueling outages. The Company's total operation and maintenance expenses for
Seabrook Unit 1, including costs of the refueling outage, will also contribute
to an expected $7 million increase in operations and maintenance expense in 1997
over 1996 levels, which will be partly offset by a decrease of $1.2 million in
provisions for routine plant outage costs.
Millstone Unit 3 was taken out of service on March 30, 1996, and will
remain shut down pending a comprehensive Nuclear Regulatory Commission (NRC)
inquiry into the conformity of the unit and its operations with all applicable
NRC regulations and standards. Relative to 1996, the loss of low-cost energy
from this unit for all of 1997 should add about $1.5 million to the Company's
fuel expense. It is not likely that Unit 3 will return to service before
year-end 1997, but when it does commence generating, the Company's sales margin
will improve from a fuel expense decline of about $500,000, partly offset by
replacement fuel provision of about $100,000, for every month of normal
operation. The Company's total operation and maintenance expenses for Millstone
Unit 3 are now estimated to be $12 million for 1997, which includes the
increased costs of correcting deficiencies resulting from the NRC's inquiry. The
Company anticipates that, once NRC deficiencies are corrected and Unit 3 is
returned to service, operating costs should ramp down to more normal levels for
an efficient and safe nuclear unit of this class. On August 7, 1997, the Company
and the other nine minority, non-operating joint owners of Millstone Unit 3
filed lawsuits against Northeast Utilities (NU) and its trustees, as well as a
demand for arbitration
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<PAGE>
against The Connecticut Light and Power Company and Western Massachusetts
Electric Company, the subsidiaries of NU who are the majority joint owners of
the unit and who have contracted with the minority joint owners to operate it.
The nine non-operating joint owners, who together own about 19.5% of the unit,
claim that NU and its subsidiaries failed to comply with NRC regulations, failed
to operate Millstone Station in accordance with good utility operating practice
and concealed their failures from the non-operating joint owners and the NRC.
The arbitration and lawsuits seek to recover costs of purchasing replacement
power and increased operation and maintenance costs resulting from the shutdown
of Millstone Unit 3.
The Connecticut Yankee unit was taken out of service on July 23, 1996 and,
by decision of the Board of Directors of that company in December of 1996, has
been retired. Relative to 1996, the loss of low cost energy from this unit for
all of 1997 (it operated at virtually 100% output in 1996 before shutting down)
should add about $4.5 million to the Company's fuel expense. This increased fuel
expense is expected to be more than offset by a ramping down of Connecticut
Yankee's operating expenses, which are now expected to DECREASE by about $5.8
million for the entire year 1997 ( from $18.3 million in 1996 to $12.5 million
in 1997). These expenses are expected to continue to decline by substantial
amounts before leveling out at about $6 million per year after 1999 until
decommissioning is complete. However, the ability of the Company to recover its
ownership share of future costs associated with the retirement of the
Connecticut Yankee unit will be dependent upon the outcome of pending regulatory
proceedings before the Federal Energy Regulatory Commission.
To summarize, the total incremental impact of nuclear generating unit
outages on the Company's expense levels anticipated for 1997 relative to 1996 is
currently estimated as an increase of about $9 million in fuel expense and $4.5
million in operation and purchased capacity expense. This amount would be
equivalent to about $.55 per share of the Company's common stock.
Another major factor affecting the Company's earnings prospects will be the
Company's ability to control operating expenses. The Company offered voluntary
early retirement programs and a voluntary severance program to union, nonunion
and management employees in 1996. The cost of these programs resulted in a 1996
pre-tax charge of $23 million and should lead to a 1997 employee reduction of
230 employees (by year-end) from a level of approximately 1,300 employees at
year-end 1995. A portion of the resulting personnel cost savings occurred in
1996, but the majority of the savings will be realized as the Company's process
re-engineering efforts are completed over the next several years. Incremental
savings from personnel reductions of $4 million in 1997 ($2.4 million realized
in the first nine months) and another $6 million in 1998 are estimated. Other
unquantified process re-engineering savings are anticipated over this time frame
as well.
Anticipated depreciation expense should increase by $2-3 million in 1997
from 1996 levels, a slower rate of increase than in prior years because 1996
capital spending of $45 million (excluding nuclear fuel) was at its lowest level
in over 15 years, and also because new conservation program spending is no
longer capitalized and depreciated.
The Company expects continued reductions in annual interest expense of
about $7-8 million to a 1997 level of $62-63 million, at current interest rates.
This reduction is due to refinancings of some Company debt in 1996 and 1997, and
to a significant repayment of debt in 1996 and 1997 made possible by the
Company's excellent cash flow position. In fact, although the Company had no net
change in retained earnings in 1996, it was able to improve its equity ratio
from 31.7% to 33.2% as a result of debt reduction. The anticipated 1997 interest
expense level is about 45% below the 1989 level and would mark the eighth
consecutive year of net interest expense decline.
In the fall of 1996, using proceeds of a lower cost bank term loan, the
Company was successful in purchasing $67 million of the approximately $200
million principal amount of outstanding Seabrook Secured Lease Obligation Bonds,
for its own account. The interest income that the Company receives from its $67
million investment in these bonds appears on the income statement as a credit to
interest expense, partially offsetting the interest expense incurred on the
Seabrook Secured Lease Obligation Bonds.
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<PAGE>
The Company expects an improvement in unregulated subsidiary earnings in
1997 compared to the results of 1996, due partly to non-recurrence of one-time
pre-tax charges incurred in 1996 totaling $4.3 million and, also, the
achievement of a near "break-even" level in earnings from its American Payment
Systems, Inc. subsidiary operations, which improvement would result in an
increase in the Company's pre-tax income of $3-$4 million. In the near term, the
Company's investments in these subsidiaries are unlikely to have a major
positive effect on earnings, but the Company continues to believe that these
investments will contribute to future earnings growth.
As announced in a press release dated July 1, 1997, the Company has agreed
to lend up to $15 million to the Company's Employee Stock Ownership Plan
("ESOP") for the purpose of purchasing shares of the Company's common stock in
open-market transactions. As of October 22, 1997, approximately 314,000 shares
had been purchased by the ESOP. Based on this number of shares purchased, the
net effect will be to increase earnings per share by about $.02 in 1997 and by
an additional $.04 per share in 1998 over 1997. The earnings per share impact
will gradually reverse, to no net change at the end of the 12-year period, as
the shares are allocated to employees' ESOP accounts and the loan is repaid.
The Company expects that 1997 quarterly earnings from operations will
follow a pattern similar to that of 1996, with third quarter earnings
contributing over half of the annual total. Summer seasonal retail sales and
summer pricing are the predominant factors contributing to this pattern.
1998 and on
- -----------
Looking forward to 1998, the Company is expecting significant expense
declines from a number of sources. From the nuclear generating units, it is
expected that operation and maintenance expenses associated with Seabrook Unit 1
and Connecticut Yankee should decline by a total of about $8 million (about $2
million less of a decrease than previously estimated, due to recent budget
changes); if Millstone Unit 3 returns to service, the expense associated with
that unit should decline as well. Seabrook Unit 1 should have no refueling
outage in 1998 and, if it operates at normal 90% availability, fuel expense
should decline by about $1.4 million, net of the replacement fuel provision
accrual between scheduled refueling outages; if Millstone Unit 3 returns to
service, fuel expense should decline by $400,000 for every month of operation,
net of the replacement fuel provision accrual of $100,000 per month...up to $4
million for the year if full power is reached by April 1, 1998. As noted above,
personnel costs should decline by about $6 million from the full benefits of
voluntary separation programs. Interest costs are expected to continue to
decline by about $10 million from reductions in interest rates and repayment of
debt, reaching a level (about $51 million) last experienced in 1984.
To summarize, the potential for 1998 expense reduction from the items
identified above is $27 to $31 million. While there will probably be some
decline in 1997 retail revenues due to bill reductions (no net sales growth is
anticipated, as Yale University begins to cogenerate a portion of its
electricity requirements), and while other factors may increase costs (e.g. wage
increases, depreciation), the substantial expense reductions identified above
should allow earnings from operations to increase into the above-11.5% return on
common stock equity "sharing" range of the DPUC Order and well above a $3.40 per
share level.
On June 30, 1997, the Company's unionized employees accepted a new
five-year agreement, amending and extending the existing agreement that was
scheduled to remain in effect through May 15, 1998. The new agreement provides
for, among other things, 2% annual wage increases beginning in May 1998, and
annual lump sum bonuses of 2.5% of base annual straight time wages (not
cumulative). These provisions will restrict the growth of the Company's
bargaining unit base wage expense to about $500,000 per year. The agreement also
provides for job security for longer term bargaining unit employees, and will
allow the Company some flexibility in adjusting work methods, as part of its
ongoing process re-engineering efforts.
Although the $2.88 indicated annual common stock dividend level for 1996
represented a payout of 100% of total 1996 earnings, the Company's cash flow
remains, and is expected to remain, very strong. Net cash provided by operating
activities was $144.8 million in 1996, nearly 3.6 times the common stock
dividend payout, one of the
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<PAGE>
highest such "coverage" levels in the utility industry. The DPUC Order will
limit earnings from utility operations such that further dividend increases may
have to be delayed for several years. However, the Order should allow the
Company to recover some of its regulatory assets more rapidly, help it prepare
for competition in the electric utility industry, and help maintain its cash
flow at its excellent current level through the end of the decade. If the
Company is able to grow income and earnings into the Order's "sharing" range in
1998, the common stock dividend payout ratio at the current indicated dividend
rate would be close to 80%.
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<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
On November 2, 1993, the Company received "updated" personal property tax
bills from the City of New Haven (the City) for the tax year 1991-1992,
aggregating $6.6 million, based on an audit by the City's tax assessor. On May
7, 1994, the Company received a "Certificate of Correction....to correct a
clerical omission or mistake" from the City's tax assessor relative to the
assessed value of the Company's personal property for the tax year 1994-1995,
which certificate purports to increase said assessed value by approximately 53%
above the tax assessor's valuation at February 28, 1994, generating tax claims
of approximately $3.5 million. On March 1, 1995, the Company received notices of
assessment changes relative to the assessed value of the Company's personal
property for the tax year 1995-1996, which notices purport to increase said
assessed value by approximately 48% over the valuation declared by the Company,
generating tax claims of approximately $3.5 million. On May 11, 1995, the
Company received notices of assessment changes relative to the assessed values
of the Company's personal property for the tax years 1992-1993 and 1993-1994,
which notices purport to increase said assessed values by approximately 45% and
49%, respectively, over the valuations declared by the Company, generating tax
claims of approximately $4.1 million and $3.5 million, respectively. On March 8,
1996, the Company received notices of assessment changes relative to the
assessed value of the Company's personal property for the tax year 1996-1997,
which notices purport to increase said assessed value by approximately 57% over
the valuations declared by the Company and are expected to generate tax claims
of approximately $3.8 million. On March 7, 1997, the Company received notices of
assessment changes relative to the assessed value of the Company's personal
property for the tax year 1997-1998, which notices purport to increase said
assessed value by approximately 54% over the valuations declared by the Company
and are expected to generate tax claims of approximately $3.7 million. The
Company is vigorously contesting each of these actions by the City's tax
assessor. In January 1996, the Connecticut Superior Court granted the Company's
motion for summary judgment against the City relative to the earliest tax year
at issue, 1991-1992, ruling that, after January 31, 1992, the tax assessor had
no statutory authority to revalue personal property listed and valued on the
Company's tax list for the tax year 1991-1992. This Superior Court decision,
which would also have been applicable to and defeated the assessor's valuation
increases for the two subsequent tax years, 1992-1993 and 1993-1994, was
appealed by the City. On April 11, 1997, the Connecticut Supreme Court reversed
the Superior Court's decisions in this and two other companion cases involving
other taxpayers, ruling that the tax assessor had a three-year period in which
to audit and revalue personal property listed and valued on the Company's tax
list for the tax year 1991-1992. It is currently anticipated that all of the
pending cases for all of the tax years in dispute will now be scheduled for
trial in the Superior Court relative to the Company's claim that the tax
assessor's increases in personal property tax assessments for the three earliest
years were unlawful for other reasons and relative to the vigorously contested
issue, for all of the tax years, as to the reasonableness of the tax assessor's
valuation method, both as to amount and methodology. It is the present opinion
of the Company that the ultimate outcome of this dispute will not have a
significant impact on the long-term financial position of the Company.
- 30 -
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
<TABLE>
<CAPTION>
Exhibit
Table Item Exhibit
Number Number Description
---------- ------- -----------
<S> <C> <C>
(10) 10.22 Copy of Amended and Restated Employment Agreement, effective as
of March 1, 1997, between The United Illuminating Company and
Richard J. Grossi, amending and replacing Exhibits 10.14a*,
10.14b** and 10.14c***.
(10) 10.23 Copy of Amended and Restated Employment Agreement, effective as
of March 1, 1997, between The United Illuminating Company and
Robert L. Fiscus, amending and replacing Exhibits 10.15a*,
10.15b** and 10.15c***.
(10) 10.24 Copy of Amended and Restated Employment Agreement, effective as
of March 1, 1997, between The United Illuminating Company and
James F. Crowe, amending and replacing Exhibits 10.16a*,
10.16b** and 10.16c***.
(10) 10.25 Copy of Employment Agreement, dated as of March 1, 1997, between
The United Illuminating Company and Albert N. Henricksen.
(10) 10.26 Copy of Employment Agreement, dated as of March 1, 1997, between
The United Illuminating Company and Anthony J. Vallillo.
(10) 10.27 Copy of Employment Agreement, dated as of March 1, 1997, between
The United Illuminating Company and Rita L. Bowlby.
(10) 10.28 Copy of Employment Agreement, dated as of March 1, 1997, between
The United Illuminating Company and Stephen F. Goldschmidt.
(10) 10.29 Copy of Employment Agreement, dated as of March 1, 1997, between
The United Illuminating Company and James L. Benjamin.
(10) 10.30 Copy of Employment Agreement, dated as of March 1, 1997, between
The United Illuminating Company and Kurt D. Mohlman.
(10) 10.31 Copy of Employment Agreement, dated as of March 1, 1997, between
The United Illuminating Company and Charles J. Pepe.
</TABLE>
- 31 -
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Table Item Exhibit
Number Number Description
---------- ------- -----------
<S> <C> <C>
(12), (99) 12 Statement Showing Computation of Ratios of Earnings to Fixed
Charges and Ratios of Earnings to Combined Fixed Charges and
Preferred Stock Dividend Requirements (Twelve Months Ended
September 30, 1997 and Twelve Months Ended December 31, 1996,
1995, 1994, 1993 and 1992).
(27) 27 Financial Data Schedule
</TABLE>
* Filed with Annual Report (Form 10-K) for fiscal year ended December 31,
1992.
** Filed with Annual Report (Form 10-K) for fiscal year ended December 31,
1995.
*** Filed with Quarterly Report (Form 10-Q) for fiscal quarter ended June 30,
1995.
(b) Reports on Form 8-K.
None
- 32 -
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE UNITED ILLUMINATING COMPANY
Date ll/13/97 Signature /s/ Robert L.Fiscus
----------------- ----------------------------------
Robert L. Fiscus
President and
Chief Financial Officer
- 33 -
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Table Item Exhibit
Number Number Description Page No.
---------- ------- ----------- --------
<S> <C> <C>
(10) 10.22 Copy of Amended and Restated Employment Agreement, effective as of
March 1, 1997, between The United Illuminating Company and Richard J.
Grossi, amending and replacing Exhibits 10.14a*, 10.14b** and
10.14c***.
(10) 10.23 Copy of Amended and Restated Employment Agreement, effective as of
March 1, 1997, between The United Illuminating Company and Robert L.
Fiscus, amending and replacing Exhibits 10.15a*, 10.15b** and
10.15c***.
(10) 10.24 Copy of Amended and Restated Employment Agreement, effective as of
March 1, 1997, between The United Illuminating Company and James F.
Crowe, amending and replacing Exhibits 10.16a*, 10.16b** and 10.16c***.
(10) 10.25 Copy of Employment Agreement, dated as of March 1, 1997, between The
United Illuminating Company and Albert N. Henricksen.
(10) 10.26 Copy of Employment Agreement, dated as of March 1, 1997, between The
United Illuminating Company and Anthony J. Vallillo.
(10) 10.27 Copy of Employment Agreement, dated as of March 1, 1997, between The
United Illuminating Company and Rita L. Bowlby.
(10) 10.28 Copy of Employment Agreement, dated as of March 1, 1997, between The
United Illuminating Company and Stephen F. Goldschmidt.
(10) 10.29 Copy of Employment Agreement, dated as of March 1, 1997, between The
United Illuminating Company and James L. Benjamin.
(10) 10.30 Copy of Employment Agreement, dated as of March 1, 1997, between The
United Illuminating Company and Kurt D. Mohlman.
(10) 10.31 Copy of Employment Agreement, dated as of March 1, 1997, between The
United Illuminating Company and Charles J. Pepe.
(12), (99) 12 Statement Showing Computation of Ratios of Earnings to Fixed Charges
and Ratios of Earnings to Combined Fixed Charges and Preferred Stock
Dividend Requirements (Twelve Months Ended September 30, 1997 and
Twelve Months Ended December 31, 1996, 1995, 1994, 1993 and 1992).
(27) 27 Financial Data Schedule
</TABLE>
EXHIBIT 10.22
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made as of the 1st day of January, 1988, and amended as
of July 23, 1990, June 1, 1995 and March 1, 1997, between THE UNITED
ILLUMINATING COMPANY, a Connecticut corporation (the Company) and RICHARD J.
GROSSI, an individual (the Executive),
WITNESSETH THAT
WHEREAS, the Executive has been in the employ of the Company
for a substantial period of time; and
WHEREAS, the Company desires to continue to employ the Executive as
Chairman of the Board of Directors and Chief Executive Officer, and the
Executive desires to continue to be employed by the Company as its Chairman of
the Board of Directors and Chief Executive Officer; and
WHEREAS, the Company and the Executive desire to enter into a written
agreement confirming certain of the rights and benefits which the Executive has
heretofore enjoyed and certain of the duties and obligations which the Executive
has heretofore assumed, and conferring upon the Executive certain rights and
benefits which he has not heretofore enjoyed and imposing upon the Executive
certain duties and obligations to which he has not heretofore been subject,
NOW THEREFORE, in consideration of the foregoing and the respective
covenants and agreements of the parties herein contained, and the services
heretofore rendered by the Executive to the Company and to be rendered to the
Company pursuant hereto hereafter, and in order to provide an incentive to the
Executive to remain in the employ of the Company hereafter and, in particular,
in the event of any Change in Control (as herein defined) of the Company,
thereby establishing and preserving continuity of management, the Parties hereby
agree as follows:
(1) EMPLOYMENT
(a) The Company hereby agrees to employ the Executive, and the
Executive hereby agrees to serve the Company all upon the terms and conditions
set forth herein.
(b) Unless and until terminated pursuant to Section (5)(a),
Section (5)(b)(i) or Section (5)(c)(i) hereof, the employment of the Executive
by the Company shall be for a term expiring on the date specified in a Notice of
Termination pursuant to Section (5)(d) hereof.
(2) POSITION AND DUTIES
The Executive shall be employed by the Company as Chairman
<PAGE>
of the Board of Directors and Chief Executive Officer, or in such other
equivalent executive position as the Company's Board of Directors may determine,
without diminishment in his officership status, privileges or working
conditions. The Executive shall accept such employment and shall perform and
discharge, faithfully, diligently and to the best of his abilities, the duties
and obligations of his office and such other duties as may from time to time be
assigned to him by the Chief Executive Officer, or by the Board of Directors, of
the Company, and shall devote substantially all his working time and efforts to
the business and affairs of the Company; provided, however, that, to an extent
consistent with the needs of the Company, the Executive shall be entitled to
expend a reasonable amount of time on civic and philanthropic activities and the
management of his own and his family's business investments and activities.
Although a Change in Control of the Company shall not affect the obligations of
the Company and the Executive as set forth in the two preceding sentences, at
and after the date of any Change in Control the Company's employment of the
Executive shall also be without diminishment in his management responsibilities,
duties or powers.
(3) PLACE OF PERFORMANCE
In his employment by the Company, the Executive shall be based at the
executive offices of the Company situated within the Company's statutory service
area.
(4) COMPENSATION
(a) Base Salary. During the term of his employment hereunder,
the Executive shall receive a base salary (Base Salary) at an annual rate of
Three Hundred Eighteen Thousand Dollars ($318,000). The Executive's Base Salary
rate shall be reviewed by the Board of Directors of the Company
contemporaneously with each review of the salary rates of the Company's other
officers by said Board of Directors, and may be revised upwards as a result of
any such review. The Executive's Base Salary may be revised downwards by said
Board of Directors contemporaneously with any general reduction of the salary
rates of the Company's other officers.
(b) Incentive Compensation. During the term of his
employment hereunder, the Executive shall be entitled to participate in each
incentive compensation program established for officers of the Company.
For purposes of this Agreement, Total Compensation is defined
as the sum of the Executive's Base Salary and any amount paid or payable
pursuant to this Section (4)(b).
(c) Business Expenses. During the term of his employment
hereunder, the Executive shall be entitled to receive prompt reimbursement for
all reasonable expenses incurred by him
- 2 -
<PAGE>
(in accordance with the policies and procedures established by the Board of
Directors of the Company from time to time for the Company's senior executive
officers) in performing services hereunder, provided that the Executive properly
accounts therefor.
(d) Fringe Benefits. During the term of his employment
hereunder, the Executive shall be entitled to participate in and receive full
benefits under all of the Company's employee benefit plans, programs and
arrangements for its officers, including, without limitation, its Pension Plan.
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.
(e) Vacations. During the term of his employment hereunder,
the Executive shall be entitled to the number of paid vacation days in each
calendar year determined by the Board of Directors of the Company from time to
time for the Company's senior executive officers, and shall also be entitled to
all paid holidays given by the Company to its employees.
(f) Supplemental Retirement. Upon termination of the
Executive's employment, a supplemental retirement benefit shall be payable to
him or his beneficiary in accordance with the provisions of this Section (4)(f).
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 Company's Pension Plan), shall be the excess, if any, of (A) less (B), where
(A) is 2.2% (.022) of the Executive's highest three-year average Total
Compensation times the number of years at termination (not to exceed thirty) of
the Executive's service deemed as an employee of the Company, and (B) is the
benefit payable under the Company's Pension Plan. Payment of the supplemental
retirement benefit shall begin at the same time as the Executive's Pension Plan
benefit payments and shall be subject to the same reductions for early
commencement, except that the reductions shall be based on the Executive's
service deemed as an employee of the Company. The supplemental retirement
benefit may be paid in any form available under the Pension Plan, as elected by
the Executive prior to benefit payment commencement. The conversion factors
between forms of benefits used for purposes of the Pension Plan shall be used
for purposes of the supplemental retirement benefit. The form of payment of the
supplemental retirement benefit may be the same or different from the form of
payment of the Executive's benefits under the Pension Plan. 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,
the death benefit provisions of the Pension Plan shall apply, mutatis mutandis,
to the supplemental retirement benefit payable pursuant to this Section (4)(f).
- 3 -
<PAGE>
(5) TERMINATION
(a) The Executive's employment hereunder shall terminate upon
his death.
(b) Termination by the Company.
(i) The Company may terminate the Executive's
employment hereunder for Cause. 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 (A) continued failure to perform and
discharge the duties or obligations of his office, or such other duties as may
from time to time be assigned to him by the Chief Executive Officer or by the
Board of Directors, faithfully, diligently, to the best of his abilities, and in
accordance with standards accepted in the electric utility industry, after
written notice by the Board of Directors of the Company specifying the alleged
failure in reasonably detailed terms and including in said notice the opinion of
a majority of the entire membership of said Board of Directors that there has
been such failure, or (B) willful misconduct that is materially and demonstrably
injurious to the Company, or (C) conviction of a felony involving the personal
dishonesty or moral turpitude of the Executive (unless such conviction is
reversed in any final appeal therefrom), or (D) total and permanent physical or
mental disability, or (E) absence from work on a full-time basis, due to
physical or mental illness, for an uninterrupted 365-day period. On and after
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 (F)
conviction of a felony involving the personal dishonesty or moral turpitude of
the Executive (unless such conviction is reversed in any final appeal
therefrom), or (G) total and permanent physical or mental disability, or (H)
absence from work on a full-time basis, due to physical or mental illness, for
an uninterrupted 365-day period. Notwithstanding the foregoing, the Executive
shall not be deemed to have been terminated for Cause unless and until there
shall have been delivered to the Executive (I) a copy of a resolution, duly
adopted by the affirmative vote of not less than a majority of the entire
membership of the Board of Directors of the Company, at a meeting of said Board
of Directors called and held for the purpose (after reasonable notice to the
Executive and an opportunity for him, together with his counsel, to be heard
before said Board of Directors), finding that, in the good faith opinion of such
majority of said Board of Directors, the Executive was guilty of conduct
described in an applicable clause of this Section (5)(b)(i), and specifying the
particulars thereof, or that the events described in an applicable clause of
this Section (5)(b)(i) have occurred, and (II) an affidavit of the Secretary or
an Assistant Secretary of the Company stating that such resolution was in fact
adopted by the affirmative vote of not less than a majority of the entire
membership of the Board of Directors of the Company; and (III) delivery of a
Notice of
- 4 -
<PAGE>
Termination pursuant to Section (5)(d) hereof.
(ii) Without Cause. The Company may terminate the
Executive's employment without Cause, effective upon at least three (3) years'
prior Notice of Termination delivered to the Executive pursuant to Section
(5)(d) hereof.
(c) Termination by the Executive.
(i) Upon Breach by the Company. The Executive may
terminate his employment hereunder, upon thirty (30) days' prior Notice of
Termination delivered to the Company pursuant to Section (5)(d) hereof, for
failure of the Company to observe and perform one or more of its obligations
under Sections (1), (2), (3) and/or (4) hereof (a Breach by the Company) at a
time when the Executive is not in default of any of his obligations under
Sections (1) and/or (2) hereof.
(ii) Absent Breach by the Company. The Executive may
terminate his employment hereunder in the absence of a Breach by the Company,
effective upon at least six (6) months' prior Notice of Termination delivered to
the Company pursuant to Section (5)(d) hereof.
(d) Notice of Termination. Any termination of employment, by
the Company or by the Executive, shall be communicated by delivery of a written
Notice of Termination to the other party.
(e) Date of Termination. For purposes of this Agreement, the
Date of Termination is defined as the earlier of (i) if the Executive's
employment is terminated pursuant to Section (5)(b)(ii) hereof, the date
specified in the Notice of Termination, or (ii) if the Executive's employment is
terminated (A) by his death, the date of his death, (B) pursuant to Section
(5)(b)(i) or Section (5)(c) hereof, the date specified in the Notice of
Termination, or (C) in any other event, the date on which a Notice of
Termination is delivered.
(6) CONSEQUENCES OF TERMINATION
(a) If the Executive's employment terminates pursuant to
Section (5)(a) hereof, the Company shall pay to the personal representative
and/or spouse of the Executive his Total Compensation earned prior to the Date
of Termination, any amounts payable pursuant to Sections (4)(c), (4)(d), (4)(e)
and (4)(f) hereof and any benefits or amounts payable under any deferred
compensation plan in which the Executive had been a participant, and the Company
shall have no further obligation under this Agreement.
(b) If the Executive's employment terminates pursuant to
Section (5)(b)(ii) or Section (5)(c)(ii) hereof, the Company shall pay to the
Executive and/or his personal representative
- 5 -
<PAGE>
and/or spouse his Total Compensation earned prior to the Date of Termination,
any amounts payable pursuant to Sections (4)(c), (4)(d), (4)(e) and (4)(f)
hereof and any benefits or amounts payable under any deferred compensation plan
in which the Executive had been a participant, and the Company shall have no
further obligation to the Executive and/or his personal representative and/or
spouse under this Agreement or on account of, or arising out of, the termination
of the Executive's employment. The Executive may petition the Board of Directors
of the Company for an immediate lump sum payment, in lieu of any amounts payable
pursuant to Section (4)(f) hereof on account of the Executive's termination of
employment pursuant to Section (5)(b)(ii) or Section (5)(c)(ii) hereof, in an
amount equal to the actuarial present value of a supplemental retirement
benefit, expressed in the form of a single life annuity beginning at Executive's
termination of employment equal to the excess if any of (A) less (B) where (A)
is 2.2% (.022) of the Executive's highest three-year average Total Compensation
times the number of years at termination (not to exceed thirty) of the
Executive's service deemed as an employee of the Company, and (B) is the benefit
payable under the Company's Pension Plan at the Executive's termination of
employment. The actuarial present value of such supplemental retirement benefit
shall be calculated on the basis of the annual yield on thirty-year United
States Treasury bonds on the final business day of he month preceding the
termination of his employment and the 1983 Group Annuity table. The Board of
Directors of the Company may grant or deny any such petition by the Executive in
its sole discretion.
(c) If the Executive's employment is terminated pursuant to
Section (5)(b)(i) hereof, or if the Executive terminates his employment in the
absence of a Breach by the Company and not in accordance with Section (5)(c)(ii)
hereof, the Company shall pay to the Executive his full Base Salary earned prior
to the Date of Termination, any amounts payable pursuant to Sections (4)(c),
(4)(d), and (4)(e) hereof and any benefits or amounts payable under any deferred
compensation plan in which the Executive had been a participant, and, provided
that the Company is not in default of any of its obligations hereunder, 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.
(d) If the Executive's employment is terminated pursuant to
Section (5)(c)(i) hereof, or if the Company terminates the Executive's
employment without Cause and not in accordance with Section (5)(b)(ii) hereof:
(i) The Company shall pay to the Executive his Total
Compensation earned prior to the Date of Termination, any amounts payable
pursuant to Sections (4)(c), (4)(d) and (4)(e) hereof and any benefits or
amounts payable under any deferred compensation plan in which the Executive had
been a participant; and if the Notice of Termination is delivered on or after
the
- 6 -
<PAGE>
date of, and in connection with, a Change in Control, the Company shall afford
the Executive the severance benefits set forth on Schedule C attached hereto.
(ii) In lieu of any amounts payable pursuant to
Section (4)(f) hereof on account of the Executive's termination of employment,
the Company shall pay to the Executive an immediate lump sum amount equal to the
actuarial present value of a supplemental retirement benefit, expressed in the
form of a single life annuity beginning at Executive's termination of
employment, equal to the excess if any of (A) less (B), where (A) is 2.2% (.022)
of the Executive's highest three-year average Total Compensation times the
number of years at termination (not to exceed thirty) of the Executive's service
deemed as an employee of the Company, and (B) is the benefit payable under the
Company's Pension Plan at the Executive's termination of employment. The
actuarial present value of such supplemental retirement benefit shall be
calculated on the basis of the annual yield on thirty-year United States
Treasury bonds on the final business day of the month preceding the termination
of his employment and the 1983 Group Annuity table.
(iii) The Company shall maintain in full force and
effect, for the continued benefit of the Executive for the period ending on the
third anniversary of the Date of Termination, all employee benefit plans and
programs in which the Executive was entitled to participate immediately prior to
the Date of Termination, provided that the Executive's continued participation
is possible under the general terms and provisions of such plans and programs.
If the Executive's participation in any such plan or program is barred as a
result of such termination, the Company shall arrange to provide the Executive
with benefits substantially similar on an after-tax basis to those which the
Executive was entitled to receive under such plan or program.
(iv) The Company shall pay to the Executive and/or
his personal representative his full Base Salary, during the period commencing
on the date following the Date of Termination and ending on the third
anniversary of the Date of Termination, at the rate in effect at the time the
Notice of Termination is delivered; provided, however, that if the Notice of
Termination is delivered on or after the date of, and in connection with, a
Change in Control the Company shall pay to the Executive, in lieu of the
payments prescribed by the foregoing clause, an immediate lump sum amount equal
to the aggregate sum of all of said payments.
(v) The Executive shall not be required to mitigate
the amount of any payment provided for in this Section (6)(d) by seeking
employment or otherwise. The benefits payable under this Section (6)(d) shall
not be reduced by reason of the Executive's securing other employment or for any
other reason, unless the Notice of Termination is delivered on or after, and in
- 7 -
<PAGE>
connection with, a Change in Control, in which event the provisions of the
following three sentences shall apply. If, prior to the third anniversary of the
Date of Termination, the Executive obtains employment, the Executive shall
refund to the Company a portion of the lump sum payment provided for in Section
(6)(d)(iv) equal to the amounts earned by the Executive from his subsequent
employer prior to said anniversary date, but in no event more than the amount of
said lump sum payment prorated over the number of months in the period
commencing on the date following his Date of Termination and ending on the third
anniversary of the Date of Termination, multiplied by the number of months
remaining between the Executive's date-of-hire in his new employment and the
third anniversary of his Date of Termination. The Executive shall refund to the
Company any amount required by the preceding sentence within one hundred and
eighty (180) days after the date-of-hire in his new employment. The employee
benefit plans and programs to be provided by the Company pursuant to Section
(6)(d)(iii) shall be reduced as and to the extent that such benefits are
provided to the Executive by a subsequent employer during the period covered by
said Section (6)(d)(iii).
(vi) The payment to, and acceptance by, the Executive
of any sum of money or benefit prescribed in this Section (6)(d) shall effect
and evidence a release by the Executive of any and all claims against the
Company on account of, or arising out of, the termination of the Executive's
employment, except as prescribed in this Section (6)(d).
(7) CHANGE IN CONTROL
For purposes of this Agreement, Change in Control shall mean any of the
following events:
(a) any merger or consolidation of the Company with any
corporate shareholder or group of corporate shareholders holding twenty-five
percent (.25) or more of the Common Stock of the Company or with any other
corporation or group of corporations which is, or after such merger or
consolidation would be, or be affiliated with, a shareholder owning at least
twenty-five percent (.25) of the Common Stock of the Company; or
(b) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition to or with any shareholder or group of shareholders holding
twenty-five percent (.25) or more of the Common Stock of the Company, or any
affiliate of such shareholder or group of shareholders, of any assets of the
Company having an aggregate fair market value of $50 million or more; or
(c) the issuance or sale by the Company of any securities of
the Company to any shareholder or group of shareholders holding twenty-five
percent (.25) or more of the Common Stock of the Company, or to any affiliate of
such shareholder or group of shareholders, in exchange for cash,
- 8 -
<PAGE>
securities or other consideration having an aggregate fair market value of $50
million or more; or
(d) the implementation of any plan or proposal for the
liquidation or dissolution of the Company proposed by or on behalf of any
shareholder or group of shareholders owning at least twenty-five percent (.25)
of the Common Stock of the Company, or any affiliate of such shareholder or
group of shareholders; or
(e) any reclassification of securities (including a reverse
stock split), or recapitalization of the Company or any other transaction which
has the effect, directly or indirectly, of increasing the proportionate share of
outstanding shares of any class of equity securities, or securities convertible
into any equity securities, of the Company, which is directly or indirectly
owned by a shareholder or group of shareholders owning at least twenty-five
percent (.25) of the Common Stock of the Company, or any affiliate of such
shareholder or group of shareholders.
The Board of Directors of the Company may, from time to time, by the
affirmative vote of not less than a majority of the entire membership of said
Board of Directors, at a meeting of said Board of Directors called and held for
the purpose, modify the phrase "twenty-five percent (.25)" in one or more of the
foregoing Sections (7)(a), (7)(b), (7)(c), (7)(d) and/or (7)(e) to a lesser
percentage, but not less than twenty percent (.20).
(8) ADDITIONAL CONSEQUENCES OF A CHANGE IN CONTROL
(a) In the event that a Change in Control has been approved by
all necessary shareholder, creditor and regulatory actions, the earning of
Performance Shares by the Executive under the Company's Long-Term Incentive
Program will be accelerated to the day prior to the date of the Change in
Control, and the Executive will be deemed to have earned all of the Contingent
Performance Shares outstanding with respect to him, payable to him on said day
prior to the date of the Change in Control, at his option, either (i) in
authorized but unissued shares of the Company's Common Stock, or (ii) in cash,
based upon the market value of the Company's Common Stock at the end of the
business day next preceding said day prior to the date of the Change in Control.
(b) In the event that a Change in Control has been approved by
all necessary shareholder, creditor and regulatory actions, the Company will,
not later than the day prior to the date of the Change in Control, pay to the
Trustee of The United Illuminating Company Supplemental Retirement Benefit Trust
established pursuant to the Agreement, made as of the 1st day of June, 1995
between the Company and State Street Bank and Trust Company, as Trustee, cash in
an amount equal to: (A) In the event that the Executive's employment has been
terminated or will be
- 9 -
<PAGE>
terminated prior to the date of the Change in Control, a sum, calculated by the
Company's independent certified public accountants, 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 (6)(a), Section (6)(b)
or Section (6)(d) hereof; or (B) in the event that the Executive employment has
not been terminated and will not be terminated prior to the date of the Change
in Control, a sum, calculated by the Company's independent certified public
accountants, reasonably sufficient to pay and discharge the Company's
obligations to the Executive under Section (6)(d) hereof assuming, for purposes
of such calculation, that the Executive's employment is terminated under said
Section (6)(d) by a Notice of Termination delivered on the date of the Change in
Control and specifying an immediate Date of Termination.
(c) On and after the date of the Change in Control, the
Executive's Base Salary may not be reduced by the Board of Directors to an
annual rate less than the rate fixed by the Board of Directors of the Company as
a result of its most recent review of salary rates, pursuant to Section (4)(a)
hereof, prior to the date of the Change in Control.
(9) TAX SAVINGS PROVISION
If any portion of the payments which the Executive has the right to
receive from the Company, or any affiliated entity, hereunder would constitute
"excess parachute payments" (as defined in Section 280G of the Internal Revenue
Code, and not governed by the terms defined in this Agreement) subject to the
excise tax imposed by Section 4999 of the Internal Revenue Code, such excess
parachute payments shall be reduced to the largest amount that will result in no
portion of such excess parachute payments being subject to the excise tax
imposed by Section 4999 of the Internal Revenue Code.
(10) SUCCESSORS; BINDING AGREEMENT
(a) The Company shall pay to the Executive and/or his personal
representative and/or spouse all legal fees and expenses and court costs, if
any, incurred by the Executive and/or such representative and/or spouse in
successful litigation to enforce his rights under this Agreement.
(b) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Company, 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. Failure of the Company to obtain such agreement by the effectiveness of
any such succession shall be a breach of this Agreement and shall entitle the
Executive to
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<PAGE>
compensation from the Company in the same amount and upon the same terms as he
would be entitled to hereunder if he terminated his employment upon Breach by
the Company, except that, for purposes of implementing the foregoing, the date
on which any such succession becomes effective shall be deemed the Date of
Termination. As used in this Agreement, the term "the Company" shall include The
United Illuminating Company, any parent and any successor to the business or
assets of either as aforesaid which executes and delivers the agreement provided
for in this Section (10) or which otherwise becomes bound by all the terms and
provisions of this Agreement by operation of law.
(c) 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. If the Executive should die while any
amounts would still be payable to him hereunder if he had continued to live, all
such amounts, unless otherwise provided herein, shall be paid in accordance with
the terms of this Agreement to the Executive's devisee, legatee or other
designee or, if there be no such designee, to the Executive's estate.
(11) NOTICE
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 United Illuminating Company, 157
Church Street, New Haven, Connecticut, Attention: Secretary, or, in the case of
the Executive, to him at 157 Church Street, New Haven Connecticut, or to such
other address as either party shall designate by giving written notice of such
change to the other party.
(12) MISCELLANEOUS
(a) No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is approved by the
Board of Directors of the Company and agreed to in a writing signed by the
Executive and such officer as may be specifically authorized by the Board of
Directors of 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 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 which are not set forth expressly in this Agreement. The validity,
interpretation, construction and performance of this Agreement
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<PAGE>
shall be governed by the laws of the State of Connecticut.
(b) Exhibits A-1 and A-2 attached hereto, showing calculations
of supplemental retirement benefits under Section (4)(f), and Exhibit B attached
hereto, showing a calculation of a lump sum payment under Section (6)(d)(ii),
are incorporated herein by reference and set forth, by example, the parties'
intended interpretation and application of such Sections.
(13) VALIDITY
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.
(14) SURVIVAL
The provisions of this Agreement shall not survive the termination of
this Agreement or of employment hereunder, except that the provisions of
Sections (4), (6), (8), (9), (10), and (11) hereof shall survive such
termination and shall be binding upon the Company's successors and assigns.
(15) COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date and year first above written.
Attest: THE UNITED ILLUMINATING COMPANY
/s/ Kurt Mohlman By: /s/ Robert L. Fiscus
- --------------------- ----------------------------------
Secretary President and Chief Financial
Officer
/s/ Richard J. Grossi
----------------------------------
Richard J. Grossi
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<PAGE>
EXHIBIT A-1
TO
EMPLOYMENT AGREEMENT
BETWEEN
THE UNITED ILLUMINATING COMPANY
AND
MR. RICHARD J. GROSSI
---------------------
Sample calculation of supplemental retirement benefits under Section (4)(f).
Assume the Executive retires at the Expiration of the Agreement and immediately
commences his Pension Plan benefits under the following facts:
(1) Retirement Age 55 (September 1,1990)
---------------------
(2) Actual Service with the Company 33 years 3 months (9/1/90)
--------------------------
(3) Deemed Service with the Company 33 years 3 months (9/1/90)
--------------------------
(4) Average Total Compensation See Calculations Below
----------------------
Total Compensation at age 54 $185,000
Total Compensation at age 53 $180,000
Total Compensation at age 52 $175,000 (3 year average = $180,000
deemed to be 3 highest years'
compensation, for purposes of this
example)
(A) Target Benefit at Age 55
1. 2.2% of 3 year average Total Compensation times
Deemed Service (up to 30 years)
(.022) x ($180,000) x (30) $118,800
2. Early Retirement Reduction Factor (based on Deemed Service) .561
--------
3. Target Benefit at Age 55: 1 times 2 66,647
(B) Pension Benefit at Age 55
1. Quantity A (estimated) $ 10,000
2. Quantity B 170,000
3. Quantity C (average of 3 highest years' compensation) 180,000
4. 1% of Quantity A plus 2% of Quantity B: 3,500
5. Actual Service with the Company (up to 25 years) 25
6. 4 times 5 87,500
7. 1/2% of Quantity C (up to $25,000, effective with
1995 Union Contract) 1,250
8. Actual Service with the Company in excess of 25 years 8.25
9. 7 times 8 1,031
10. Pension unreduced at age 55: 6 plus 9 88,531
11. Early Retirement Reduction Factor
(based on actual service) .561
12. Pension payable at age 55: 10 times 11 49,666
13. Supplemental Pension: A3 - B12 16,981
<PAGE>
EXHIBIT A-2
TO
EMPLOYMENT AGREEMENT
BETWEEN
THE UNITED ILLUMINATING COMPANY
AND
MR. RICHARD J. GROSSI
---------------------
Sample calculation of supplemental retirement benefits under Section (4)(f).
Assume the Agreement terminates at an Expiration Date but the Executive
continues to be employed by the Company for 2 years after the expiration of the
Agreement before retiring and commencing his Pension Plan benefits under the
following facts:
(1) Retirement Age 57 (September 1, 1992)
----------------------
(2) Actual Service with the Company
(a) Before Expiration of Agreement
(b) After Expiration of Agreement
(c) Total 35 years 3 months (9/1/92)
--------------------------
(3) Deemed Service with the Company
(a) Before Expiration of Agreement
(b) After Expiration of Agreement
(c) Total 35 years 3 months (9/1/92)
--------------------------
(4) Average Total Compensation See Calculations Below
----------------------
Total Compensation at age 56 $185,000
Total Compensation at age 55 $180,000
Total Compensation at age 54 $175,000 (3 year average = $180,000
deemed to be 3 highest years'
compensation, for purposes of
this example)
(A) Target Benefit at Age 57
1. 2.2% of 3 year average Total Compensation times
Deemed Service (up to 30 years)
(.022) x ($180,000) x (30) $118,800
2. Early Retirement Reduction Factor (based on Deemed Service) .655
--------
3. Target Benefit at Age 57: 1 times 2 77,814
(B) Pension Benefit at Age 57
1. Quantity A (estimated) $ 10,000
2. Quantity B 170,000
3. Quantity C (average of 3 highest years' compensation) 180,000
4. 1% of Quantity A plus 2% of Quantity B: 3,500
5. Actual Service with the Company (up to 25 years) 25
6. 4 times 5 87,500
7. 1/2% of Quantity C (up to $25,000 effective with
1995 Union Contract) 125
8. Actual Service with the Company in excess of 25 years 10.25
9. 7 times 8 1,281
10. Pension unreduced at age 57: 6 plus 9 88,781
11. Early Retirement Reduction Factor (based on actual service) .655
12. Pension payable at age 57: 10 times 11 58,151
13. Supplemental Pension: A3 - B12 19,663
<PAGE>
EXHIBIT B
TO
EMPLOYMENT AGREEMENT
BETWEEN
THE UNITED ILLUMINATING COMPANY
AND
MR. RICHARD J. GROSSI
---------------------
Sample calculation of lump-sum payment in lieu of supplemental retirement
benefits under Section (6)(d)(iii). Assume the Executive's employment terminates
and Section (6)(d) applies under the following facts:
(1) Age of Executive at Termination 53 (May 31, 1988)
-----------------
(2) Actual Service with the Company 31 years (5/31/88)
------------------
(3) Deemed Service with the Company 31 years (5/31/88)
------------------
(4) Average Total Compensation See Calculations Below
----------------------
Total Compensation at age 53 $185,000
Total Compensation at age 52 $180,000
Total Compensation at age 51 $175,000 (3 year average = $180,000
deemed to be 3 highest years'
compensation, for purposes of
this example)
(A) Target Benefit at Age 53
1. 2.2% of 3 year average Total Compensation times
Deemed Service (up to 30 years)
(.022) x ($180,000) x (23.917) $118,800
2. Early Retirement Reduction Factor (based on Deemed Service) 1.000
--------
3. Target Benefit at Age 53: 1 times 2 118,800
(B) Pension Benefit at Age 55
1. Quantity A (estimated) $ 10,000
2. Quantity B 170,000
3. Quantity C (average of 3 highest years' compensation) 180,000
4. 1% of Quantity A plus 2% of Quantity B: 3,500
5. Actual Service with the Company (up to 25 years) 25
6. 4 times 5 87,500
7. 1/2% of Quantity C (up to $25,000, effective with
1995 Union Contract) 125
8. Actual Service with the Company in excess of 25 years 6
9. 7 times 8 750
10. Pension unreduced at age 55: 6 plus 9 88,250
11. Early Retirement Reduction Factor (based on actual service) .561
12. Pension payable at age 55: 10 times 11 49,508
13. Supplemental Pension: A3 - B12 69,292
14. Annuity Factor for determining Lump-Sum Value at age 55 10.3880
--
15. Lump-Sum Value at age 55: 13 times 14 719,805
-- --
16. Interest discount factor from age 55 to age 53 (based on 7-1/2%) .8653
-- --
17. Lump-Sum Value at age 55 discounted to age 53: 15 times 16 622,848
-- --
<PAGE>
SCHEDULE C
Severance Benefits
------------------
At the option of the Officer, exercised by written notice to the Company, the
benefits of either (A) or (B) below will be afforded the Officer:
(A) a lump sum payment in an amount equal to the product of (X) multiplied
by (Y), where:
(X) is the sum of one-twelfth of the Officer's annual salary
rate approved by the Board of Directors of the Company at
the time of its most recent review of the salary rates of
all of the Company's officers, plus one-twelfth of the cash
award(s) that the Officer would earn under the short-term
incentive compensation program(s) in which the Officer is a
participant on the date of the termination of the Officer's
employment, assuming that all of the Officer's program goals
for the performance period are achieved at the target level;
and
(Y) is the number of whole and partial years (not to be less
than 12 nor more than 24) of the Officer's service deemed as
an employee of the Company on the date of termination of the
Officer's employment.
(B) The Officer's choice of the addition of six years of age, or six years
of service deemed as an employee of the Company, or any combination
(not to exceed 6) of whole and partial years of age and whole and
partial years of service deemed as an employee of the Company, in the
calculation of the benefits payable to the Officer under the Company's
retiree medical benefit plan(s) and in the calculation of the benefits
payable to the Officer as a supplemental retirement benefit under his
Employment Agreement.
EXHIBIT 10.23
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made as of the 1st day of January, 1988, and amended as
of July 23, 1990, June 1, 1995 and March 1, 1997, between THE UNITED
ILLUMINATING COMPANY, a Connecticut corporation (the Company) and ROBERT L.
FISCUS, an individual (the Executive),
WITNESSETH THAT
WHEREAS, the Executive has been in the employ of the Company for a
substantial period of time; and
WHEREAS, the Company desires to continue to employ the Executive as
President and Chief Financial Officer, and the Executive desires to continue to
be employed by the Company as its President and Chief Financial Officer; and
WHEREAS, the Company and the Executive desire to enter into a written
agreement confirming certain of the rights and benefits which the Executive has
heretofore enjoyed and certain of the duties and obligations which the Executive
has heretofore assumed, and conferring upon the Executive certain rights and
benefits which he has not heretofore enjoyed and imposing upon the Executive
certain duties and obligations to which he has not heretofore been subject,
NOW THEREFORE, in consideration of the foregoing and the respective
covenants and agreements of the parties herein contained, and the services
heretofore rendered by the Executive to the Company and to be rendered to the
Company pursuant hereto hereafter, and in order to provide an incentive to the
Executive to remain in the employ of the Company hereafter and, in particular,
in the event of any Change in Control (as herein defined) of the Company,
thereby establishing and preserving continuity of management, the Parties hereby
agree as follows:
(1) EMPLOYMENT
(a) The Company hereby agrees to employ the Executive, and the
Executive hereby agrees to serve the Company all upon the terms and conditions
set forth herein.
(b) Unless and until terminated pursuant to Section (5)(a),
Section (5)(b)(i) or Section (5)(c)(i) hereof, the employment of the Executive
by the Company shall be for a term expiring on the date specified in a Notice of
Termination pursuant to Section (5)(d) hereof.
(2) POSITION AND DUTIES
The Executive shall be employed by the Company as President and Chief
Financial Officer, or in such other equivalent or
<PAGE>
higher senior executive position as the Company's Board of Directors may
determine, without diminishment in his officership status, privileges or working
conditions. The Executive shall accept such employment and shall perform and
discharge, faithfully, diligently and to the best of his abilities, the duties
and obligations of his office and such other duties as may from time to time be
assigned to him by the Chief Executive Officer, or by the Board of Directors, of
the Company, and shall devote substantially all his working time and efforts to
the business and affairs of the Company; provided, however, that, to an extent
consistent with the needs of the Company, the Executive shall be entitled to
expend a reasonable amount of time on civic and philanthropic activities and the
management of his own and his family's business investments and activities.
Although a Change in Control of the Company shall not affect the obligations of
the Company and the Executive as set forth in the two preceding sentences, at
and after the date of any Change in Control the Company's employment of the
Executive shall also be without diminishment in his management responsibilities,
duties or powers.
(3) PLACE OF PERFORMANCE
In his employment by the Company, the Executive shall be based at the
executive offices of the Company situated within the Company's statutory service
area.
(4) COMPENSATION
(a) Base Salary. During the term of his employment hereunder,
the Executive shall receive a base salary (Base Salary) at an annual rate of Two
Hundred Eighteen Thousand Four Hundred Dollars ($218,400). The Executive's Base
Salary rate shall be reviewed by the Board of Directors of the Company
contemporaneously with each review of the salary rates of the Company's other
officers by said Board of Directors, and may be revised upwards as a result of
any such review. The Executive's Base Salary may be revised downwards by said
Board of Directors contemporaneously with any general reduction of the salary
rates of the Company's other officers.
(b) Incentive Compensation. During the term of his employment
hereunder, the Executive shall be entitled to participate in each incentive
compensation program established for officers of the Company.
For purposes of this Agreement, Total Compensation is defined
as the sum of the Executive's Base Salary and any amount paid or payable
pursuant to this Section (4)(b).
(c) Business Expenses. During the term of his employment
hereunder, the Executive shall be entitled to receive prompt reimbursement for
all reasonable expenses incurred by him (in accordance with the policies and
procedures established by
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<PAGE>
the Board of Directors of the Company from time to time for the Company's senior
executive officers) in performing services hereunder, provided that the
Executive properly accounts therefor.
(d) Fringe Benefits. During the term of his employment
hereunder, the Executive shall be entitled to participate in and receive full
benefits under all of the Company's employee benefit plans, programs and
arrangements for its officers, including, without limitation, its Pension Plan.
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.
(e) Vacations. During the term of his employment hereunder,
the Executive shall be entitled to the number of paid vacation days in each
calendar year determined by the Board of Directors of the Company from time to
time for the Company's senior executive officers, and shall also be entitled to
all paid holidays given by the Company to its employees.
(f) Supplemental Retirement. Upon termination of the
Executive's employment, a supplemental retirement benefit shall be payable to
him or his beneficiary in accordance with the provisions of this Section (4)(f).
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 Company's Pension Plan), shall be the excess, if any, of (A) less (B), where
(A) is 2.2% (.022) of the Executive's highest three-year average Total
Compensation times the number of years at termination (not to exceed thirty) of
the Executive's service deemed as an employee of the Company, and (B) is the
benefit payable under the Company's Pension Plan. For purposes of this
Agreement, the Executive's service deemed as an employee of the Company
commenced on July 1, 1959. Payment of the supplemental retirement benefit shall
begin at the same time as the Executive's Pension Plan benefit payments and
shall be subject to the same reductions for early commencement, except that the
reductions shall be based on the Executive's service deemed as an employee of
the Company. The supplemental retirement benefit may be paid in any form
available under the Pension Plan, as elected by the Executive prior to benefit
payment commencement. The conversion factors between forms of benefits used for
purposes of the Pension Plan shall be used for purposes of the supplemental
retirement benefit. The form of payment of the supplemental retirement benefit
may be the same or different from the form of payment of the Executive's
benefits under the Pension Plan. 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, the death benefit provisions of the
Pension Plan shall apply, mutatis mutandis, to the supplemental
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<PAGE>
retirement benefit payable pursuant to this Section (4)(f).
(5) TERMINATION
(a) The Executive's employment hereunder shall terminate upon
his death.
(b) Termination by the Company.
(i) The Company may terminate the Executive's
employment hereunder for Cause. 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 (A) continued failure to perform and
discharge the duties or obligations of his office, or such other duties as may
from time to time be assigned to him by the Chief Executive Officer or by the
Board of Directors, faithfully, diligently, to the best of his abilities, and in
accordance with standards accepted in the electric utility industry, after
written notice by the Board of Directors of the Company specifying the alleged
failure in reasonably detailed terms and including in said notice the opinion of
a majority of the entire membership of said Board of Directors that there has
been such failure, or (B) willful misconduct that is materially and demonstrably
injurious to the Company, or (C) conviction of a felony involving the personal
dishonesty or moral turpitude of the Executive (unless such conviction is
reversed in any final appeal therefrom), or (D) total and permanent physical or
mental disability, or (E) absence from work on a full-time basis, due to
physical or mental illness, for an uninterrupted 365-day period. On and after
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 (F)
conviction of a felony involving the personal dishonesty or moral turpitude of
the Executive (unless such conviction is reversed in any final appeal
therefrom), or (G) total and permanent physical or mental disability, or (H)
absence from work on a full-time basis, due to physical or mental illness, for
an uninterrupted 365-day period. Notwithstanding the foregoing, the Executive
shall not be deemed to have been terminated for Cause unless and until there
shall have been delivered to the Executive (I) a copy of a resolution, duly
adopted by the affirmative vote of not less than a majority of the entire
membership of the Board of Directors of the Company, at a meeting of said Board
of Directors called and held for the purpose (after reasonable notice to the
Executive and an opportunity for him, together with his counsel, to be heard
before said Board of Directors), finding that, in the good faith opinion of such
majority of said Board of Directors, the Executive was guilty of conduct
described in an applicable clause of this Section (5)(b)(i), and specifying the
particulars thereof, or that the events described in an applicable clause of
this Section (5)(b)(i) have occurred, and (II) an affidavit of the Secretary or
an Assistant Secretary of the Company stating that such resolution was in fact
adopted by the affirmative vote
- 4 -
<PAGE>
of not less than a majority of the entire membership of the Board of Directors
of the Company; and (III) delivery of a Notice of Termination pursuant to
Section (5)(d) hereof.
(ii) Without Cause. The Company may terminate the
Executive's employment without Cause, effective upon at least three (3) years'
prior Notice of Termination delivered to the Executive pursuant to Section
(5)(d) hereof.
(c) Termination by the Executive.
(i) Upon Breach by the Company. The Executive may
terminate his employment hereunder, upon thirty (30) days' prior Notice of
Termination delivered to the Company pursuant to Section (5)(d) hereof, for
failure of the Company to observe and perform one or more of its obligations
under Sections (1), (2), (3) and/or (4) hereof (a Breach by the Company) at a
time when the Executive is not in default of any of his obligations under
Sections (1) and/or (2) hereof.
(ii) Absent Breach by the Company. The Executive may
terminate his employment hereunder in the absence of a Breach by the Company,
effective upon at least six (6) months' prior Notice of Termination delivered to
the Company pursuant to Section (5)(d) hereof.
(d) Notice of Termination. Any termination of employment, by
the Company or by the Executive, shall be communicated by delivery of a written
Notice of Termination to the other party.
(e) Date of Termination. For purposes of this Agreement, the
Date of Termination is defined as the earlier of (i) if the Executive's
employment is terminated pursuant to Section (5)(b)(ii) hereof, the date
specified in the Notice of Termination, or (ii) if the Executive's employment is
terminated (A) by his death, the date of his death, (B) pursuant to Section
(5)(b)(i) or Section (5)(c) hereof, the date specified in the Notice of
Termination, or (C) in any other event, the date on which a Notice of
Termination is delivered.
(6) CONSEQUENCES OF TERMINATION
(a) If the Executive's employment terminates pursuant to
Section (5)(a) hereof, the Company shall pay to the personal representative
and/or spouse of the Executive his Total Compensation earned prior to the Date
of Termination, any amounts payable pursuant to Sections (4)(c), (4)(d), (4)(e)
and (4)(f) hereof and any benefits or amounts payable under any deferred
compensation plan in which the Executive had been a participant, and the Company
shall have no further obligation under this Agreement.
- 5 -
<PAGE>
(b) If the Executive's employment terminates pursuant to
Section (5)(b)(ii) or Section (5)(c)(ii) hereof, the Company shall pay to the
Executive and/or his personal representative and/or spouse his Total
Compensation earned prior to the Date of Termination, any amounts payable
pursuant to Sections (4)(c), (4)(d), (4)(e) and (4)(f) hereof and any benefits
or amounts payable under any deferred compensation plan in which the Executive
had been a participant, and the Company shall have no further obligation to the
Executive and/or his personal representative and/or spouse under this Agreement
or on account of, or arising out of, the termination of the Executive's
employment. The Executive may petition the Board of Directors of the Company for
an immediate lump sum payment, in lieu of any amounts payable pursuant to
Section (4)(f) hereof on account of the Executive's termination of employment
pursuant to Section (5)(b)(ii) or Section (5)(c)(ii) hereof, in an amount equal
to the actuarial present value of a supplemental retirement benefit, expressed
in the form of a single life annuity beginning at Executive's termination of
employment equal to the excess if any of (A) less (B) where (A) is 2.2% (.022)
of the Executive's highest three-year average Total Compensation times the
number of years at termination (not to exceed thirty) of the Executive's service
deemed as an employee of the Company, and (B) is the benefit payable under the
Company's Pension Plan at the Executive's termination of employment. The
actuarial present value of such supplemental retirement benefit shall be
calculated on the basis of the annual yield on thirty-year United States
Treasury bonds on the final business day of he month preceding the termination
of his employment and the 1983 Group Annuity table. The Board of Directors of
the Company may grant or deny any such petition by the Executive in its sole
discretion.
(c) If the Executive's employment is terminated pursuant to
Section (5)(b)(i) hereof, or if the Executive terminates his employment in the
absence of a Breach by the Company and not in accordance with Section (5)(c)(ii)
hereof, the Company shall pay to the Executive his full Base Salary earned prior
to the Date of Termination, any amounts payable pursuant to Sections (4)(c),
(4)(d), and (4)(e) hereof and any benefits or amounts payable under any deferred
compensation plan in which the Executive had been a participant, and, provided
that the Company is not in default of any of its obligations hereunder, 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.
(d) If the Executive's employment is terminated pursuant to
Section (5)(c)(i) hereof, or if the Company terminates the Executive's
employment without Cause and not in accordance with Section (5)(b)(ii) hereof:
(i) The Company shall pay to the Executive his Total
Compensation earned prior to the Date of Termination, any amounts payable
pursuant to Sections (4)(c), (4)(d) and (4)(e) hereof and any benefits or
amounts payable under any deferred
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<PAGE>
compensation plan in which the Executive had been a participant; and if the
Notice of Termination is delivered on or after the date of, and in connection
with, a Change in Control, the Company shall afford the Executive the severance
benefits set forth on Schedule C attached hereto.
(ii) In lieu of any amounts payable pursuant to
Section (4)(f) hereof on account of the Executive's termination of employment,
the Company shall pay to the Executive an immediate lump sum amount equal to the
actuarial present value of a supplemental retirement benefit, expressed in the
form of a single life annuity beginning at Executive's termination of
employment, equal to the excess if any of (A) less (B), where (A) is 2.2% (.022)
of the Executive's highest three-year average Total Compensation times the
number of years at termination (not to exceed thirty) of the Executive's service
deemed as an employee of the Company, and (B) is the benefit payable under the
Company's Pension Plan at the Executive's termination of employment. The
actuarial present value of such supplemental retirement benefit shall be
calculated on the basis of the annual yield on thirty-year United States
Treasury bonds on the final business day of the month preceding the termination
of his employment and the 1983 Group Annuity table.
(iii) The Company shall maintain in full force and
effect, for the continued benefit of the Executive for the period ending on the
third anniversary of the Date of Termination, all employee benefit plans and
programs in which the Executive was entitled to participate immediately prior to
the Date of Termination, provided that the Executive's continued participation
is possible under the general terms and provisions of such plans and programs.
If the Executive's participation in any such plan or program is barred as a
result of such termination, the Company shall arrange to provide the Executive
with benefits substantially similar on an after-tax basis to those which the
Executive was entitled to receive under such plan or program.
(iv) The Company shall pay to the Executive and/or
his personal representative his full Base Salary, during the period commencing
on the date following the Date of Termination and ending on the third
anniversary of the Date of Termination, at the rate in effect at the time the
Notice of Termination is delivered; provided, however, that if the Notice of
Termination is delivered on or after the date of, and in connection with, a
Change in Control the Company shall pay to the Executive, in lieu of the
payments prescribed by the foregoing clause, an immediate lump sum amount equal
to the aggregate sum of all of said payments.
(v) The Executive shall not be required to mitigate
the amount of any payment provided for in this Section (6)(d) by seeking
employment or otherwise. The benefits payable under this Section (6)(d) shall
not be reduced by reason of the
- 7 -
<PAGE>
Executive's securing other employment or for any other reason, unless the Notice
of Termination is delivered on or after, and in connection with, a Change in
Control, in which event the provisions of the following three sentences shall
apply. If, prior to the third anniversary of the Date of Termination, the
Executive obtains employment, the Executive shall refund to the Company a
portion of the lump sum payment provided for in Section (6)(d)(iv) equal to the
amounts earned by the Executive from his subsequent employer prior to said
anniversary date, but in no event more than the amount of said lump sum payment
prorated over the number of months in the period commencing on the date
following his Date of Termination and ending on the third anniversary of the
Date of Termination, multiplied by the number of months remaining between the
Executive's date-of-hire in his new employment and the third anniversary of his
Date of Termination. The Executive shall refund to the Company any amount
required by the preceding sentence within one hundred and eighty (180) days
after the date-of-hire in his new employment. The employee benefit plans and
programs to be provided by the Company pursuant to Section (6)(d)(iii) shall be
reduced as and to the extent that such benefits are provided to the Executive by
a subsequent employer during the period covered by said Section (6)(d)(iii).
(vi) The payment to, and acceptance by, the Executive
of any sum of money or benefit prescribed in this Section (6)(d) shall effect
and evidence a release by the Executive of any and all claims against the
Company on account of, or arising out of, the termination of the Executive's
employment, except as prescribed in this Section (6)(d).
(7) CHANGE IN CONTROL
For purposes of this Agreement, Change in Control shall mean any of the
following events:
(a) any merger or consolidation of the Company with any
corporate shareholder or group of corporate shareholders holding twenty-five
percent (.25) or more of the Common Stock of the Company or with any other
corporation or group of corporations which is, or after such merger or
consolidation would be, or be affiliated with, a shareholder owning at least
twenty-five percent (.25) of the Common Stock of the Company; or
(b) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition to or with any shareholder or group of shareholders holding
twenty-five percent (.25) or more of the Common Stock of the Company, or any
affiliate of such shareholder or group of shareholders, of any assets of the
Company having an aggregate fair market value of $50 million or more; or
(c) the issuance or sale by the Company of any securities of
the Company to any shareholder or group of shareholders holding twenty-five
percent (.25) or more of the
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<PAGE>
Common Stock of the Company, or to any affiliate of such shareholder or group of
shareholders, in exchange for cash, securities or other consideration having an
aggregate fair market value of $50 million or more; or
(d) the implementation of any plan or proposal for the
liquidation or dissolution of the Company proposed by or on behalf of any
shareholder or group of shareholders owning at least twenty-five percent (.25)
of the Common Stock of the Company, or any affiliate of such shareholder or
group of shareholders; or
(e) any reclassification of securities (including a reverse
stock split), or recapitalization of the Company or any other transaction which
has the effect, directly or indirectly, of increasing the proportionate share of
outstanding shares of any class of equity securities, or securities convertible
into any equity securities, of the Company, which is directly or indirectly
owned by a shareholder or group of shareholders owning at least twenty-five
percent (.25) of the Common Stock of the Company, or any affiliate of such
shareholder or group of shareholders.
The Board of Directors of the Company may, from time to time, by the
affirmative vote of not less than a majority of the entire membership of said
Board of Directors, at a meeting of said Board of Directors called and held for
the purpose, modify the phrase "twenty-five percent (.25)" in one or more of the
foregoing Sections (7)(a), (7)(b), (7)(c), (7)(d) and/or (7)(e) to a lesser
percentage, but not less than twenty percent (.20).
(8) ADDITIONAL CONSEQUENCES OF A CHANGE IN CONTROL
(a) In the event that a Change in Control has been approved by
all necessary shareholder, creditor and regulatory actions, the earning of
Performance Shares by the Executive under the Company's Long-Term Incentive
Program will be accelerated to the day prior to the date of the Change in
Control, and the Executive will be deemed to have earned all of the Contingent
Performance Shares outstanding with respect to him, payable to him on said day
prior to the date of the Change in Control, at his option, either (i) in
authorized but unissued shares of the Company's Common Stock, or (ii) in cash,
based upon the market value of the Company's Common Stock at the end of the
business day next preceding said day prior to the date of the Change in Control.
(b) In the event that a Change in Control has been approved by
all necessary shareholder, creditor and regulatory actions, the Company will,
not later than the day prior to the date of the Change in Control, pay to the
Trustee of The United Illuminating Company Supplemental Retirement Benefit Trust
established pursuant to the Agreement, made as of the 1st day of June, 1995
between the Company and State Street Bank and Trust
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<PAGE>
Company, as Trustee, cash in an amount equal to: (A) In the event that the
Executive's employment has been terminated or will be terminated prior to the
date of the Change in Control, a sum, calculated by the Company's independent
certified public accountants, 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 (6)(a), Section (6)(b) or Section
(6)(d) hereof; or (B) in the event that the Executive employment has not been
terminated and will not be terminated prior to the date of the Change in
Control, a sum, calculated by the Company's independent certified public
accountants, reasonably sufficient to pay and discharge the Company's
obligations to the Executive under Section (6)(d) hereof assuming, for purposes
of such calculation, that the Executive's employment is terminated under said
Section (6)(d) by a Notice of Termination delivered on the date of the Change in
Control and specifying an immediate Date of Termination.
(c) On and after the date of the Change in Control, the
Executive's Base Salary may not be reduced by the Board of Directors to an
annual rate less than the rate fixed by the Board of Directors of the Company as
a result of its most recent review of salary rates, pursuant to Section (4)(a)
hereof, prior to the date of the Change in Control.
(9) TAX SAVINGS PROVISION
If any portion of the payments which the Executive has the right to
receive from the Company, or any affiliated entity, hereunder would constitute
"excess parachute payments" (as defined in Section 280G of the Internal Revenue
Code, and not governed by the terms defined in this Agreement) subject to the
excise tax imposed by Section 4999 of the Internal Revenue Code, such excess
parachute payments shall be reduced to the largest amount that will result in no
portion of such excess parachute payments being subject to the excise tax
imposed by Section 4999 of the Internal Revenue Code.
(10) SUCCESSORS; BINDING AGREEMENT
(a) The Company shall pay to the Executive and/or his personal
representative and/or spouse all legal fees and expenses and court costs, if
any, incurred by the Executive and/or such representative and/or spouse in
successful litigation to enforce his rights under this Agreement.
(b) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Company, 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. Failure of the Company to obtain
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<PAGE>
such agreement by the effectiveness of any such succession shall be a breach of
this Agreement and shall entitle the Executive to compensation from the Company
in the same amount and upon the same terms as he would be entitled to hereunder
if he terminated his employment upon Breach by the Company, except that, for
purposes of implementing the foregoing, the date on which any such succession
becomes effective shall be deemed the Date of Termination. As used in this
Agreement, the term "the Company" shall include The United Illuminating Company,
any parent and any successor to the business or assets of either as aforesaid
which executes and delivers the agreement provided for in this Section (10) or
which otherwise becomes bound by all the terms and provisions of this Agreement
by operation of law.
(c) 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. If the Executive should die while any
amounts would still be payable to him hereunder if he had continued to live, all
such amounts, unless otherwise provided herein, shall be paid in accordance with
the terms of this Agreement to the Executive's devisee, legatee or other
designee or, if there be no such designee, to the Executive's estate.
(11) NOTICE
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 United Illuminating Company, 157
Church Street, New Haven, Connecticut, Attention: Secretary, or, in the case of
the Executive, to him at 157 Church Street, New Haven Connecticut, or to such
other address as either party shall designate by giving written notice of such
change to the other party.
(12) MISCELLANEOUS
(a) No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is approved by the
Board of Directors of the Company and agreed to in a writing signed by the
Executive and such officer as may be specifically authorized by the Board of
Directors of 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 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 which are
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<PAGE>
not set forth expressly in this Agreement. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of Connecticut.
(b) Exhibits A-1 and A-2 attached hereto, showing calculations
of supplemental retirement benefits under Section (4)(f), and Exhibit B attached
hereto, showing a calculation of a lump sum payment under Section (6)(d)(ii),
are incorporated herein by reference and set forth, by example, the parties'
intended interpretation and application of such Sections.
(13) VALIDITY
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.
(14) SURVIVAL
The provisions of this Agreement shall not survive the termination of
this Agreement or of employment hereunder, except that the provisions of
Sections (4), (6), (8), (9), (10), and (11) hereof shall survive such
termination and shall be binding upon the Company's successors and assigns.
(15) COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date and year first above written.
Attest: THE UNITED ILLUMINATING COMPANY
/s/ Kurt Mohlman By: /s/ Richard J. Grossi
- ------------------- -----------------------------------
Secretary Chairman of the Board of
Directors and Chief Executive Officer
/s/ Robert L. Fiscus
-----------------------------------
Robert L. Fiscus
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<PAGE>
EXHIBIT A-1
TO
EMPLOYMENT AGREEMENT
BETWEEN
THE UNITED ILLUMINATING COMPANY
AND
MR. ROBERT L. FISCUS
--------------------
Sample calculation of supplemental retirement benefits under Section (4)(f).
Assume the Executive retires at the Expiration of the Agreement and immediately
commences his Pension Plan benefits under the following facts:
(1) Retirement Age 55 (July 1,1992)
---------------------------
(2) Actual Service with the Company 19 years 11 months (7/1/92)
---------------------------
(3) Deemed Service with the Company 33 years (7/1/92)
---------------------------
(4) Average Total Compensation See Calculations Below
---------------------------
Total Compensation at age 54 $185,000
Total Compensation at age 53 $180,000
Total Compensation at age 52 $175,000 3 year average = $180,000
deemed to be 3 highest years'
compensation, for purposes of
this example)
(A) Target Benefit at Age 55
1. 2.2% of 3 year average Total Compensation times
Deemed Service (up to 30 years)
(.022) x ($180,000) x (30) $118,800
2. Early Retirement Reduction Factor (based on Deemed Service) .561
-------
3. Target Benefit at Age 55: 1 times 2 66,647
(B) Pension Benefit at Age 55
1. Quantity A (estimated) $ 10,000
2. Quantity B 170,000
3. Quantity C (average of 3 highest years' compensation) 180,000
4. 1% of Quantity A plus 2% of Quantity B: 3,500
5. Actual Service with the Company (up to 25 years) 19.917
6. 4 times 5 69,710
7. 1/2% of Quantity C (up to $25,000, effective
with 1995 Union Contract) 125
8. Actual Service with the Company in excess of 25 years 0
9. 7 times 8 0
10. Pension unreduced at age 55: 6 plus 9 69,710
11. Early Retirement Reduction Factor (based on actual service) .427
12. Pension payable at age 55: 10 times 11 29,766
13. Supplemental Pension: A3 - B12 36,881
<PAGE>
EXHIBIT A-2
TO
EMPLOYMENT AGREEMENT
BETWEEN
THE UNITED ILLUMINATING COMPANY
AND
MR. ROBERT L. FISCUS
--------------------
Sample calculation of supplemental retirement benefits under Section (4)(f).
Assume the Agreement terminates at an Expiration Date but the Executive
continues to be employed by the Company for 2 years after the expiration of the
Agreement before retiring and commencing his Pension Plan benefits under the
following facts:
(1) Retirement Age 57 (July 1, 1994)
---------------------------
(2) Actual Service with the Company
(a) Before Expiration of Agreement
(b) After Expiration of Agreement
(c) Total 21 years 11 months (7/1/94)
---------------------------
(3) Deemed Service with the Company
(a) Before Expiration of Agreement
(b) After Expiration of Agreement
(c) Total 35 years (7/1/94)
---------------------------
(4) Average Total Compensation See Calculations Below
---------------------------
Total Compensation at age 56 $185,000
Total Compensation at age 55 $180,000
Total Compensation at age 54 $175,000 (3 year average = $180,000
deemed to be 3 highest years'
compensation, for purposes of
this example)
(A) Target Benefit at Age 57
1. 2.2% of 3 year average Total Compensation times
Deemed Service (up to 30 years)
(.022) x ($180,000) x (30) $118,800
2. Early Retirement Reduction Factor (based on Deemed Service) .655
-------
3. Target Benefit at Age 57: 1 times 2 77,814
(B) Pension Benefit at Age 57
1. Quantity A (estimated) $ 10,000
2. Quantity B 170,000
3. Quantity C (average of 3 highest years' compensation) 180,000
4. 1% of Quantity A plus 2% of Quantity B: 3,500
5. Actual Service with the Company (up to 25 years) 21.917
6. 4 times 5 76,710
7. 1/2% of Quantity C (up to $25,000 effective with
1995 Union Contract) 125
8. Actual Service with the Company in excess of 25 years 0
9. 7 times 8 0
10. Pension unreduced at age 57: 6 plus 9 76,710
11. Early Retirement Reduction Factor (based on actual service) .498
12. Pension payable at age 57: 10 times 11 38,202
13. Supplemental Pension: A3 - B12 39,612
<PAGE>
EXHIBIT B
TO
EMPLOYMENT AGREEMENT
BETWEEN
THE UNITED ILLUMINATING COMPANY
AND
MR. ROBERT L. FISCUS
--------------------
Sample calculation of lump-sum payment in lieu of supplemental retirement
benefits under Section (6)(d)(iii). Assume the Executive's employment terminates
and Section (6)(d) applies under the following facts:
(1) Age of Executive at Termination 51 (May 31, 1988)
----------------------------
(2) Actual Service with the Company 15 years 10 months (5/31/88)
----------------------------
(3) Deemed Service with the Company 28 years 11 months (5/31/88)
----------------------------
(4) Average Total Compensation See Calculations Below
----------------------------
Total Compensation at age 53 $185,000
Total Compensation at age 52 $180,000
Total Compensation at age 51 $175,000 (3 year average = $180,000
deemed to be 3 highest years'
compensation, for purposes of
this example)
(A) Target Benefit at Age 51
1. 2.2% of 3 year average Total Compensation times
Deemed Service (up to 30 years)
(.022) x ($180,000) x (28.917) $114,511
2. Early Retirement Reduction Factor (based on Deemed Service) 1.000
-------
3. Target Benefit at Age 51: 1 times 2 114,511
(B) Pension Benefit at Age 55
1. Quantity A (estimated) $ 10,000
2. Quantity B 170,000
3. Quantity C (average of 3 highest years' compensation) 180,000
4. 1% of Quantity A plus 2% of Quantity B: 3,500
5. Actual Service with the Company (up to 25 years) 15.833
6. 4 times 5 55,416
7. 1/2% of Quantity C (up to $25,000, effective with
1995 Union Contract) 125
8. Actual Service with the Company in excess of 25 years 0
9. 7 times 8 0
10. Pension unreduced at age 55: 6 plus 9 55,416
11. Early Retirement Reduction Factor (based on actual service) .427
12. Pension payable at age 55: 10 times 11 23,663
13. Supplemental Pension: A3 - B12 90,848
14. Annuity Factor for determining Lump-Sum Value at age 55 10.3880
--
15. Lump-Sum Value at age 55: 13 times 14 943,729
--
16. Interest discount factor from age 55 to age 51 (based on 7-1/2%) .7488
-- --
17. Lump-Sum Value at age 55 discounted to age 51: 15 times 16 706,664
-- --
<PAGE>
SCHEDULE C
Severance Benefits
------------------
At the option of the Officer, exercised by written notice to the Company, the
benefits of either (A) or (B) below will be afforded the Officer:
(A) a lump sum payment in an amount equal to the product of (X) multiplied
by (Y), where:
(X) is the sum of one-twelfth of the Officer's annual salary
rate approved by the Board of Directors of the Company at
the time of its most recent review of the salary rates of
all of the Company's officers, plus one-twelfth of the cash
award(s) that the Officer would earn under the short-term
incentive compensation program(s) in which the Officer is a
participant on the date of the termination of the Officer's
employment, assuming that all of the Officer's program goals
for the performance period are achieved at the target level;
and
(Y) is the number of whole and partial years (not to be less
than 12 nor more than 24) of the Officer's service deemed as
an employee of the Company on the date of termination of the
Officer's employment.
(B) The Officer's choice of the addition of six years of age, or six years
of service deemed as an employee of the Company, or any combination
(not to exceed 6) of whole and partial years of age and whole and
partial years of service deemed as an employee of the Company, in the
calculation of the benefits payable to the Officer under the Company's
retiree medical benefit plan(s) and in the calculation of the benefits
payable to the Officer as a supplemental retirement benefit under his
Employment Agreement.
EXHIBIT 10.24
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made as of the 1st day of January, 1988, and amended as
of July 23, 1990, June 1, 1995 and March 1, 1997, between THE UNITED
ILLUMINATING COMPANY, a Connecticut corporation (the Company) and JAMES F.
CROWE, an individual (the Executive),
WITNESSETH THAT
WHEREAS, the Executive has been in the employ of the Company for a
substantial period of time; and
WHEREAS, the Company desires to continue to employ the Executive as a
Group Vice President, and the Executive desires to continue to be employed by
the Company as a Group Vice President; and
WHEREAS, the Company and the Executive desire to enter into a written
agreement confirming certain of the rights and benefits which the Executive has
heretofore enjoyed and certain of the duties and obligations which the Executive
has heretofore assumed, and conferring upon the Executive certain rights and
benefits which he has not heretofore enjoyed and imposing upon the Executive
certain duties and obligations to which he has not heretofore been subject,
NOW THEREFORE, in consideration of the foregoing and the respective
covenants and agreements of the parties herein contained, and the services
heretofore rendered by the Executive to the Company and to be rendered to the
Company pursuant hereto hereafter, and in order to provide an incentive to the
Executive to remain in the employ of the Company hereafter and, in particular,
in the event of any Change in Control (as herein defined) of the Company,
thereby establishing and preserving continuity of management, the Parties hereby
agree as follows:
(1) EMPLOYMENT
(a) The Company hereby agrees to employ the Executive, and the
Executive hereby agrees to serve the Company all upon the terms and conditions
set forth herein.
(b) Unless and until terminated pursuant to Section (5)(a),
Section (5)(b)(i) or Section (5)(c)(i) hereof, the employment of the Executive
by the Company shall be for a term expiring on the date specified in a Notice of
Termination pursuant to Section (5)(d) hereof.
(2) POSITION AND DUTIES
The Executive shall be employed by the Company as a Group Vice
President, or in such other equivalent or higher senior
<PAGE>
executive position as the Company's Board of Directors may determine, without
diminishment in his officership status, privileges or working conditions. The
Executive shall accept such employment and shall perform and discharge,
faithfully, diligently and to the best of his abilities, the duties and
obligations of his office and such other duties as may from time to time be
assigned to him by the Chief Executive Officer, or by the Board of Directors, of
the Company, and shall devote substantially all his working time and efforts to
the business and affairs of the Company; provided, however, that, to an extent
consistent with the needs of the Company, the Executive shall be entitled to
expend a reasonable amount of time on civic and philanthropic activities and the
management of his own and his family's business investments and activities.
Although a Change in Control of the Company shall not affect the obligations of
the Company and the Executive as set forth in the two preceding sentences, at
and after the date of any Change in Control the Company's employment of the
Executive shall also be without diminishment in his management responsibilities,
duties or powers.
(3) PLACE OF PERFORMANCE
In his employment by the Company, the Executive shall be based at the
executive offices of the Company situated within the Company's statutory service
area.
(4) COMPENSATION
(a) Base Salary. During the term of his employment hereunder,
the Executive shall receive a base salary (Base Salary) at an annual rate of One
Hundred Seventy-Six Thousand Six Hundred Dollars ($176,600). The Executive's
Base Salary rate shall be reviewed by the Board of Directors of the Company
contemporaneously with each review of the salary rates of the Company's other
officers by said Board of Directors, and may be revised upwards as a result of
any such review. The Executive's Base Salary may be revised downwards by said
Board of Directors contemporaneously with any general reduction of the salary
rates of the Company's other officers.
(b) Incentive Compensation. During the term of his employment
hereunder, the Executive shall be entitled to participate in each incentive
compensation program established for officers of the Company.
For purposes of this Agreement, Total Compensation is defined
as the sum of the Executive's Base Salary and any amount paid or payable
pursuant to this Section (4)(b).
(c) Business Expenses. During the term of his employment
hereunder, the Executive shall be entitled to receive prompt reimbursement for
all reasonable expenses incurred by him (in accordance with the policies and
procedures established by
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<PAGE>
the Board of Directors of the Company from time to time for the Company's senior
executive officers) in performing services hereunder, provided that the
Executive properly accounts therefor.
(d) Fringe Benefits. During the term of his employment
hereunder, the Executive shall be entitled to participate in and receive full
benefits under all of the Company's employee benefit plans, programs and
arrangements for its officers, including, without limitation, its Pension Plan.
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.
(e) Vacations. During the term of his employment hereunder,
the Executive shall be entitled to the number of paid vacation days in each
calendar year determined by the Board of Directors of the Company from time to
time for the Company's senior executive officers, and shall also be entitled to
all paid holidays given by the Company to its employees.
(f) Supplemental Retirement. Upon termination of the
Executive's employment, a supplemental retirement benefit shall be payable to
him or his beneficiary in accordance with the provisions of this Section (4)(f).
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 Company's Pension Plan), shall be the excess, if any, of (A) less (B), where
(A) is 2.2% (.022) of the Executive's highest three-year average Total
Compensation times the number of years at termination (not to exceed thirty) of
the Executive's service deemed as an employee of the Company, and (B) is the
benefit payable under the Company's Pension Plan. Payment of the supplemental
retirement benefit shall begin at the same time as the Executive's Pension Plan
benefit payments and shall be subject to the same reductions for early
commencement, except that the reductions shall be based on the Executive's
service deemed as an employee of the Company. The supplemental retirement
benefit may be paid in any form available under the Pension Plan, as elected by
the Executive prior to benefit payment commencement. The conversion factors
between forms of benefits used for purposes of the Pension Plan shall be used
for purposes of the supplemental retirement benefit. The form of payment of the
supplemental retirement benefit may be the same or different from the form of
payment of the Executive's benefits under the Pension Plan. 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,
the death benefit provisions of the Pension Plan shall apply, mutatis mutandis,
to the supplemental retirement benefit payable pursuant to this Section (4)(f).
- 3 -
<PAGE>
(5) TERMINATION
(a) The Executive's employment hereunder shall terminate upon
his death.
(b) Termination by the Company.
(i) The Company may terminate the Executive's
employment hereunder for Cause. 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 (A) continued failure to perform and
discharge the duties or obligations of his office, or such other duties as may
from time to time be assigned to him by the Chief Executive Officer or by the
Board of Directors, faithfully, diligently, to the best of his abilities, and in
accordance with standards accepted in the electric utility industry, after
written notice by the Board of Directors of the Company specifying the alleged
failure in reasonably detailed terms and including in said notice the opinion of
a majority of the entire membership of said Board of Directors that there has
been such failure, or (B) willful misconduct that is materially and demonstrably
injurious to the Company, or (C) conviction of a felony involving the personal
dishonesty or moral turpitude of the Executive (unless such conviction is
reversed in any final appeal therefrom), or (D) total and permanent physical or
mental disability, or (E) absence from work on a full-time basis, due to
physical or mental illness, for an uninterrupted 365-day period. On and after
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 (F)
conviction of a felony involving the personal dishonesty or moral turpitude of
the Executive (unless such conviction is reversed in any final appeal
therefrom), or (G) total and permanent physical or mental disability, or (H)
absence from work on a full-time basis, due to physical or mental illness, for
an uninterrupted 365-day period. Notwithstanding the foregoing, the Executive
shall not be deemed to have been terminated for Cause unless and until there
shall have been delivered to the Executive (I) a copy of a resolution, duly
adopted by the affirmative vote of not less than a majority of the entire
membership of the Board of Directors of the Company, at a meeting of said Board
of Directors called and held for the purpose (after reasonable notice to the
Executive and an opportunity for him, together with his counsel, to be heard
before said Board of Directors), finding that, in the good faith opinion of such
majority of said Board of Directors, the Executive was guilty of conduct
described in an applicable clause of this Section (5)(b)(i), and specifying the
particulars thereof, or that the events described in an applicable clause of
this Section (5)(b)(i) have occurred, and (II) an affidavit of the Secretary or
an Assistant Secretary of the Company stating that such resolution was in fact
adopted by the affirmative vote of not less than a majority of the entire
membership of the Board of Directors of the Company; and (III) delivery of
a Notice of
- 4 -
<PAGE>
Termination pursuant to Section (5)(d) hereof.
(ii) Without Cause. The Company may terminate the
Executive's employment without Cause, effective upon at least three (3) years'
prior Notice of Termination delivered to the Executive pursuant to Section
(5)(d) hereof.
(c) Termination by the Executive.
(i) Upon Breach by the Company. The Executive may
terminate his employment hereunder, upon thirty (30) days' prior Notice of
Termination delivered to the Company pursuant to Section (5)(d) hereof, for
failure of the Company to observe and perform one or more of its obligations
under Sections (1), (2), (3) and/or (4) hereof (a Breach by the Company) at a
time when the Executive is not in default of any of his obligations under
Sections (1) and/or (2) hereof.
(ii) Absent Breach by the Company. The Executive may
terminate his employment hereunder in the absence of a Breach by the Company,
effective upon at least six (6) months' prior Notice of Termination delivered to
the Company pursuant to Section (5)(d) hereof.
(d) Notice of Termination. Any termination of employment, by
the Company or by the Executive, shall be communicated by delivery of a written
Notice of Termination to the other party.
(e) Date of Termination. For purposes of this Agreement, the
Date of Termination is defined as the earlier of (i) if the Executive's
employment is terminated pursuant to Section (5)(b)(ii) hereof, the date
specified in the Notice of Termination, or (ii) if the Executive's employment is
terminated (A) by his death, the date of his death, (B) pursuant to Section
(5)(b)(i) or Section (5)(c) hereof, the date specified in the Notice of
Termination, or (C) in any other event, the date on which a Notice of
Termination is delivered.
(6) CONSEQUENCES OF TERMINATION
(a) If the Executive's employment terminates pursuant to
Section (5)(a) hereof, the Company shall pay to the personal representative
and/or spouse of the Executive his Total Compensation earned prior to the Date
of Termination, any amounts payable pursuant to Sections (4)(c), (4)(d), (4)(e)
and (4)(f) hereof and any benefits or amounts payable under any deferred
compensation plan in which the Executive had been a participant, and the Company
shall have no further obligation under this Agreement.
(b) If the Executive's employment terminates pursuant to
Section (5)(b)(ii) or Section (5)(c)(ii) hereof, the Company shall pay to th
Executive and/or his personal representative
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<PAGE>
and/or spouse his Total Compensation earned prior to the Date of Termination,
any amounts payable pursuant to Sections (4)(c), (4)(d), (4)(e) and (4)(f)
hereof and any benefits or amounts payable under any deferred compensation plan
in which the Executive had been a participant, and the Company shall have no
further obligation to the Executive and/or his personal representative and/or
spouse under this Agreement or on account of, or arising out of, the termination
of the Executive's employment. The Executive may petition the Board of Directors
of the Company for an immediate lump sum payment, in lieu of any amounts payable
pursuant to Section (4)(f) hereof on account of the Executive's termination of
employment pursuant to Section (5)(b)(ii) or Section (5)(c)(ii) hereof, in an
amount equal to the actuarial present value of a supplemental retirement
benefit, expressed in the form of a single life annuity beginning at Executive's
termination of employment equal to the excess if any of (A) less (B) where (A)
is 2.2% (.022) of the Executive's highest three-year average Total Compensation
times the number of years at termination (not to exceed thirty) of the
Executive's service deemed as an employee of the Company, and (B) is the benefit
payable under the Company's Pension Plan at the Executive's termination of
employment. The actuarial present value of such supplemental retirement benefit
shall be calculated on the basis of the annual yield on thirty-year United
States Treasury bonds on the final business day of he month preceding the
termination of his employment and the 1983 Group Annuity table. The Board of
Directors of the Company may grant or deny any such petition by the Executive in
its sole discretion.
(c) If the Executive's employment is terminated pursuant to
Section (5)(b)(i) hereof, or if the Executive terminates his employment in the
absence of a Breach by the Company and not in accordance with Section (5)(c)(ii)
hereof, the Company shall pay to the Executive his full Base Salary earned prior
to the Date of Termination, any amounts payable pursuant to Sections (4)(c),
(4)(d), and (4)(e) hereof and any benefits or amounts payable under any deferred
compensation plan in which the Executive had been a participant, and, provided
that the Company is not in default of any of its obligations hereunder, 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.
(d) If the Executive's employment is terminated pursuant to
Section (5)(c)(i) hereof, or if the Company terminates the Executive's
employment without Cause and not in accordance with Section (5)(b)(ii) hereof:
(i) The Company shall pay to the Executive his Total
Compensation earned prior to the Date of Termination, any amounts payable
pursuant to Sections (4)(c), (4)(d) and (4)(e) hereof and any benefits or
amounts payable under any deferred compensation plan in which the Executive had
been a participant; and if the Notice of Termination is delivered on or after
the
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<PAGE>
date of, and in connection with, a Change in Control, the Company shall afford
the Executive the severance benefits set forth on Schedule C attached hereto.
(ii) In lieu of any amounts payable pursuant to
Section (4)(f) hereof on account of the Executive's termination of employment,
the Company shall pay to the Executive an immediate lump sum amount equal to the
actuarial present value of a supplemental retirement benefit, expressed in the
form of a single life annuity beginning at Executive's termination of
employment, equal to the excess if any of (A) less (B), where (A) is 2.2% (.022)
of the Executive's highest three-year average Total Compensation times the
number of years at termination (not to exceed thirty) of the Executive's service
deemed as an employee of the Company, and (B) is the benefit payable under the
Company's Pension Plan at the Executive's termination of employment. The
actuarial present value of such supplemental retirement benefit shall be
calculated on the basis of the annual yield on thirty-year United States
Treasury bonds on the final business day of the month preceding the termination
of his employment and the 1983 Group Annuity table.
(iii) The Company shall maintain in full force and
effect, for the continued benefit of the Executive for the period ending on the
third anniversary of the Date of Termination, all employee benefit plans and
programs in which the Executive was entitled to participate immediately prior to
the Date of Termination, provided that the Executive's continued participation
is possible under the general terms and provisions of such plans and programs.
If the Executive's participation in any such plan or program is barred as a
result of such termination, the Company shall arrange to provide the Executive
with benefits substantially similar on an after-tax basis to those which the
Executive was entitled to receive under such plan or program.
(iv) The Company shall pay to the Executive and/or
his personal representative his full Base Salary, during the period commencing
on the date following the Date of Termination and ending on the third
anniversary of the Date of Termination, at the rate in effect at the time the
Notice of Termination is delivered; provided, however, that if the Notice of
Termination is delivered on or after the date of, and in connection with, a
Change in Control the Company shall pay to the Executive, in lieu of the
payments prescribed by the foregoing clause, an immediate lump sum amount equal
to the aggregate sum of all of said payments.
(v) The Executive shall not be required to mitigate
the amount of any payment provided for in this Section (6)(d) by seeking
employment or otherwise. The benefits payable under this Section (6)(d) shall
not be reduced by reason of the Executive's securing other employment or for any
other reason, unless the Notice of Termination is delivered on or after, and
in
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<PAGE>
connection with, a Change in Control, in which event the provisions of the
following three sentences shall apply. If, prior to the third anniversary of the
Date of Termination, the Executive obtains employment, the Executive shall
refund to the Company a portion of the lump sum payment provided for in Section
(6)(d)(iv) equal to the amounts earned by the Executive from his subsequent
employer prior to said anniversary date, but in no event more than the amount of
said lump sum payment prorated over the number of months in the period
commencing on the date following his Date of Termination and ending on the third
anniversary of the Date of Termination, multiplied by the number of months
remaining between the Executive's date-of-hire in his new employment and the
third anniversary of his Date of Termination. The Executive shall refund to the
Company any amount required by the preceding sentence within one hundred and
eighty (180) days after the date-of-hire in his new employment. The employee
benefit plans and programs to be provided by the Company pursuant to Section
(6)(d)(iii) shall be reduced as and to the extent that such benefits are
provided to the Executive by a subsequent employer during the period covered by
said Section (6)(d)(iii).
(vi) The payment to, and acceptance by, the Executive
of any sum of money or benefit prescribed in this Section (6)(d) shall effect
and evidence a release by the Executive of any and all claims against the
Company on account of, or arising out of, the termination of the Executive's
employment, except as prescribed in this Section (6)(d).
(7) CHANGE IN CONTROL
For purposes of this Agreement, Change in Control shall mean any of the
following events:
(a) any merger or consolidation of the Company with any
corporate shareholder or group of corporate shareholders holding twenty-five
percent (.25) or more of the Common Stock of the Company or with any other
corporation or group of corporations which is, or after such merger or
consolidation would be, or be affiliated with, a shareholder owning at least
twenty-five percent (.25) of the Common Stock of the Company; or
(b) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition to or with any shareholder or group of shareholders holding
twenty-five percent (.25) or more of the Common Stock of the Company, or any
affiliate of such shareholder or group of shareholders, of any assets of the
Company having an aggregate fair market value of $50 million or more; or
(c) the issuance or sale by the Company of any securities of
the Company to any shareholder or group of shareholders holding twenty-five
percent (.25) or more of the Common Stock of the Company, or to any affiliate of
such shareholder or group of shareholders, in exchange for cash,
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<PAGE>
securities or other consideration having an aggregate fair market value of $50
million or more; or
(d) the implementation of any plan or proposal for the
liquidation or dissolution of the Company proposed by or on behalf of any
shareholder or group of shareholders owning at least twenty-five percent (.25)
of the Common Stock of the Company, or any affiliate of such shareholder or
group of shareholders; or
(e) any reclassification of securities (including a reverse
stock split), or recapitalization of the Company or any other transaction which
has the effect, directly or indirectly, of increasing the proportionate share of
outstanding shares of any class of equity securities, or securities convertible
into any equity securities, of the Company, which is directly or indirectly
owned by a shareholder or group of shareholders owning at least twenty-five
percent (.25) of the Common Stock of the Company, or any affiliate of such
shareholder or group of shareholders.
The Board of Directors of the Company may, from time to time, by the
affirmative vote of not less than a majority of the entire membership of said
Board of Directors, at a meeting of said Board of Directors called and held for
the purpose, modify the phrase "twenty-five percent (.25)" in one or more of the
foregoing Sections (7)(a), (7)(b), (7)(c), (7)(d) and/or (7)(e) to a lesser
percentage, but not less than twenty percent (.20).
(8) ADDITIONAL CONSEQUENCES OF A CHANGE IN CONTROL
(a) In the event that a Change in Control has been approved by
all necessary shareholder, creditor and regulatory actions, the earning of
Performance Shares by the Executive under the Company's Long-Term Incentive
Program will be accelerated to the day prior to the date of the Change in
Control, and the Executive will be deemed to have earned all of the Contingent
Performance Shares outstanding with respect to him, payable to him on said day
prior to the date of the Change in Control, at his option, either (i) in
authorized but unissued shares of the Company's Common Stock, or (ii) in cash,
based upon the market value of the Company's Common Stock at the end of the
business day next preceding said day prior to the date of the Change in Control.
(b) In the event that a Change in Control has been approved by
all necessary shareholder, creditor and regulatory actions, the Company will,
not later than the day prior to the date of the Change in Control, pay to the
Trustee of The United Illuminating Company Supplemental Retirement Benefit Trust
established pursuant to the Agreement, made as of the 1st day of June, 1995
between the Company and State Street Bank and Trust Company, as Trustee, cash in
an amount equal to: (A) In the event that the Executive's employment has been
terminated or will be
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<PAGE>
terminated prior to the date of the Change in Control, a sum, calculated by the
Company's independent certified public accountants, 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 (6)(a), Section (6)(b)
or Section (6)(d) hereof; or (B) in the event that the Executive employment has
not been terminated and will not be terminated prior to the date of the Change
in Control, a sum, calculated by the Company's independent certified public
accountants, reasonably sufficient to pay and discharge the Company's
obligations to the Executive under Section (6)(d) hereof assuming, for purposes
of such calculation, that the Executive's employment is terminated under said
Section (6)(d) by a Notice of Termination delivered on the date of the Change in
Control and specifying an immediate Date of Termination.
(c) On and after the date of the Change in Control, the
Executive's Base Salary may not be reduced by the Board of Directors to an
annual rate less than the rate fixed by the Board of Directors of the Company as
a result of its most recent review of salary rates, pursuant to Section (4)(a)
hereof, prior to the date of the Change in Control.
(9) TAX SAVINGS PROVISION
If any portion of the payments which the Executive has the right to
receive from the Company, or any affiliated entity, hereunder would constitute
"excess parachute payments" (as defined in Section 280G of the Internal Revenue
Code, and not governed by the terms defined in this Agreement) subject to the
excise tax imposed by Section 4999 of the Internal Revenue Code, such excess
parachute payments shall be reduced to the largest amount that will result in no
portion of such excess parachute payments being subject to the excise tax
imposed by Section 4999 of the Internal Revenue Code.
(10) SUCCESSORS; BINDING AGREEMENT
(a) The Company shall pay to the Executive and/or his personal
representative and/or spouse all legal fees and expenses and court costs, if
any, incurred by the Executive and/or such representative and/or spouse in
successful litigation to enforce his rights under this Agreement.
(b) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Company, 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. Failure of the Company to obtain such agreement by the effectiveness of
any such succession shall be a breach of this Agreement and shall entitle the
Executive to
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<PAGE>
compensation from the Company in the same amount and upon the same terms as he
would be entitled to hereunder if he terminated his employment upon Breach by
the Company, except that, for purposes of implementing the foregoing, the date
on which any such succession becomes effective shall be deemed the Date of
Termination. As used in this Agreement, the term "the Company" shall include The
United Illuminating Company, any parent and any successor to the business or
assets of either as aforesaid which executes and delivers the agreement provided
for in this Section (10) or which otherwise becomes bound by all the terms and
provisions of this Agreement by operation of law.
(c) 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. If the Executive should die while any
amounts would still be payable to him hereunder if he had continued to live, all
such amounts, unless otherwise provided herein, shall be paid in accordance with
the terms of this Agreement to the Executive's devisee, legatee or other
designee or, if there be no such designee, to the Executive's estate.
(11) NOTICE
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 United Illuminating Company, 157
Church Street, New Haven, Connecticut, Attention: Secretary, or, in the case of
the Executive, to him at 157 Church Street, New Haven Connecticut, or to such
other address as either party shall designate by giving written notice of such
change to the other party.
(12) MISCELLANEOUS
(a) No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is approved by the
Board of Directors of the Company and agreed to in a writing signed by the
Executive and such officer as may be specifically authorized by the Board of
Directors of 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 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 which are not set forth expressly in this Agreement. The validity,
interpretation, construction and performance of this Agreement
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<PAGE>
shall be governed by the laws of the State of Connecticut.
(b) Exhibits A-1 and A-2 attached hereto, showing calculations
of supplemental retirement benefits under Section (4)(f), and Exhibit B attached
hereto, showing a calculation of a lump sum payment under Section (6)(d)(ii),
are incorporated herein by reference and set forth, by example, the parties'
intended interpretation and application of such Sections.
(13) VALIDITY
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.
(14) SURVIVAL
The provisions of this Agreement shall not survive the termination of
this Agreement or of employment hereunder, except that the provisions of
Sections (4), (6), (8), (9), (10), and (11) hereof shall survive such
termination and shall be binding upon the Company's successors and assigns.
(15) COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date and year first above written.
Attest: THE UNITED ILLUMINATING COMPANY
/s/ Kurt Mohlman By: /s/ Richard J. Grossi
- ----------------------- ------------------------------------------
Secretary Chairman of the Board of Directors
and Chief Executive Officer
/s/ James F. Crowe
------------------------------------------
James F. Crowe
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<PAGE>
EXHIBIT A-1
TO
EMPLOYMENT AGREEMENT
Between
The United Illuminating Company
and
Mr. James F. Crowe
------------------
Sample calculation of supplemental retirement benefits under Section (4)(f).
Assume the Executive retires at the Expiration of the Agreement and immediately
commences his Pension Plan benefits under the following facts:
(1) Retirement Age 55 (October 1,1997)
---------------------------
(2) Actual Service with the Company 33 years 3 months (10/1/97)
---------------------------
(3) Deemed Service with the Company 33 years 3 months (10/1/97)
---------------------------
(4) Average Total Compensation See Calculations Below
---------------------------
Total Compensation at age 54 $185,000
Total Compensation at age 53 $180,000
Total Compensation at age 52 $175,000 (3 year average = $180,000
deemed to be 3 highest years'
compensation, for purposes of
this example)
(A) Target Benefit at Age 55
1. 2.2% of 3 year average Total Compensation times
Deemed Service (up to 30 years)
(.022) x ($180,000) x (30) $118,800
2. Early Retirement Reduction Factor (based on Deemed Service) .561
-------
3. Target Benefit at Age 55: 1 times 2 66,647
(B) Pension Benefit at Age 55
1. Quantity A (estimated) $ 10,000
2. Quantity B 170,000
3. Quantity C (average of 3 highest years' compensation) 180,000
4. 1% of Quantity A plus 2% of Quantity B: 3,500
5. Actual Service with the Company (up to 25 years) 25
6. 4 times 5 87,500
7. 1/2% of Quantity C (up to $25,000, effective
with 1995 Union Contract) 125
8. Actual Service with the Company in excess of 25 years 8.25
9. 7 times 8 1,031
10. Pension unreduced at age 55: 6 plus 9 88,531
11. Early Retirement Reduction Factor (based on actual service) .561
12. Pension payable at age 55: 10 times 11 49,666
13. Supplemental Pension: A3 - B12 16,981
<PAGE>
EXHIBIT A-2
TO
EMPLOYMENT AGREEMENT
Between
The United Illuminating Company
and
Mr. James F. Crowe
------------------
Sample calculation of supplemental retirement benefits under Section (4)(f).
Assume the Agreement terminates at an Expiration Date but the Executive
continues to be employed by the Company for 2 years after the expiration of the
Agreement before retiring and commencing his Pension Plan benefits under the
following facts:
(1) Retirement Age 57 (October 1, 1999)
---------------------------
(2) Actual Service with the Company
(a) Before Expiration of Agreement
(b) After Expiration of Agreement
(c) Total 35 years 3 months (10/1/99)
---------------------------
(3) Deemed Service with the Company
(a) Before Expiration of Agreement
(b) After Expiration of Agreement
(c) Total 35 years 3 months (10/1/99)
---------------------------
(4) Average Total Compensation See Calculations Below
---------------------------
Total Compensation at age 56 $185,000
Total Compensation at age 55 $180,000
Total Compensation at age 54 $175,000 (3 year average = $180,000
deemed to be 3 highest years'
compensation, for purposes of
this example)
(A) Target Benefit at Age 57
1. 2.2% of 3 year average Total Compensation times
Deemed Service (up to 30 years)
(.022) x ($180,000) x (30) $118,800
2. Early Retirement Reduction Factor (based on Deemed Service) .655
-------
3. Target Benefit at Age 57: 1 times 2 77,814
(B) Pension Benefit at Age 57
1. Quantity A (estimated) $ 10,000
2. Quantity B 170,000
3. Quantity C (average of 3 highest years' compensation) 180,000
4. 1% of Quantity A plus 2% of Quantity B: 3,500
5. Actual Service with the Company (up to 25 years) 25
6. 4 times 5 87,500
7. 1/2% of Quantity C (up to $25,000 effective with
1995 Union Contract) 125
8. Actual Service with the Company in excess of 25 years 10.25
9. 7 times 8 1,281
10. Pension unreduced at age 57: 6 plus 9 88,781
11. Early Retirement Reduction Factor (based on actual service) .655
12. Pension payable at age 57: 10 times 11 58,152
13. Supplemental Pension: A3 - B12 19,662
<PAGE>
EXHIBIT B
TO
EMPLOYMENT AGREEMENT
Between
The United Illuminating Company
and
Mr. James F. Crowe
------------------
Sample calculation of lump-sum payment in lieu of supplemental retirement
benefits under Section (6)(d)(iii). Assume the Executive's employment terminates
and Section (6)(d) applies under the following facts:
(1) Age of Executive at Termination 47 (May 31, 1988)
----------------------------
(2) Actual Service with the Company 23 years 11 months (5/31/88)
----------------------------
(3) Deemed Service with the Company 23 years 11 months (5/31/88)
----------------------------
(4) Average Total Compensation See Calculations Below
----------------------------
Total Compensation at age 47 $185,000
Total Compensation at age 46 $180,000
Total Compensation at age 45 $175,000 (3 year average = $180,000
deemed to be 3 highest years'
compensation, for purposes of
this example)
(A) Target Benefit at Age 47
1. 2.2% of 3 year average Total Compensation times
Deemed Service (up to 30 years)
(.022) x ($180,000) x (23.917) $94,711
2. Early Retirement Reduction Factor (based on Deemed Service) 1.000
------
3. Target Benefit at Age 47: 1 times 2 94,711
(B) Pension Benefit at Age 55
1. Quantity A (estimated) $ 10,000
2. Quantity B 170,000
3. Quantity C (average of 3 highest years' compensation) 180,000
4. 1% of Quantity A plus 2% of Quantity B: 3,500
5. Actual Service with the Company (up to 25 years) 23.917
6. 4 times 5 83,710
7. 1/2% of Quantity C (up to $25,000, effective with
1995 Union Contract) 125
8. Actual Service with the Company in excess of 25 years 0
9. 7 times 8 0
10. Pension unreduced at age 55: 6 plus 9 83,710
11. Early Retirement Reduction Factor (based on actual service) .427
12. Pension payable at age 55: 10 times 11 35,744
13. Supplemental Pension: A3 - B12 58,967
14. Annuity Factor for determining Lump-Sum Value at age 55 10.3880
--
15. Lump-Sum Value at age 55: 13 times 14 612,549
--
16. Interest discount factor from age 55 to age 47 (based on 7-1/2%) .5607
-- --
17. Lump-Sum Value at age 55 discounted to age 47: 15 times 16 343,456
-- --
<PAGE>
SCHEDULE C
Severance Benefits
------------------
At the option of the Officer, exercised by written notice to the Company, the
benefits of either (A) or (B) below will be afforded the Officer:
(A) a lump sum payment in an amount equal to the product of (X) multiplied
by (Y), where:
(X) is the sum of one-twelfth of the Officer's annual
salary rate approved by the Board of Directors of the
Company at the time of its most recent review of the
salary rates of all of the Company's officers, plus
one-twelfth of the cash award(s) that the Officer
would earn under the short-term incentive
compensation program(s) in which the Officer is a
participant on the date of the termination of the
Officer's employment, assuming that all of the
Officer's program goals for the performance period
are achieved at the target level; and
(Y) is the number of whole and partial years (not to be
less than 12 nor more than 24) of the Officer's
service deemed as an employee of the Company on the
date of termination of the Officer's employment.
(B) The Officer's choice of the addition of six years of age, or six years
of service deemed as an employee of the Company, or any combination
(not to exceed 6) of whole and partial years of age and whole and
partial years of service deemed as an employee of the Company, in the
calculation of the benefits payable to the Officer under the Company's
retiree medical benefit plan(s) and in the calculation of the benefits
payable to the Officer as a supplemental retirement benefit under his
Employment Agreement.
EXHIBIT 10.25
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made as of the 1st day of March, 1997, between THE
UNITED ILLUMINATING COMPANY, a Connecticut corporation (the Company) and ALBERT
N. HENRICKSEN, an individual (the Officer),
WITNESSETH THAT
WHEREAS, the Company desires to continue to employ the Officer as a
Group Vice President of the Company, and the Officer desires to be employed by
the Company as a Group Vice President,
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, and in order to provide an incentive to
the Officer to remain in the employ of the Company hereafter and, in particular,
in the event of any Change in Control (as herein defined) of the Company,
thereby establishing and preserving continuity of management, the Parties hereby
agree as follows:
(1) EMPLOYMENT
The Company hereby agrees to employ the Officer, and the
Officer hereby agrees to serve the Company, at the pleasure of the Board of
Directors of the Company, all upon the terms and conditions set forth herein.
(2) POSITION AND DUTIES
The Officer shall be employed by the Company as a Group Vice President,
or in such other equivalent or higher officership position as the Company's
Board of Directors may determine. The Officer shall accept such employment and
shall perform and discharge, faithfully, diligently and to the best of the
Officer's abilities, the duties and obligations of the Officer's office and such
other duties as may from time to time be assigned to the Officer by, or at the
direction of, the Board of Directors of the Company, and shall devote
substantially all of the Officer's working time and efforts to the business and
affairs of the Company. Although a Change in Control of the Company shall not
affect the obligations of the Company and the Officer as set forth in the two
preceding sentences, at and after the date of any Change in Control the
Company's employment of the Officer shall also be without diminishment in the
Officer's management responsibilities, duties or powers.
(3) PLACE OF PERFORMANCE
In his employment by the Company, the Officer shall be based at the
executive offices of the Company situated within the Company's statutory service
area.
<PAGE>
(4) COMPENSATION
(a) Base Salary. During the term of the Officer's employment
hereunder, the Officer shall receive a base salary (Base Salary) at an annual
rate of One Hundred Thirty-Six Thousand Nine Hundred Dollars ($136,900). The
Officer's Base Salary rate shall be reviewed by the Board of Directors of the
Company contemporaneously with each review of the salary rates of the Company's
other officers by said Board of Directors, and may be revised upwards as a
result of any such review. The Officer's Base Salary may be revised downwards by
said Board of Directors contemporaneously with any general reduction of the
salary rates of the Company's other officers.
(b) Incentive Compensation. During the term of the Officer's
employment hereunder, the Officer shall be eligible to be designated by the
Board of Directors of the Company as a participant in each incentive
compensation program established for all officers of the Company.
For purposes of this Agreement, Total Compensation is defined
as the sum of the Officer's Base Salary and any amount paid or payable pursuant
to this Section (4)(b).
(c) Business Expenses. During the term of the Officer's
employment hereunder, the Officer shall be entitled to receive prompt
reimbursement for all reasonable expenses incurred by the Officer (in accordance
with the policies and procedures established by the Board of Directors of the
Company from time to time for all of the Company's officers) in performing
services hereunder, provided that the Officer properly accounts therefor.
(d) Benefit Programs. During the term of the Officer's
employment hereunder, the Officer shall be entitled to participate in and
receive full benefits under all of the Company's employee benefit plans,
programs and arrangements for its officers, including, without limitation, its
retirement and pension plan programs. Nothing paid to the Officer 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
Officer under any other Section of this Agreement.
(e) Vacations and Holidays. During the term of the Officer's
employment hereunder, the Officer shall be entitled to the number of paid
vacation days in each calendar year determined by the Board of Directors of the
Company from time to time for all of the Company's officers, and shall also be
entitled to all paid holidays afforded by the Company to its employees.
(f) Supplemental Retirement. Upon termination of the Officer's
employment, a supplemental retirement benefit shall be payable to him or his
beneficiary in accordance with the provisions of this Section (4)(f). The annual
supplemental
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<PAGE>
retirement benefit, expressed in the form of a single life annuity beginning at
the Officer's Normal Retirement Date (as defined in the Company's Pension Plan),
shall be the excess, if any, of (A) less (B), where (A) is 2.0% (.020) of the
Officer's highest three-year average Total Compensation times the number of
years at termination (not to exceed thirty) of the Officer's service as an
employee of the Company, and (B) is the benefit payable under the Company's
Pension Plan. Payment of the supplemental retirement benefit shall begin at the
same time as the Officer's Pension Plan benefit payments and shall be subject to
the same reductions for early commencement. The supplemental retirement benefit
may be paid in any form available under the Pension Plan, as elected by the
Officer prior to benefit payment commencement. The conversion factors between
forms of benefits used for purposes of the Pension Plan shall be used for
purposes of the supplemental retirement benefit. The form of payment of the
supplemental retirement benefit may be the same or different from the form of
payment of the Officer's benefits under the Pension Plan. If the form of payment
provides for a death benefit, such benefit shall be payable to the Officer's
estate, unless another beneficiary has been designated by the Officer. If the
Officer dies prior to the commencement of benefit payments, the death benefit
provisions of the Pension Plan shall apply, mutatis mutandis, to the
supplemental retirement benefit payable pursuant to this Section (4)(f).
(5) TERMINATION
(a) The Officer's employment hereunder shall terminate upon
the Officer's death.
(b) The Board of Directors of the Company may terminate the
Officer's employment hereunder at any time, with or without Cause. Prior to the
date of a Change in Control, the Company shall be deemed to have Cause to
terminate the Officer's employment hereunder only upon the Officer's (A)
continued failure to perform and discharge the duties or obligations of the
Officer's office, or such other duties as may from time to time be assigned to
the Officer by, or at the direction of, the Board of Directors, faithfully,
diligently, to the best of the Officer's abilities, and in accordance with
standards accepted in the electric utility industry, in the opinion of a
majority of the members of the Board of Directors of the Company, or (B)
misconduct that is injurious to the Company, or (C) conviction of a felony
involving the personal dishonesty or moral turpitude of the Officer, or (D)
total and permanent physical or mental disability, or (E) absence from work on a
full-time basis, due to physical or mental illness, for an uninterrupted 365-day
period. On and after the date of a Change in Control, the Company shall be
deemed to have Cause to terminate the Officer's employment hereunder only upon
the Officer's (F) conviction of a felony involving the personal dishonesty or
moral turpitude of the Officer, or (G) total and permanent physical or mental
disability, or (H) absence from work on a full-time basis, due to
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<PAGE>
physical or mental illness, for an uninterrupted 365-day period.
(c) The Officer may terminate the Officer's employment
hereunder, upon at least thirty (30) days' prior Notice of Termination delivered
to the Company, for failure of the Company to observe and perform one or more of
its obligations under Sections (1), (2), (3) and/or (4) hereof, which failure
the Company fails to remedy within such notice period (a Breach by the Company)
at a time when the Officer is not in default of any of the Officer's obligations
under Sections (1) and/or (2) hereof. The Officer may terminate his employment
hereunder in the absence of a Breach by the Company, effective upon at least six
(6) months' prior Notice of Termination delivered to the Company.
(d) Notice of Termination. Any termination of employment, by
the Company or by the Officer, shall be communicated by delivery of a written
Notice of Termination to the other party.
(e) Date of Termination. For purposes of this Agreement, the
Date of Termination is defined as: if the Officer's employment is terminated (A)
by his death, the date of his death, or (B) pursuant to Section (5)(b) or
Section (5)(c) hereof, the date specified in the Notice of Termination.
(6) CONSEQUENCES OF TERMINATION
(a) If the Officer's employment terminates by reason of the
Officer's death, the Company shall pay to the personal representative and/or
spouse of the Officer the Officer's Total Compensation earned prior to the Date
of Termination, any amounts payable pursuant to Sections (4)(c), (4)(d) and 4(f)
hereof and any benefits or amounts payable under any deferred compensation plan
in which the Officer had been a participant, and the Company shall have no
further obligation under this Agreement.
(b) If the Officer terminates the Officer's employment
hereunder in the absence of a Breach by the Company and upon at least six (6)
months' prior Notice of Termination, the Company shall pay to the Officer and/or
the Officer's personal representative and/or spouse the Officer's Total
Compensation earned prior to the Date of Termination, any amounts payable
pursuant to Sections (4)(c), (4)(d) and (4)(f) hereof and any benefits or
amounts payable under any deferred compensation plan in which the Officer had
been a participant, and the Company shall have no further obligation to the
Officer and/or the Officer's personal representative and/or spouse under this
Agreement or on account of, or arising out of, the termination of the Officer's
employment. The Officer may petition the Board of Directors of the Company for
an immediate lump sum payment, in lieu of any amounts payable pursuant to
Section (4)(f) hereof on account of the Officer's termination of employment, in
an amount equal to the actuarial present value of a supplemental retirement
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<PAGE>
benefit, expressed in the form of a single life annuity beginning at Officer's
termination of employment (or age 55, if later), equal to the excess if any of
(A) less (B) where (A) is 2.0% (.020) of the Officer's highest three-year
average Total Compensation times the number of years at termination (not to
exceed thirty) of the Officer's service as an employee of the Company, and (B)
is the benefit payable under the Company's Pension Plan at the Officer's
termination of employment (or age 55, if later). The actuarial present value of
such supplemental retirement benefit shall be calculated on the basis of the
annual yield on thirty-year United States Treasury bonds on the final business
day of the month preceding the Date of Termination of the Officer's employment
and the 1983 Group Annuity table. The Board of Directors of the Company may
grant or deny any such petition by the Officer in its absolute discretion.
(c) If the Company terminates the Officer's employment
hereunder with Cause, or if the Officer terminates the Officer's employment
hereunder in the absence of a Breach by the Company and upon less than six (6)
months' prior Notice of Termination, the Company shall pay to the Officer the
Officer's full Base Salary earned prior to the Date of Termination, any amounts
payable pursuant to Sections (4)(c) and (4)(d) hereof and any benefits or
amounts payable under any deferred compensation plan in which the Officer had
been a participant, and, provided that the Company is not in default of any of
its obligations hereunder, the Company shall have no further obligation to the
Officer under this Agreement or on account of, or arising out of, the
termination of the Officer's employment.
(d) If the Company terminates the Officer's employment
hereunder without Cause, or if the Officer terminates the Officer's employment
hereunder on account of a Breach by the Company:
(i) The Company shall pay to the Officer the
Officer's Total Compensation earned prior to the Date of Termination, any
amounts payable pursuant to Sections 4(c) and 4(d) hereof and any benefits or
amounts payable under any deferred compensation plan in which the Officer had
been a participant.
(ii) The Company shall afford the Officer the
severance benefits set forth on Schedule C attached hereto.
(iii) In lieu of any amounts payable pursuant to
Section (4)(f) hereof on account of the Officer's termination of employment, the
Company shall pay to the Officer an immediate lump sum amount equal to the
actuarial present value of a supplemental retirement benefit, expressed in the
form of a single life annuity beginning at the Officer's termination of
employment (or age 55, if later), equal to the excess if any of (A) less (B),
where (A) is 2.0% (.020) of the Officer's highest three-year average Total
Compensation times the number of years
- 5 -
<PAGE>
at termination (not to exceed thirty) of the Officer's service as an employee of
the Company, and (B) is the benefit payable under the Company's Pension Plan at
the Officer's termination of employment (or age 55, if later). The actuarial
present value of such supplemental retirement benefit shall be calculated on the
basis of the annual yield on thirty-year United States Treasury bonds on the
final business day of the month preceding the Date of Termination of the
Officer's employment and the 1983 Group Annuity table.
(iv) The payment to, and acceptance by, the Officer
of any sum of money or benefit prescribed in this Section (6)(d) shall effect
and evidence a release by the Officer of any and all claims against the Company
on account of, or arising out of, the termination of the Officer's employment.
(7) CHANGE IN CONTROL
For purposes of this Agreement, Change in Control shall mean any of the
following events:
(a) any merger or consolidation of the Company with any
corporate shareholder of group of corporate shareholders holding twenty-five
percent (.25) or more of the Common Stock of the Company or with any other
corporation or group of corporations which is, or after such merger or
consolidation would be, or be affiliated with, a shareholder owning at least
twenty-five percent (.25) of the Common Stock of the Company; or
(b) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition to or with any shareholder or group of shareholders holding
twenty-five percent (.25) or more of the Common Stock of the Company, or any
affiliate of such shareholder or group of shareholders, of any assets of the
Company having an aggregate fair market value of $50 million or more; or
(c) the issuance or sale by the Company of any securities of
the Company to any shareholder or group of shareholders holding twenty-five
percent (.25) or more of the Common Stock of the Company, or to any affiliate of
such shareholder or group of shareholders, in exchange for cash, securities or
other consideration having an aggregate fair market value of $50 million or
more; or
(d) the implementation of any plan or proposal for the
liquidation or dissolution of the Company proposed by or on behalf of any
shareholder or group of shareholders owning at least twenty-five percent (.25)
of the Common Stock of the Company, or any affiliate of such shareholder or
group of shareholders; or
(e) any reclassification of securities (including a reverse
stock split), or recapitalization of the Company or any other transaction which
has the effect, directly or indirectly,
- 6 -
<PAGE>
of increasing the proportionate share of outstanding shares of any class of
equity securities, or securities convertible into any equity securities, of the
Company, which is directly or indirectly owned by a shareholder or group of
shareholders owning at least twenty-five percent (.25) of the Common Stock of
the Company, or any affiliate of such shareholder or group of shareholders.
The Board of Directors of the Company may, from time to time, by the
affirmative vote of not less than a majority of the entire membership of said
Board of Directors, at a meeting of said Board of Directors called and held for
the purpose, modify the phrase "twenty-five percent (.25)" in one or more of the
foregoing Sections (7)(a), (7)(b), (7)(c), (7)(d) and/or (7)(e) to a lesser
percentage, but not less than twenty percent (.20).
(8) ADDITIONAL CONSEQUENCES OF A CHANGE IN CONTROL
(a) In the event that a Change in Control has been approved by
all necessary shareholder, creditor and regulatory actions, the Company will,
not later than the day prior to the date of the Change in Control, pay to the
Trustee of The United Illuminating Company Supplemental Retirement Benefit Trust
established pursuant to the Agreement, made as of the 1st day of June, 1995
between the Company and State Street Bank and Trust Company, as Trustee, for the
benefit of the Officer, cash in an amount equal to: (A) In the event that the
Officer's employment has been terminated or will be terminated prior to the date
of the Change in Control, a sum, calculated by the Company's independent
certified public accountants, reasonably sufficient to pay and discharge the
Company's future obligations, if any, to the Officer and/or his personal
representative and/or spouse, under Section (6)(a), Section (6)(b) or Section
(6)(d) hereof; or (B) in the event that the Officer's employment has not been
terminated and will not be terminated prior to the date of the Change in
Control, a sum, calculated by the Company's independent certified public
accountants, reasonably sufficient to pay and discharge the Company's
obligations to the Officer under Section (6)(d) hereof assuming, for purposes of
such calculation, that the Officer's employment is terminated under said Section
(6)(d) by a Notice of Termination delivered on the date of the Change in Control
and specifying an immediate Date of Termination.
(b) On and after the date of the Change in Control, the
Officer's Base Salary may not be reduced by the Board of Directors to an annual
rate less than the rate fixed by the Board of Directors of the Company as a
result of its most recent review of salary rates, pursuant to Section (4)(a)
hereof, prior to the date of the Change in Control.
(9) TAX SAVINGS PROVISION
If any portion of the payments which the Officer has the right to
receive from the Company, or any affiliated entity,
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<PAGE>
hereunder would constitute "excess parachute payments" (as defined in Section
280G of the Internal Revenue Code, and not governed by the terms defined in this
Agreement) subject to the excise tax imposed by Section 4999 of the Internal
Revenue Code, such excess parachute payments shall be reduced to the largest
amount that will result in no portion of such excess parachute payments being
subject to the excise tax imposed by Section 4999 of the Internal Revenue Code.
(10) SUCCESSORS; BINDING AGREEMENT
(a) The Company shall pay to the Officer and/or the Officer's
personal representative and/or spouse all legal fees and expenses and court
costs, if any, incurred by the Officer and/or the Officer's representative
and/or spouse in successful litigation to enforce the Officer's rights under
this Agreement.
(b) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Company, by agreement in form
and substance reasonably satisfactory to the Officer, 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. Failure of the Company to obtain such agreement by the effectiveness of
any such succession shall be a breach of this Agreement and shall entitle the
Officer to compensation from the Company in the same amount and upon the same
terms as the Officer would be entitled to hereunder if the Officer terminated
the Officer's employment upon Breach by the Company, except that, for purposes
of implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination. As used in this Agreement,
the term "the Company" shall include The United Illuminating Company, any parent
and any successor to the business or assets of either as aforesaid which
executes and delivers the agreement provided for in this Section (10) or which
otherwise becomes bound by all the terms and provisions of this Agreement by
operation of law.
(c) This Agreement and all rights of the Officer hereunder
shall inure to the benefit of and be enforceable by the Officer's personal or
legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If the Officer should die while any amounts
would still be payable to the Officer hereunder if the Officer had continued to
live, all such amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to the Officer's devisee, legatee or
other designee or, if there be no such designee, to the Officer's estate.
(11) NOTICE
For the purpose of this Agreement, notices and all other communications
to either party hereunder provided for in the
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<PAGE>
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 United Illuminating Company, 157 Church Street, New Haven, Connecticut,
Attention: Secretary, or, in the case of the Officer, to the Officer at 157
Church Street, New Haven Connecticut, or to such other address as either party
shall designate by giving written notice of such change to the other party.
(12) MISCELLANEOUS
(a) No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is approved by the
Board of Directors of the Company and agreed to in a writing signed by the
Officer and such officer of the Company as may be specifically authorized by the
Board of Directors of 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.
The validity, interpretation, construction and performance of this Agreement
shall be governed by the laws of the State of Connecticut.
(b) Exhibits A-1 and A-2 attached hereto, showing calculations
of supplemental retirement benefits under Section (4)(f), and Exhibit B attached
hereto, showing a calculation of a lump sum payment under Section (6)(d)(iii),
are incorporated herein by reference and set forth, by example, the parties'
intended interpretation and application of such Sections.
(13) VALIDITY
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.
(14) SURVIVAL
The provisions of this Agreement shall not survive the termination of
this Agreement or of the Officer's employment hereunder, except that the
provisions of Sections (4), (6), (8), (9), (10), and (11) hereof shall survive
such termination and shall be binding upon the Company's successors and assigns.
(15) COUNTERPARTS
This Agreement may be executed in one or more counterparts,
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<PAGE>
each of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date and year first above written.
Attest: THE UNITED ILLUMINATING COMPANY
/s/ Kurt Mohlman By: /s/ Richard J. Grossi
- ----------------------- -------------------------------------
Secretary Chairman of the Board of
Directors and Chief Executive Officer
/s/ Albert N. Henricksen
-------------------------------------
Albert N. Henricksen
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<PAGE>
EXHIBIT A-1
To
EMPLOYMENT AGREEMENT
BETWEEN
THE UNITED ILLUMINATING COMPANY
AND
MR. ALBERT HENRICKSEN
---------------------
Sample calculation of supplemental retirement benefits under Section (4)(f).
Assume the Officer retires upon the termination of his employment and
immediately commences his Pension Plan benefits under the following facts:
(1) Retirement Age 55 (September 1, 1990)
--------------------------
(2) Actual Service with the Company 33 years 3 months (9/1/90)
--------------------------
(3) Service with the Company 33 years 3 months (9/1/90)
--------------------------
(4) Three-year average Total Compensation See Calculations Below
--------------------------
Projected Earnings at age 54 $143,580
Projected Earnings at age 53 136,095
Estimated Earnings at age 52 129,000 3-year average - $136,225
Estimated Earnings at age 51 122,275
Estimated Earnings at age 50 115,900 5-year average - $129,370
(A) Target Benefit at Age 55
- ----------------------------
1. 2.0% of 3-year average earnings times Service (Up to 30 years)
(.020) x ($136,225) x (30) $81,735
2. Early Retirement Reduction Factor (based on Service) .561
------
3. Target Benefit at Age 55: 1 times 2 45,853
(B) Pension Benefit at Age 55
- -----------------------------
1. Quantity A $10,000
2. Quantity B 119,370
3. Quantity C 129,370
4. 1% of Quantity A plus 2% of Quantity B: 2,487
5. Service with the Company (up to 25 years) 25
6. 4 time 5 62,175
7. 1/2% of Quantity C (up to $13,000) 65
8. Service with the Company in excess of 25 years 8.25
9. 7 times 8 536
10. Pension unreduced at age 55: 6 plus 9 62,711
11. Early Retirement Reduction Factor (based on Service) .561
12. Pension payable at age 55: 10 times 11 35,181
13. Supplemental Pension: A3-B12 10,672
<PAGE>
EXHIBIT A-2
To
EMPLOYMENT AGREEMENT
BETWEEN
THE UNITED ILLUMINATING COMPANY
AND
MR. ALBERT HENRICKSEN
---------------------
Sample calculation of supplemental retirement benefits under Section (4)(f).
Assume the Agreement terminates but the Officer continues to be employed by the
Company for 2 years thereafter before retiring and commencing his Pension Plan
benefits under the following facts:
(1) Retirement Age 57 (September 1, 1992)
--------------------------
(2) Service with the Company
(a) Before Expiration of Agreement 33 years 3 months
--------------------------
(b) After Expiration of Agreement 2 years
--------------------------
(c) Total 35 years 3 months (9/1/92)
--------------------------
(3) Three-year average total Compensation See Calculations Below
--------------------------
Projected Earnings at age 56 $159,808
Projected Earnings at age 55 151,477
Estimated Earnings at age 54 143,580 3-year average - $151,622
Estimated Earnings at age 53 136,095
Estimated Earnings at age 52 129,000 5-year average - $143,992
(A) Target Benefit at Age 57
- ----------------------------
1. 2.0% of 3-year average earnings times Service (Up to 30 years)
(.020) x ($151,622) x (30) $90,973
2. Early Retirement Reduction Factor (based on Service) .655
------
3. Target Benefit at Age 55: 1 times 2 59,587
(B) Pension Benefit at Age 57
- -----------------------------
1. Quantity A $10,000
2. Quantity B 133,992
3. Quantity C 143,992
4. 1% of Quantity A plus 2% of Quantity B: 2,780
5. Service with the Company (up to 25 years) 25
6. 4 times 5 69,500
<PAGE>
7. 1/2% of Quantity C (up to $13,000) 65
8. Service with the Company in excess of 25 years 10.25
9. 7 times 8 666
10. Pension unreduced at age 57: 6 plus 9 70,166
11. Early Retirement Reduction Factor (based on Service) .655
12. Pension payable at age 57: 10 times 11 45,959
13. Supplemental Pension: A3-B12 13,628
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<PAGE>
EXHIBIT B
To
EMPLOYMENT AGREEMENT
BETWEEN
THE UNITED ILLUMINATING COMPANY
AND
MR. ALBERT HENRICKSEN
---------------------
Sample calculation of lump sum payment in lieu of supplemental retirement
benefit under Section (6)(d)(iii). Assume the Officer's employment terminates
and Section (6)(d) applies under the following facts:
Assume the Officer retires upon the termination of his employment and
immediately commences his Pension Plan benefits under the following facts:
(1) Age of Executive at Termination 53 (May 31, 1988)
--------------------------
(2) Service with the Company 31 years (5/31/88)
--------------------------
(3) Three-year average Total Compensation See Calculations Below
--------------------------
Projected Earnings at age 53 $136,095
Estimated Earnings at age 52 129,000
Estimated Earnings at age 51 122,275 3-year average = $129,123
Estimated Earnings at age 50 115,900
Estimated Earnings at age 49 109,858 5-year average = $122,626
(A) Target Benefit at Age 51
- ----------------------------
1. 2.0% of 3-year average earnings times Service (Up to 30 years)
(.020) x ($129,123) x (30) $77,474
2. Early Retirement Reduction Factor (based on Service) 1.000
------
3. Target Benefit at Age 51: 1 times 2 77,474
(B) Pension Benefit at Age 55
- -----------------------------
1. Quantity A $10,000
2. Quantity B 112,626
3. Quantity C 122,626
4. 1% of Quantity A plus 2% of Quantity B: 2,353
5. Service with the Company (up to 25 years) 25
6. 4 times 5 58,825
7. 1/2% of Quantity C (up to $13,000) 65
8. Service with the Company in excess of 25 years 6
9. 7 times 8 390
10. Pension unreduced at age 55: 6 plus 9 59,215
11. Early Retirement Reduction Factor (based on Service) .561
12. Pension payable at age 55: 10 times 11 33,220
13. Supplemental Pension: A3-B12 44,254
<PAGE>
14. Annuity Factor for Determining Lump Sum Value at age 55 10.3880
15. Lump Sum Value at age 55: 13 times 14 459,711
16. Interest discount factor from age 55 to age 53 (based on 7-1/2%) .8653
17. Lump Sum Value at age 55, discounted to age 53 15 times 16 397,788
<PAGE>
SCHEDULE C
Severance Benefits
------------------
At the option of the Officer, exercised by written notice to the Company, the
benefits of either (A) or (B) below will be afforded the Officer:
(A) a lump sum payment in an amount equal to the product of (X) multiplied by
(Y), where:
(X) is the sum of one-twelfth of the Officer's annual salary rate
approved by the Board of Directors of the Company at the time of
its most recent review of the salary rates of all of the
Company's officers, plus one-twelfth of the cash award(s) that
the Officer would earn under the short-term incentive
compensation program(s) in which the Officer is a participant on
the date of the termination of the Officer's employment, assuming
that all of the Officer's program goals for the performance
period are achieved at the target level; and
(Y) is the number of whole and partial years (not to be less than 12
nor more than 24) of the Officer's service deemed as an employee
of the Company on the date of termination of the Officer's
employment.
(B) The Officer's choice of the addition of six years of age, or six years of
service deemed as an employee of the Company, or any combination (not to
exceed 6) of whole and partial years of age and whole and partial years of
service deemed as an employee of the Company, in the calculation of the
benefits payable to the Officer under the Company's retiree medical benefit
plan(s) and in the calculation of the benefits payable to the Officer as a
supplemental retirement benefit under his Employment Agreement.
Exhibits C-1 and C-2 attached hereto, showing calculations of supplemental
retirement benefits under Schedule C, paragraph (B), set forth, by example, the
parties' intended interpretation and application of said paragraph.
<PAGE>
EXHIBIT C-1
TO
EMPLOYMENT AGREEMENT
BETWEEN
THE UNITED ILLUMINATING COMPANY
AND
MR. ALBERT HENRICKSEN
---------------------
Sample calculation of supplemental retirement benefits under Schedule A
paragraph (B).
Assume the Officer retires on the date of termination of employment based on the
following facts:
Actual Date of Termination 4/1/97
Actual Age of Officer at Termination 56
Actual Years of Service at Termination 30
Enhanced Age of Officer at Termination 62 (+6 years)
Enhanced Years of Service at Termination 30 (+0 years)
Three Year Average Total Compensation $140,000
(A) The retirement benefit calculated in accordance with Company's Pension
Plan, but with the addition of six years of age.
Gross Pension (Attachment A-1-1) $67,605.84
Reduction for Early Retirement Age: 62 years (.0000) 0.00
---------
Net Annual Pension $67,605.84
(B) The benefit payable to the Officer under the Company's Pension Plan at the
age of 56.
Gross Pension (Attachment A-1-2) $67,611.44
Reduction for Early Retirement Age 56 (.3950) 26,706.52
---------
Net Annual Pension $40,904.92
Supplemental Retirement Benefit
(A) - (B) = ($67,605.84) - ($40,904.92) = $26,700.92
<PAGE>
Attachment A-1-1
THE UNITED ILLUMINATING COMPANY
-------------------------------
NAME: ENHANCED AGE 62
S.S. NUMBER: - -
AGE AT RETIREMENT: 62 YRS. AND 0 MOS.
YEARS OF SERVICE: 30 YRS. AND 0 MOS.
VESTED PERCENTAGE: 100%
PREPARER'S NAME:
DATE PREPARED: 4/03/97
BENEFIT CALCULATION
------------------------------------- ANNUAL
AMOUNT
------
A1 = 1024.00 FIRST 25 YEARS OF PARTICIPATION:
1.0% X 25.0000 X 12076.66 = $ 3019.17
A2 = 407.00 (NO. OF YRS.) (QUANTITY A)
A = 4800XA1/A2 2.0% X 25.0000 X 127923.34 = 63961.67
= 12076.66 (NO. OF YRS. (QUANTITY B)
B = 127923.34 YEARS OF PARTICIPATION IN EXCESS OF 25:
.5% X 5.0000 X 25000.00 = 625.00
C = 140000.00 (NO. OF YRS.) (QUANTITY C - MAXIMUM
OF 25000.00) ---------
GROSS PENSION = $67605.84
=========
<PAGE>
Attachment A-1-2
THE UNITED ILLUMINATING COMPANY
-------------------------------
NAME: ENHANCED AGE 56
S.S. NUMBER: - -
AGE AT RETIREMENT: 56 YRS. AND 0 MOS.
YEARS OF SERVICE: 30 YRS. AND 0 MOS.
VESTED PERCENTAGE: 100%
PREPARER'S NAME:
DATE PREPARED: 4/03/97
BENEFIT CALCULATION
------------------------------------ ANNUAL
AMOUNT
------
A1 = 1223.00 FIRST 25 YEARS OF PARTICIPATION:
1.0% X 25.0000 X 12054.21 = $ 3013.55
A2 = 487.00 (NO. OF YRS.) (QUANTITY A)
A = 4800XA1/A2 2.0% X 25.0000 X 127945.79 = 63972.89
= 12054.21 (NO. OF YRS.) (QUANTITY B)
B = 127945.79 YEARS OF PARTICIPATION IN EXCESS OF 25:
.5% X 5.0000 X 25000.00 = 625.00
C = 140000.00 (NO. OF YRS.) (QUANTITY C - MAXIMUM
OF 25000.00) --------
GROSS PENSION = $67611.44
=========
<PAGE>
EXHIBIT C-2
TO
EMPLOYMENT AGREEMENT
BETWEEN
THE UNITED ILLUMINATING COMPANY
AND
MR. ALBERT HENRICKSEN
---------------------
Sample calculation of supplemental retirement benefits under Schedule A
paragraph (B).
Assume the Officer terminates on the date of termination of employment and
elects to begin receiving his/her vested pension benefit at age 55 based on the
following facts:
Actual Date of Termination 4/1/97
Actual Age of Executive at Termination 50
Actual Years of Service at Termination 24
Enhanced Age of Executive at Termination 50 (+0 years)
Enhanced Years of Service at Termination 30 (+6 years)
Three Year Average Total Compensation $140,000
(A) The retirement (vested pension) benefit, payable to the Officer at age 55,
calculated in accordance with Company's Pension Plan, but with the addition
of six years of service.
Gross Vested Pension (Attachment A-2-1) $67,526.96
Reduction for Early Retirement Age: 55 years (.4390) 29,644.34
---------
Net Annual Pension $37,882.62
(B) The vested pension benefit payable to the Officer under the Company's
Pension Plan at the age of 55.
Gross Vested Pension (Attachment A-2-2) $63,876.25
Reduction for Early Retirement Age: 55 years (.5730) 36,601.09
---------
Net Annual Pension $27,275.16
Supplemental Retirement Benefit
(A) - (B) = ($37,882.62) - ($27,275.16) = $10,607.46
<PAGE>
Attachment A-2-1
THE UNITED ILLUMINATING COMPANY
-------------------------------
NAME: ACTUAL AGE 50
S.S. NUMBER: - -
AGE AT TERMINATION: 50 YRS. AND 0 MOS.
YEARS OF SERVICE: 30 YRS. AND 0 MOS.
VESTED PERCENTAGE: 100%
PREPARER'S NAME:
DATE PREPARED: 4/03/97
BENEFIT CALCULATION
------------------------------------ ANNUAL
AMOUNT
------
A1 = 1185.00 FIRST 25 YEARS OF PARTICIPATION:
1.0% X 25.0000 X 12392.16 = $ 3098.04
A2 = 459.00 (NO. OF YRS.) (QUANTITY A)
A = 4800XA1/A2 2.0% X 25.0000 X 127607.84 = 63803.92
= 12392.16 (NO. OF YRS.) (QUANTITY B)
B = 127607.84 YEARS OF PARTICIPATION IN EXCESS OF 25:
.5% X 5.0000 X 25000.00 = 625.00
C = 140000.00 (NO. OF YRS.) (QUANTITY C - MAXIMUM
OF 25000.00) --------
GROSS PENSION = $67526.96
=========
<PAGE>
Attachment A-2-2
THE UNITED ILLUMINATING COMPANY
-------------------------------
NAME: AGE 50
S.S. NUMBER: - -
AGE AT TERMINATION: 50 YRS. AND 0 MOS.
YEARS OF SERVICE: 24 YRS. AND 0 MOS.
VESTED PERCENTAGE: 100%
PREPARER'S NAME:
DATE PREPARED: 4/04/97
BENEFIT CALCULATION
------------------------------------ ANNUAL
AMOUNT
------
A1 = 1131.00 FIRST 25 YEARS OF PARTICIPATION:
1.0% X 24.0000 X 13848.98 = $ 3323.76
A2 = 392.00 (NO. OF YRS.) (QUANTITY A)
A = 4800XA1/A2 2.0% X 24.0000 X 126151.02 = 60552.49
= 13848.98 (NO. OF YRS.) (QUANTITY B)
B = 126151.02 YEARS OF PARTICIPATION IN EXCESS OF 25:
.5% X .0000 X 25000.00 = .00
C = 140000.00 (NO. OF YRS.) (QUANTITY C - MAXIMUM
OF 25000.00) --------
GROSS PENSION = $63876.25
=========
EXHIBIT 10.26
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made as of the 1st day of March, 1997, between THE
UNITED ILLUMINATING COMPANY, a Connecticut corporation (the Company) and ANTHONY
J. VALLILLO, an individual (the Officer),
WITNESSETH THAT
WHEREAS, the Company desires to continue to employ the Officer as a
Group Vice President of the Company, and the Officer desires to be employed by
the Company as a Group Vice President,
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, and in order to provide an incentive to
the Officer to remain in the employ of the Company hereafter and, in particular,
in the event of any Change in Control (as herein defined) of the Company,
thereby establishing and preserving continuity of management, the Parties hereby
agree as follows:
(1) EMPLOYMENT
The Company hereby agrees to employ the Officer, and the
Officer hereby agrees to serve the Company, at the pleasure of the Board of
Directors of the Company, all upon the terms and conditions set forth herein.
(2) POSITION AND DUTIES
The Officer shall be employed by the Company as a Group Vice President,
or in such other equivalent or higher officership position as the Company's
Board of Directors may determine. The Officer shall accept such employment and
shall perform and discharge, faithfully, diligently and to the best of the
Officer's abilities, the duties and obligations of the Officer's office and such
other duties as may from time to time be assigned to the Officer by, or at the
direction of, the Board of Directors of the Company, and shall devote
substantially all of the Officer's working time and efforts to the business and
affairs of the Company. Although a Change in Control of the Company shall not
affect the obligations of the Company and the Officer as set forth in the two
preceding sentences, at and after the date of any Change in Control the
Company's employment of the Officer shall also be without diminishment in the
Officer's management responsibilities, duties or powers.
(3) PLACE OF PERFORMANCE
In his employment by the Company, the Officer shall be based at the
executive offices of the Company situated within the Company's statutory service
area.
<PAGE>
(4) COMPENSATION
(a) Base Salary. During the term of the Officer's employment
hereunder, the Officer shall receive a base salary (Base Salary) at an annual
rate of One Hundred Forty Thousand Dollars ($140,000). The Officer's Base Salary
rate shall be reviewed by the Board of Directors of the Company
contemporaneously with each review of the salary rates of the Company's other
officers by said Board of Directors, and may be revised upwards as a result of
any such review. The Officer's Base Salary may be revised downwards by said
Board of Directors contemporaneously with any general reduction of the salary
rates of the Company's other officers.
(b) Incentive Compensation. During the term of the Officer's
employment hereunder, the Officer shall be eligible to be designated by the
Board of Directors of the Company as a participant in each incentive
compensation program established for all officers of the Company.
For purposes of this Agreement, Total Compensation is defined
as the sum of the Officer's Base Salary and any amount paid or payable pursuant
to this Section (4)(b).
(c) Business Expenses. During the term of the Officer's
employment hereunder, the Officer shall be entitled to receive prompt
reimbursement for all reasonable expenses incurred by the Officer (in accordance
with the policies and procedures established by the Board of Directors of the
Company from time to time for all of the Company's officers) in performing
services hereunder, provided that the Officer properly accounts therefor.
(d) Benefit Programs. During the term of the Officer's
employment hereunder, the Officer shall be entitled to participate in and
receive full benefits under all of the Company's employee benefit plans,
programs and arrangements for its officers, including, without limitation, its
retirement and pension plan programs. Nothing paid to the Officer 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
Officer under any other Section of this Agreement.
(e) Vacations and Holidays. During the term of the Officer's
employment hereunder, the Officer shall be entitled to the number of paid
vacation days in each calendar year determined by the Board of Directors of the
Company from time to time for all of the Company's officers, and shall also be
entitled to all paid holidays afforded by the Company to its employees.
(f) Supplemental Retirement. Upon termination of the Officer's
employment, a supplemental retirement benefit shall be payable to him or his
beneficiary in accordance with the provisions of this Section (4)(f). The annual
supplemental
- 2 -
<PAGE>
retirement benefit, expressed in the form of a single life annuity beginning at
the Officer's Normal Retirement Date (as defined in the Company's Pension Plan),
shall be the excess, if any, of (A) less (B), where (A) is 2.0% (.020) of the
Officer's highest three-year average Total Compensation times the number of
years at termination (not to exceed thirty) of the Officer's service as an
employee of the Company, and (B) is the benefit payable under the Company's
Pension Plan. Payment of the supplemental retirement benefit shall begin at the
same time as the Officer's Pension Plan benefit payments and shall be subject to
the same reductions for early commencement. The supplemental retirement benefit
may be paid in any form available under the Pension Plan, as elected by the
Officer prior to benefit payment commencement. The conversion factors between
forms of benefits used for purposes of the Pension Plan shall be used for
purposes of the supplemental retirement benefit. The form of payment of the
supplemental retirement benefit may be the same or different from the form of
payment of the Officer's benefits under the Pension Plan. If the form of payment
provides for a death benefit, such benefit shall be payable to the Officer's
estate, unless another beneficiary has been designated by the Officer. If the
Officer dies prior to the commencement of benefit payments, the death benefit
provisions of the Pension Plan shall apply, mutatis mutandis, to the
supplemental retirement benefit payable pursuant to this Section (4)(f).
(5) TERMINATION
(a) The Officer's employment hereunder shall terminate upon
the Officer's death.
(b) The Board of Directors of the Company may terminate the
Officer's employment hereunder at any time, with or without Cause. Prior to the
date of a Change in Control, the Company shall be deemed to have Cause to
terminate the Officer's employment hereunder only upon the Officer's (A)
continued failure to perform and discharge the duties or obligations of the
Officer's office, or such other duties as may from time to time be assigned to
the Officer by, or at the direction of, the Board of Directors, faithfully,
diligently, to the best of the Officer's abilities, and in accordance with
standards accepted in the electric utility industry, in the opinion of a
majority of the members of the Board of Directors of the Company, or (B)
misconduct that is injurious to the Company, or (C) conviction of a felony
involving the personal dishonesty or moral turpitude of the Officer, or (D)
total and permanent physical or mental disability, or (E) absence from work on a
full-time basis, due to physical or mental illness, for an uninterrupted 365-day
period. On and after the date of a Change in Control, the Company shall be
deemed to have Cause to terminate the Officer's employment hereunder only upon
the Officer's (F) conviction of a felony involving the personal dishonesty or
moral turpitude of the Officer, or (G) total and permanent physical or mental
disability, or (H) absence from work on a full-time basis, due to
- 3 -
<PAGE>
physical or mental illness, for an uninterrupted 365-day period.
(c) The Officer may terminate the Officer's employment
hereunder, upon at least thirty (30) days' prior Notice of Termination delivered
to the Company, for failure of the Company to observe and perform one or more of
its obligations under Sections (1), (2), (3) and/or (4) hereof, which failure
the Company fails to remedy within such notice period (a Breach by the Company)
at a time when the Officer is not in default of any of the Officer's obligations
under Sections (1) and/or (2) hereof. The Officer may terminate his employment
hereunder in the absence of a Breach by the Company, effective upon at least six
(6) months' prior Notice of Termination delivered to the Company.
(d) Notice of Termination. Any termination of employment, by
the Company or by the Officer, shall be communicated by delivery of a written
Notice of Termination to the other party.
(e) Date of Termination. For purposes of this Agreement, the
Date of Termination is defined as: if the Officer's employment is terminated (A)
by his death, the date of his death, or (B) pursuant to Section (5)(b) or
Section (5)(c) hereof, the date specified in the Notice of Termination.
(6) CONSEQUENCES OF TERMINATION
(a) If the Officer's employment terminates by reason of the
Officer's death, the Company shall pay to the personal representative and/or
spouse of the Officer the Officer's Total Compensation earned prior to the Date
of Termination, any amounts payable pursuant to Sections (4)(c), (4)(d) and 4(f)
hereof and any benefits or amounts payable under any deferred compensation plan
in which the Officer had been a participant, and the Company shall have no
further obligation under this Agreement.
(b) If the Officer terminates the Officer's employment
hereunder in the absence of a Breach by the Company and upon at least six (6)
months' prior Notice of Termination, the Company shall pay to the Officer and/or
the Officer's personal representative and/or spouse the Officer's Total
Compensation earned prior to the Date of Termination, any amounts payable
pursuant to Sections (4)(c), (4)(d) and (4)(f) hereof and any benefits or
amounts payable under any deferred compensation plan in which the Officer had
been a participant, and the Company shall have no further obligation to the
Officer and/or the Officer's personal representative and/or spouse under this
Agreement or on account of, or arising out of, the termination of the Officer's
employment. The Officer may petition the Board of Directors of the Company for
an immediate lump sum payment, in lieu of any amounts payable pursuant to
Section (4)(f) hereof on account of the Officer's termination of employment, in
an amount equal to the actuarial present value of a supplemental retirement
- 4 -
<PAGE>
benefit, expressed in the form of a single life annuity beginning at Officer's
termination of employment (or age 55, if later), equal to the excess if any of
(A) less (B) where (A) is 2.0% (.020) of the Officer's highest three-year
average Total Compensation times the number of years at termination (not to
exceed thirty) of the Officer's service as an employee of the Company, and (B)
is the benefit payable under the Company's Pension Plan at the Officer's
termination of employment (or age 55, if later). The actuarial present value of
such supplemental retirement benefit shall be calculated on the basis of the
annual yield on thirty-year United States Treasury bonds on the final business
day of the month preceding the Date of Termination of the Officer's employment
and the 1983 Group Annuity table. The Board of Directors of the Company may
grant or deny any such petition by the Officer in its absolute discretion.
(c) If the Company terminates the Officer's employment
hereunder with Cause, or if the Officer terminates the Officer's employment
hereunder in the absence of a Breach by the Company and upon less than six (6)
months' prior Notice of Termination, the Company shall pay to the Officer the
Officer's full Base Salary earned prior to the Date of Termination, any amounts
payable pursuant to Sections (4)(c) and (4)(d) hereof and any benefits or
amounts payable under any deferred compensation plan in which the Officer had
been a participant, and, provided that the Company is not in default of any of
its obligations hereunder, the Company shall have no further obligation to the
Officer under this Agreement or on account of, or arising out of, the
termination of the Officer's employment.
(d) If the Company terminates the Officer's employment
hereunder without Cause, or if the Officer terminates the Officer's employment
hereunder on account of a Breach by the Company:
(i) The Company shall pay to the Officer the
Officer's Total Compensation earned prior to the Date of Termination, any
amounts payable pursuant to Sections 4(c) and 4(d) hereof and any benefits or
amounts payable under any deferred compensation plan in which the Officer had
been a participant.
(ii) The Company shall afford the Officer the
severance benefits set forth on Schedule C attached hereto.
(iii) In lieu of any amounts payable pursuant to
Section (4)(f) hereof on account of the Officer's termination of employment, the
Company shall pay to the Officer an immediate lump sum amount equal to the
actuarial present value of a supplemental retirement benefit, expressed in the
form of a single life annuity beginning at the Officer's termination of
employment (or age 55, if later), equal to the excess if any of (A) less (B),
where (A) is 2.0% (.020) of the Officer's highest three-year average Total
Compensation times the number of years
- 5 -
<PAGE>
at termination (not to exceed thirty) of the Officer's service as an employee of
the Company, and (B) is the benefit payable under the Company's Pension Plan at
the Officer's termination of employment (or age 55, if later). The actuarial
present value of such supplemental retirement benefit shall be calculated on the
basis of the annual yield on thirty-year United States Treasury bonds on the
final business day of the month preceding the Date of Termination of the
Officer's employment and the 1983 Group Annuity table.
(iv) The payment to, and acceptance by, the Officer
of any sum of money or benefit prescribed in this Section (6)(d) shall effect
and evidence a release by the Officer of any and all claims against the Company
on account of, or arising out of, the termination of the Officer's employment.
(7) CHANGE IN CONTROL
For purposes of this Agreement, Change in Control shall mean any of the
following events:
(a) any merger or consolidation of the Company with any
corporate shareholder of group of corporate shareholders holding twenty-five
percent (.25) or more of the Common Stock of the Company or with any other
corporation or group of corporations which is, or after such merger or
consolidation would be, or be affiliated with, a shareholder owning at least
twenty-five percent (.25) of the Common Stock of the Company; or
(b) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition to or with any shareholder or group of shareholders holding
twenty-five percent (.25) or more of the Common Stock of the Company, or any
affiliate of such shareholder or group of shareholders, of any assets of the
Company having an aggregate fair market value of $50 million or more; or
(c) the issuance or sale by the Company of any securities of
the Company to any shareholder or group of shareholders holding twenty-five
percent (.25) or more of the Common Stock of the Company, or to any affiliate of
such shareholder or group of shareholders, in exchange for cash, securities or
other consideration having an aggregate fair market value of $50 million or
more; or
(d) the implementation of any plan or proposal for the
liquidation or dissolution of the Company proposed by or on behalf of any
shareholder or group of shareholders owning at least twenty-five percent (.25)
of the Common Stock of the Company, or any affiliate of such shareholder or
group of shareholders; or
(e) any reclassification of securities (including a reverse
stock split), or recapitalization of the Company or any other transaction which
has the effect, directly or indirectly,
- 6 -
<PAGE>
of increasing the proportionate share of outstanding shares of any class of
equity securities, or securities convertible into any equity securities, of the
Company, which is directly or indirectly owned by a shareholder or group of
shareholders owning at least twenty-five percent (.25) of the Common Stock of
the Company, or any affiliate of such shareholder or group of shareholders.
The Board of Directors of the Company may, from time to time, by the
affirmative vote of not less than a majority of the entire membership of said
Board of Directors, at a meeting of said Board of Directors called and held for
the purpose, modify the phrase "twenty-five percent (.25)" in one or more of the
foregoing Sections (7)(a), (7)(b), (7)(c), (7)(d) and/or (7)(e) to a lesser
percentage, but not less than twenty percent (.20).
(8) ADDITIONAL CONSEQUENCES OF A CHANGE IN CONTROL
(a) In the event that a Change in Control has been approved by
all necessary shareholder, creditor and regulatory actions, the Company will,
not later than the day prior to the date of the Change in Control, pay to the
Trustee of The United Illuminating Company Supplemental Retirement Benefit Trust
established pursuant to the Agreement, made as of the 1st day of June, 1995
between the Company and State Street Bank and Trust Company, as Trustee, for the
benefit of the Officer, cash in an amount equal to: (A) In the event that the
Officer's employment has been terminated or will be terminated prior to the date
of the Change in Control, a sum, calculated by the Company's independent
certified public accountants, reasonably sufficient to pay and discharge the
Company's future obligations, if any, to the Officer and/or his personal
representative and/or spouse, under Section (6)(a), Section (6)(b) or Section
(6)(d) hereof; or (B) in the event that the Officer's employment has not been
terminated and will not be terminated prior to the date of the Change in
Control, a sum, calculated by the Company's independent certified public
accountants, reasonably sufficient to pay and discharge the Company's
obligations to the Officer under Section (6)(d) hereof assuming, for purposes of
such calculation, that the Officer's employment is terminated under said Section
(6)(d) by a Notice of Termination delivered on the date of the Change in Control
and specifying an immediate Date of Termination.
(b) On and after the date of the Change in Control, the
Officer's Base Salary may not be reduced by the Board of Directors to an annual
rate less than the rate fixed by the Board of Directors of the Company as a
result of its most recent review of salary rates, pursuant to Section (4)(a)
hereof, prior to the date of the Change in Control.
(9) TAX SAVINGS PROVISION
If any portion of the payments which the Officer has the right to
receive from the Company, or any affiliated entity,
- 7 -
<PAGE>
hereunder would constitute "excess parachute payments" (as defined in Section
280G of the Internal Revenue Code, and not governed by the terms defined in this
Agreement) subject to the excise tax imposed by Section 4999 of the Internal
Revenue Code, such excess parachute payments shall be reduced to the largest
amount that will result in no portion of such excess parachute payments being
subject to the excise tax imposed by Section 4999 of the Internal Revenue Code.
(10) SUCCESSORS; BINDING AGREEMENT
(a) The Company shall pay to the Officer and/or the Officer's
personal representative and/or spouse all legal fees and expenses and court
costs, if any, incurred by the Officer and/or the Officer's representative
and/or spouse in successful litigation to enforce the Officer's rights under
this Agreement.
(b) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Company, by agreement in form
and substance reasonably satisfactory to the Officer, 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. Failure of the Company to obtain such agreement by the effectiveness of
any such succession shall be a breach of this Agreement and shall entitle the
Officer to compensation from the Company in the same amount and upon the same
terms as the Officer would be entitled to hereunder if the Officer terminated
the Officer's employment upon Breach by the Company, except that, for purposes
of implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination. As used in this Agreement,
the term "the Company" shall include The United Illuminating Company, any parent
and any successor to the business or assets of either as aforesaid which
executes and delivers the agreement provided for in this Section (10) or which
otherwise becomes bound by all the terms and provisions of this Agreement by
operation of law.
(c) This Agreement and all rights of the Officer hereunder
shall inure to the benefit of and be enforceable by the Officer's personal or
legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If the Officer should die while any amounts
would still be payable to the Officer hereunder if the Officer had continued to
live, all such amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to the Officer's devisee, legatee or
other designee or, if there be no such designee, to the Officer's estate.
(11) NOTICE
For the purpose of this Agreement, notices and all other communications
to either party hereunder provided for in the
- 8 -
<PAGE>
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 United Illuminating Company, 157 Church Street, New Haven, Connecticut,
Attention: Secretary, or, in the case of the Officer, to the Officer at 157
Church Street, New Haven Connecticut, or to such other address as either party
shall designate by giving written notice of such change to the other party.
(12) MISCELLANEOUS
(a) No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is approved by the
Board of Directors of the Company and agreed to in a writing signed by the
Officer and such officer of the Company as may be specifically authorized by the
Board of Directors of 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.
The validity, interpretation, construction and performance of this Agreement
shall be governed by the laws of the State of Connecticut.
(b) Exhibits A-1 and A-2 attached hereto, showing calculations
of supplemental retirement benefits under Section (4)(f), and Exhibit B attached
hereto, showing a calculation of a lump sum payment under Section (6)(d)(iii),
are incorporated herein by reference and set forth, by example, the parties'
intended interpretation and application of such Sections.
(13) VALIDITY
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.
(14) SURVIVAL
The provisions of this Agreement shall not survive the termination of
this Agreement or of the Officer's employment hereunder, except that the
provisions of Sections (4), (6), (8), (9), (10), and (11) hereof shall survive
such termination and shall be binding upon the Company's successors and assigns.
(15) COUNTERPARTS
This Agreement may be executed in one or more counterparts,
- 9 -
<PAGE>
each of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date and year first above written.
Attest: THE UNITED ILLUMINATING COMPANY
/s/ Kurt Mohlman By: /s/ Richard J. Grossi
- ---------------------- -------------------------------------
Secretary Chairman of the Board of Directors
and Chief Executive Officer
/s/ Anthony J. Vallillo
-------------------------------------
Anthony J. Vallillo
- 10 -
<PAGE>
EXHIBIT A-1
To
EMPLOYMENT AGREEMENT
BETWEEN
THE UNITED ILLUMINATING COMPANY
AND
MR. ANTHONY VALLILLO
--------------------
Sample calculation of supplemental retirement benefits under Section (4)(f).
Assume the Officer retires upon the termination of his employment and
immediately commences his Pension Plan benefits under the following facts:
(1) Retirement Age 55 (September 1, 1990)
--------------------------
(2) Actual Service with the Company 33 years 3 months (9/1/90)
--------------------------
(3) Service with the Company 33 years 3 months (9/1/90)
--------------------------
(4) Three-year average Total Compensation See Calculations Below
--------------------------
Projected Earnings at age 54 $143,580
Projected Earnings at age 53 136,095
Estimated Earnings at age 52 129,000 3-year average - $136,225
Estimated Earnings at age 51 122,275
Estimated Earnings at age 50 115,900 5-year average - $129,370
(A) Target Benefit at Age 55
- ----------------------------
1. 2.0% of 3-year average earnings times Service (Up to 30 years)
(.020) x ($136,225) x (30) $81,735
2. Early Retirement Reduction Factor (based on Service) .561
------
3. Target Benefit at Age 55: 1 times 2 45,853
(B) Pension Benefit at Age 55
- -----------------------------
1. Quantity A $10,000
2. Quantity B 119,370
3. Quantity C 129,370
4. 1% of Quantity A plus 2% of Quantity B: 2,487
5. Service with the Company (up to 25 years) 25
6. 4 time 5 62,175
7. 1/2% of Quantity C (up to $13,000) 65
8. Service with the Company in excess of 25 years 8.25
9. 7 times 8 536
10. Pension unreduced at age 55: 6 plus 9 62,711
11. Early Retirement Reduction Factor (based on Service) .561
12. Pension payable at age 55: 10 times 11 35,181
13. Supplemental Pension: A3-B12 10,672
<PAGE>
EXHIBIT A-2
To
EMPLOYMENT AGREEMENT
BETWEEN
THE UNITED ILLUMINATING COMPANY
AND
MR. ANTHONY VALLILLO
--------------------
Sample calculation of supplemental retirement benefits under Section (4)(f).
Assume the Agreement terminates but the Officer continues to be employed by the
Company for 2 years thereafter before retiring and commencing his Pension Plan
benefits under the following facts:
(1) Retirement Age 57 (September 1, 1992)
--------------------------
(2) Service with the Company
(a) Before Expiration of Agreement 33 years 3 months
--------------------------
(b) After Expiration of Agreement 2 years
--------------------------
(c) Total 35 years 3 months (9/1/92)
--------------------------
(3) Three-year average total Compensation See Calculations Below
--------------------------
Projected Earnings at age 56 $159,808
Projected Earnings at age 55 151,477
Estimated Earnings at age 54 143,580 3-year average - $151,622
Estimated Earnings at age 53 136,095
Estimated Earnings at age 52 129,000 5-year average - $143,992
(A) Target Benefit at Age 57
- ----------------------------
1. 2.0% of 3-year average earnings times Service (Up to 30 years)
(.020) x ($151,622) x (30) $90,973
2. Early Retirement Reduction Factor (based on Service) .655
------
3. Target Benefit at Age 55: 1 times 2 59,587
(B) Pension Benefit at Age 57
- -----------------------------
1. Quantity A $10,000
2. Quantity B 133,992
3. Quantity C 143,992
4. 1% of Quantity A plus 2% of Quantity B: 2,780
5. Service with the Company (up to 25 years) 25
6. 4 times 5 69,500
<PAGE>
7. 1/2% of Quantity C (up to $13,000) 65
8. Service with the Company in excess of 25 years 10.25
9. 7 times 8 666
10. Pension unreduced at age 57: 6 plus 9 70,166
11. Early Retirement Reduction Factor (based on Service) .655
12. Pension payable at age 57: 10 times 11 45,959
13. Supplemental Pension: A3-B12 13,628
- 2 -
<PAGE>
EXHIBIT B
To
EMPLOYMENT AGREEMENT
BETWEEN
THE UNITED ILLUMINATING COMPANY
AND
MR. ANTHONY VALLILLO
--------------------
Sample calculation of lump sum payment in lieu of supplemental retirement
benefit under Section (6)(d)(iii). Assume the Officer's employment terminates
and Section (6)(d) applies under the following facts:
Assume the Officer retires upon the termination of his employment and
immediately commences his Pension Plan benefits under the following facts:
(1) Age of Executive at Termination 53 (May 31, 1988)
--------------------------
(2) Service with the Company 31 years (5/31/88)
--------------------------
(3) Three-year average Total Compensation See Calculations Below
--------------------------
Projected Earnings at age 53 $136,095
Estimated Earnings at age 52 129,000
Estimated Earnings at age 51 122,275 3-year average = $129,123
Estimated Earnings at age 50 115,900
Estimated Earnings at age 49 109,858 5-year average = $122,626
(A) Target Benefit at Age 51
- ----------------------------
1. 2.0% of 3-year average earnings times Service (Up to 30 years)
(.020) x ($129,123) x (30) $77,474
2. Early Retirement Reduction Factor (based on Service) 1.000
------
3. Target Benefit at Age 51: 1 times 2 77,474
(B) Pension Benefit at Age 55
- -----------------------------
1. Quantity A $10,000
2. Quantity B 112,626
3. Quantity C 122,626
4. 1% of Quantity A plus 2% of Quantity B: 2,353
5. Service with the Company (up to 25 years) 25
6. 4 times 5 58,825
7. 1/2% of Quantity C (up to $13,000) 65
8. Service with the Company in excess of 25 years 6
9. 7 times 8 390
10. Pension unreduced at age 55: 6 plus 9 59,215
11. Early Retirement Reduction Factor (based on Service) .561
12. Pension payable at age 55: 10 times 11 33,220
13. Supplemental Pension: A3-B12 44,254
<PAGE>
14. Annuity Factor for Determining Lump Sum Value at age 55 10.3880
15. Lump Sum Value at age 55: 13 times 14 459,711
16. Interest discount factor from age 55 to age 53 (based on 7-1/2%) .8653
17. Lump Sum Value at age 55, discounted to age 53 15 times 16 397,788
- 2 -
<PAGE>
SCHEDULE C
Severance Benefits
------------------
At the option of the Officer, exercised by written notice to the Company, the
benefits of either (A) or (B) below will be afforded the Officer:
(A) a lump sum payment in an amount equal to the product of (X) multiplied by
(Y), where:
(X) is the sum of one-twelfth of the Officer's annual salary rate
approved by the Board of Directors of the Company at the time of
its most recent review of the salary rates of all of the
Company's officers, plus one-twelfth of the cash award(s) that
the Officer would earn under the short-term incentive
compensation program(s) in which the Officer is a participant on
the date of the termination of the Officer's employment, assuming
that all of the Officer's program goals for the performance
period are achieved at the target level; and
(Y) is the number of whole and partial years (not to be less than 12
nor more than 24) of the Officer's service deemed as an employee
of the Company on the date of termination of the Officer's
employment.
(B) The Officer's choice of the addition of six years of age, or six years of
service deemed as an employee of the Company, or any combination (not to
exceed 6) of whole and partial years of age and whole and partial years of
service deemed as an employee of the Company, in the calculation of the
benefits payable to the Officer under the Company's retiree medical benefit
plan(s) and in the calculation of the benefits payable to the Officer as a
supplemental retirement benefit under his Employment Agreement.
Exhibits C-1 and C-2 attached hereto, showing calculations of supplemental
retirement benefits under Schedule C, paragraph (B), set forth, by example, the
parties' intended interpretation and application of said paragraph.
<PAGE>
EXHIBIT C-1
TO
EMPLOYMENT AGREEMENT
BETWEEN
THE UNITED ILLUMINATING COMPANY
AND
MR. ANTHONY VALLILLO
--------------------
Sample calculation of supplemental retirement benefits under Schedule A
paragraph (B).
Assume the Officer retires on the date of termination of employment based on the
following facts:
Actual Date of Termination 4/1/97
Actual Age of Officer at Termination 56
Actual Years of Service at Termination 30
Enhanced Age of Officer at Termination 62 (+6 years)
Enhanced Years of Service at Termination 30 (+0 years)
Three Year Average Total Compensation $140,000
(A) The retirement benefit calculated in accordance with Company's Pension
Plan, but with the addition of six years of age.
Gross Pension (Attachment A-1-1) $67,605.84
Reduction for Early Retirement Age: 62 years (.0000) 0.00
---------
Net Annual Pension $67,605.84
(B) The benefit payable to the Officer under the Company's Pension Plan at the
age of 56.
Gross Pension (Attachment A-1-2) $67,611.44
Reduction for Early Retirement Age 56 (.3950) 26,706.52
---------
Net Annual Pension $40,904.92
Supplemental Retirement Benefit
(A) - (B) = ($67,605.84) - ($40,904.92) = $26,700.92
<PAGE>
Attachment A-1-1
THE UNITED ILLUMINATING COMPANY
-------------------------------
NAME: ENHANCED AGE 62
S.S. NUMBER: - -
AGE AT RETIREMENT: 62 YRS. AND 0 MOS.
YEARS OF SERVICE: 30 YRS. AND 0 MOS.
VESTED PERCENTAGE: 100%
PREPARER'S NAME:
DATE PREPARED: 4/03/97
BENEFIT CALCULATION
------------------------------------- ANNUAL
AMOUNT
--------
A1 = 1024.00 FIRST 25 YEARS OF PARTICIPATION:
1.0% X 25.0000 X 12076.66 = $ 3019.17
A2 = 407.00 (NO. OF YRS.) (QUANTITY A)
A = 4800XA1/A2 2.0% X 25.0000 X 127923.34 = 63961.67
= 12076.66 (NO. OF YRS.) (QUANTITY B)
B = 127923.34 YEARS OF PARTICIPATION IN EXCESS OF 25:
.5% X 5.0000 X 25000.00 = 625.00
C = 140000.00 (NO. OF YRS.) (QUANTITY C - MAXIMUM
OF 25000.00) --------
GROSS PENSION = $67605.84
========
<PAGE>
Attachment A-1-2
THE UNITED ILLUMINATING COMPANY
-------------------------------
NAME: ENHANCED AGE 56
S.S. NUMBER: - -
AGE AT RETIREMENT: 56 YRS. AND 0 MOS.
YEARS OF SERVICE: 30 YRS. AND 0 MOS.
VESTED PERCENTAGE: 100%
PREPARER'S NAME:
DATE PREPARED: 4/03/97
BENEFIT CALCULATION
------------------------------------ ANNUAL
AMOUNT
------
A1 = 1223.00 FIRST 25 YEARS OF PARTICIPATION:
l.0% X 25.0000 X 12054.21 = $ 3013.55
A2 = 487.00 (NO. OF YRS.) (QUANTITY A)
A = 4800XA1/A2 2.0% X 25.0000 X 127945.79 = 63972.89
= 12054.21 (NO. OF YRS.) (QUANTITY B)
B = 127945.79 YEARS OF PARTICIPATION IN EXCESS OF 25:
.5% X 5.0000 X 25000.00 = 625.00
C = 140000.00 (NO. OF YRS.) (QUANTITY C - MAXIMUM
OF 25000.00) --------
GROSS PENSION = $67611.44
========
<PAGE>
EXHIBIT C-2
TO
EMPLOYMENT AGREEMENT
BETWEEN
THE UNITED ILLUMINATING COMPANY
AND
MR. ANTHONY VALLILLO
--------------------
Sample calculation of supplemental retirement benefits under Schedule A
paragraph (B).
Assume the Officer terminates on the date of termination of employment and
elects to begin receiving his/her vested pension benefit at age 55 based on the
following facts:
Actual Date of Termination 4/1/97
Actual Age of Executive at Termination 50
Actual Years of Service at Termination 24
Enhanced Age of Executive at Termination 50 (+0 years)
Enhanced Years of Service at Termination 30 (+6 years)
Three Year Average Total Compensation $140,000
(A) The retirement (vested pension) benefit, payable to the Officer at age 55,
calculated in accordance with Company's Pension Plan, but with the addition
of six years of service.
Gross Vested Pension (Attachment A-2-1) $67,526.96
Reduction for Early Retirement Age: 55 years (.4390) 29,644.34
---------
Net Annual Pension $37,882.62
(B) The vested pension benefit payable to the Officer under the Company's
Pension Plan at the age of 55.
Gross Vested Pension (Attachment A-2-2) $63,876.25
Reduction for Early Retirement Age: 55 years (.5730) 36,601.09
---------
Net Annual Pension $27,275.16
Supplemental Retirement Benefit
(A) - (B) = ($37,882.62) - ($27,275.16) = $10,607.46
<PAGE>
Attachment A-2-1
THE UNITED ILLUMINATING COMPANY
-------------------------------
NAME: ACTUAL AGE 50
S.S. NUMBER: - -
AGE AT TERMINATION: 50 YRS. AND 0 MOS.
YEARS OF SERVICE: 30 YRS. AND 0 MOS.
VESTED PERCENTAGE: 100%
PREPARER'S NAME:
DATE PREPARED: 4/03/97
BENEFIT CALCULATION
------------------------------------ ANNUAL
AMOUNT
------
A1 = 1185.00 FIRST 25 YEARS OF PARTICIPATION:
1.0% X 25.0000 X 12392.16 = $ 3098.04
A2 = 459.00 (NO. OF YRS.) (QUANTITY A)
A = 4800XA1/A2 2.0% X 25.0000 X 127607.84 = 63803.92
= 12392.16 (NO. OF YRS.) (QUANTITY B)
B = 127607.84 YEARS OF PARTICIPATION IN EXCESS OF 25:
.5% X 5.0000 X 25000.00 = 625.00
C = 140000.00 (NO. OF YRS.) (QUANTITY C - MAXIMUM
OF 25000.00) --------
GROSS PENSION = $67526.96
========
<PAGE>
Attachment A-2-2
THE UNITED ILLUMINATING COMPANY
-------------------------------
NAME: AGE 50
S.S. NUMBER: - -
AGE AT TERMINATION: 50 YRS. AND 0 MOS.
YEARS OF SERVICE: 24 YRS. AND 0 MOS.
VESTED PERCENTAGE: 100%
PREPARER'S NAME:
DATE PREPARED: 4/04/97
BENEFIT CALCULATION
------------------------------------ ANNUAL
AMOUNT
------
A1 = 1131.00 FIRST 25 YEARS OF PARTICIPATION:
1.0% X 24.0000 X 13848.98 = $ 3323.76
A2 = 392.00 (NO. OF YRS.) (QUANTITY A)
A = 4800XA1/A2 2.0% X 24.0000 X 126151.02 = 60552.49
= 13848.98 (NO. OF YRS.) (QUANTITY B)
B = 126151.02 YEARS OF PARTICIPATION IN EXCESS OF 25:
.5% X .0000 X 25000.00 = .00
C = 140000.00 (NO. OF YRS.) (QUANTITY C - MAXIMUM
OF 25000.00) --------
GROSS PENSION = $63876.25
========
EXHIBIT 10.27
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made as of the 1st day of March, 1997, between THE
UNITED ILLUMINATING COMPANY, a Connecticut corporation (the Company) and RITA L.
BOWLBY, an individual (the Officer),
WITNESSETH THAT
WHEREAS, the Company desires to continue to employ the Officer as Vice
President - Corporate Affairs of the Company, and the Officer desires to be
employed by the Company as Vice President - Corporate Affairs.
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, and in order to provide an incentive to
the Officer to remain in the employ of the Company hereafter and, in particular,
in the event of any Change in Control (as herein defined) of the Company,
thereby establishing and preserving continuity of management, the Parties hereby
agree as follows:
(1) EMPLOYMENT
The Company hereby agrees to employ the Officer, and the
Officer hereby agrees to serve the Company, at the pleasure of the Board of
Directors of the Company, all upon the terms and conditions set forth herein.
(2) POSITION AND DUTIES
The Officer shall be employed by the Company as Vice President -
Corporate Affairs, or in such other equivalent or higher officership position as
the Company's Board of Directors may determine. The Officer shall accept such
employment and shall perform and discharge, faithfully, diligently and to the
best of the Officer's abilities, the duties and obligations of the Officer's
office and such other duties as may from time to time be assigned to the Officer
by, or at the direction of, the Board of Directors of the Company, and shall
devote substantially all of the Officer's working time and efforts to the
business and affairs of the Company. Although a Change in Control of the Company
shall not affect the obligations of the Company and the Officer as set forth in
the two preceding sentences, at and after the date of any Change in Control the
Company's employment of the Officer shall also be without diminishment in the
Officer's management responsibilities, duties or powers.
(3) PLACE OF PERFORMANCE
In his employment by the Company, the Officer shall be based at the
executive offices of the Company situated within the Company's statutory service
area.
<PAGE>
(4) COMPENSATION
(a) Base Salary. During the term of the Officer's employment
hereunder, the Officer shall receive a base salary (Base Salary) at an annual
rate of One Hundred Thirteen Thousand One Hundred Dollars ($113,100). The
Officer's Base Salary rate shall be reviewed by the Board of Directors of the
Company contemporaneously with each review of the salary rates of the Company's
other officers by said Board of Directors, and may be revised upwards as a
result of any such review. The Officer's Base Salary may be revised downwards by
said Board of Directors contemporaneously with any general reduction of the
salary rates of the Company's other officers.
(b) Incentive Compensation. During the term of the Officer's
employment hereunder, the Officer shall be eligible to be designated by the
Board of Directors of the Company as a participant in each incentive
compensation program established for all officers of the Company.
For purposes of this Agreement, Total Compensation is defined
as the sum of the Officer's Base Salary and any amount paid or payable pursuant
to this Section (4)(b).
(c) Business Expenses. During the term of the Officer's
employment hereunder, the Officer shall be entitled to receive prompt
reimbursement for all reasonable expenses incurred by the Officer (in accordance
with the policies and procedures established by the Board of Directors of the
Company from time to time for all of the Company's officers) in performing
services hereunder, provided that the Officer properly accounts therefor.
(d) Benefit Programs. During the term of the Officer's
employment hereunder, the Officer shall be entitled to participate in and
receive full benefits under all of the Company's employee benefit plans,
programs and arrangements for its officers, including, without limitation, its
retirement and pension plan programs. Nothing paid to the Officer 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
Officer under any other Section of this Agreement.
(e) Vacations and Holidays. During the term of the Officer's
employment hereunder, the Officer shall be entitled to the number of paid
vacation days in each calendar year determined by the Board of Directors of the
Company from time to time for all of the Company's officers, and shall also be
entitled to all paid holidays afforded by the Company to its employees.
(5) TERMINATION
(a) The Officer's employment hereunder shall terminate upon
the Officer's death.
- 2 -
<PAGE>
(b) The Board of Directors of the Company may terminate the
Officer's employment hereunder at any time, with or without Cause. Prior to the
date of a Change in Control, the Company shall be deemed to have Cause to
terminate the Officer's employment hereunder only upon the Officer's (A)
continued failure to perform and discharge the duties or obligations of the
Officer's office, or such other duties as may from time to time be assigned to
the Officer by, or at the direction of, the Board of Directors, faithfully,
diligently, to the best of the Officer's abilities, and in accordance with
standards accepted in the electric utility industry, in the opinion of a
majority of the members of the Board of Directors of the Company, or (B)
misconduct that is injurious to the Company, or (C) conviction of a felony
involving the personal dishonesty or moral turpitude of the Officer, or (D)
total and permanent physical or mental disability, or (E) absence from work on a
full-time basis, due to physical or mental illness, for an uninterrupted 365-day
period. On and after the date of a Change in Control, the Company shall be
deemed to have Cause to terminate the Officer's employment hereunder only upon
the Officer's (F) conviction of a felony involving the personal dishonesty or
moral turpitude of the Officer, or (G) total and permanent physical or mental
disability, or (H) absence from work on a full-time basis, due to physical or
mental illness, for an uninterrupted 365-day period.
(c) The Officer may terminate the Officer's employment
hereunder, upon at least thirty (30) days' prior Notice of Termination delivered
to the Company, for failure of the Company to observe and perform one or more of
its obligations under Sections (1), (2), (3) and/or (4) hereof, which failure
the Company fails to remedy within such notice period (a Breach by the Company)
at a time when the Officer is not in default of any of the Officer's obligations
under Sections (1) and/or (2) hereof. The Officer may terminate his employment
hereunder in the absence of a Breach by the Company, effective upon at least six
(6) months' prior Notice of Termination delivered to the Company.
(d) Notice of Termination. Any termination of employment, by
the Company or by the Officer, shall be communicated by delivery of a written
Notice of Termination to the other party.
(e) Date of Termination. For purposes of this Agreement, the
Date of Termination is defined as: if the Officer's employment is terminated (A)
by his death, the date of his death, or (B) pursuant to Section (5)(b) or
Section (5)(c) hereof, the date specified in the Notice of Termination.
(6) CONSEQUENCES OF TERMINATION
(a) If the Officer's employment terminates by reason of the
Officer's death, the Company shall pay to the personal representative and/or
spouse of the Officer the Officer's Total
- 3 -
<PAGE>
Compensation earned prior to the Date of Termination, any amounts payable
pursuant to Sections (4)(c) and (4)(d) hereof and any benefits or amounts
payable under any deferred compensation plan in which the Officer had been a
participant, and the Company shall have no further obligation under this
Agreement.
(b) If the Officer terminates the Officer's employment
hereunder in the absence of a Breach by the Company and upon at least six (6)
months' prior Notice of Termination, the Company shall pay to the Officer and/or
the Officer's personal representative and/or spouse the Officer's Total
Compensation earned prior to the Date of Termination, any amounts payable
pursuant to Sections (4)(c) and (4)(d) hereof and any benefits or amounts
payable under any deferred compensation plan in which the Officer had been a
participant, and the Company shall have no further obligation to the Officer
and/or the Officer's personal representative and/or spouse under this Agreement
or on account of, or arising out of, the termination of the Officer's
employment.
(c) If the Company terminates the Officer's employment
hereunder with Cause, or if the Officer terminates the Officer's employment
hereunder in the absence of a Breach by the Company and upon less than six (6)
months' prior Notice of Termination, the Company shall pay to the Officer the
Officer's full Base Salary earned prior to the Date of Termination, any amounts
payable pursuant to Sections (4)(c) and (4)(d) hereof and any benefits or
amounts payable under any deferred compensation plan in which the Officer had
been a participant, and, provided that the Company is not in default of any of
its obligations hereunder, the Company shall have no further obligation to the
Officer under this Agreement or on account of, or arising out of, the
termination of the Officer's employment.
(d) If the Company terminates the Officer's employment
hereunder without Cause, or if the Officer terminates the Officer's employment
hereunder on account of a Breach by the Company:
(i) The Company shall pay to the Officer the
Officer's Total Compensation earned prior to the Date of Termination, any
amounts payable pursuant to Sections 4(c) and 4(d) hereof and any benefits or
amounts payable under any deferred compensation plan in which the Officer had
been a participant.
(ii) The Company shall afford the Officer the
severance benefits set forth on Schedule A attached hereto.
(iii) The payment to, and acceptance by, the Officer
of any sum of money or benefit prescribed in this Section (6)(d) shall effect
and evidence a release by the Officer of any and all claims against the Company
on account of, or arising out of, the termination of the Officer's employment.
- 4 -
<PAGE>
(7) CHANGE IN CONTROL
For purposes of this Agreement, Change in Control shall mean any of the
following events:
(a) any merger or consolidation of the Company with any
corporate shareholder or group of corporate shareholders holding twenty-five
percent (.25) or more of the Common Stock of the Company or with any other
corporation or group of corporations which is, or after such merger or
consolidation would be, or be affiliated with, a shareholder owning at least
twenty-five percent (.25) of the Common Stock of the Company; or
(b) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition to or with any shareholder or group of shareholders holding
twenty-five percent (.25) or more of the Common Stock of the Company, or any
affiliate of such shareholder or group of shareholders, of any assets of the
Company having an aggregate fair market value of $50 million or more; or
(c) the issuance or sale by the Company of any securities of
the Company to any shareholder or group of shareholders holding twenty-five
percent (.25) or more of the Common Stock of the Company, or to any affiliate of
such shareholder or group of shareholders, in exchange for cash, securities or
other consideration having an aggregate fair market value of $50 million or
more; or
(d) the implementation of any plan or proposal for the
liquidation or dissolution of the Company proposed by or on behalf of any
shareholder or group of shareholders owning at least twenty-five percent (.25)
of the Common Stock of the Company, or any affiliate of such shareholder or
group of shareholders; or
(e) any reclassification of securities (including a reverse
stock split), or recapitalization of the Company or any other transaction which
has the effect, directly or indirectly, of increasing the proportionate share of
outstanding shares of any class of equity securities, or securities convertible
into any equity securities, of the Company, which is directly or indirectly
owned by a shareholder or group of shareholders owning at least twenty-five
percent (.25) of the Common Stock of the Company, or any affiliate of such
shareholder or group of shareholders.
The Board of Directors of the Company may, from time to time, by the
affirmative vote of not less than a majority of the entire membership of said
Board of Directors, at a meeting of said Board of Directors called and held for
the purpose, modify the phrase "twenty-five percent (.25)" in one or more of the
foregoing Sections (7)(a), (7)(b), (7)(c), (7)(d) and/or (7)(e) to a lesser
percentage, but not less than twenty percent (.20).
- 5 -
<PAGE>
(8) ADDITIONAL CONSEQUENCES OF A CHANGE IN CONTROL
(a) In the event that a Change in Control has been approved by
all necessary shareholder, creditor and regulatory actions, the Company will,
not later than the day prior to the date of the Change in Control, pay to the
Trustee of The United Illuminating Company Supplemental Retirement Benefit Trust
established pursuant to the Agreement, made as of the 1st day of June, 1995
between the Company and State Street Bank and Trust Company, as Trustee, for the
benefit of the Officer, cash in an amount equal to: (A) In the event that the
Officer's employment has been terminated or will be terminated prior to the date
of the Change in Control, a sum, calculated by the Company's independent
certified public accountants, reasonably sufficient to pay and discharge the
Company's future obligations, if any, to the Officer and/or his personal
representative and/or spouse, under Section (6)(a), Section (6)(b) or Section
(6)(d) hereof; or (B) in the event that the Officer's employment has not been
terminated and will not be terminated prior to the date of the Change in
Control, a sum, calculated by the Company's independent certified public
accountants, reasonably sufficient to pay and discharge the Company's
obligations to the Officer under Section (6)(d) hereof assuming, for purposes of
such calculation, that the Officer's employment is terminated under said Section
(6)(d) by a Notice of Termination delivered on the date of the Change in Control
and specifying an immediate Date of Termination.
(b) On and after the date of the Change in Control, the
Officer's Base Salary may not be reduced by the Board of Directors to an annual
rate less than the rate fixed by the Board of Directors of the Company as a
result of its most recent review of salary rates, pursuant to Section (4)(a)
hereof, prior to the date of the Change in Control.
(9) TAX SAVINGS PROVISION
If any portion of the payments which the Officer has the right to
receive from the Company, or any affiliated entity, hereunder would constitute
"excess parachute payments" (as defined in Section 280G of the Internal Revenue
Code, and not governed by the terms defined in this Agreement) subject to the
excise tax imposed by Section 4999 of the Internal Revenue Code, such excess
parachute payments shall be reduced to the largest amount that will result in no
portion of such excess parachute payments being subject to the excise tax
imposed by Section 4999 of the Internal Revenue Code.
(10) SUCCESSORS; BINDING AGREEMENT
(a) The Company shall pay to the Officer and/or the Officer's
personal representative and/or spouse all legal fees and expenses and court
costs, if any, incurred by the Officer and/or the Officer's representative
and/or spouse in successful litigation to enforce the Officer's rights under
this Agreement.
- 6 -
<PAGE>
(b) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Company, by agreement in form
and substance reasonably satisfactory to the Officer, 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. Failure of the Company to obtain such agreement by the effectiveness of
any such succession shall be a breach of this Agreement and shall entitle the
Officer to compensation from the Company in the same amount and upon the same
terms as the Officer would be entitled to hereunder if the Officer terminated
the Officer's employment upon Breach by the Company, except that, for purposes
of implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination. As used in this Agreement,
the term "the Company" shall include The United Illuminating Company, any parent
and any successor to the business or assets of either as aforesaid which
executes and delivers the agreement provided for in this Section (10) or which
otherwise becomes bound by all the terms and provisions of this Agreement by
operation of law.
(c) This Agreement and all rights of the Officer hereunder
shall inure to the benefit of and be enforceable by the Officer's personal or
legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If the Officer should die while any amounts
would still be payable to the Officer hereunder if the Officer had continued to
live, all such amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to the Officer's devisee, legatee or
other designee or, if there be no such designee, to the Officer's estate.
(11) NOTICE
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 United Illuminating Company, 157
Church Street, New Haven, Connecticut, Attention: Secretary, or, in the case of
the Officer, to the Officer at 157 Church Street, New Haven Connecticut, or to
such other address as either party shall designate by giving written notice of
such change to the other party.
(12) MISCELLANEOUS
No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is approved by the
Board of Directors of the Company and agreed to in a writing signed by the
Officer and such officer of the Company as may be specifically authorized by the
Board of
- 7 -
<PAGE>
Directors of 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.
The validity, interpretation, construction and performance of this Agreement
shall be governed by the laws of the State of Connecticut.
(13) VALIDITY
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.
(14) SURVIVAL
The provisions of this Agreement shall not survive the termination of
this Agreement or of the Officer's employment hereunder, except that the
provisions of Sections (4), (6), (8), (9), (10), and (11) hereof shall survive
such termination and shall be binding upon the Company's successors and assigns.
(15) COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date and year first above written.
Attest: THE UNITED ILLUMINATING COMPANY
/s/ Kurt Mohlman By: /s/ Richard J. Grossi
- ----------------------- -------------------------------------
Secretary Chairman of the Board of
Directors and Chief Executive Officer
/s/ Rita L. Bowlby
-------------------------------------
Rita L. Bowlby
- 8 -
<PAGE>
SCHEDULE A
Severance Benefits
------------------
At the option of the Officer, exercised by written notice to the Company, the
benefits of either (A) or (B) below will be afforded the Officer:
(A) a lump sum payment in an amount equal to the product of (X) multiplied by
(Y), where:
(X) is the sum of one-twelfth of the Officer's annual salary rate
approved by the Board of Directors of the Company at the time of
its most recent review of the salary rates of all of the
Company's officers, plus one-twelfth of the cash award(s) that
the Officer would earn under the short-term incentive
compensation program(s) in which the Officer is a participant on
the date of the termination of the Officer's employment, assuming
that all of the Officer's program goals for the performance
period are achieved at the target level; and
(Y) is the number of whole and partial years (not to be less than 12
nor more than 24) of the Officer's service deemed as an employee
of the Company on the date of termination of the Officer's
employment.
(B) The Officer's choice of the addition of six years of age, or six years of
service deemed as an employee of the Company, or any combination (not to
exceed 6) of whole and partial years of age and whole and partial years of
service as an employee of the Company, in the calculation of the benefits
payable to the Officer under the Company's retiree medical benefit plan(s)
and in the calculation of a supplemental retirement benefit payable by the
Company to the Officer in an amount equal to the excess of (A) over (B),
where (A) is a retirement benefit calculated in accordance with the
Company's Pension Plan, but with the aforesaid addition of whole and
partial years of age and/or service, and (B) is the benefit payable to the
Officer under the Company's Pension Plan. The Officer may elect to commence
his/her receipt of payments under this option at the termination of his/her
employment or at any time thereafter, but not prior to age 55 or later than
age 65.
Exhibits A-1 and A-2 attached hereto, showing calculations of supplemental
retirement benefits under option (B), set forth, by example, the parties'
intended interpretation and application of said option (B).
<PAGE>
EXHIBIT A-1
TO
EMPLOYMENT AGREEMENT
BETWEEN
THE UNITED ILLUMINATING COMPANY
AND
RITA L. BOWLBY
--------------
Sample calculation of supplemental retirement benefits under Schedule A
paragraph (B).
Assume the Officer retires on the date of termination of employment based on the
following facts:
Actual Date of Termination 4/1/97
Actual Age of Officer at Termination 56
Actual Years of Service at Termination 30
Enhanced Age of Officer at Termination 62 (+6 years)
Enhanced Years of Service at Termination 30 (+0 years)
Three Year Average Total Compensation $140,000
(A) The retirement benefit calculated in accordance with Company's Pension
Plan, but with the addition of six years of age.
Gross Pension (Attachment A-1-1) $67,605.84
Reduction for Early Retirement Age: 62 years (.0000) 0.00
---------
Net Annual Pension $67,605.84
(B) The benefit payable to the Officer under the Company's Pension Plan at the
age of 56.
Gross Pension (Attachment A-1-2) $67,611.44
Reduction for Early Retirement Age 56 (.3950) 26,706.52
---------
Net Annual Pension $40,904.92
Supplemental Retirement Benefit
(A) - (B) = ($67,605.84) - ($40,904.92) = $26,700.92
<PAGE>
Attachment A-1-1
THE UNITED ILLUMINATING COMPANY
-------------------------------
NAME: ENHANCED AGE 62
S.S. NUMBER: - -
AGE AT RETIREMENT: 62 YRS. AND 0 MOS.
YEARS OF SERVICE: 30 YRS. AND 0 MOS.
VESTED PERCENTAGE: 100%
PREPARER'S NAME:
DATE PREPARED: 4/03/97
BENEFIT CALCULATION
------------------------------------- ANNUAL
AMOUNT
------
A1 = 1024.00 FIRST 25 YEARS OF PARTICIPATION:
1.0% X 25.0000 X 12076.66 = $ 3019.17
A2 = 407.00 (NO. OF YRS.) (QUANTITY A)
A = 4800XA1/A2 2.0% X 25.0000 X 127923.34 = 63961.67
= 12076.66 (NO. OF YRS.) (QUANTITY B)
B = 127923.34 YEARS OF PARTICIPATION IN EXCESS OF 25:
.5% X 5.0000 X 25000.00 = 625.00
C = 140000.00 (NO. OF YRS.) (QUANTITY C - MAXIMUM
OF 25000.00) --------
GROSS PENSION = $67605.84
========
<PAGE>
Attachment A-1-2
THE UNITED ILLUMINATING COMPANY
-------------------------------
NAME: ENHANCED AGE 56
S.S. NUMBER: - -
AGE AT RETIREMENT: 56 YRS. AND 0 MOS.
YEARS OF SERVICE: 30 YRS. AND 0 MOS.
VESTED PERCENTAGE: 100%
PREPARER'S NAME:
DATE PREPARED: 4/03/97
BENEFIT CALCULATION
------------------------------------ ANNUAL
AMOUNT
------
A1 = 1223.00 FIRST 25 YEARS OF PARTICIPATION:
1.0% X 25.0000 X 12054.21 = $ 3013.55
A2 = 487.00 (NO. OF YRS.) (QUANTITY A)
A = 4800XA1/A2 2.0% X 25.0000 X 127945.79 = 63972.89
= 12054.21 (NO. OF YRS.) (QUANTITY B)
B = 127945.79 YEARS OF PARTICIPATION IN EXCESS OF 25:
.5% X 5.0000 X 25000.00 = 625.00
C = 140000.00 (NO. OF YRS.) (QUANTITY C - MAXIMUM
OF 25000.00) --------
GROSS PENSION = $67611.44
========
<PAGE>
EXHIBIT A-2
TO
EMPLOYMENT AGREEMENT
BETWEEN
THE UNITED ILLUMINATING COMPANY
AND
RITA L. BOWLBY
--------------
Sample calculation of supplemental retirement benefits under Schedule A
paragraph (B).
Assume the Officer terminates on the date of termination of employment and
elects to begin receiving his/her vested pension benefit at age 55 based on the
following facts:
Actual Date of Termination 4/1/97
Actual Age of Executive at Termination 50
Actual Years of Service at Termination 24
Enhanced Age of Executive at Termination 50 (+0 years)
Enhanced Years of Service at Termination 30 (+6 years)
Three Year Average Total Compensation $140,000
(A) The retirement (vested pension) benefit, payable to the Officer at age 55,
calculated in accordance with Company's Pension Plan, but with the addition
of six years of service.
Gross Vested Pension (Attachment A-2-1) $67,526.96
Reduction for Early Retirement Age: 55 years (.4390) 29,644.34
---------
Net Annual Pension $37,882.62
(B) The vested pension benefit payable to the Officer under the Company's
Pension Plan at the age of 55.
Gross Vested Pension (Attachment A-2-2) $63,876.25
Reduction for Early Retirement Age: 55 years (.5730) 36,601.09
---------
Net Annual Pension $27,275.16
Supplemental Retirement Benefit
(A) - (B) = ($37,882.62) - ($27,275.16) = $10,607.46
<PAGE>
Attachment A-2-1
THE UNITED ILLUMINATING COMPANY
-------------------------------
NAME: ACTUAL AGE 50
S.S. NUMBER: - -
AGE AT TERMINATION: 50 YRS. AND 0 MOS.
YEARS OF SERVICE: 30 YRS. AND 0 MOS.
VESTED PERCENTAGE: 100%
PREPARER'S NAME:
DATE PREPARED: 4/03/97
BENEFIT CALCULATION
------------------------------------ ANNUAL
AMOUNT
------
A1 = 1185.00 FIRST 25 YEARS OF PARTICIPATION:
1.0% X 25.0000 X 12392.16 = $ 3098.04
A2 = 459.00 (NO. OF YRS.) (QUANTITY A)
A = 4800XA1/A2 2.0% X 25.0000 X 127607.84 = 63803.92
= 12392.16 (NO. OF YRS.) (QUANTITY B)
B = 127607.84 YEARS OF PARTICIPATION IN EXCESS OF 25:
.5% X 5.0000 X 25000.00 = 625.00
C = 140000.00 (NO. OF YRS.) (QUANTITY C - MAXIMUM
OF 25000.00) --------
GROSS PENSION = $67526.96
========
<PAGE>
Attachment A-2-2
THE UNITED ILLUMINATING COMPANY
-------------------------------
NAME: AGE 50
S.S. NUMBER: - -
AGE AT TERMINATION: 50 YRS. AND 0 MOS.
YEARS OF SERVICE: 24 YRS. AND 0 MOS.
VESTED PERCENTAGE: 100%
PREPARER'S NAME:
DATE PREPARED: 4/04/97
BENEFIT CALCULATION
------------------------------------ ANNUAL
AMOUNT
------
A1 = 1131.00 FIRST 25 YEARS OF PARTICIPATION:
1.0% X 24.0000 X 13848.98 = $ 3323.76
A2 = 392.00 (NO. OF YRS.) (QUANTITY A)
A = 4800XA1/A2 2.0% X 24.0000 X 126151.02 = 60552.49
= 13848.98 (NO. OF YRS.) (QUANTITY B)
B = 126151.02 YEARS OF PARTICIPATION IN EXCESS OF 25:
.5% X .0000 X 25000.00 = .00
C = 140000.00 (NO. OF YRS.) (QUANTITY C - MAXIMUM
OF 25000.00) --------
GROSS PENSION = $63876.25
========
EXHIBIT 10.28
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made as of the 1st day of March, 1997, between THE
UNITED ILLUMINATING COMPANY, a Connecticut corporation (the Company) and STEPHEN
F. GOLDSCHMIDT, an individual (the Officer),
WITNESSETH THAT
WHEREAS, the Company desires to continue to employ the Officer as Vice
President - Planning and Information Resources of the Company, and the Officer
desires to be employed by the Company as Vice President Planning and Information
Resources.
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, and in order to provide an incentive to
the Officer to remain in the employ of the Company hereafter and, in particular,
in the event of any Change in Control (as herein defined) of the Company,
thereby establishing and preserving continuity of management, the Parties hereby
agree as follows:
(1) EMPLOYMENT
The Company hereby agrees to employ the Officer, and the
Officer hereby agrees to serve the Company, at the pleasure of the Board of
Directors of the Company, all upon the terms and conditions set forth herein.
(2) POSITION AND DUTIES
The Officer shall be employed by the Company as Vice President -
Planning and Information Resources, or in such other equivalent or higher
officership position as the Company's Board of Directors may determine. The
Officer shall accept such employment and shall perform and discharge,
faithfully, diligently and to the best of the Officer's abilities, the duties
and obligations of the Officer's office and such other duties as may from time
to time be assigned to the Officer by, or at the direction of, the Board of
Directors of the Company, and shall devote substantially all of the Officer's
working time and efforts to the business and affairs of the Company. Although a
Change in Control of the Company shall not affect the obligations of the Company
and the Officer as set forth in the two preceding sentences, at and after the
date of any Change in Control the Company's employment of the Officer shall also
be without diminishment in the Officer's management responsibilities, duties or
powers.
(3) PLACE OF PERFORMANCE
In his employment by the Company, the Officer shall be based at the
executive offices of the Company situated within the
<PAGE>
Company's statutory service area.
(4) COMPENSATION
(a) Base Salary. During the term of the Officer's employment
hereunder, the Officer shall receive a base salary (Base Salary) at an annual
rate of One Hundred Eighteen Thousand Dollars ($118,000). The Officer's Base
Salary rate shall be reviewed by the Board of Directors of the Company
contemporaneously with each review of the salary rates of the Company's other
officers by said Board of Directors, and may be revised upwards as a result of
any such review. The Officer's Base Salary may be revised downwards by said
Board of Directors contemporaneously with any general reduction of the salary
rates of the Company's other officers.
(b) Incentive Compensation. During the term of the Officer's
employment hereunder, the Officer shall be eligible to be designated by the
Board of Directors of the Company as a participant in each incentive
compensation program established for all officers of the Company.
For purposes of this Agreement, Total Compensation is defined
as the sum of the Officer's Base Salary and any amount paid or payable pursuant
to this Section (4)(b).
(c) Business Expenses. During the term of the Officer's
employment hereunder, the Officer shall be entitled to receive prompt
reimbursement for all reasonable expenses incurred by the Officer (in accordance
with the policies and procedures established by the Board of Directors of the
Company from time to time for all of the Company's officers) in performing
services hereunder, provided that the Officer properly accounts therefor.
(d) Benefit Programs. During the term of the Officer's
employment hereunder, the Officer shall be entitled to participate in and
receive full benefits under all of the Company's employee benefit plans,
programs and arrangements for its officers, including, without limitation, its
retirement and pension plan programs. Nothing paid to the Officer 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
Officer under any other Section of this Agreement.
(e) Vacations and Holidays. During the term of the Officer's
employment hereunder, the Officer shall be entitled to the number of paid
vacation days in each calendar year determined by the Board of Directors of the
Company from time to time for all of the Company's officers, and shall also be
entitled to all paid holidays afforded by the Company to its employees.
- 2 -
<PAGE>
(5) TERMINATION
(a) The Officer's employment hereunder shall terminate upon
the Officer's death.
(b) The Board of Directors of the Company may terminate the
Officer's employment hereunder at any time, with or without Cause. Prior to the
date of a Change in Control, the Company shall be deemed to have Cause to
terminate the Officer's employment hereunder only upon the Officer's (A)
continued failure to perform and discharge the duties or obligations of the
Officer's office, or such other duties as may from time to time be assigned to
the Officer by, or at the direction of, the Board of Directors, faithfully,
diligently, to the best of the Officer's abilities, and in accordance with
standards accepted in the electric utility industry, in the opinion of a
majority of the members of the Board of Directors of the Company, or (B)
misconduct that is injurious to the Company, or (C) conviction of a felony
involving the personal dishonesty or moral turpitude of the Officer, or (D)
total and permanent physical or mental disability, or (E) absence from work on a
full-time basis, due to physical or mental illness, for an uninterrupted 365-day
period. On and after the date of a Change in Control, the Company shall be
deemed to have Cause to terminate the Officer's employment hereunder only upon
the Officer's (F) conviction of a felony involving the personal dishonesty or
moral turpitude of the Officer, or (G) total and permanent physical or mental
disability, or (H) absence from work on a full-time basis, due to physical or
mental illness, for an uninterrupted 365-day period.
(c) The Officer may terminate the Officer's employment
hereunder, upon at least thirty (30) days' prior Notice of Termination delivered
to the Company, for failure of the Company to observe and perform one or more of
its obligations under Sections (1), (2), (3) and/or (4) hereof, which failure
the Company fails to remedy within such notice period (a Breach by the Company)
at a time when the Officer is not in default of any of the Officer's obligations
under Sections (1) and/or (2) hereof. The Officer may terminate his employment
hereunder in the absence of a Breach by the Company, effective upon at least six
(6) months' prior Notice of Termination delivered to the Company.
(d) Notice of Termination. Any termination of employment, by
the Company or by the Officer, shall be communicated by delivery of a written
Notice of Termination to the other party.
(e) Date of Termination. For purposes of this Agreement, the
Date of Termination is defined as: if the Officer's employment is terminated (A)
by his death, the date of his death, or (B) pursuant to Section (5)(b) or
Section (5)(c) hereof, the date specified in the Notice of Termination.
- 3 -
<PAGE>
(6) CONSEQUENCES OF TERMINATION
(a) If the Officer's employment terminates by reason of the
Officer's death, the Company shall pay to the personal representative and/or
spouse of the Officer the Officer's Total Compensation earned prior to the Date
of Termination, any amounts payable pursuant to Sections (4)(c) and (4)(d)
hereof and any benefits or amounts payable under any deferred compensation plan
in which the Officer had been a participant, and the Company shall have no
further obligation under this Agreement.
(b) If the Officer terminates the Officer's employment
hereunder in the absence of a Breach by the Company and upon at least six (6)
months' prior Notice of Termination, the Company shall pay to the Officer and/or
the Officer's personal representative and/or spouse the Officer's Total
Compensation earned prior to the Date of Termination, any amounts payable
pursuant to Sections (4)(c) and (4)(d) hereof and any benefits or amounts
payable under any deferred compensation plan in which the Officer had been a
participant, and the Company shall have no further obligation to the Officer
and/or the Officer's personal representative and/or spouse under this Agreement
or on account of, or arising out of, the termination of the Officer's
employment.
(c) If the Company terminates the Officer's employment
hereunder with Cause, or if the Officer terminates the Officer's employment
hereunder in the absence of a Breach by the Company and upon less than six (6)
months' prior Notice of Termination, the Company shall pay to the Officer the
Officer's full Base Salary earned prior to the Date of Termination, any amounts
payable pursuant to Sections (4)(c) and (4)(d) hereof and any benefits or
amounts payable under any deferred compensation plan in which the Officer had
been a participant, and, provided that the Company is not in default of any of
its obligations hereunder, the Company shall have no further obligation to the
Officer under this Agreement or on account of, or arising out of, the
termination of the Officer's employment.
(d) If the Company terminates the Officer's employment
hereunder without Cause, or if the Officer terminates the Officer's employment
hereunder on account of a Breach by the Company:
(i) The Company shall pay to the Officer the
Officer's Total Compensation earned prior to the Date of Termination, any
amounts payable pursuant to Sections 4(c) and 4(d) hereof and any benefits or
amounts payable under any deferred compensation plan in which the Officer had
been a participant.
(ii) The Company shall afford the Officer the
severance benefits set forth on Schedule A attached hereto.
(iii) The payment to, and acceptance by, the Officer
of any sum of money or benefit prescribed in this Section
- 4 -
<PAGE>
(6)(d) shall effect and evidence a release by the Officer of any and all claims
against the Company on account of, or arising out of, the termination of the
Officer's employment.
(7) CHANGE IN CONTROL
For purposes of this Agreement, Change in Control shall mean any of the
following events:
(a) any merger or consolidation of the Company with any
corporate shareholder or group of corporate shareholders holding twenty-five
percent (.25) or more of the Common Stock of the Company or with any other
corporation or group of corporations which is, or after such merger or
consolidation would be, or be affiliated with, a shareholder owning at least
twenty-five percent (.25) of the Common Stock of the Company; or
(b) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition to or with any shareholder or group of shareholders holding
twenty-five percent (.25) or more of the Common Stock of the Company, or any
affiliate of such shareholder or group of shareholders, of any assets of the
Company having an aggregate fair market value of $50 million or more; or
(c) the issuance or sale by the Company of any securities of
the Company to any shareholder or group of shareholders holding twenty-five
percent (.25) or more of the Common Stock of the Company, or to any affiliate of
such shareholder or group of shareholders, in exchange for cash, securities or
other consideration having an aggregate fair market value of $50 million or
more; or
(d) the implementation of any plan or proposal for the
liquidation or dissolution of the Company proposed by or on behalf of any
shareholder or group of shareholders owning at least twenty-five percent (.25)
of the Common Stock of the Company, or any affiliate of such shareholder or
group of shareholders; or
(e) any reclassification of securities (including a reverse
stock split), or recapitalization of the Company or any other transaction which
has the effect, directly or indirectly, of increasing the proportionate share of
outstanding shares of any class of equity securities, or securities convertible
into any equity securities, of the Company, which is directly or indirectly
owned by a shareholder or group of shareholders owning at least twenty-five
percent (.25) of the Common Stock of the Company, or any affiliate of such
shareholder or group of shareholders.
The Board of Directors of the Company may, from time to time, by the
affirmative vote of not less than a majority of the entire membership of said
Board of Directors, at a meeting of said Board of Directors called and held for
the purpose, modify
- 5 -
<PAGE>
the phrase "twenty-five percent (.25)" in one or more of the foregoing Sections
(7)(a), (7)(b), (7)(c), (7)(d) and/or (7)(e) to a lesser percentage, but not
less than twenty percent (.20).
(8) ADDITIONAL CONSEQUENCES OF A CHANGE IN CONTROL
(a) In the event that a Change in Control has been approved by
all necessary shareholder, creditor and regulatory actions, the Company will,
not later than the day prior to the date of the Change in Control, pay to the
Trustee of The United Illuminating Company Supplemental Retirement Benefit Trust
established pursuant to the Agreement, made as of the 1st day of June, 1995
between the Company and State Street Bank and Trust Company, as Trustee, for the
benefit of the Officer, cash in an amount equal to: (A) In the event that the
Officer's employment has been terminated or will be terminated prior to the date
of the Change in Control, a sum, calculated by the Company's independent
certified public accountants, reasonably sufficient to pay and discharge the
Company's future obligations, if any, to the Officer and/or his personal
representative and/or spouse, under Section (6)(a), Section (6)(b) or Section
(6)(d) hereof; or (B) in the event that the Officer's employment has not been
terminated and will not be terminated prior to the date of the Change in
Control, a sum, calculated by the Company's independent certified public
accountants, reasonably sufficient to pay and discharge the Company's
obligations to the Officer under Section (6)(d) hereof assuming, for purposes of
such calculation, that the Officer's employment is terminated under said Section
(6)(d) by a Notice of Termination delivered on the date of the Change in Control
and specifying an immediate Date of Termination.
(b) On and after the date of the Change in Control, the
Officer's Base Salary may not be reduced by the Board of Directors to an annual
rate less than the rate fixed by the Board of Directors of the Company as a
result of its most recent review of salary rates, pursuant to Section (4)(a)
hereof, prior to the date of the Change in Control.
(9) TAX SAVINGS PROVISION
If any portion of the payments which the Officer has the right to
receive from the Company, or any affiliated entity, hereunder would constitute
"excess parachute payments" (as defined in Section 280G of the Internal Revenue
Code, and not governed by the terms defined in this Agreement) subject to the
excise tax imposed by Section 4999 of the Internal Revenue Code, such excess
parachute payments shall be reduced to the largest amount that will result in no
portion of such excess parachute payments being subject to the excise tax
imposed by Section 4999 of the Internal Revenue Code.
(10) SUCCESSORS; BINDING AGREEMENT
(a) The Company shall pay to the Officer and/or the
- 6 -
<PAGE>
Officer's personal representative and/or spouse all legal fees and expenses and
court costs, if any, incurred by the Officer and/or the Officer's representative
and/or spouse in successful litigation to enforce the Officer's rights under
this Agreement.
(b) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Company, by agreement in form
and substance reasonably satisfactory to the Officer, 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. Failure of the Company to obtain such agreement by the effectiveness of
any such succession shall be a breach of this Agreement and shall entitle the
Officer to compensation from the Company in the same amount and upon the same
terms as the Officer would be entitled to hereunder if the Officer terminated
the Officer's employment upon Breach by the Company, except that, for purposes
of implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination. As used in this Agreement,
the term "the Company" shall include The United Illuminating Company, any parent
and any successor to the business or assets of either as aforesaid which
executes and delivers the agreement provided for in this Section (10) or which
otherwise becomes bound by all the terms and provisions of this Agreement by
operation of law.
(c) This Agreement and all rights of the Officer hereunder
shall inure to the benefit of and be enforceable by the Officer's personal or
legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If the Officer should die while any amounts
would still be payable to the Officer hereunder if the Officer had continued to
live, all such amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to the Officer's devisee, legatee or
other designee or, if there be no such designee, to the Officer's estate.
(11) NOTICE
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 United Illuminating Company, 157
Church Street, New Haven, Connecticut, Attention: Secretary, or, in the case of
the Officer, to the Officer at 157 Church Street, New Haven Connecticut, or to
such other address as either party shall designate by giving written notice of
such change to the other party.
- 7 -
<PAGE>
(12) MISCELLANEOUS
No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is approved by the
Board of Directors of the Company and agreed to in a writing signed by the
Officer and such officer of the Company as may be specifically authorized by the
Board of Directors of 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.
The validity, interpretation, construction and performance of this Agreement
shall be governed by the laws of the State of Connecticut.
(13) VALIDITY
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.
(14) SURVIVAL
The provisions of this Agreement shall not survive the termination of
this Agreement or of the Officer's employment hereunder, except that the
provisions of Sections (4), (6), (8), (9), (10), and (11) hereof shall survive
such termination and shall be binding upon the Company's successors and assigns.
(15) COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date and year first above written.
Attest: THE UNITED ILLUMINATING COMPANY
/s/ Kurt Mohlman By: /s/ Richard J. Grossi
- ---------------------- -----------------------------------
Secretary Chairman of the Board of Directors
and Chief Executive Officer
/s/ Stephen F. Goldschmidt
-----------------------------------
Stephen F. Goldschmidt
- 8 -
<PAGE>
SCHEDULE A
Severance Benefits
------------------
At the option of the Officer, exercised by written notice to the Company, the
benefits of either (A) or (B) below will be afforded the Officer:
(A) a lump sum payment in an amount equal to the product of (X) multiplied by
(Y), where:
(X) is the sum of one-twelfth of the Officer's annual salary rate
approved by the Board of Directors of the Company at the time of
its most recent review of the salary rates of all of the
Company's officers, plus one-twelfth of the cash award(s) that
the Officer would earn under the short-term incentive
compensation program(s) in which the Officer is a participant on
the date of the termination of the Officer's employment, assuming
that all of the Officer's program goals for the performance
period are achieved at the target level; and
(Y) is the number of whole and partial years (not to be less than 12
nor more than 24) of the Officer's service deemed as an employee
of the Company on the date of termination of the Officer's
employment.
(B) The Officer's choice of the addition of six years of age, or six years of
service deemed as an employee of the Company, or any combination (not to
exceed 6) of whole and partial years of age and whole and partial years of
service as an employee of the Company, in the calculation of the benefits
payable to the Officer under the Company's retiree medical benefit plan(s)
and in the calculation of a supplemental retirement benefit payable by the
Company to the Officer in an amount equal to the excess of (A) over (B),
where (A) is a retirement benefit calculated in accordance with the
Company's Pension Plan, but with the aforesaid addition of whole and
partial years of age and/or service, and (B) is the benefit payable to the
Officer under the Company's Pension Plan. The Officer may elect to commence
his/her receipt of payments under this option at the termination of his/her
employment or at any time thereafter, but not prior to age 55 or later than
age 65.
Exhibits A-1 and A-2 attached hereto, showing calculations of supplemental
retirement benefits under option (B), set forth, by example, the parties'
intended interpretation and application of said option (B).
<PAGE>
EXHIBIT A-1
TO
EMPLOYMENT AGREEMENT
BETWEEN
THE UNITED ILLUMINATING COMPANY
AND
STEPHEN F. GOLDSCHMIDT
----------------------
Sample calculation of supplemental retirement benefits under Schedule A
paragraph (B).
Assume the Officer retires on the date of termination of employment based on the
following facts:
Actual Date of Termination 4/1/97
Actual Age of Officer at Termination 56
Actual Years of Service at Termination 30
Enhanced Age of Officer at Termination 62 (+6 years)
Enhanced Years of Service at Termination 30 (+0 years)
Three Year Average Total Compensation $140,000
(A) The retirement benefit calculated in accordance with Company's Pension
Plan, but with the addition of six years of age.
Gross Pension (Attachment A-1-1) $67,605.84
Reduction for Early Retirement Age: 62 years (.0000) 0.00
---------
Net Annual Pension $67,605.84
(B) The benefit payable to the Officer under the Company's Pension Plan at the
age of 56.
Gross Pension (Attachment A-1-2) $67,611.44
Reduction for Early Retirement Age 56 (.3950) 26,706.52
---------
Net Annual Pension $40,904.92
Supplemental Retirement Benefit
(A) - (B) = ($67,605.84) - ($40,904.92) = $26,700.92
<PAGE>
Attachment A-1-1
THE UNITED ILLUMINATING COMPANY
-------------------------------
NAME: ENHANCED AGE 62
S.S. NUMBER: - -
AGE AT RETIREMENT: 62 YRS. AND 0 MOS.
YEARS OF SERVICE: 30 YRS. AND 0 MOS.
VESTED PERCENTAGE: 100%
PREPARER'S NAME:
DATE PREPARED: 4/03/97
BENEFIT CALCULATION
------------------------------------- ANNUAL
AMOUNT
------
A1 = 1024.00 FIRST 25 YEARS OF PARTICIPATION:
1.0% X 25.0000 X 12076.66 = $ 3019.17
A2 = 407.00 (NO. OF YRS.) (QUANTITY A)
A = 4800XA1/A2 2.0% X 25.0000 X 127923.34 = 63961.67
= 12076.66 (NO. OF YRS.) (QUANTITY B)
B = 127923.34 YEARS OF PARTICIPATION IN EXCESS OF 25:
.5% X 5.0000 X 25000.00 = 625.00
C = 140000.00 (NO. OF YRS.) (QUANTITY C - MAXIMUM
OF 25000.00) --------
GROSS PENSION = $67605.84
========
<PAGE>
Attachment A-1-2
THE UNITED ILLUMINATING COMPANY
-------------------------------
NAME: ENHANCED AGE 56
S.S. NUMBER: - -
AGE AT RETIREMENT: 56 YRS. AND 0 MOS.
YEARS OF SERVICE: 30 YRS. AND 0 MOS.
VESTED PERCENTAGE: 100%
PREPARER'S NAME:
DATE PREPARED: 4/03/97
BENEFIT CALCULATION
------------------------------------ ANNUAL
AMOUNT
------
A1 = 1223.00 FIRST 25 YEARS OF PARTICIPATION:
1.0% X 25.0000 X 12054.21 = $ 3013.55
A2 = 487.00 (NO. OF YRS.) (QUANTITY A)
A = 4800XA1/A2 2.0% X 25.0000 X 127945.79 = 63972.89
= 12054.21 (NO. OF YRS.) (QUANTITY B)
B = 127945.79 YEARS OF PARTICIPATION IN EXCESS OF 25:
.5% X 5.0000 X 25000.00 = 625.00
C = 140000.00 (NO. OF YRS.) (QUANTITY C - MAXIMUM
OF 25000.00) --------
GROSS PENSION = $67611.44
========
<PAGE>
EXHIBIT A-2
TO
EMPLOYMENT AGREEMENT
BETWEEN
THE UNITED ILLUMINATING COMPANY
AND
STEPHEN F. GOLDSCHMIDT
----------------------
Sample calculation of supplemental retirement benefits under Schedule A
paragraph (B).
Assume the Officer terminates on the date of termination of employment and
elects to begin receiving his/her vested pension benefit at age 55 based on the
following facts:
Actual Date of Termination 4/1/97
Actual Age of Executive at Termination 50
Actual Years of Service at Termination 24
Enhanced Age of Executive at Termination 50 (+0 years)
Enhanced Years of Service at Termination 30 (+6 years)
Three Year Average Total Compensation $140,000
(A) The retirement (vested pension) benefit, payable to the Officer at age 55,
calculated in accordance with Company's Pension Plan, but with the addition
of six years of service.
Gross Vested Pension (Attachment A-2-1) $67,526.96
Reduction for Early Retirement Age: 55 years (.4390) 29,644.34
---------
Net Annual Pension $37,882.62
(B) The vested pension benefit payable to the Officer under the Company's
Pension Plan at the age of 55.
Gross Vested Pension (Attachment A-2-2) $63,876.25
Reduction for Early Retirement Age: 55 years (.5730) 36,601.09
---------
Net Annual Pension $27,275.16
Supplemental Retirement Benefit
(A) - (B) = ($37,882.62) - ($27,275.16) = $10,607.46
<PAGE>
Attachment A-2-1
THE UNITED ILLUMINATING COMPANY
-------------------------------
NAME: ACTUAL AGE 50
S.S. NUMBER: - -
AGE AT TERMINATION: 50 YRS. AND 0 MOS.
YEARS OF SERVICE: 30 YRS. AND 0 MOS.
VESTED PERCENTAGE: 100%
PREPARER'S NAME:
DATE PREPARED: 4/03/97
BENEFIT CALCULATION
------------------------------------ ANNUAL
AMOUNT
------
A1 = 1185.00 FIRST 25 YEARS OF PARTICIPATION:
1.0% X 25.0000 X 12392.16 = $ 3098.04
A2 = 459.00 (NO. OF YRS.) (QUANTITY A)
A = 4800XA1/A2 2.0% X 25.0000 X 127607.84 = 63803.92
= 12392.16 (NO. OF YRS.) (QUANTITY B)
B = 127607.84 YEARS OF PARTICIPATION IN EXCESS OF 25:
.5% X 5.0000 X 25000.00 = 625.00
C = 140000.00 (NO. OF YRS.) (QUANTITY C - MAXIMUM
OF 25000.00) --------
GROSS PENSION = $67526.96
========
<PAGE>
Attachment A-2-2
THE UNITED ILLUMINATING COMPANY
-------------------------------
NAME: AGE 50
S.S. NUMBER: - -
AGE AT TERMINATION: 50 YRS. AND 0 MOS.
YEARS OF SERVICE: 24 YRS. AND 0 MOS.
VESTED PERCENTAGE: 100%
PREPARER'S NAME:
DATE PREPARED: 4/04/97
BENEFIT CALCULATION
------------------------------------ ANNUAL
AMOUNT
------
A1 = 1131.00 FIRST 25 YEARS OF PARTICIPATION:
1.0% X 24.0000 X 13848.98 = $ 3323.76
A2 = 392.00 (NO. OF YRS.) (QUANTITY A)
A = 4800XA1/A2 2.0% X 24.0000 X 126151.02 = 60552.49
= 13848.98 (NO. OF YRS.) (QUANTITY B)
B = 126151.02 YEARS OF PARTICIPATION IN EXCESS OF 25:
.5% X .0000 X 25000.00 = .00
C = 140000.00 (NO. OF YRS.) (QUANTITY C - MAXIMUM
OF 25000.00) --------
GROSS PENSION = $63876.25
========
EXHIBIT 10.29
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made as of the 1st day of March, 1997, between THE
UNITED ILLUMINATING COMPANY, a Connecticut corporation (the Company) and JAMES
L. BENJAMIN, an individual (the Officer),
WITNESSETH THAT
WHEREAS, the Company desires to continue to employ the Officer as
Controller of the Company, and the Officer desires to be employed by the Company
as Controller.
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, and in order to provide an incentive to
the Officer to remain in the employ of the Company hereafter and, in particular,
in the event of any Change in Control (as herein defined) of the Company,
thereby establishing and preserving continuity of management, the Parties hereby
agree as follows:
(1) EMPLOYMENT
The Company hereby agrees to employ the Officer, and the
Officer hereby agrees to serve the Company, at the pleasure of the Board of
Directors of the Company, all upon the terms and conditions set forth herein.
(2) POSITION AND DUTIES
The Officer shall be employed by the Company as Controller, or in such
other equivalent or higher officership position as the Company's Board of
Directors may determine. The Officer shall accept such employment and shall
perform and discharge, faithfully, diligently and to the best of the Officer's
abilities, the duties and obligations of the Officer's office and such other
duties as may from time to time be assigned to the Officer by, or at the
direction of, the Board of Directors of the Company, and shall devote
substantially all of the Officer's working time and efforts to the business and
affairs of the Company. Although a Change in Control of the Company shall not
affect the obligations of the Company and the Officer as set forth in the two
preceding sentences, at and after the date of any Change in Control the
Company's employment of the Officer shall also be without diminishment in the
Officer's management responsibilities, duties or powers.
(3) PLACE OF PERFORMANCE
In his employment by the Company, the Officer shall be based at the
executive offices of the Company situated within the Company's statutory service
area.
<PAGE>
(4) COMPENSATION
(a) Base Salary. During the term of the Officer's employment
hereunder, the Officer shall receive a base salary (Base Salary) at an annual
rate of One Hundred Eleven Thousand Dollars ($111,000). The Officer's Base
Salary rate shall be reviewed by the Board of Directors of the Company
contemporaneously with each review of the salary rates of the Company's other
officers by said Board of Directors, and may be revised upwards as a result of
any such review. The Officer's Base Salary may be revised downwards by said
Board of Directors contemporaneously with any general reduction of the salary
rates of the Company's other officers.
(b) Incentive Compensation. During the term of the Officer's
employment hereunder, the Officer shall be eligible to be designated by the
Board of Directors of the Company as a participant in each incentive
compensation program established for all officers of the Company.
For purposes of this Agreement, Total Compensation is defined
as the sum of the Officer's Base Salary and any amount paid or payable pursuant
to this Section (4)(b).
(c) Business Expenses. During the term of the Officer's
employment hereunder, the Officer shall be entitled to receive prompt
reimbursement for all reasonable expenses incurred by the Officer (in accordance
with the policies and procedures established by the Board of Directors of the
Company from time to time for all of the Company's officers) in performing
services hereunder, provided that the Officer properly accounts therefor.
(d) Benefit Programs. During the term of the Officer's
employment hereunder, the Officer shall be entitled to participate in and
receive full benefits under all of the Company's employee benefit plans,
programs and arrangements for its officers, including, without limitation, its
retirement and pension plan programs. Nothing paid to the Officer 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
Officer under any other Section of this Agreement.
(e) Vacations and Holidays. During the term of the Officer's
employment hereunder, the Officer shall be entitled to the number of paid
vacation days in each calendar year determined by the Board of Directors of the
Company from time to time for all of the Company's officers, and shall also be
entitled to all paid holidays afforded by the Company to its employees.
(5) TERMINATION
(a) The Officer's employment hereunder shall terminate upon
the Officer's death.
- 2 -
<PAGE>
(b) The Board of Directors of the Company may terminate the
Officer's employment hereunder at any time, with or without Cause. Prior to the
date of a Change in Control, the Company shall be deemed to have Cause to
terminate the Officer's employment hereunder only upon the Officer's (A)
continued failure to perform and discharge the duties or obligations of the
Officer's office, or such other duties as may from time to time be assigned to
the Officer by, or at the direction of, the Board of Directors, faithfully,
diligently, to the best of the Officer's abilities, and in accordance with
standards accepted in the electric utility industry, in the opinion of a
majority of the members of the Board of Directors of the Company, or (B)
misconduct that is injurious to the Company, or (C) conviction of a felony
involving the personal dishonesty or moral turpitude of the Officer, or (D)
total and permanent physical or mental disability, or (E) absence from work on a
full-time basis, due to physical or mental illness, for an uninterrupted 365-day
period. On and after the date of a Change in Control, the Company shall be
deemed to have Cause to terminate the Officer's employment hereunder only upon
the Officer's (F) conviction of a felony involving the personal dishonesty or
moral turpitude of the Officer, or (G) total and permanent physical or mental
disability, or (H) absence from work on a full-time basis, due to physical or
mental illness, for an uninterrupted 365-day period.
(c) The Officer may terminate the Officer's employment
hereunder, upon at least thirty (30) days' prior Notice of Termination delivered
to the Company, for failure of the Company to observe and perform one or more of
its obligations under Sections (1), (2), (3) and/or (4) hereof, which failure
the Company fails to remedy within such notice period (a Breach by the Company)
at a time when the Officer is not in default of any of the Officer's obligations
under Sections (1) and/or (2) hereof. The Officer may terminate his employment
hereunder in the absence of a Breach by the Company, effective upon at least six
(6) months' prior Notice of Termination delivered to the Company.
(d) Notice of Termination. Any termination of employment, by
the Company or by the Officer, shall be communicated by delivery of a written
Notice of Termination to the other party.
(e) Date of Termination. For purposes of this Agreement, the
Date of Termination is defined as: if the Officer's employment is terminated (A)
by his death, the date of his death, or (B) pursuant to Section (5)(b) or
Section (5)(c) hereof, the date specified in the Notice of Termination.
(6) CONSEQUENCES OF TERMINATION
(a) If the Officer's employment terminates by reason of the
Officer's death, the Company shall pay to the personal representative and/or
spouse of the Officer the Officer's Total
- 3 -
<PAGE>
Compensation earned prior to the Date of Termination, any amounts payable
pursuant to Sections (4)(c) and (4)(d) hereof and any benefits or amounts
payable under any deferred compensation plan in which the Officer had been a
participant, and the Company shall have no further obligation under this
Agreement.
(b) If the Officer terminates the Officer's employment
hereunder in the absence of a Breach by the Company and upon at least six (6)
months' prior Notice of Termination, the Company shall pay to the Officer and/or
the Officer's personal representative and/or spouse the Officer's Total
Compensation earned prior to the Date of Termination, any amounts payable
pursuant to Sections (4)(c) and (4)(d) hereof and any benefits or amounts
payable under any deferred compensation plan in which the Officer had been a
participant, and the Company shall have no further obligation to the Officer
and/or the Officer's personal representative and/or spouse under this Agreement
or on account of, or arising out of, the termination of the Officer's
employment.
(c) If the Company terminates the Officer's employment
hereunder with Cause, or if the Officer terminates the Officer's employment
hereunder in the absence of a Breach by the Company and upon less than six (6)
months' prior Notice of Termination, the Company shall pay to the Officer the
Officer's full Base Salary earned prior to the Date of Termination, any amounts
payable pursuant to Sections (4)(c) and (4)(d) hereof and any benefits or
amounts payable under any deferred compensation plan in which the Officer had
been a participant, and, provided that the Company is not in default of any of
its obligations hereunder, the Company shall have no further obligation to the
Officer under this Agreement or on account of, or arising out of, the
termination of the Officer's employment.
(d) If the Company terminates the Officer's employment
hereunder without Cause, or if the Officer terminates the Officer's employment
hereunder on account of a Breach by the Company:
(i) The Company shall pay to the Officer the
Officer's Total Compensation earned prior to the Date of Termination, any
amounts payable pursuant to Sections 4(c) and 4(d) hereof and any benefits or
amounts payable under any deferred compensation plan in which the Officer had
been a participant.
(ii) The Company shall afford the Officer the
severance benefits set forth on Schedule A attached hereto.
(iii) The payment to, and acceptance by, the Officer
of any sum of money or benefit prescribed in this Section (6)(d) shall effect
and evidence a release by the Officer of any and all claims against the Company
on account of, or arising out of, the termination of the Officer's employment.
- 4 -
<PAGE>
(7) CHANGE IN CONTROL
For purposes of this Agreement, Change in Control shall mean any of the
following events:
(a) any merger or consolidation of the Company with any
corporate shareholder or group of corporate shareholders holding twenty-five
percent (.25) or more of the Common Stock of the Company or with any other
corporation or group of corporations which is, or after such merger or
consolidation would be, or be affiliated with, a shareholder owning at least
twenty-five percent (.25) of the Common Stock of the Company; or
(b) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition to or with any shareholder or group of shareholders holding
twenty-five percent (.25) or more of the Common Stock of the Company, or any
affiliate of such shareholder or group of shareholders, of any assets of the
Company having an aggregate fair market value of $50 million or more; or
(c) the issuance or sale by the Company of any securities of
the Company to any shareholder or group of shareholders holding twenty-five
percent (.25) or more of the Common Stock of the Company, or to any affiliate of
such shareholder or group of shareholders, in exchange for cash, securities or
other consideration having an aggregate fair market value of $50 million or
more; or
(d) the implementation of any plan or proposal for the
liquidation or dissolution of the Company proposed by or on behalf of any
shareholder or group of shareholders owning at least twenty-five percent (.25)
of the Common Stock of the Company, or any affiliate of such shareholder or
group of shareholders; or
(e) any reclassification of securities (including a reverse
stock split), or recapitalization of the Company or any other transaction which
has the effect, directly or indirectly, of increasing the proportionate share of
outstanding shares of any class of equity securities, or securities convertible
into any equity securities, of the Company, which is directly or indirectly
owned by a shareholder or group of shareholders owning at least twenty-five
percent (.25) of the Common Stock of the Company, or any affiliate of such
shareholder or group of shareholders.
The Board of Directors of the Company may, from time to time, by the
affirmative vote of not less than a majority of the entire membership of said
Board of Directors, at a meeting of said Board of Directors called and held for
the purpose, modify the phrase "twenty-five percent (.25)" in one or more of the
foregoing Sections (7)(a), (7)(b), (7)(c), (7)(d) and/or (7)(e) to a lesser
percentage, but not less than twenty percent (.20).
- 5 -
<PAGE>
(8) ADDITIONAL CONSEQUENCES OF A CHANGE IN CONTROL
(a) In the event that a Change in Control has been approved by
all necessary shareholder, creditor and regulatory actions, the Company will,
not later than the day prior to the date of the Change in Control, pay to the
Trustee of The United Illuminating Company Supplemental Retirement Benefit Trust
established pursuant to the Agreement, made as of the 1st day of June, 1995
between the Company and State Street Bank and Trust Company, as Trustee, for the
benefit of the Officer, cash in an amount equal to: (A) In the event that the
Officer's employment has been terminated or will be terminated prior to the date
of the Change in Control, a sum, calculated by the Company's independent
certified public accountants, reasonably sufficient to pay and discharge the
Company's future obligations, if any, to the Officer and/or his personal
representative and/or spouse, under Section (6)(a), Section (6)(b) or Section
(6)(d) hereof; or (B) in the event that the Officer's employment has not been
terminated and will not be terminated prior to the date of the Change in
Control, a sum, calculated by the Company's independent certified public
accountants, reasonably sufficient to pay and discharge the Company's
obligations to the Officer under Section (6)(d) hereof assuming, for purposes of
such calculation, that the Officer's employment is terminated under said Section
(6)(d) by a Notice of Termination delivered on the date of the Change in Control
and specifying an immediate Date of Termination.
(b) On and after the date of the Change in Control, the
Officer's Base Salary may not be reduced by the Board of Directors to an annual
rate less than the rate fixed by the Board of Directors of the Company as a
result of its most recent review of salary rates, pursuant to Section (4)(a)
hereof, prior to the date of the Change in Control.
(9) TAX SAVINGS PROVISION
If any portion of the payments which the Officer has the right to
receive from the Company, or any affiliated entity, hereunder would constitute
"excess parachute payments" (as defined in Section 280G of the Internal Revenue
Code, and not governed by the terms defined in this Agreement) subject to the
excise tax imposed by Section 4999 of the Internal Revenue Code, such excess
parachute payments shall be reduced to the largest amount that will result in no
portion of such excess parachute payments being subject to the excise tax
imposed by Section 4999 of the Internal Revenue Code.
(10) SUCCESSORS; BINDING AGREEMENT
(a) The Company shall pay to the Officer and/or the Officer's
personal representative and/or spouse all legal fees and expenses and court
costs, if any, incurred by the Officer and/or the Officer's representative
and/or spouse in successful litigation to enforce the Officer's rights under
this Agreement.
- 6 -
<PAGE>
(b) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Company, by agreement in form
and substance reasonably satisfactory to the Officer, 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. Failure of the Company to obtain such agreement by the effectiveness of
any such succession shall be a breach of this Agreement and shall entitle the
Officer to compensation from the Company in the same amount and upon the same
terms as the Officer would be entitled to hereunder if the Officer terminated
the Officer's employment upon Breach by the Company, except that, for purposes
of implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination. As used in this Agreement,
the term "the Company" shall include The United Illuminating Company, any parent
and any successor to the business or assets of either as aforesaid which
executes and delivers the agreement provided for in this Section (10) or which
otherwise becomes bound by all the terms and provisions of this Agreement by
operation of law.
(c) This Agreement and all rights of the Officer hereunder
shall inure to the benefit of and be enforceable by the Officer's personal or
legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If the Officer should die while any amounts
would still be payable to the Officer hereunder if the Officer had continued to
live, all such amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to the Officer's devisee, legatee or
other designee or, if there be no such designee, to the Officer's estate.
(11) NOTICE
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 United Illuminating Company, 157
Church Street, New Haven, Connecticut, Attention: Secretary, or, in the case of
the Officer, to the Officer at 157 Church Street, New Haven Connecticut, or to
such other address as either party shall designate by giving written notice of
such change to the other party.
(12) MISCELLANEOUS
No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is approved by the
Board of Directors of the Company and agreed to in a writing signed by the
Officer and such officer of the Company as may be specifically authorized by the
Board of
- 7 -
<PAGE>
Directors of 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.
The validity, interpretation, construction and performance of this Agreement
shall be governed by the laws of the State of Connecticut.
(13) VALIDITY
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.
(14) SURVIVAL
The provisions of this Agreement shall not survive the termination of
this Agreement or of the Officer's employment hereunder, except that the
provisions of Sections (4), (6), (8), (9), (10), and (11) hereof shall survive
such termination and shall be binding upon the Company's successors and assigns.
(15) COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date and year first above written.
Attest: THE UNITED ILLUMINATING COMPANY
/s/ Kurt Mohlman By: /s/ Richard J. Grossi
- ---------------------- -------------------------------------
Secretary Chairman of the Board of Directors
and Chief Executive Officer
/s/ James L. Benjamin
--------------------------------------
James L. Benjamin
- 8 -
<PAGE>
SCHEDULE A
Severance Benefits
------------------
At the option of the Officer, exercised by written notice to the Company, the
benefits of either (A) or (B) below will be afforded the Officer:
(A) a lump sum payment in an amount equal to the product of (X) multiplied by
(Y), where:
(X) is the sum of one-twelfth of the Officer's annual salary rate
approved by the Board of Directors of the Company at the time of
its most recent review of the salary rates of all of the
Company's officers, plus one-twelfth of the cash award(s) that
the Officer would earn under the short-term incentive
compensation program(s) in which the Officer is a participant on
the date of the termination of the Officer's employment, assuming
that all of the Officer's program goals for the performance
period are achieved at the target level; and
(Y) is the number of whole and partial years (not to be less than 12
nor more than 24) of the Officer's service deemed as an employee
of the Company on the date of termination of the Officer's
employment.
(B) The Officer's choice of the addition of six years of age, or six years of
service deemed as an employee of the Company, or any combination (not to
exceed 6) of whole and partial years of age and whole and partial years of
service as an employee of the Company, in the calculation of the benefits
payable to the Officer under the Company's retiree medical benefit plan(s)
and in the calculation of a supplemental retirement benefit payable by the
Company to the Officer in an amount equal to the excess of (A) over (B),
where (A) is a retirement benefit calculated in accordance with the
Company's Pension Plan, but with the aforesaid addition of whole and
partial years of age and/or service, and (B) is the benefit payable to the
Officer under the Company's Pension Plan. The Officer may elect to commence
his/her receipt of payments under this option at the termination of his/her
employment or at any time thereafter, but not prior to age 55 or later than
age 65.
Exhibits A-1 and A-2 attached hereto, showing calculations of supplemental
retirement benefits under option (B), set forth, by example, the parties'
intended interpretation and application of said option (B).
<PAGE>
EXHIBIT A-1
TO
EMPLOYMENT AGREEMENT
BETWEEN
THE UNITED ILLUMINATING COMPANY
AND
JAMES L. BENJAMIN
-----------------
Sample calculation of supplemental retirement benefits under Schedule A
paragraph (B).
Assume the Officer retires on the date of termination of employment based on the
following facts:
Actual Date of Termination 4/1/97
Actual Age of Officer at Termination 56
Actual Years of Service at Termination 30
Enhanced Age of Officer at Termination 62 (+6 years)
Enhanced Years of Service at Termination 30 (+0 years)
Three Year Average Total Compensation $140,000
(A) The retirement benefit calculated in accordance with Company's Pension
Plan, but with the addition of six years of age.
Gross Pension (Attachment A-1-1) $67,605.84
Reduction for Early Retirement Age: 62 years (.0000) 0.00
---------
Net Annual Pension $67,605.84
(B) The benefit payable to the Officer under the Company's Pension Plan at the
age of 56.
Gross Pension (Attachment A-1-2) $67,611.44
Reduction for Early Retirement Age 56 (.3950) 26,706.52
---------
Net Annual Pension $40,904.92
Supplemental Retirement Benefit
(A) - (B) = ($67,605.84) - ($40,904.92) = $26,700.92
<PAGE>
Attachment A-1-1
THE UNITED ILLUMINATING COMPANY
-------------------------------
NAME: ENHANCED AGE 62
S.S. NUMBER: - -
AGE AT RETIREMENT: 62 YRS. AND 0 MOS.
YEARS OF SERVICE: 30 YRS. AND 0 MOS.
VESTED PERCENTAGE: 100%
PREPARER'S NAME:
DATE PREPARED: 4/03/97
BENEFIT CALCULATION
------------------------------------- ANNUAL
AMOUNT
------
A1 = 1024.00 FIRST 25 YEARS OF PARTICIPATION:
1.0% X 25.0000 X 12076.66 = $ 3019.17
A2 = 407.00 (NO. OF YRS.) (QUANTITY A)
A = 4800XA1/A2 2.0% X 25.0000 X 127923.34 = 63961.67
= 12076.66 (NO. OF YRS.) (QUANTITY B)
B = 127923.34 YEARS OF PARTICIPATION IN EXCESS OF 25:
.5% X 5.0000 X 25000.00 = 625.00
C = 140000.00 (NO. OF YRS.) (QUANTITY C - MAXIMUM
OF 25000.00) --------
GROSS PENSION = $67605.84
========
<PAGE>
Attachment A-1-2
THE UNITED ILLUMINATING COMPANY
-------------------------------
NAME: ENHANCED AGE 56
S.S. NUMBER: - -
AGE AT RETIREMENT: 56 YRS. AND 0 MOS.
YEARS OF SERVICE: 30 YRS. AND 0 MOS.
VESTED PERCENTAGE: 100%
PREPARER'S NAME:
DATE PREPARED: 4/03/97
BENEFIT CALCULATION
------------------------------------ ANNUAL
AMOUNT
------
A1 = 1223.00 FIRST 25 YEARS OF PARTICIPATION:
1.0% X 25.0000 X 12054.21 = $ 3013.55
A2 = 487.00 (NO. OF YRS.) (QUANTITY A)
A = 4800XA1/A2 2.0% X 25.0000 X 127945.79 = 63972.89
= 12054.21 (NO. OF YRS.) (QUANTITY B)
B = 127945.79 YEARS OF PARTICIPATION IN EXCESS OF 25:
.5% X 5.0000 X 25000.00 = 625.00
C = 140000.00 (NO. OF YRS.) (QUANTITY C - MAXIMUM
OF 25000.00) --------
GROSS PENSION = $67611.44
========
<PAGE>
EXHIBIT A-2
TO
EMPLOYMENT AGREEMENT
BETWEEN
THE UNITED ILLUMINATING COMPANY
AND
JAMES L. BENJAMIN
-----------------
Sample calculation of supplemental retirement benefits under Schedule A
paragraph (B).
Assume the Officer terminates on the date of termination of employment and
elects to begin receiving his/her vested pension benefit at age 55 based on the
following facts:
Actual Date of Termination 4/1/97
Actual Age of Executive at Termination 50
Actual Years of Service at Termination 24
Enhanced Age of Executive at Termination 50 (+0 years)
Enhanced Years of Service at Termination 30 (+6 years)
Three Year Average Total Compensation $140,000
(A) The retirement (vested pension) benefit, payable to the Officer at age 55,
calculated in accordance with Company's Pension Plan, but with the addition
of six years of service.
Gross Vested Pension (Attachment A-2-1) $67,526.96
Reduction for Early Retirement Age: 55 years (.4390) 29,644.34
---------
Net Annual Pension $37,882.62
(B) The vested pension benefit payable to the Officer under the Company's
Pension Plan at the age of 55.
Gross Vested Pension (Attachment A-2-2) $63,876.25
Reduction for Early Retirement Age: 55 years (.5730) 36,601.09
---------
Net Annual Pension $27,275.16
Supplemental Retirement Benefit
(A) - (B) = ($37,882.62) - ($27,275.16) = $10,607.46
<PAGE>
Attachment A-2-1
THE UNITED ILLUMINATING COMPANY
-------------------------------
NAME: ACTUAL AGE 50
S.S. NUMBER: - -
AGE AT TERMINATION: 50 YRS. AND 0 MOS.
YEARS OF SERVICE: 30 YRS. AND 0 MOS.
VESTED PERCENTAGE: 100%
PREPARER'S NAME:
DATE PREPARED: 4/03/97
BENEFIT CALCULATION
------------------------------------ ANNUAL
AMOUNT
------
A1 = 1185.00 FIRST 25 YEARS OF PARTICIPATION:
1.0% X 25.0000 X 12392.16 = $ 3098.04
A2 = 459.00 (NO. OF YRS.) (QUANTITY A)
A = 4800XA1/A2 2.0% X 25.0000 X 127607.84 = 63803.92
= 12392.16 (NO. OF YRS.) (QUANTITY B)
B = 127607.84 YEARS OF PARTICIPATION IN EXCESS OF 25:
.5% X 5.0000 X 25000.00 = 625.00
C = 140000.00 (NO. OF YRS.) (QUANTITY C - MAXIMUM
OF 25000.00) --------
GROSS PENSION = $67526.96
========
<PAGE>
Attachment A-2-2
THE UNITED ILLUMINATING COMPANY
-------------------------------
NAME: AGE 50
S.S. NUMBER: - -
AGE AT TERMINATION: 50 YRS. AND 0 MOS.
YEARS OF SERVICE: 24 YRS. AND 0 MOS.
VESTED PERCENTAGE: 100%
PREPARER'S NAME:
DATE PREPARED: 4/04/97
BENEFIT CALCULATION
------------------------------------ ANNUAL
AMOUNT
------
A1 = 1131.00 FIRST 25 YEARS OF PARTICIPATION:
1.0% X 24.0000 X 13848.98 = $ 3323.76
A2 = 392.00 (NO. OF YRS.) (QUANTITY A)
A = 4800XA1/A2 2.0% X 24.0000 X 126151.02 = 60552.49
= 13848.98 (NO. OF YRS.) (QUANTITY B)
B = 126151.02 YEARS OF PARTICIPATION IN EXCESS OF 25:
.5% X .0000 X 25000.00 = .00
C = 140000.00 (NO. OF YRS.) (QUANTITY C - MAXIMUM
OF 25000.00) --------
GROSS PENSION = $63876.25
========
EXHIBIT 10.30
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made as of the 1st day of March, 1997, between THE
UNITED ILLUMINATING COMPANY, a Connecticut corporation (the Company) and KURT
MOHLMAN, an individual (the Officer),
WITNESSETH THAT
WHEREAS, the Company desires to continue to employ the Officer as
Treasurer and Secretary of the Company, and the Officer desires to be employed
by the Company as Treasurer and Secretary.
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, and in order to provide an incentive to
the Officer to remain in the employ of the Company hereafter and, in particular,
in the event of any Change in Control (as herein defined) of the Company,
thereby establishing and preserving continuity of management, the Parties hereby
agree as follows:
(1) EMPLOYMENT
The Company hereby agrees to employ the Officer, and the
Officer hereby agrees to serve the Company, at the pleasure of the Board of
Directors of the Company, all upon the terms and conditions set forth herein.
(2) POSITION AND DUTIES
The Officer shall be employed by the Company as Treasurer and
Secretary, or in such other equivalent or higher officership position as the
Company's Board of Directors may determine. The Officer shall accept such
employment and shall perform and discharge, faithfully, diligently and to the
best of the Officer's abilities, the duties and obligations of the Officer's
office and such other duties as may from time to time be assigned to the Officer
by, or at the direction of, the Board of Directors of the Company, and shall
devote substantially all of the Officer's working time and efforts to the
business and affairs of the Company. Although a Change in Control of the Company
shall not affect the obligations of the Company and the Officer as set forth in
the two preceding sentences, at and after the date of any Change in Control the
Company's employment of the Officer shall also be without diminishment in the
Officer's management responsibilities, duties or powers.
(3) PLACE OF PERFORMANCE
In his employment by the Company, the Officer shall be based at the
executive offices of the Company situated within the Company's statutory service
area.
<PAGE>
(4) COMPENSATION
(a) Base Salary. During the term of the Officer's employment
hereunder, the Officer shall receive a base salary (Base Salary) at an annual
rate of One Hundred Nineteen Thousand Dollars ($119,000). The Officer's Base
Salary rate shall be reviewed by the Board of Directors of the Company
contemporaneously with each review of the salary rates of the Company's other
officers by said Board of Directors, and may be revised upwards as a result of
any such review. The Officer's Base Salary may be revised downwards by said
Board of Directors contemporaneously with any general reduction of the salary
rates of the Company's other officers.
(b) Incentive Compensation. During the term of the Officer's
employment hereunder, the Officer shall be eligible to be designated by the
Board of Directors of the Company as a participant in each incentive
compensation program established for all officers of the Company.
For purposes of this Agreement, Total Compensation is defined
as the sum of the Officer's Base Salary and any amount paid or payable pursuant
to this Section (4)(b).
(c) Business Expenses. During the term of the Officer's
employment hereunder, the Officer shall be entitled to receive prompt
reimbursement for all reasonable expenses incurred by the Officer (in accordance
with the policies and procedures established by the Board of Directors of the
Company from time to time for all of the Company's officers) in performing
services hereunder, provided that the Officer properly accounts therefor.
(d) Benefit Programs. During the term of the Officer's
employment hereunder, the Officer shall be entitled to participate in and
receive full benefits under all of the Company's employee benefit plans,
programs and arrangements for its officers, including, without limitation, its
retirement and pension plan programs. Nothing paid to the Officer 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
Officer under any other Section of this Agreement.
(e) Vacations and Holidays. During the term of the Officer's
employment hereunder, the Officer shall be entitled to the number of paid
vacation days in each calendar year determined by the Board of Directors of the
Company from time to time for all of the Company's officers, and shall also be
entitled to all paid holidays afforded by the Company to its employees.
(5) TERMINATION
(a) The Officer's employment hereunder shall terminate upon
the Officer's death.
- 2 -
<PAGE>
(b) The Board of Directors of the Company may terminate the
Officer's employment hereunder at any time, with or without Cause. Prior to the
date of a Change in Control, the Company shall be deemed to have Cause to
terminate the Officer's employment hereunder only upon the Officer's (A)
continued failure to perform and discharge the duties or obligations of the
Officer's office, or such other duties as may from time to time be assigned to
the Officer by, or at the direction of, the Board of Directors, faithfully,
diligently, to the best of the Officer's abilities, and in accordance with
standards accepted in the electric utility industry, in the opinion of a
majority of the members of the Board of Directors of the Company, or (B)
misconduct that is injurious to the Company, or (C) conviction of a felony
involving the personal dishonesty or moral turpitude of the Officer, or (D)
total and permanent physical or mental disability, or (E) absence from work on a
full-time basis, due to physical or mental illness, for an uninterrupted 365-day
period. On and after the date of a Change in Control, the Company shall be
deemed to have Cause to terminate the Officer's employment hereunder only upon
the Officer's (F) conviction of a felony involving the personal dishonesty or
moral turpitude of the Officer, or (G) total and permanent physical or mental
disability, or (H) absence from work on a full-time basis, due to physical or
mental illness, for an uninterrupted 365-day period.
(c) The Officer may terminate the Officer's employment
hereunder, upon at least thirty (30) days' prior Notice of Termination delivered
to the Company, for failure of the Company to observe and perform one or more of
its obligations under Sections (1), (2), (3) and/or (4) hereof, which failure
the Company fails to remedy within such notice period (a Breach by the Company)
at a time when the Officer is not in default of any of the Officer's obligations
under Sections (1) and/or (2) hereof. The Officer may terminate his employment
hereunder in the absence of a Breach by the Company, effective upon at least six
(6) months' prior Notice of Termination delivered to the Company.
(d) Notice of Termination. Any termination of employment, by
the Company or by the Officer, shall be communicated by delivery of a written
Notice of Termination to the other party.
(e) Date of Termination. For purposes of this Agreement, the
Date of Termination is defined as: if the Officer's employment is terminated (A)
by his death, the date of his death, or (B) pursuant to Section (5)(b) or
Section (5)(c) hereof, the date specified in the Notice of Termination.
(6) CONSEQUENCES OF TERMINATION
(a) If the Officer's employment terminates by reason of the
Officer's death, the Company shall pay to the personal representative and/or
spouse of the Officer the Officer's Total
- 3 -
<PAGE>
Compensation earned prior to the Date of Termination, any amounts payable
pursuant to Sections (4)(c) and (4)(d) hereof and any benefits or amounts
payable under any deferred compensation plan in which the Officer had been a
participant, and the Company shall have no further obligation under this
Agreement.
(b) If the Officer terminates the Officer's employment
hereunder in the absence of a Breach by the Company and upon at least six (6)
months' prior Notice of Termination, the Company shall pay to the Officer and/or
the Officer's personal representative and/or spouse the Officer's Total
Compensation earned prior to the Date of Termination, any amounts payable
pursuant to Sections (4)(c) and (4)(d) hereof and any benefits or amounts
payable under any deferred compensation plan in which the Officer had been a
participant, and the Company shall have no further obligation to the Officer
and/or the Officer's personal representative and/or spouse under this Agreement
or on account of, or arising out of, the termination of the Officer's
employment.
(c) If the Company terminates the Officer's employment
hereunder with Cause, or if the Officer terminates the Officer's employment
hereunder in the absence of a Breach by the Company and upon less than six (6)
months' prior Notice of Termination, the Company shall pay to the Officer the
Officer's full Base Salary earned prior to the Date of Termination, any amounts
payable pursuant to Sections (4)(c) and (4)(d) hereof and any benefits or
amounts payable under any deferred compensation plan in which the Officer had
been a participant, and, provided that the Company is not in default of any of
its obligations hereunder, the Company shall have no further obligation to the
Officer under this Agreement or on account of, or arising out of, the
termination of the Officer's employment.
(d) If the Company terminates the Officer's employment
hereunder without Cause, or if the Officer terminates the Officer's employment
hereunder on account of a Breach by the Company:
(i) The Company shall pay to the Officer the
Officer's Total Compensation earned prior to the Date of Termination, any
amounts payable pursuant to Sections 4(c) and 4(d) hereof and any benefits or
amounts payable under any deferred compensation plan in which the Officer had
been a participant.
(ii) The Company shall afford the Officer the
severance benefits set forth on Schedule A attached hereto.
(iii) The payment to, and acceptance by, the Officer
of any sum of money or benefit prescribed in this Section (6)(d) shall effect
and evidence a release by the Officer of any and all claims against the Company
on account of, or arising out of, the termination of the Officer's employment.
- 4 -
<PAGE>
(7) CHANGE IN CONTROL
For purposes of this Agreement, Change in Control shall mean any of the
following events:
(a) any merger or consolidation of the Company with any
corporate shareholder or group of corporate shareholders holding twenty-five
percent (.25) or more of the Common Stock of the Company or with any other
corporation or group of corporations which is, or after such merger or
consolidation would be, or be affiliated with, a shareholder owning at least
twenty-five percent (.25) of the Common Stock of the Company; or
(b) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition to or with any shareholder or group of shareholders holding
twenty-five percent (.25) or more of the Common Stock of the Company, or any
affiliate of such shareholder or group of shareholders, of any assets of the
Company having an aggregate fair market value of $50 million or more; or
(c) the issuance or sale by the Company of any securities of
the Company to any shareholder or group of shareholders holding twenty-five
percent (.25) or more of the Common Stock of the Company, or to any affiliate of
such shareholder or group of shareholders, in exchange for cash, securities or
other consideration having an aggregate fair market value of $50 million or
more; or
(d) the implementation of any plan or proposal for the
liquidation or dissolution of the Company proposed by or on behalf of any
shareholder or group of shareholders owning at least twenty-five percent (.25)
of the Common Stock of the Company, or any affiliate of such shareholder or
group of shareholders; or
(e) any reclassification of securities (including a reverse
stock split), or recapitalization of the Company or any other transaction which
has the effect, directly or indirectly, of increasing the proportionate share of
outstanding shares of any class of equity securities, or securities convertible
into any equity securities, of the Company, which is directly or indirectly
owned by a shareholder or group of shareholders owning at least twenty-five
percent (.25) of the Common Stock of the Company, or any affiliate of such
shareholder or group of shareholders.
The Board of Directors of the Company may, from time to time, by the
affirmative vote of not less than a majority of the entire membership of said
Board of Directors, at a meeting of said Board of Directors called and held for
the purpose, modify the phrase "twenty-five percent (.25)" in one or more of the
foregoing Sections (7)(a), (7)(b), (7)(c), (7)(d) and/or (7)(e) to a lesser
percentage, but not less than twenty percent (.20).
- 5 -
<PAGE>
(8) ADDITIONAL CONSEQUENCES OF A CHANGE IN CONTROL
(a) In the event that a Change in Control has been approved by
all necessary shareholder, creditor and regulatory actions, the Company will,
not later than the day prior to the date of the Change in Control, pay to the
Trustee of The United Illuminating Company Supplemental Retirement Benefit Trust
established pursuant to the Agreement, made as of the 1st day of June, 1995
between the Company and State Street Bank and Trust Company, as Trustee, for the
benefit of the Officer, cash in an amount equal to: (A) In the event that the
Officer's employment has been terminated or will be terminated prior to the date
of the Change in Control, a sum, calculated by the Company's independent
certified public accountants, reasonably sufficient to pay and discharge the
Company's future obligations, if any, to the Officer and/or his personal
representative and/or spouse, under Section (6)(a), Section (6)(b) or Section
(6)(d) hereof; or (B) in the event that the Officer's employment has not been
terminated and will not be terminated prior to the date of the Change in
Control, a sum, calculated by the Company's independent certified public
accountants, reasonably sufficient to pay and discharge the Company's
obligations to the Officer under Section (6)(d) hereof assuming, for purposes of
such calculation, that the Officer's employment is terminated under said Section
(6)(d) by a Notice of Termination delivered on the date of the Change in Control
and specifying an immediate Date of Termination.
(b) On and after the date of the Change in Control, the
Officer's Base Salary may not be reduced by the Board of Directors to an annual
rate less than the rate fixed by the Board of Directors of the Company as a
result of its most recent review of salary rates, pursuant to Section (4)(a)
hereof, prior to the date of the Change in Control.
(9) TAX SAVINGS PROVISION
If any portion of the payments which the Officer has the right to
receive from the Company, or any affiliated entity, hereunder would constitute
"excess parachute payments" (as defined in Section 280G of the Internal Revenue
Code, and not governed by the terms defined in this Agreement) subject to the
excise tax imposed by Section 4999 of the Internal Revenue Code, such excess
parachute payments shall be reduced to the largest amount that will result in no
portion of such excess parachute payments being subject to the excise tax
imposed by Section 4999 of the Internal Revenue Code.
(10) SUCCESSORS; BINDING AGREEMENT
(a) The Company shall pay to the Officer and/or the Officer's
personal representative and/or spouse all legal fees and expenses and court
costs, if any, incurred by the Officer and/or the Officer's representative
and/or spouse in successful litigation to enforce the Officer's rights under
this Agreement.
- 6 -
<PAGE>
(b) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Company, by agreement in form
and substance reasonably satisfactory to the Officer, 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. Failure of the Company to obtain such agreement by the effectiveness of
any such succession shall be a breach of this Agreement and shall entitle the
Officer to compensation from the Company in the same amount and upon the same
terms as the Officer would be entitled to hereunder if the Officer terminated
the Officer's employment upon Breach by the Company, except that, for purposes
of implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination. As used in this Agreement,
the term "the Company" shall include The United Illuminating Company, any parent
and any successor to the business or assets of either as aforesaid which
executes and delivers the agreement provided for in this Section (10) or which
otherwise becomes bound by all the terms and provisions of this Agreement by
operation of law.
(c) This Agreement and all rights of the Officer hereunder
shall inure to the benefit of and be enforceable by the Officer's personal or
legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If the Officer should die while any amounts
would still be payable to the Officer hereunder if the Officer had continued to
live, all such amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to the Officer's devisee, legatee or
other designee or, if there be no such designee, to the Officer's estate.
(11) NOTICE
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 United Illuminating Company, 157
Church Street, New Haven, Connecticut, Attention: Secretary, or, in the case of
the Officer, to the Officer at 157 Church Street, New Haven Connecticut, or to
such other address as either party shall designate by giving written notice of
such change to the other party.
(12) MISCELLANEOUS
No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is approved by the
Board of Directors of the Company and agreed to in a writing signed by the
Officer and such officer of the Company as may be specifically authorized by the
Board of
- 7 -
<PAGE>
Directors of 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.
The validity, interpretation, construction and performance of this Agreement
shall be governed by the laws of the State of Connecticut.
(13) VALIDITY
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.
(14) SURVIVAL
The provisions of this Agreement shall not survive the termination of
this Agreement or of the Officer's employment hereunder, except that the
provisions of Sections (4), (6), (8), (9), (10), and (11) hereof shall survive
such termination and shall be binding upon the Company's successors and assigns.
(15) COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date and year first above written.
Attest: THE UNITED ILLUMINATING COMPANY
/s/ Charles J. Pepe By: /s/ Richard J. Grossi
- ------------------------ ----------------------------------
Secretary Chairman of the Board of Directors
and Chief Executive Officer
/s/ Kurt Mohlman
----------------------------------
Kurt Mohlman
- 8 -
<PAGE>
SCHEDULE A
Severance Benefits
------------------
At the option of the Officer, exercised by written notice to the Company, the
benefits of either (A) or (B) below will be afforded the Officer:
(A) a lump sum payment in an amount equal to the product of (X) multiplied by
(Y), where:
(X) is the sum of one-twelfth of the Officer's annual salary rate
approved by the Board of Directors of the Company at the time of
its most recent review of the salary rates of all of the
Company's officers, plus one-twelfth of the cash award(s) that
the Officer would earn under the short-term incentive
compensation program(s) in which the Officer is a participant on
the date of the termination of the Officer's employment, assuming
that all of the Officer's program goals for the performance
period are achieved at the target level; and
(Y) is the number of whole and partial years (not to be less than 12
nor more than 24) of the Officer's service deemed as an employee
of the Company on the date of termination of the Officer's
employment.
(B) The Officer's choice of the addition of six years of age, or six years of
service deemed as an employee of the Company, or any combination (not to
exceed 6) of whole and partial years of age and whole and partial years of
service as an employee of the Company, in the calculation of the benefits
payable to the Officer under the Company's retiree medical benefit plan(s)
and in the calculation of a supplemental retirement benefit payable by the
Company to the Officer in an amount equal to the excess of (A) over (B),
where (A) is a retirement benefit calculated in accordance with the
Company's Pension Plan, but with the aforesaid addition of whole and
partial years of age and/or service, and (B) is the benefit payable to the
Officer under the Company's Pension Plan. The Officer may elect to commence
his/her receipt of payments under this option at the termination of his/her
employment or at any time thereafter, but not prior to age 55 or later than
age 65.
Exhibits A-1 and A-2 attached hereto, showing calculations of supplemental
retirement benefits under option (B), set forth, by example, the parties'
intended interpretation and application of said option (B).
<PAGE>
EXHIBIT A-1
TO
EMPLOYMENT AGREEMENT
BETWEEN
THE UNITED ILLUMINATING COMPANY
AND
KURT MOHLMAN
------------
Sample calculation of supplemental retirement benefits under Schedule A
paragraph (B).
Assume the Officer retires on the date of termination of employment based on the
following facts:
Actual Date of Termination 4/1/97
Actual Age of Officer at Termination 56
Actual Years of Service at Termination 30
Enhanced Age of Officer at Termination 62 (+6 years)
Enhanced Years of Service at Termination 30 (+0 years)
Three Year Average Total Compensation $140,000
(A) The retirement benefit calculated in accordance with Company's Pension
Plan, but with the addition of six years of age.
Gross Pension (Attachment A-1-1) $67,605.84
Reduction for Early Retirement Age: 62 years (.0000) 0.00
---------
Net Annual Pension $67,605.84
(B) The benefit payable to the Officer under the Company's Pension Plan at the
age of 56.
Gross Pension (Attachment A-1-2) $67,611.44
Reduction for Early Retirement Age 56 (.3950) 26,706.52
---------
Net Annual Pension $40,904.92
Supplemental Retirement Benefit
(A) - (B) = ($67,605.84) - ($40,904.92) = $26,700.92
<PAGE>
Attachment A-1-1
THE UNITED ILLUMINATING COMPANY
-------------------------------
NAME: ENHANCED AGE 62
S.S. NUMBER: - -
AGE AT RETIREMENT: 62 YRS. AND 0 MOS.
YEARS OF SERVICE: 30 YRS. AND 0 MOS.
VESTED PERCENTAGE: 100%
PREPARER'S NAME:
DATE PREPARED: 4/03/97
BENEFIT CALCULATION
------------------------------------- ANNUAL
AMOUNT
------
A1 = 1024.00 FIRST 25 YEARS OF PARTICIPATION:
1.0% X 25.0000 X 12076.66 = $ 3019.17
A2 = 407.00 (NO. OF YRS.) (QUANTITY A)
A = 4800XA1/A2 2.0% X 25.0000 X 127923.34 = 63961.67
= 12076.66 (NO. OF YRS.) (QUANTITY B)
B = 127923.34 YEARS OF PARTICIPATION IN EXCESS OF 25:
.5% X 5.0000 X 25000.00 = 625.00
C = 140000.00 (NO. OF YRS.) (QUANTITY C - MAXIMUM
OF 25000.00) --------
GROSS PENSION = $67605.84
========
<PAGE>
Attachment A-1-2
THE UNITED ILLUMINATING COMPANY
-------------------------------
NAME: ENHANCED AGE 56
S.S. NUMBER: - -
AGE AT RETIREMENT: 56 YRS. AND 0 MOS.
YEARS OF SERVICE: 30 YRS. AND 0 MOS.
VESTED PERCENTAGE: 100%
PREPARER'S NAME:
DATE PREPARED: 4/03/97
BENEFIT CALCULATION
------------------------------------ ANNUAL
AMOUNT
------
A1 = 1223.00 FIRST 25 YEARS OF PARTICIPATION:
1.0% X 25.0000 X 12054.21 = $ 3013.55
A2 = 487.00 (NO. OF YRS.) (QUANTITY A)
A = 4800XA1/A2 2.0% X 25.0000 X 127945.79 = 63972.89
= 12054.21 (NO. OF YRS.) (QUANTITY B)
B = 127945.79 YEARS OF PARTICIPATION IN EXCESS OF 25:
.5% X 5.0000 X 25000.00 = 625.00
C = 140000.00 (NO. OF YRS.) (QUANTITY C - MAXIMUM
OF 25000.00) --------
GROSS PENSION = $67611.44
========
<PAGE>
EXHIBIT A-2
TO
EMPLOYMENT AGREEMENT
BETWEEN
THE UNITED ILLUMINATING COMPANY
AND
KURT MOHLMAN
------------
Sample calculation of supplemental retirement benefits under Schedule A
paragraph (B).
Assume the Officer terminates on the date of termination of employment and
elects to begin receiving his/her vested pension benefit at age 55 based on the
following facts:
Actual Date of Termination 4/1/97
Actual Age of Executive at Termination 50
Actual Years of Service at Termination 24
Enhanced Age of Executive at Termination 50 (+0 years)
Enhanced Years of Service at Termination 30 (+6 years)
Three Year Average Total Compensation $140,000
(A) The retirement (vested pension) benefit, payable to the Officer at age 55,
calculated in accordance with Company's Pension Plan, but with the addition
of six years of service.
Gross Vested Pension (Attachment A-2-1) $67,526.96
Reduction for Early Retirement Age: 55 years (.4390) 29,644.34
---------
Net Annual Pension $37,882.62
(B) The vested pension benefit payable to the Officer under the Company's
Pension Plan at the age of 55.
Gross Vested Pension (Attachment A-2-2) $63,876.25
Reduction for Early Retirement Age: 55 years (.5730) 36,601.09
---------
Net Annual Pension $27,275.16
Supplemental Retirement Benefit
(A) - (B) = ($37,882.62) - ($27,275.16) = $10,607.46
<PAGE>
Attachment A-2-1
THE UNITED ILLUMINATING COMPANY
-------------------------------
NAME: ACTUAL AGE 50
S.S. NUMBER: - -
AGE AT TERMINATION: 50 YRS. AND 0 MOS.
YEARS OF SERVICE: 30 YRS. AND 0 MOS.
VESTED PERCENTAGE: 100%
PREPARER'S NAME:
DATE PREPARED: 4/03/97
BENEFIT CALCULATION
------------------------------------ ANNUAL
AMOUNT
------
A1 = 1185.00 FIRST 25 YEARS OF PARTICIPATION:
1.0% X 25.0000 X 12392.16 = $ 3098.04
A2 = 459.00 (NO. OF YRS.) (QUANTITY A)
A = 4800XA1/A2 2.0% X 25.0000 X 127607.84 = 63803.92
= 12392.16 (NO. OF YRS.) (QUANTITY B)
B = 127607.84 YEARS OF PARTICIPATION IN EXCESS OF 25:
.5% X 5.0000 X 25000.00 = 625.00
C = 140000.00 (NO. OF YRS.) (QUANTITY C - MAXIMUM
OF 25000.00) --------
GROSS PENSION = $67526.96
========
<PAGE>
Attachment A-2-2
THE UNITED ILLUMINATING COMPANY
-------------------------------
NAME: AGE 50
S.S. NUMBER: - -
AGE AT TERMINATION: 50 YRS. AND 0 MOS.
YEARS OF SERVICE: 24 YRS. AND 0 MOS.
VESTED PERCENTAGE: 100%
PREPARER'S NAME:
DATE PREPARED: 4/04/97
BENEFIT CALCULATION
------------------------------------ ANNUAL
AMOUNT
------
A1 = 1131.00 FIRST 25 YEARS OF PARTICIPATION:
1.0% X 24.0000 X 13848.98 = $ 3323.76
A2 = 392.00 (NO. OF YRS.) (QUANTITY A)
A = 4800XA1/A2 2.0% X 24.0000 X 126151.02 = 60552.49
= 13848.98 (NO. OF YRS.) (QUANTITY B)
B = 126151.02 YEARS OF PARTICIPATION IN EXCESS OF 25:
.5% X .0000 X 25000.00 = .00
C = 140000.00 (NO. OF YRS.) (QUANTITY C - MAXIMUM
OF 25000.00) --------
GROSS PENSION = $63876.25
========
EXHIBIT 10.31
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made as of the 1st day of March, 1997, between THE
UNITED ILLUMINATING COMPANY, a Connecticut corporation (the Company) and CHARLES
J. PEPE, an individual (the Officer),
WITNESSETH THAT
WHEREAS, the Company desires to continue to employ the Officer as
Assistant Treasurer and Assistant Secretary of the Company, and the Officer
desires to be employed by the Company as Assistant Treasurer and Assistant
Secretary.
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, and in order to provide an incentive to
the Officer to remain in the employ of the Company hereafter and, in particular,
in the event of any Change in Control (as herein defined) of the Company,
thereby establishing and preserving continuity of management, the Parties hereby
agree as follows:
(1) EMPLOYMENT
The Company hereby agrees to employ the Officer, and the
Officer hereby agrees to serve the Company, at the pleasure of the Board of
Directors of the Company, all upon the terms and conditions set forth herein.
(2) POSITION AND DUTIES
The Officer shall be employed by the Company as Assistant Treasurer and
Assistant Secretary, or in such other equivalent or higher officership position
as the Company's Board of Directors may determine. The Officer shall accept such
employment and shall perform and discharge, faithfully, diligently and to the
best of the Officer's abilities, the duties and obligations of the Officer's
office and such other duties as may from time to time be assigned to the Officer
by, or at the direction of, the Board of Directors of the Company, and shall
devote substantially all of the Officer's working time and efforts to the
business and affairs of the Company. Although a Change in Control of the Company
shall not affect the obligations of the Company and the Officer as set forth in
the two preceding sentences, at and after the date of any Change in Control the
Company's employment of the Officer shall also be without diminishment in the
Officer's management responsibilities, duties or powers.
(3) PLACE OF PERFORMANCE
In his employment by the Company, the Officer shall be based at the
executive offices of the Company situated within the Company's statutory service
area.
<PAGE>
(4) COMPENSATION
(a) Base Salary. During the term of the Officer's employment
hereunder, the Officer shall receive a base salary (Base Salary) at an annual
rate of One Hundred Thousand Dollars ($100,000). The Officer's Base Salary rate
shall be reviewed by the Board of Directors of the Company contemporaneously
with each review of the salary rates of the Company's other officers by said
Board of Directors, and may be revised upwards as a result of any such review.
The Officer's Base Salary may be revised downwards by said Board of Directors
contemporaneously with any general reduction of the salary rates of the
Company's other officers.
(b) Incentive Compensation. During the term of the Officer's
employment hereunder, the Officer shall be eligible to be designated by the
Board of Directors of the Company as a participant in each incentive
compensation program established for all officers of the Company.
For purposes of this Agreement, Total Compensation is defined
as the sum of the Officer's Base Salary and any amount paid or payable pursuant
to this Section (4)(b).
(c) Business Expenses. During the term of the Officer's
employment hereunder, the Officer shall be entitled to receive prompt
reimbursement for all reasonable expenses incurred by the Officer (in accordance
with the policies and procedures established by the Board of Directors of the
Company from time to time for all of the Company's officers) in performing
services hereunder, provided that the Officer properly accounts therefor.
(d) Benefit Programs. During the term of the Officer's
employment hereunder, the Officer shall be entitled to participate in and
receive full benefits under all of the Company's employee benefit plans,
programs and arrangements for its officers, including, without limitation, its
retirement and pension plan programs. Nothing paid to the Officer 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
Officer under any other Section of this Agreement.
(e) Vacations and Holidays. During the term of the Officer's
employment hereunder, the Officer shall be entitled to the number of paid
vacation days in each calendar year determined by the Board of Directors of the
Company from time to time for all of the Company's officers, and shall also be
entitled to all paid holidays afforded by the Company to its employees.
(5) TERMINATION
(a) The Officer's employment hereunder shall terminate upon
the Officer's death.
- 2 -
<PAGE>
(b) The Board of Directors of the Company may terminate the
Officer's employment hereunder at any time, with or without Cause. Prior to the
date of a Change in Control, the Company shall be deemed to have Cause to
terminate the Officer's employment hereunder only upon the Officer's (A)
continued failure to perform and discharge the duties or obligations of the
Officer's office, or such other duties as may from time to time be assigned to
the Officer by, or at the direction of, the Board of Directors, faithfully,
diligently, to the best of the Officer's abilities, and in accordance with
standards accepted in the electric utility industry, in the opinion of a
majority of the members of the Board of Directors of the Company, or (B)
misconduct that is injurious to the Company, or (C) conviction of a felony
involving the personal dishonesty or moral turpitude of the Officer, or (D)
total and permanent physical or mental disability, or (E) absence from work on a
full-time basis, due to physical or mental illness, for an uninterrupted 365-day
period. On and after the date of a Change in Control, the Company shall be
deemed to have Cause to terminate the Officer's employment hereunder only upon
the Officer's (F) conviction of a felony involving the personal dishonesty or
moral turpitude of the Officer, or (G) total and permanent physical or mental
disability, or (H) absence from work on a full-time basis, due to physical or
mental illness, for an uninterrupted 365-day period.
(c) The Officer may terminate the Officer's employment
hereunder, upon at least thirty (30) days' prior Notice of Termination delivered
to the Company, for failure of the Company to observe and perform one or more of
its obligations under Sections (1), (2), (3) and/or (4) hereof, which failure
the Company fails to remedy within such notice period (a Breach by the Company)
at a time when the Officer is not in default of any of the Officer's obligations
under Sections (1) and/or (2) hereof. The Officer may terminate his employment
hereunder in the absence of a Breach by the Company, effective upon at least six
(6) months' prior Notice of Termination delivered to the Company.
(d) Notice of Termination. Any termination of employment, by
the Company or by the Officer, shall be communicated by delivery of a written
Notice of Termination to the other party.
(e) Date of Termination. For purposes of this Agreement, the
Date of Termination is defined as: if the Officer's employment is terminated (A)
by his death, the date of his death, or (B) pursuant to Section (5)(b) or
Section (5)(c) hereof, the date specified in the Notice of Termination.
(6) CONSEQUENCES OF TERMINATION
(a) If the Officer's employment terminates by reason of the
Officer's death, the Company shall pay to the personal representative and/or
spouse of the Officer the Officer's Total
- 3 -
<PAGE>
Compensation earned prior to the Date of Termination, any amounts payable
pursuant to Sections (4)(c) and (4)(d) hereof and any benefits or amounts
payable under any deferred compensation plan in which the Officer had been a
participant, and the Company shall have no further obligation under this
Agreement.
(b) If the Officer terminates the Officer's employment
hereunder in the absence of a Breach by the Company and upon at least six (6)
months' prior Notice of Termination, the Company shall pay to the Officer and/or
the Officer's personal representative and/or spouse the Officer's Total
Compensation earned prior to the Date of Termination, any amounts payable
pursuant to Sections (4)(c) and (4)(d) hereof and any benefits or amounts
payable under any deferred compensation plan in which the Officer had been a
participant, and the Company shall have no further obligation to the Officer
and/or the Officer's personal representative and/or spouse under this Agreement
or on account of, or arising out of, the termination of the Officer's
employment.
(c) If the Company terminates the Officer's employment
hereunder with Cause, or if the Officer terminates the Officer's employment
hereunder in the absence of a Breach by the Company and upon less than six (6)
months' prior Notice of Termination, the Company shall pay to the Officer the
Officer's full Base Salary earned prior to the Date of Termination, any amounts
payable pursuant to Sections (4)(c) and (4)(d) hereof and any benefits or
amounts payable under any deferred compensation plan in which the Officer had
been a participant, and, provided that the Company is not in default of any of
its obligations hereunder, the Company shall have no further obligation to the
Officer under this Agreement or on account of, or arising out of, the
termination of the Officer's employment.
(d) If the Company terminates the Officer's employment
hereunder without Cause, or if the Officer terminates the Officer's employment
hereunder on account of a Breach by the Company:
(i) The Company shall pay to the Officer the
Officer's Total Compensation earned prior to the Date of Termination, any
amounts payable pursuant to Sections 4(c) and 4(d) hereof and any benefits or
amounts payable under any deferred compensation plan in which the Officer had
been a participant.
(ii) The Company shall afford the Officer the
severance benefits set forth on Schedule A attached hereto.
(iii) The payment to, and acceptance by, the Officer
of any sum of money or benefit prescribed in this Section (6)(d) shall effect
and evidence a release by the Officer of any and all claims against the Company
on account of, or arising out of, the termination of the Officer's employment.
- 4 -
<PAGE>
(7) CHANGE IN CONTROL
For purposes of this Agreement, Change in Control shall mean any of the
following events:
(a) any merger or consolidation of the Company with any
corporate shareholder or group of corporate shareholders holding twenty-five
percent (.25) or more of the Common Stock of the Company or with any other
corporation or group of corporations which is, or after such merger or
consolidation would be, or be affiliated with, a shareholder owning at least
twenty-five percent (.25) of the Common Stock of the Company; or
(b) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition to or with any shareholder or group of shareholders holding
twenty-five percent (.25) or more of the Common Stock of the Company, or any
affiliate of such shareholder or group of shareholders, of any assets of the
Company having an aggregate fair market value of $50 million or more; or
(c) the issuance or sale by the Company of any securities of
the Company to any shareholder or group of shareholders holding twenty-five
percent (.25) or more of the Common Stock of the Company, or to any affiliate of
such shareholder or group of shareholders, in exchange for cash, securities or
other consideration having an aggregate fair market value of $50 million or
more; or
(d) the implementation of any plan or proposal for the
liquidation or dissolution of the Company proposed by or on behalf of any
shareholder or group of shareholders owning at least twenty-five percent (.25)
of the Common Stock of the Company, or any affiliate of such shareholder or
group of shareholders; or
(e) any reclassification of securities (including a reverse
stock split), or recapitalization of the Company or any other transaction which
has the effect, directly or indirectly, of increasing the proportionate share of
outstanding shares of any class of equity securities, or securities convertible
into any equity securities, of the Company, which is directly or indirectly
owned by a shareholder or group of shareholders owning at least twenty-five
percent (.25) of the Common Stock of the Company, or any affiliate of such
shareholder or group of shareholders.
The Board of Directors of the Company may, from time to time, by the
affirmative vote of not less than a majority of the entire membership of said
Board of Directors, at a meeting of said Board of Directors called and held for
the purpose, modify the phrase "twenty-five percent (.25)" in one or more of the
foregoing Sections (7)(a), (7)(b), (7)(c), (7)(d) and/or (7)(e) to a lesser
percentage, but not less than twenty percent (.20).
- 5 -
<PAGE>
(8) ADDITIONAL CONSEQUENCES OF A CHANGE IN CONTROL
(a) In the event that a Change in Control has been approved by
all necessary shareholder, creditor and regulatory actions, the Company will,
not later than the day prior to the date of the Change in Control, pay to the
Trustee of The United Illuminating Company Supplemental Retirement Benefit Trust
established pursuant to the Agreement, made as of the 1st day of June, 1995
between the Company and State Street Bank and Trust Company, as Trustee, for the
benefit of the Officer, cash in an amount equal to: (A) In the event that the
Officer's employment has been terminated or will be terminated prior to the date
of the Change in Control, a sum, calculated by the Company's independent
certified public accountants, reasonably sufficient to pay and discharge the
Company's future obligations, if any, to the Officer and/or his personal
representative and/or spouse, under Section (6)(a), Section (6)(b) or Section
(6)(d) hereof; or (B) in the event that the Officer's employment has not been
terminated and will not be terminated prior to the date of the Change in
Control, a sum, calculated by the Company's independent certified public
accountants, reasonably sufficient to pay and discharge the Company's
obligations to the Officer under Section (6)(d) hereof assuming, for purposes of
such calculation, that the Officer's employment is terminated under said Section
(6)(d) by a Notice of Termination delivered on the date of the Change in Control
and specifying an immediate Date of Termination.
(b) On and after the date of the Change in Control, the
Officer's Base Salary may not be reduced by the Board of Directors to an annual
rate less than the rate fixed by the Board of Directors of the Company as a
result of its most recent review of salary rates, pursuant to Section (4)(a)
hereof, prior to the date of the Change in Control.
(9) TAX SAVINGS PROVISION
If any portion of the payments which the Officer has the right to
receive from the Company, or any affiliated entity, hereunder would constitute
"excess parachute payments" (as defined in Section 280G of the Internal Revenue
Code, and not governed by the terms defined in this Agreement) subject to the
excise tax imposed by Section 4999 of the Internal Revenue Code, such excess
parachute payments shall be reduced to the largest amount that will result in no
portion of such excess parachute payments being subject to the excise tax
imposed by Section 4999 of the Internal Revenue Code.
(10) SUCCESSORS; BINDING AGREEMENT
(a) The Company shall pay to the Officer and/or the Officer's
personal representative and/or spouse all legal fees and expenses and court
costs, if any, incurred by the Officer and/or the Officer's representative
and/or spouse in successful litigation to enforce the Officer's rights under
this Agreement.
- 6 -
<PAGE>
(b) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Company, by agreement in form
and substance reasonably satisfactory to the Officer, 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. Failure of the Company to obtain such agreement by the effectiveness of
any such succession shall be a breach of this Agreement and shall entitle the
Officer to compensation from the Company in the same amount and upon the same
terms as the Officer would be entitled to hereunder if the Officer terminated
the Officer's employment upon Breach by the Company, except that, for purposes
of implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination. As used in this Agreement,
the term "the Company" shall include The United Illuminating Company, any parent
and any successor to the business or assets of either as aforesaid which
executes and delivers the agreement provided for in this Section (10) or which
otherwise becomes bound by all the terms and provisions of this Agreement by
operation of law.
(c) This Agreement and all rights of the Officer hereunder
shall inure to the benefit of and be enforceable by the Officer's personal or
legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If the Officer should die while any amounts
would still be payable to the Officer hereunder if the Officer had continued to
live, all such amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to the Officer's devisee, legatee or
other designee or, if there be no such designee, to the Officer's estate.
(11) NOTICE
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 United Illuminating Company, 157
Church Street, New Haven, Connecticut, Attention: Secretary, or, in the case of
the Officer, to the Officer at 157 Church Street, New Haven Connecticut, or to
such other address as either party shall designate by giving written notice of
such change to the other party.
(12) MISCELLANEOUS
No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is approved by the
Board of Directors of the Company and agreed to in a writing signed by the
Officer and such officer of the Company as may be specifically authorized by the
Board of
- 7 -
<PAGE>
Directors of 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.
The validity, interpretation, construction and performance of this Agreement
shall be governed by the laws of the State of Connecticut.
(13) VALIDITY
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.
(14) SURVIVAL
The provisions of this Agreement shall not survive the termination of
this Agreement or of the Officer's employment hereunder, except that the
provisions of Sections (4), (6), (8), (9), (10), and (11) hereof shall survive
such termination and shall be binding upon the Company's successors and assigns.
(15) COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date and year first above written.
Attest: THE UNITED ILLUMINATING COMPANY
/s/ Kurt Mohlman By: /s/ Richard J. Grossi
- ------------------------ --------------------------------------
Secretary Chairman of the Board of Directors
and Chief Executive Officer
/s/ Charles J. Pepe
--------------------------------------
Charles J. Pepe
- 8 -
<PAGE>
SCHEDULE A
Severance Benefits
------------------
At the option of the Officer, exercised by written notice to the Company, the
benefits of either (A) or (B) below will be afforded the Officer:
(A) a lump sum payment in an amount equal to the product of (X) multiplied
by (Y), where:
(X) is the sum of one-twelfth of the Officer's annual salary rate
approved by the Board of Directors of the Company at the time of
its most recent review of the salary rates of all of the
Company's officers, plus one-twelfth of the cash award(s) that
the Officer would earn under the short-term incentive
compensation program(s) in which the Officer is a participant on
the date of the termination of the Officer's employment, assuming
that all of the Officer's program goals for the performance
period are achieved at the target level; and
(Y) is the number of whole and partial years (not to be less than 12
nor more than 24) of the Officer's service deemed as an employee
of the Company on the date of termination of the Officer's
employment.
(B) The Officer's choice of the addition of six years of age, or six years of
service deemed as an employee of the Company, or any combination (not to
exceed 6) of whole and partial years of age and whole and partial years of
service as an employee of the Company, in the calculation of the benefits
payable to the Officer under the Company's retiree medical benefit plan(s)
and in the calculation of a supplemental retirement benefit payable by the
Company to the Officer in an amount equal to the excess of (A) over (B),
where (A) is a retirement benefit calculated in accordance with the
Company's Pension Plan, but with the aforesaid addition of whole and
partial years of age and/or service, and (B) is the benefit payable to the
Officer under the Company's Pension Plan. The Officer may elect to commence
his/her receipt of payments under this option at the termination of his/her
employment or at any time thereafter, but not prior to age 55 or later than
age 65.
Exhibits A-1 and A-2 attached hereto, showing calculations of supplemental
retirement benefits under option (B), set forth, by example, the parties'
intended interpretation and application of said option (B).
<PAGE>
EXHIBIT A-1
TO
EMPLOYMENT AGREEMENT
BETWEEN
THE UNITED ILLUMINATING COMPANY
AND
CHARLES J. PEPE
---------------
Sample calculation of supplemental retirement benefits under Schedule A
paragraph (B).
Assume the Officer retires on the date of termination of employment based on the
following facts:
Actual Date of Termination 4/1/97
Actual Age of Officer at Termination 56
Actual Years of Service at Termination 30
Enhanced Age of Officer at Termination 62 (+6 years)
Enhanced Years of Service at Termination 30 (+0 years)
Three Year Average Total Compensation $140,000
(A) The retirement benefit calculated in accordance with Company's Pension
Plan, but with the addition of six years of age.
Gross Pension (Attachment A-1-1) $67,605.84
Reduction for Early Retirement Age: 62 years (.0000) 0.00
---------
Net Annual Pension $67,605.84
(B) The benefit payable to the Officer under the Company's Pension Plan at the
age of 56.
Gross Pension (Attachment A-1-2) $67,611.44
Reduction for Early Retirement Age 56 (.3950) 26,706.52
---------
Net Annual Pension $40,904.92
Supplemental Retirement Benefit
(A) - (B) = ($67,605.84) - ($40,904.92) = $26,700.92
<PAGE>
Attachment A-1-1
THE UNITED ILLUMINATING COMPANY
-------------------------------
NAME: ENHANCED AGE 62
S.S. NUMBER: - -
AGE AT RETIREMENT: 62 YRS. AND 0 MOS.
YEARS OF SERVICE: 30 YRS. AND 0 MOS.
VESTED PERCENTAGE: 100%
PREPARER'S NAME:
DATE PREPARED: 4/03/97
BENEFIT CALCULATION
------------------------------------- ANNUAL
AMOUNT
------
A1 = 1024.00 FIRST 25 YEARS OF PARTICIPATION:
1.0% X 25.0000 X 12076.66 = $ 3019.17
A2 = 407.00 (NO. OF YRS.) (QUANTITY A)
A = 4800XA1/A2 2.0% X 25.0000 X 127923.34 = 63961.67
= 12076.66 (NO. OF YRS.) (QUANTITY B)
B = 127923.34 YEARS OF PARTICIPATION IN EXCESS OF 25:
.5% X 5.0000 X 25000.00 = 625.00
C = 140000.00 (NO. OF YRS.) (QUANTITY C - MAXIMUM
OF 25000.00) --------
GROSS PENSION = $67605.84
========
<PAGE>
Attachment A-1-2
THE UNITED ILLUMINATING COMPANY
-------------------------------
NAME: ENHANCED AGE 56
S.S. NUMBER: - -
AGE AT RETIREMENT: 56 YRS. AND 0 MOS.
YEARS OF SERVICE: 30 YRS. AND 0 MOS.
VESTED PERCENTAGE: 100%
PREPARER'S NAME:
DATE PREPARED: 4/03/97
BENEFIT CALCULATION
------------------------------------ ANNUAL
AMOUNT
------
A1 = 1223.00 FIRST 25 YEARS OF PARTICIPATION:
1.0% X 25.0000 X 12054.21 = $ 3013.55
A2 = 487.00 (NO. OF YRS.) (QUANTITY A)
A = 4800XA1/A2 2.0% X 25.0000 X 127945.79 = 63972.89
= 12054.21 (NO. OF YRS.) (QUANTITY B)
B = 127945.79 YEARS OF PARTICIPATION IN EXCESS OF 25:
.5% X 5.0000 X 25000.00 = 625.00
C = 140000.00 (NO. OF YRS.) (QUANTITY C - MAXIMUM
OF 25000.00) --------
GROSS PENSION = $67611.44
========
<PAGE>
EXHIBIT A-2
TO
EMPLOYMENT AGREEMENT
BETWEEN
THE UNITED ILLUMINATING COMPANY
AND
CHARLES J. PEPE
---------------
Sample calculation of supplemental retirement benefits under Schedule A
paragraph (B).
Assume the Officer terminates on the date of termination of employment and
elects to begin receiving his/her vested pension benefit at age 55 based on the
following facts:
Actual Date of Termination 4/1/97
Actual Age of Executive at Termination 50
Actual Years of Service at Termination 24
Enhanced Age of Executive at Termination 50 (+0 years)
Enhanced Years of Service at Termination 30 (+6 years)
Three Year Average Total Compensation $140,000
(A) The retirement (vested pension) benefit, payable to the Officer at age 55,
calculated in accordance with Company's Pension Plan, but with the addition
of six years of service.
Gross Vested Pension (Attachment A-2-1) $67,526.96
Reduction for Early Retirement Age: 55 years (.4390) 29,644.34
---------
Net Annual Pension $37,882.62
(B) The vested pension benefit payable to the Officer under the Company's
Pension Plan at the age of 55.
Gross Vested Pension (Attachment A-2-2) $63,876.25
Reduction for Early Retirement Age: 55 years (.5730) 36,601.09
---------
Net Annual Pension $27,275.16
Supplemental Retirement Benefit
(A) - (B) = ($37,882.62) - ($27,275.16) = $10,607.46
<PAGE>
Attachment A-2-1
THE UNITED ILLUMINATING COMPANY
-------------------------------
NAME: ACTUAL AGE 50
S.S. NUMBER: - -
AGE AT TERMINATION: 50 YRS. AND 0 MOS.
YEARS OF SERVICE: 30 YRS. AND 0 MOS.
VESTED PERCENTAGE: 100%
PREPARER'S NAME:
DATE PREPARED: 4/03/97
BENEFIT CALCULATION
------------------------------------ ANNUAL
AMOUNT
------
A1 = 1185.00 FIRST 25 YEARS OF PARTICIPATION:
1.0% X 25.0000 X 12392.16 = $ 3098.04
A2 = 459.00 (NO. OF YRS.) (QUANTITY A)
A = 4800XA1/A2 2.0% X 25.0000 X 127607.84 = 63803.92
= 12392.16 (NO. OF YRS.) (QUANTITY B)
B = 127607.84 YEARS OF PARTICIPATION IN EXCESS OF 25:
.5% X 5.0000 X 25000.00 = 625.00
C = 140000.00 (NO. OF YRS.) (QUANTITY C - MAXIMUM
OF 25000.00) --------
GROSS PENSION = $67526.96
========
<PAGE>
Attachment A-2-2
THE UNITED ILLUMINATING COMPANY
-------------------------------
NAME: AGE 50
S.S. NUMBER: - -
AGE AT TERMINATION: 50 YRS. AND 0 MOS.
YEARS OF SERVICE: 24 YRS. AND 0 MOS.
VESTED PERCENTAGE: 100%
PREPARER'S NAME:
DATE PREPARED: 4/04/97
BENEFIT CALCULATION
------------------------------------ ANNUAL
AMOUNT
------
A1 = 1131.00 FIRST 25 YEARS OF PARTICIPATION:
1.0% X 24.0000 X 13848.98 = $ 3323.76
A2 = 392.00 (NO. OF YRS.) (QUANTITY A)
A = 4800XA1/A2 2.0% X 24.0000 X 126151.02 = 60552.49
= 13848.98 (NO. OF YRS.) (QUANTITY B)
B = 126151.02 YEARS OF PARTICIPATION IN EXCESS OF 25:
.5% X .0000 X 25000.00 = .00
C = 140000.00 (NO. OF YRS.) (QUANTITY C - MAXIMUM
OF 25000.00) --------
GROSS PENSION = $63876.25
========
<TABLE>
EXHIBIT 12
PAGE 1 OF 2
THE UNITED ILLUMINATING COMPANY
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(IN THOUSANDS)
<CAPTION>
TWELVE
MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPT. 30,
-----------------------------------------------------------------------
1992 1993 1994 1995 1996 1997
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
EARNINGS
Net income $56,768 $40,481 $46,795 $50,393 $39,096 $40,242
Federal income taxes 19,276 22,342 34,551 41,951 35,252 27,534
State income taxes 16,878 4,645 6,216 12,976 8,506 7,197
Fixed charges 109,449 97,928 88,093 83,994 80,097 80,132
----------- ----------- ----------- ----------- ----------- ------------
Earnings available for fixed charges $202,371 $165,396 $175,655 $189,314 $162,951 $155,105
=========== =========== =========== =========== =========== ============
FIXED CHARGES
Interest on long-term debt $88,666 $80,030 $73,772 $63,431 $66,305 $65,723
Other interest 12,882 12,260 10,301 16,723 9,534 10,314
Interest on nuclear fuel burned 2,963 928 - - - -
One third of rental charges 4,938 4,710 4,020 3,840 4,258 4,095
----------- ----------- ----------- ----------- ----------- ------------
$109,449 $97,928 $88,093 $83,994 $80,097 $80,132
=========== =========== =========== =========== =========== ============
RATIO OF EARNINGS TO FIXED
CHARGES 1.85 1.69 1.99 2.25 2.03 1.94
=========== =========== =========== =========== =========== ============
</TABLE>
<PAGE>
<TABLE>
EXHIBIT 12
PAGE 2 OF 2
THE UNITED ILLUMINATING COMPANY
COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDEND REQUIREMENTS
(IN THOUSANDS)
<CAPTION>
TWELVE
MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPT. 30,
----------------------------------------------------------------------
1992 1993 1994 1995 1996 1997
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
EARNINGS
Net income $56,768 $40,481 $46,795 $50,393 $39,096 $40,242
Federal income taxes 19,276 22,342 34,551 41,951 35,252 27,534
State income taxes 16,878 4,645 6,216 12,976 8,506 7,197
Fixed charges 109,449 97,928 88,093 83,994 80,097 80,132
----------- ----------- ----------- ---------- ---------- -----------
Earnings available for combined fixed
charges and preferred stock
dividend requirements $202,371 $165,396 $175,655 $189,314 $162,951 $155,105
=========== =========== =========== ========== ========== ===========
FIXED CHARGES AND PREFERRED
STOCK DIVIDEND REQUIREMENTS
Interest on long-term debt $ 88,666 $ 80,030 $ 73,772 $ 63,431 $ 66,305 $65,723
Other interest 12,882 12,260 10,301 16,723 9,534 10,314
Interest on nuclear fuel burned 2,963 928 - - - -
One third of rental charges 4,938 4,710 4,020 3,840 4,258 4,095
Preferred stock dividend requirements (1) 7,100 7,197 6,223 2,778 699 382
----------- ----------- ----------- ---------- ---------- -----------
$ 116,549 $ 105,125 $ 94,316 $ 86,772 $ 80,796 $80,514
=========== =========== =========== ========== ========== ===========
RATIO OF EARNINGS TO FIXED
CHARGES AND PREFERRED
STOCK DIVIDEND REQUIREMENTS 1.74 1.57 1.86 2.18 2.02 1.93
=========== =========== =========== ========== ========== ===========
</TABLE>
(1) Preferred Stock Dividends increased to reflect the pre-tax earnings required
to cover such dividend requirements.
<TABLE> <S> <C>
<ARTICLE> UT
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,288,992
<OTHER-PROPERTY-AND-INVEST> 30,836
<TOTAL-CURRENT-ASSETS> 224,256
<TOTAL-DEFERRED-CHARGES> 421,661
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 1,965,745
<COMMON> 274,189
<CAPITAL-SURPLUS-PAID-IN> (1,410)
<RETAINED-EARNINGS> 166,140
<TOTAL-COMMON-STOCKHOLDERS-EQ> 438,919
0
4,351
<LONG-TERM-DEBT-NET> 728,612
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 43,995
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 112,135
0
<CAPITAL-LEASE-OBLIGATIONS> 16,941
<LEASES-CURRENT> 333
<OTHER-ITEMS-CAPITAL-AND-LIAB> 620,459
<TOT-CAPITALIZATION-AND-LIAB> 1,965,745
<GROSS-OPERATING-REVENUE> 540,662
<INCOME-TAX-EXPENSE> 35,128
<OTHER-OPERATING-EXPENSES> 422,341
<TOTAL-OPERATING-EXPENSES> 457,469
<OPERATING-INCOME-LOSS> 83,193
<OTHER-INCOME-NET> 6,839
<INCOME-BEFORE-INTEREST-EXPEN> 90,032
<TOTAL-INTEREST-EXPENSE> 46,769
<NET-INCOME> 39,654
154
<EARNINGS-AVAILABLE-FOR-COMM> 39,548
<COMMON-STOCK-DIVIDENDS> 30,255
<TOTAL-INTEREST-ON-BONDS> 57,369
<CASH-FLOW-OPERATIONS> 108,477
<EPS-PRIMARY> 2.82
<EPS-DILUTED> 2.82
</TABLE>
