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Registration No. 33
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-----------------------
UIL HOLDINGS CORPORATION
(Exact Name of Registrant as Specified in Charter)
CONNECTICUT 4911 06-1541045
- --------------------------------- --------------------------- -----------------
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Incorporation or Organization) Classification Code Number) Identification
Number)
157 Church Street
New Haven, Connecticut 06506
(203-499-2000)
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(Address, Including Zip Code, and Telephone Number, Including Area Code
of Registrant's Principal Executive Offices)
-----------------------------
COPIES TO:
KURT MOHLMAN WILLIAM C. BASKIN, JR., ESQ.
157 Church Street Wiggin & Dana
New Haven, Connecticut 06506 One Century Tower
(203-499-2000) New Haven, Connecticut 06508-1832
(Name, Address, Including Zip Code,
and Telephone Number, Including Area Code
of Agent For Service)
Approximate date of commencement of proposed sale to the public: As
soon as practicable after this registration statement is declared effective and
all other conditions to the merger of United Mergings, Inc. with and into The
United
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Illuminating Company and the related share exchange between the registrant and
The United Illuminating Company, as described in the enclosed proxy
statement-prospectus, have been satisfied.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
Title of Proposed Proposed
Each Class of Maximum Maximum
Securities Amount Offering Aggregate Amount Of
To Be To Be Price Per Offering Registration
Registered Registered Unit Price Fee
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
<S> <C> <C> <C> <C>
Common Stock, without 15,001,292 shares $43.80 $657,056,590.00 $182,662.00
par value
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
</TABLE>
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PROXY STATEMENT AND PROSPECTUS
FOR
THE UNITED ILLUMINATING COMPANY ("UI")
PROSPECTUS
FOR
UIL HOLDINGS CORPORATION ("HOLDINGS")
COMMON STOCK
This Proxy Statement and Prospectus contains both a Proxy Statement
for the Annual Meeting of the Shareowners of UI to be held on May 19, 1999
(the "Annual Meeting") and a Prospectus of Holdings relating to the issuance
of up to 15,001,292 shares of common stock, no par value, of Holdings (the
"Holdings Common Stock"), upon the consummation of, and subsequent to the
formation of, a holding company structure as described herein.
We propose to reorganize UI's current corporate structure by forming a
holding company structure pursuant to an Agreement and Plan of Merger and Share
Exchange (the "Plan of Exchange"), a copy of which is attached hereto as Exhibit
B. Our holding company restructuring, including the Plan of Exchange, also
includes certain additional aspects that may be important to you. See "PROPOSAL
2 - APPROVAL OF HOLDING COMPANY STRUCTURE."
Under the Plan of Exchange, all of the outstanding shares of UI's
common stock, no par value (the "UI Common Stock") will be exchanged on a
share-for-share basis for Holdings Common Stock (the "Share Exchange"). After
the Share Exchange, each person who owned UI Common Stock immediately prior to
the Share Exchange will own a corresponding number of shares of the outstanding
Holdings Common Stock.
IF THE SHARE EXCHANGE IS IMPLEMENTED, YOU NEED NOT SURRENDER YOUR UI
STOCK CERTIFICATES FOR STOCK CERTIFICATES OF HOLDINGS. SEE "PROPOSAL 2 -
APPROVAL OF HOLDING COMPANY STRUCTURE - EXCHANGE OF STOCK CERTIFICATES NOT
REQUIRED."
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT AND PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
The principal executive offices of UI and Holdings are located at 157
Church Street, New Haven, Connecticut 06506; telephone number (203) 499-2000.
This Proxy Statement and Prospectus and the accompanying Proxy solicited on
behalf of the Board of Directors of UI will be first released to the owners of
UI Common Stock on or about March 30, 1999.
The date of this Proxy Statement and Prospectus is March 30, 1999
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TABLE OF CONTENTS
<TABLE>
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Page
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<S> <C>
Available Information..................................................................................... 3
Forward-Looking Statements................................................................................ 3
Incorporation of Certain Documents by Reference........................................................... 3
Plan of Exchange Questions and Answers.................................................................... 4
Risk Factors.............................................................................................. 7
Information About the Annual Meeting...................................................................... 8
Shareowners Entitled to Vote..................................................................... 8
Principal Shareowners............................................................................ 9
Nominees for Election as Directors............................................................... 9
Corporate Governance Standards................................................................... 12
Stock Ownership of Directors and Officers........................................................ 14
Section 16(a) Beneficial Ownership Reporting Compliance.......................................... 15
Executive Compensation........................................................................... 15
Option/SAR Grants in Last Fiscal Year............................................................ 18
Stock Option Exercises in 1998 and Year-End Option Values........................................ 19
Retirement Plans................................................................................. 19
Board of Directors Compensation and Executive Development Committee Report on
Executive Compensation........................................................................ 20
Chief Executive Officer Compensation for 1998.................................................... 22
Compensation Committee Interlocks and Insider Participation...................................... 22
Director Compensation ........................................................................... 23
Shareowner Return Presentation................................................................... 24
Employment of Independent Public Accountants..................................................... 24
Proposal 1 - Approval of 1999 Stock Option Plan ................................................ 25
Proposal 2 - Approval of Holding Company Structure............................................... 27
General................................................................................ 27
Organization of Holdings and Mergings.................................................. 28
Reasons for the Plan of Exchange....................................................... 31
Plan of Exchange....................................................................... 32
Required Shareowner Approval........................................................... 32
Dissenters' Rights..................................................................... 33
Required Regulatory Approvals.......................................................... 35
Regulation of Holdings................................................................. 35
Business of Holdings................................................................... 36
Amendment or Termination............................................................... 36
Effective Date of the Share Exchange................................................... 36
Exchange of Stock Certificates Not Required............................................ 37
Certain Federal Income Tax Consequences................................................ 37
Description of Holdings Capital Stock.................................................. 38
Directors and Management of Holdings................................................... 39
Officer Employment Contracts .......................................................... 40
Stock Option and Other Plans........................................................... 40
Transfer Agent and Registrar........................................................... 40
Financial Statements................................................................... 40
Date for Submission of Proposals by Security Holders............................................. 41
Exhibit A - 1999 Stock Option Plan........................................................................ 42
Exhibit B - Agreement and Plan of Merger and Share Exchange............................................... 47
Exhibit C - Copy of Sections 33-855 through 33-872 of the Connecticut Business Corporation Act ........... 51
Exhibit D - Certificate of Incorporation of UIL Holdings Corporation...................................... 56
Exhibit E - Bylaws of UIL Holdings Corporation............................................................ 58
</TABLE>
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AVAILABLE INFORMATION
UI is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "SEC" or "Commission"). Following
completion of the Share Exchange, Holdings will file such reports and other
information under the Exchange Act. You may read and copy any such reports,
proxy statements and other information at the SEC's public reference facilities
in Washington, D.C., Chicago, Illinois, and New York, New York. The SEC also
maintains an Internet Website at "http://www.sec.gov" that contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the Commission. The UI Common Stock is listed on
the New York Stock Exchange (the "NYSE"). You may read and copy any such
reports, proxy statements and other information concerning UI at the office of
the NYSE at 20 Broad Street, New York, New York 10005.
Holdings has filed a Registration Statement on Form S-4 (the
"Registration Statement") with the SEC under the Securities Act of 1933, as
amended (the "Securities Act") to register the Holdings Common Stock that will
be issued pursuant to the Share Exchange, as well as Holdings Common Stock that
may be issued in lieu of UI Common Stock under certain UI Common Stock plans. As
permitted by the rules and regulations of the SEC, this Proxy Statement and
Prospectus does not contain all of the information set forth in the Registration
Statement. For further information, reference is made to the Registration
Statement.
Upon completion of the Share Exchange, the Holdings Common Stock will
be listed on the NYSE. At the time of such listing, the UI Common Stock will be
delisted and will no longer be registered pursuant to Section 12 of the Exchange
Act.
FORWARD-LOOKING STATEMENTS
This Proxy Statement and Prospectus contains certain forward-looking statements.
These statements are based upon management's current expectations and
information currently available and are subject to risks and uncertainties that
could cause actual results to differ materially from those projected in such
statements. Whenever we use the words "anticipates," "believe," "estimate,"
"expect," "project," "objective," or similar expressions, they are intended to
identify forward-looking statements. For example, such forward-looking
statements may include, without limitation, statements concerning the future
payment of dividends, statements or projections as to financial results or as to
the pursuit of business in new markets, statements concerning the regulatory
approval process or future regulation of Holdings and its subsidiaries,
statements concerning the future businesses or management of Holdings and its
subsidiaries, and statements concerning the effects or benefits of a holding
company structure. In addition to the assumptions and other factors referred to
specifically in connection with such statements, factors that could cause actual
results to differ materially from those contemplated in any forward-looking
statements included, among others, regulatory developments, the rapidly changing
and increasingly competitive utility industry, energy and other markets, the
ability to obtain adequate and timely rate relief, cost recovery (including the
potential effect of stranded costs), legal or administrative proceedings,
business conditions, technological developments, changes in the cost or
availability of capital, labor developments, nuclear or environmental incidents,
factors affecting the utility industry in general, such as deregulation and
unbundling of energy services, weather conditions and changes in fuel supply or
cost, and other considerations that may be disclosed from time to time in
Holdings' or UI's publicly disseminated documents or filings. Neither Holdings
nor UI undertakes any obligation to update publicly any forward-looking
statements, whether as a result of new information, future events or otherwise.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to "incorporate by reference" information into this
Proxy Statement and Prospectus, which means that we can disclose important
information to you by referring you to another document filed separately with
the SEC. The information incorporated by reference is deemed to be part of this
Proxy Statement and Prospectus, except for any information superseded by
information in this Proxy Statement and Prospectus. This Proxy Statement and
Prospectus incorporates by reference UI's Annual Report on Form 10-K for the
year ended December 31, 1998 that was
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previously filed with the SEC. That document contains important information
about UI, its subsidiaries and their operations and financial condition.
We are also incorporating by reference additional documents that we may
file with the SEC between the date of this Proxy Statement and Prospectus and
the termination of the offering made by this Proxy Statement and Prospectus.
UI WILL PROVIDE TO YOU WITHOUT CHARGE, UPON WRITTEN OR ORAL REQUEST, A
COPY OF ANY DOCUMENTS THAT HAVE BEEN OR MAY BE INCORPORATED IN THIS PROXY
STATEMENT AND PROSPECTUS BY REFERENCE. WRITTEN OR TELEPHONE REQUESTS SHOULD BE
DIRECTED TO CHARLES J. PEPE, ASSISTANT TREASURER AND ASSISTANT SECRETARY, THE
UNITED ILLUMINATING COMPANY, 157 CHURCH STREET, P.O. BOX 1564, NEW HAVEN,
CONNECTICUT 06506-0901, TELEPHONE NUMBER (203) 499-2311, E-MAIL ADDRESS
[email protected]. COPIES OF SUCH DOCUMENTS FURNISHED WITHOUT CHARGE WILL
NOT INCLUDE ALL OF THE EXHIBITS TO THE DOCUMENTS. HOWEVER, WE WILL FURNISH A
COPY OF ANY SUCH EXHIBIT UPON PAYMENT OF A FEE TO DEFRAY THE EXPENSE (10 CENTS
PER PAGE, PLUS POSTAGE) OF FURNISHING IT. IN ORDER TO ENSURE TIMELY DELIVERY OF
THE INCORPORATED DOCUMENTS, ANY REQUEST SHOULD BE MADE BY MAY 3, 1999.
WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS
DIFFERENT FROM WHAT IS CONTAINED IN THIS PROXY STATEMENT AND PROSPECTUS. THIS
PROXY STATEMENT AND PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY SHARES OF HOLDINGS COMMON STOCK BY ANY PERSON IN
ANY JURISDICTION OR IN ANY CIRCUMSTANCE IN WHICH SUCH OFFER OR SOLICITATION
WOULD BE UNLAWFUL.
Neither the delivery of this Proxy Statement and Prospectus nor any
sale made hereunder shall, under any circumstances, create any implication that
there has been no change in the affairs of UI since the date of this Proxy
Statement and Prospectus.
PLAN OF EXCHANGE
QUESTIONS AND ANSWERS
The following Questions and Answers highlight selected information
regarding the proposed Plan of Exchange, and may not contain all of the
information that is important to you. For a more complete discussion of our
holding company restructuring, including the proposed Plan of Exchange, you
should read carefully this entire document and the attached exhibits and the
documents that are incorporated herein by reference. For example, Exhibit B, the
Plan of Exchange, provides information regarding the Share Exchange; and
Holdings, Certificate of Incorporation and Bylaws, each in the form to be in
effect at the time of the Share Exchange, are attached as Exhibit D and E; and
Exhibit C sets out, among other things, provisions governing certain rights of
UI's shareowners.
1. WHAT IS THE PROPOSED PLAN OF EXCHANGE?
(See "PROPOSAL 2 - APPROVAL OF HOLDING COMPANY STRUCTURE - GENERAL;
PLAN OF MERGER AND SHARE EXCHANGE")
The Board of Directors of UI has unanimously approved restructuring
pursuant to the Plan of Exchange whereby Holdings will serve as the parent
company of UI. Although our organization structure will change, Holdings will
continue to conduct UI's current businesses through UI and other subsidiaries of
Holdings.
All UI Common Stock will be exchanged for Holdings Common Stock on a
share-for-share basis.
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2. WHY IS THE PLAN OF EXCHANGE BEING PROPOSED?
(See "PROPOSAL 2 - APPROVAL OF HOLDING COMPANY STRUCTURE - REASONS FOR
THE PLAN OF EXCHANGE")
We believe that UI's corporate organization ought to be restructured in
order to make a clear separation of its regulated utility franchise business
from the unregulated businesses of its subsidiaries. We believe that this
separation represents the best corporate structure for operating in the
emerging, restructured energy marketplace, and that our proposal will result in
greater financial, managerial and organizational flexibility. As a result, we
will be in a better position to adapt to the changing industry and to meet and
take advantage of future challenges and opportunities. Finally, it is important
to know that our proposal is an integral part of UI's overall rate and
restructuring plan, which will result from the proceedings of the Connecticut
Department of Public Utility Control under the State's 1998 statute that is
designed to restructure Connecticut's regulated electric utility industry.
3. WHAT WILL THE ORGANIZATIONAL STRUCTURE OF THE UI BUSINESSES BE AFTER
THE RESTRUCTURING PROCESS IS COMPLETED?
(See "PROPOSAL 2 - APPROVAL OF HOLDING COMPANY STRUCTURE - ORGANIZATION
OF HOLDINGS AND MERGINGS - ORGANIZATIONAL CHARTS")
The effect of the corporate restructuring will be to separate UI's
unregulated subsidiaries from it and place them under the control of Holdings.
UI will then be a corporation devoted exclusively to the operation of its
regulated electric utility franchise business in the State of Connecticut.
4. WILL I HAVE TO EXCHANGE MY UI STOCK CERTIFICATES FOR NEW HOLDINGS STOCK
CERTIFICATES?
(See "PROPOSAL 2 - APPROVAL OF HOLDING COMPANY STRUCTURE - EXCHANGE OF
STOCK CERTIFICATES NOT REQUIRED")
No. It will not be necessary for you to turn in your UI stock
certificates for Holdings stock certificates. Your certificates will
automatically represent Holdings Common Stock.
5. WILL MY DIVIDENDS BE AFFECTED?
(See "RISK FACTORS; PROPOSAL 2 - APPROVAL OF HOLDING COMPANY STRUCTURE
- - DESCRIPTION OF HOLDINGS CAPITAL STOCK - DIVIDENDS")
We expect that quarterly dividends on the Holdings Common Stock will be
paid on the same dates currently followed by UI with respect to its Common Stock
dividends. For a period of time following the Share Exchange, we expect that the
funds required by Holdings to enable it to pay common stock dividends will be
derived predominantly from the dividends paid by UI to Holdings. We anticipate
that such cash dividends paid by UI to Holdings will be sufficient to enable
Holdings to pay cash dividends on Holdings Common Stock and to meet operating
and other expenses. Because there will be no short-term change in the nature or
extent of the businesses currently being operated by UI and its unregulated
subsidiaries, there is no present plan to alter the dividend. However, we cannot
guarantee what the amount of the initial quarterly dividend on Holdings Common
Stock may be or the payment of future dividends, since the declaration of such
dividends will depend primarily on the ability of Holdings' subsidiaries
(including UI) to pay dividends to Holdings, which, in turn, will depend upon
the future earnings and financial condition of these subsidiaries.
6. WHEN WILL THE SHARE EXCHANGE OCCUR?
(See "PROPOSAL 2 - APPROVAL OF HOLDING COMPANY STRUCTURE - EFFECTIVE
DATE OF THE SHARE EXCHANGE")
If you and the other shareowners of UI that together constitute the
owners of two-thirds of all of the shares entitled to vote for or against the
Share Exchange approve the proposed Plan of Exchange, and certain other
conditions are satisfied, the Share Exchange will become effective upon the
filing of a Certificate of Merger and Exchange with the Secretary of the State
of the State of Connecticut, or as otherwise specified in the Certificate of
Merger and Exchange. We intend to implement the Share Exchange as soon as
practicable after we receive your approval and all of the required regulatory
approvals.
7. WHAT ARE THE FEDERAL INCOME TAX CONSEQUENCES?
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(See "PROPOSAL 2 - APPROVAL OF HOLDING COMPANY STRUCTURE - CERTAIN
FEDERAL INCOME TAX CONSEQUENCES")
You will not recognize any gain or loss for federal income tax purposes
if you exchange your UI Common Stock for Holdings Common Stock.
8. WILL UI PREFERRED STOCK OR NOTES BE EXCHANGED?
(See "PROPOSAL 2 - APPROVAL OF HOLDING COMPANY STRUCTURE - PLAN OF
MERGER AND SHARE EXCHANGE")
There will be no shares of UI's authorized Preferred Stock or its
authorized Preference Stock outstanding when the Share Exchange occurs. Unissued
shares of authorized Preferred Stock and Preference Stock, and UI's Notes and
other indebtedness of UI that will be outstanding when the Share Exchange
occurs, will remain securities and obligations of UI after the Share Exchange.
We decided to leave the unissued UI Preferred Stock, Preference Stock and such
indebtedness of UI as securities and obligations of UI because we did not want
to alter, or potentially alter, the nature of the investment represented by such
securities and obligations, namely a direct investment in a regulated utility.
9. WHERE WILL MY HOLDINGS COMMON STOCK BE TRADED?
(See "PROPOSAL 2 - APPROVAL OF HOLDING COMPANY STRUCTURE - DESCRIPTION
OF HOLDINGS CAPITAL STOCK - LISTING OF HOLDINGS COMMON STOCK")
UI Common Stock is currently traded on the New York Stock Exchange
under the stock symbol "UIL." We expect the Holdings Common Stock to be listed
on the New York Stock Exchange and, after the Share Exchange, to trade under the
stock symbol "_____." UI's Common Stock will be delisted.
10. WHO WILL MANAGE HOLDINGS?
(See "PROPOSAL 2 - APPROVAL OF HOLDING COMPANY STRUCTURE - DIRECTORS
AND MANAGEMENT OF HOLDINGS")
After the Share Exchange, the Board of Directors of Holdings will
consist of those persons who are directors of UI immediately before the Share
Exchange. We anticipate that Holdings and its subsidiaries will have some common
officers.
11. HOW WILL MY PARTICIPATION IN THE AUTOMATIC DIVIDEND REINVESTMENT AND
COMMON STOCK PURCHASE PLAN BE AFFECTED?
(See "PROPOSAL 2 - APPROVAL OF HOLDING COMPANY STRUCTURE - STOCK OPTION
AND OTHER PLANS")
All shares of UI Common Stock held under our Automatic Dividend
Reinvestment and Common Stock Purchase Plan will be automatically exchanged for
shares of Holdings Common Stock. We will continue the Dividend Reinvestment and
Stock Purchase Plan with Holdings Common Stock after the Share Exchange.
12. WHEN AND WHERE WILL THE ANNUAL MEETING TAKE PLACE?
(See "INFORMATION ABOUT THE ANNUAL MEETING")
The Annual Meeting of the Shareowners of UI will be held at 1:00 p.m.
on Wednesday, May 19, 1999, at the New Haven Lawn Club, 193 Whitney Avenue, New
Haven, Connecticut.
13. WHO WILL BE ELIGIBLE TO VOTE ON THE PROPOSED PLAN OF EXCHANGE? (See
"INFORMATION ABOUT THE ANNUAL MEETING - SHAREOWNERS ENTITLED TO VOTE")
Holders of UI Common Stock at the close of business on March 11, 1999
are entitled to vote on the proposed Plan of Exchange.
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14. WHAT SHAREOWNER VOTE IS REQUIRED FOR APPROVAL OF THE PROPOSED PLAN OF
EXCHANGE?
(See "INFORMATION ABOUT THE ANNUAL MEETING - SHAREOWNERS ENTITLED TO
VOTE")
Approval of the proposed Plan of Exchange will require the affirmative
vote, in person or by proxy, of two-thirds of the outstanding shares of UI
Common Stock. Pursuant to the terms of UI's Certificate of Incorporation and the
applicable provisions of the Connecticut Business Corporation Act, each owner of
UI Common Stock entitled to vote is entitled to one vote per share on the
proposed Plan of Exchange. Since no shares of UI's authorized Preferred Stock or
its authorized Preference Stock will be outstanding at the time of the Annual
Meeting or when the Share Exchange occurs, no approval or consent with respect
to either of these classes of UI stock will be required in connection with the
proposed Plan of Exchange.
RISK FACTORS
The corporate restructuring proposed will not, in and of itself, change
the nature or extent of the regulated and unregulated businesses currently being
operated by UI and its subsidiaries. Accordingly, the shareowner risk factors
associated with the operation of those businesses will not change as a result of
the consummation of the proposed Plan of Exchange. However, UI shareowners
should bear in mind the risk factors that are associated with their investment,
some of which are summarized as follows.
NO ASSURANCE THAT RESTRUCTURING WILL BE BENEFICIAL TO OWNERS OF
HOLDINGS COMMON STOCK. We believe that the proposed holding company
restructuring will, among other things, establish a corporate structure that
will enhance the ability of UI and Holdings to take advantage of business
opportunities in the emerging energy and related markets and outside of UI's
present markets. Nevertheless, there can be no assurance that Holdings will, in
fact, be able to take advantage of such opportunities or that if Holdings does
take advantage of such opportunities, that they will be beneficial to the owners
of Holdings Common Stock.
CERTAIN BUSINESS ACTIVITIES MAY INVOLVE MORE RISK. Following
consummation of the proposed holding company restructuring, Holdings will be
able to pursue additional business opportunities through its subsidiaries
without having to obtain the prior approval of the Connecticut Department of
Public Utility Control ("DPUC"). Such business opportunities might involve more
risk than would be permitted to be pursued by UI as a regulated electric
utility, but they will seek higher potential returns commensurate with any
increased risk. Pursuit of such opportunities, however, while offering the
potential of greater reward, could have either a positive or an adverse effect
on the value of a shareowner's investment, depending upon the return actually
realized from such opportunities. There can be no assurance that such businesses
will be successful or, if unsuccessful, that they will not have a material
adverse effect on Holdings. Any losses incurred by such businesses will not be
recoverable through the electric rates of UI.
DIVIDENDS ON HOLDINGS COMMON STOCK WILL BE DEPENDENT ON DIVIDENDS PAID
TO HOLDINGS BY UI. For a period of time following the Share Exchange, the funds
required by Holdings to enable it to pay dividends on Holdings Common Stock are
expected to be derived predominantly from the dividends paid by UI to Holdings.
Accordingly, the ability of Holdings to pay such dividends, as a practical
matter, will be governed by the ability of UI to pay common stock dividends. It
is anticipated that such cash dividends paid by UI will be sufficient to enable
Holdings to pay cash dividends on Holdings Common Stock and to meet operating
and other expenses. However, the ability of UI to pay dividends on its Common
Stock will continue to be subject to the preferential dividend rights of the
owners of UI's outstanding preferred stock and preference stock, if any, and to
the common stock dividend restrictions currently contained in UI's Note
Indenture. Although it has no present intention to do so, it is possible that UI
may need to issue preferred stock and/or preference stock in the future to meet
its capital requirements. Such additional stock will have preferential dividend
rights. Because UI will remain subject to regulation by the Connecticut DPUC,
the amount of its earnings and dividends will continue to be affected by the
manner in which the DPUC regulates UI. It is expected that the transfer of UI's
existing subsidiaries to Holdings will not have a significant adverse effect on
UI's ability to pay common stock dividends to Holdings, since UI will retain the
assets that account for a substantial portion of its net earnings. There can be
no guarantee, however, of the amount of the initial quarterly dividend on
Holdings Common Stock or of the payment of future dividends by Holdings, as the
declaration of such dividends will be dependent primarily on the receipt of
future dividends from subsidiaries of Holdings which, in turn, will be dependent
upon the future earnings and financial condition of these subsidiaries. See
"PROPOSAL 2 - APPROVAL OF HOLDING COMPANY STRUCTURE - DESCRIPTION OF HOLDINGS
CAPITAL STOCK - DIVIDENDS."
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INFORMATION ABOUT THE ANNUAL MEETING
This Proxy Statement and Prospectus and the accompanying proxy form are
furnished on or about March 30, 1999, to security holders of record as of the
close of business on March 11, 1999, in connection with the solicitation of
proxies for use at the Annual Meeting of the Shareowners of UI to be held at the
New Haven Lawn Club, 193 Whitney Avenue, New Haven, Connecticut, on Wednesday,
May 19, 1999 at 1:00 p.m. for the purposes set forth in the accompanying Notice
of Annual Meeting of the Shareowners. The solicitation is made by UI, and the
expense of printing and mailing proxy material will be borne by the Company. UI
will request banks, brokers and other custodians, nominees and fiduciaries to
send proxy material to beneficial owners of shares and to secure their voting
instructions, if necessary, and UI will reimburse them for their reasonable
expenses in so doing. Directors, officers and employees of UI may also solicit
proxies personally or by telephone, but no compensation will be paid
specifically for any such solicitation. In addition, Georgeson & Company, Inc.
of New York, New York, has been retained to aid in the solicitation of proxies
by similar methods at a cost to UI of approximately $12,500, plus expenses.
SHAREOWNERS ENTITLED TO VOTE:
At the close of business on March 11, 1999, the record date for the
meeting, 14,334,922 shares of UI Common Stock were outstanding and will be
entitled to vote at the meeting, each share being entitled to one vote, on each
matter coming before the meeting as set forth in the accompanying Notice of
Annual Meeting of the Shareowners and commented on in this Proxy Statement and
Prospectus. All votes on each matter coming before the meeting will be counted
and tabulated by Inspectors of Proxies and Tellers appointed by the President of
UI pursuant to its Bylaws.
Common Stock shareowners who are participants in UI's Automatic Dividend
Reinvestment and Common Stock Purchase Plan (DRP) will receive proxy forms that
will include the shares in their accounts under the DRP. American Stock Transfer
and Trust Company, UI's agent under the DRP, has authorized the Company to vote
shares held in the DRP according to the instructions received on such proxy
forms.
Shares of Common Stock for which a proxy in the form that accompanies
this Proxy Statement is properly signed and returned (a) will be voted or not
voted, in accordance with the choice indicated on the proxy, to elect as
directors for the ensuing year the [THIRTEEN] persons named in this Proxy
Statement and Prospectus (or such other person or persons as the present
Board of Directors shall determine, if one or more of the [THIRTEEN] persons
named is unable to serve); (b) will be voted for or against, or not voted, in
accordance with the choice indicated on the proxy, with respect to the
proposal to approve the employment of PricewaterhouseCoopers LLP as
independent public accountants for the fiscal year 1999; (c) will be voted
for or against, or not voted, in accordance with the choice indicated on the
proxy, with respect to the proposal to approve the 1999 Stock Option Plan;
(d) will be voted for or against, or not voted, in accordance with the choice
indicated on the proxy, with respect to the proposal to approve the Plan of
Exchange; and (e) will be voted in accordance with the discretion of the
person or persons voting them with respect to such other matters, if any, as
may come before the meeting. UI is not aware of any such other matters to be
presented at the meeting.
Any proxy may be revoked by the shareowner at any time prior to its use. A
proxy may be revoked by filing with the Secretary of UI a written notice of
revocation or a properly signed proxy bearing a later date. A shareowner who
attends the meeting in person may, if he or she wishes, vote by ballot at the
meeting, thereby canceling any proxy vote previously given.
Under Connecticut law and UI's Bylaws, shareowners holding a majority of
the shares of Common Stock represented at the meeting, in person or by proxy,
will constitute a quorum for purposes of considering and acting and acting upon
the matters set forth in the accompanying Notice of Annual Meeting of the
Shareowners.
Assuming that a quorum is present at the meeting, directors will be elected
by a plurality of the votes cast at the meeting. Withholding authority to vote
for a director nominee will not prevent that director nominee from being
elected. Cumulative voting for directors is not permitted under Connecticut law
unless a corporation's certificate of incorporation provides for cumulative
voting rights; and UI's Certificate of Incorporation contains no provision for
such rights.
8
<PAGE>
Under Connecticut law, assuming that a quorum is present at the meeting,
action on approval of the employment of independent public accountants will be
approved if the votes cast in favor of the action exceed the votes cast against
approval of the action; and proxies marked to abstain from voting with respect
to the action will not have the legal effect of voting against approval of the
action.
Under Connecticut law, assuming that a quorum is present at the meeting,
the proposal to approve the 1999 Stock Option Plan will be approved if the votes
cast in favor of the proposal exceed the votes cast against approval of the
proposal; and proxies marked to abstain from voting with respect to the proposal
will not have the legal effect of voting against approval of the proposal.
Under Connecticut law, assuming that a quorum is present at the meeting,
the proposal to approve the Plan of Exchange will be approved if the votes cast
in favor of the proposal equal or exceed two thirds of the number of shares of
UI Common Stock entitled to vote on the proposal; and proxies marked to abstain
from voting with respect to the proposal will have the legal effect of voting
against approval of the proposal.
PRINCIPAL SHAREOWNERS:
Statements filed with the Securities and Exchange Commission (SEC),
pursuant to Section 13(d) of the Securities Exchange Act of 1934 (the 1934 Act),
by the following persons disclose beneficial ownership of shares of UI's Common
Stock (percentages are of the 14,334,922 shares outstanding as of the close of
business on March 11, 1999): (1) Rhoda L. Chase, 420,000 shares, or
approximately 2.93%; (2) her daughter, Cheryl A. Chase, 79,200 shares, or
approximately 0.55%; (3) her son, Arnold L. Chase, 230,300 shares, or
approximately 1.61%; (4) The Darland Trust, a trust for the benefit of Cheryl A.
Chase and her children, and its trustee, Rothschild Trust Cayman Limited,
146,000 shares, or approximately 1.02%; (5) David T. Chase, husband of Rhoda and
father of Cheryl and Arnold, 870,000 shares, or approximately 6.07%, all of
which are included in the shares listed in (1), (2), (3) and (4) of this
sentence; and (6) DTC Holdings Corporation (DTCHC) (formerly known as American
Ranger, Inc.), 200,000 shares, or approximately 1.40%. DTCHC is a wholly-owned
subsidiary of D.T. Chase Enterprises, Inc. (DTCE) and is indirectly owned and
controlled by David, Rhoda, Arnold and Cheryl Chase, trusts for the benefit of
Arnold Chase and his children, and trusts for the benefit of Cheryl Chase and
her children. David, Rhoda, Arnold and Cheryl Chase, DTCHC and DTCE all have as
a business address One Commercial Plaza, Hartford, CT 06103. In the statements
filed with the SEC, none of the shareholders listed above except David T. Chase
has admitted beneficial ownership of any shares of the Company's Common Stock
not held in their individual names, and all of them have disclaimed membership
in any "group" with respect to the Common Stock for purposes of Section 13(d) of
the 1934 Act.
There is no other person or group of persons known to UI to be the
beneficial owner of more than 5% of the shares of UI Common Stock as of the
close of business on March 11, 1999.
NOMINEES FOR ELECTION AS DIRECTORS:
It is intended that shares of Common Stock represented by proxies who are
authorized to vote for the election of a Board of Directors on the form that
accompanies this Proxy Statement will be voted (unless instructed otherwise on
the form) in favor of the persons listed below for election as directors of UI.
While it is not anticipated that any of the persons listed below will be unable
to serve as a director, if that should occur, the proxies will be voted for such
other person or persons as the present Board of Directors shall determine. All
of the nominees listed below [EXCEPT____ ] were elected directors at the last
annual meeting.
9
<PAGE>
<TABLE>
<CAPTION>
NAME, PRINCIPAL OCCUPATION, OTHER
CORPORATE AFFILIATIONS AND PRINCIPAL OCCUPATIONS Director
DURING THE PAST FIVE YEARS OF NOMINEE Age(1) Since
------------------------------------- ------ --------
<S> <C> <C>
Thelma R. Albright 52 1995
President, Carter Products Division, Carter-Wallace, Inc., Cranbury, New Jersey. From 1994
through 1995, Ms. Albright was General Manager and Executive Vice President of Revlon
Beauty Care Division. Also, Director, CTFA (Cosmetics, Toiletry and Fragrance Association)
and Consumer Healthcare Products Association.
Marc C. Breslawsky 56 1995
President and Chief Operating Officer, Pitney Bowes, Inc., Stamford, Connecticut. Also,
Director, Pitney Bowes, Inc., Pitney Bowes Credit Corp., C.R. Bard, Inc., the Family
Foundation of North America, CBIA (Connecticut Business and Industry Association) and
United Way of Eastern Fairfield County; Vice Chairman of the Governor's Council of Economic
Competitiveness and Technology; Member, Board of Governors, the State of Connecticut/Red
Cross Disaster Relief Cabinet and the Landmark Club; and Trustee, Norwalk Hospital.
David E. A. Carson 64 1993
President, Chief Executive Officer and Director, People's Bank, Bridgeport, Connecticut,
and President, Chief Executive Officer and Trustee, People's Mutual Holdings, Bridgeport,
Connecticut. Also, Chairman, Bridgeport Public Education Fund, Business Advisory Committee
of Connecticut Commission on Children and Bridgeport Area Foundation; and Director, Mass
Mutual Institutional Funds, MML Series Investment Funds, American Skandia Trust, Old State
House, Hartford, Connecticut, The Bushnell, Hartford, Connecticut, and Hartford Stage
Company.
John F. Croweak 62 1987
Chairman of the Board of Directors, Anthem Blue Cross & Blue Shield of Connecticut, Inc.,
North Haven, Connecticut. Prior to his retirement in 1997, Mr. Croweak served as Chairman
of the Board of Directors and Chief Executive Officer of Anthem Blue Cross & Blue Shield of
Connecticut and its predecessor, Blue Cross & Blue Shield of Connecticut, Inc. Also
Chairman of the Board of Directors, Connecticut American Insurance Company, ProMed Systems,
Inc., OPTIMED Medical Systems and Signal Medical Services, Inc.; and Director, BCS
Financial, The New Haven Savings Bank, Quinnipiac College, Opticare and Anthem, Inc.
Robert L. Fiscus 61 1992
Vice Chairman of the Board of Directors and Chief Financial Officer, The United
Illuminating Company. Mr. Fiscus served as President and Chief Financial Officer of the
Company during the period January 1994 to February 1998. Also, Director, Bridgeport
Regional Business Council, Griffin Health Services Corporation, The Aristotle Corporation,
Bridgeport Area Foundation and Susquehanna University; Governor, University of New Haven;
and Trustee, Central Connecticut Coast Young Men's Christian Association, Inc.
Betsy Henley-Cohn 46 1989
Chairman of the Board of Directors, Joseph Cohn & Son, Inc., New Haven, Connecticut. Also,
Chairwoman of Birmingham Utilities, Inc.; and Director, The Aristotle Corporation and
Citizens Bank of Connecticut.
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
NAME, PRINCIPAL OCCUPATION, OTHER
CORPORATE AFFILIATIONS AND PRINCIPAL OCCUPATIONS Director
DURING THE PAST FIVE YEARS OF NOMINEE Age(1) Since
------------------------------------- ------ --------
<S> <C> <C>
John L. Lahey 52 1994
President, Quinnipiac College, Hamden, Connecticut. Also, Director, Yale-New Haven
Hospital and Long Wharf Theater; Vice Chairman and Director, Regional Plan Association
Board, New York, New York; Co-Chairman, Connecticut Committee of the Regional Plan
Association Board; and Member, Greater New Haven Regional Leadership Council and
Accreditation Committee of the American Bar Association.
F. Patrick McFadden, Jr. 61 1987
Chairman, Citizen's Bank of Connecticut, New Haven, Connecticut. From 1994 through 1997,
Mr. McFadden was President, Chief Executive Officer and Director, The Bank of New Haven and
BNH Bancshares, Inc. Also, Chairman of the Board of Directors, Yale-New Haven Health
Services Corporation.
Frank R. O'Keefe, Jr. 69 1989
Retired; former President, Long Wharf Capital Partners, Inc. 1988-1990; retired Chairman,
President and Chief Executive Officer, Armtek Corporation 1986-1988; President and Chief
Operating Officer, Armstrong Rubber Company 1980-1986; and Director, Aetna Inc.
James A. Thomas 60 1992
Associate Dean, Yale Law School. Also, Trustee, Yale-New Haven Hospital and People's
Mutual Holdings; and Director, People's Bank and Sea Research Foundation.
Nathaniel D. Woodson 57 1998
Chairman of the Board of Directors, President and Chief Executive Officer, The United
Illuminating Company. Mr. Woodson served as President of the Energy Systems Business Unit
of Westinghouse Electric Corporation during the period January 1, 1993 to April 30, 1996.
He has served as President of the Company since February 23, 1998, Chief Executive Officer
since May 20, 1998 and Chairman of the Board of Directors since January 1, 1999.
</TABLE>
- -------------------------
(1) Age at May 19, 1999. The Board of Directors has adopted a policy pursuant
to which a director will not be a candidate for re-election after his or
her 70th birthday.
The Board of Directors held ten meetings during 1998. The average
attendance record of the directors was 95% for meetings of the Board of
Directors and its committees held during 1998.
Ms. Henley-Cohn and Messrs. Croweak, McFadden and Woodson serve on the
Executive Committee of the Board of Directors. The Executive Committee, a
standing committee that has and may exercise all the powers of the Board of
Directors when it is not in session, met once during 1998.
Ms. Albright and Messrs. Carson, Lahey, McFadden, O'Keefe and Thomas serve
on the Audit Committee of the Board of Directors. The Audit Committee, a
standing committee that oversees UI's financial accounting and reporting
practices; evaluates the reliability of the Company's system of internal
controls; assures the objectivity of independent audits; explores other issues
that it deems may potentially affect UI and its employees; and makes
recommendations in these regards to the officers and to the Board of Directors,
held six meetings during 1998.
Msses. Albright and Henley-Cohn and Messrs. Breslawsky, Carson and Thomas
serve on the Compensation and Executive Development Committee of the Board of
Directors. The Compensation and Executive Development Committee, a standing
committee that reviews the performance of the officers of UI; reviews and
recommends to the Board of Directors the levels of compensation and other
benefits paid and to be paid to the officers of UI; reviews and administers
incentive compensation programs for the officers of UI; recommends to the Board
of Directors changes in said programs; reviews the recommendations of management
for its succession planning and the selection of officers of
11
<PAGE>
UI; and reviews the investment standards, policies and objectives established
for, and the performance and methods of, UI's pension plan investment managers,
held five meetings during 1998.
Msses. Albright and Henley-Cohn and Messrs. Breslawsky, Carson, Croweak,
Lahey, McFadden, O'Keefe and Thomas serve on the Strategic Direction Committee
of the Board of Directors. The Strategic Direction Committee, a standing
committee that assists the Chief Executive Officer and senior management with
the development of an overall strategic plan for UI, taking into account the key
strategic issues facing UI and the electric utility industry and providing a
focus for defining and implementing the annual goals and projects comprising
UI's corporate business and operational plans, held three meetings during 1998.
Ms. Henley-Cohn and Messrs. Carson, McFadden, O'Keefe and Thomas serve on
the Committee on Directors. The Committee on Directors, a standing committee
that recommends policy with respect to the composition, organization, practices
and compensation of the Board of Directors and performs the nominating function
for the Board, held two meetings in 1998. The Committee on Directors will
consider for election as directors nominees recommended by shareowners upon the
timely submission of the names of such nominees with their qualifications and
biographical information forwarded to the Committee in care of the Treasurer and
Secretary of UI.
CORPORATE GOVERNANCE STANDARDS
The Board of Directors has approved the following Corporate Governance
Standards for the discharge of its duties to UI and its shareowners:
The Board of Directors (the Board) of The United Illuminating Company (the
Company) will discharge its duties in accordance with both the letter and the
spirit of all of the laws and governmental regulations that are applicable to
the Company and its operations, including the standards of conduct prescribed
for individual Directors by the Connecticut Business Corporation Act. This is
the Board's primary governance standard; and the following requirements and
proscriptions, which are reviewed by the Board annually and are subject to
revision from time to time, are intended to serve as supportive standards in
this regard.
BOARD MEMBERS
o The entire Board will be elected annually.
o A Director will not be a candidate for reelection after his or her
seventieth birthday.
o As a general rule, former executive officers of the Company will not
be candidates for election as Directors.
o A Director will not be a candidate for election to a sixth term unless
he or she is the beneficial owner, directly or indirectly, of a number
of shares of the Company's Common Stock greater than 3 times the annual
retainer fee for directors at the time that the Director commenced his
or her service, divided by the market value of the Company's Common
Stock at that time.
BOARD COMMITTEES
o Committees of the Board, and members of committees of the Board, will
be appointed by affirmative vote of a majority of the Directorships.
o The membership of the Audit Committee and the Compensation and
Executive Development Committee will consist entirely of independent
Directors.
o The Committee on Directors will assess, annually, the effectiveness of
the Board.
FUNCTIONING OF THE BOARD
o Directors will receive materials relative to agenda items as far in
advance of Board meetings as feasible.
o When the Chief Executive Officer of the Company serves as the Chairman
of the Board, the senior independent Director, in terms of service,
will preside at meetings of the Board at which the Chairman of the
Board and Chief Executive Officer is not in attendance, and at
executive sessions of independent Directors of the Board, and will also
serve as an ex-officio member of the Committee on Directors of the
Board.
12
<PAGE>
o The Board will review and approve, annually, a strategic plan and an
operating plan for the Company.
OFFICERS
o The Board will evaluate, annually, in an executive session of
independent Directors of the Board, the performance of the Chief
Executive Officer of the Company.
o The Chief Executive Officer will report, annually, to the Compensation
and Executive Development Committee of the Board, and to the Board,
regarding succession planning and management development.
o Acceptance by any officer of the Company of a compensated appointment
to the governing body of another business entity will be subject to
prior approval by the Board.
o Officers of the Company will be required to be beneficial owners,
directly or indirectly, of shares of the Common Stock of the Company in
amounts and within time periods determined by the Chief Executive
Officer of the Company.(1)
o Incentive compensation plans will link compensation directly and
objectively to measurable goals set in advance by the Board on the
recommendation of the Compensation and Executive Development Committee
of the Board.
o Awarded stock options will not be repriced, except in the event of a
reorganization, recapitalization, stock split, stock dividend,
combination of shares, merger, consolidation, distribution of assets or
other change in the corporate structure or shares of the Company.
- ----------------------
(1) As part of the 1998 Executive Compensation Review, the officers' stock
ownership requirements were increased to the following levels: chief
executive officer - 3 times salary, senior officers reporting to the
chief executive officer - 1.5 times salary, and all other officers - 1
times salary; resulting in requirements of 24,000 shares for the chief
executive officer, 22,100 shares for the senior officers as a group,
and 12,600 shares for all other officers as a group. A five-year period
was established for officers to meet the requirements.
13
<PAGE>
STOCK OWNERSHIP OF DIRECTORS AND OFFICERS:
The following table sets forth the number of shares of Common Stock of UI
beneficially owned, directly or indirectly, as of March 11, 1999, by each
director, by each of the two persons who served as the chief executive officer
during 1998, and by each of the four other most highly compensated officers
during 1998, and by all directors and officers as a group:
<TABLE>
<CAPTION>
SHARES
NAME OF INDIVIDUAL OR BENEFICIALLY
NUMBER OF PERSONS IN OWNED DIRECTLY
GROUP OR INDIRECTLY(1)(2)(3)
---------------------------------------------------------------------------------------------------
<S> <C>
Thelma R. Albright 3,238
Marc C. Breslawsky 4,810
David E.A. Carson 8,186
John F. Croweak 3,640
Robert L. Fiscus 33,065
Betsy Henley-Cohn 3,913
John L. Lahey 2,041
F. Patrick McFadden, Jr. 3,969
Frank R. O'Keefe, Jr. 5,036
James A. Thomas 2,350
Nathaniel D. Woodson 5,130
James F. Crowe 6,924
Albert N. Henricksen 3,070
Anthony J. Vallillo 2,352
Richard J. Grossi 0(4)
20 Directors and Officers as a group, including those named above 104,026
</TABLE>
- -------------------------
(1) Based on reports furnished by the directors and officers. The shares
include, in some instances, shares held by the immediate families of
directors and officers or entities controlled by directors and officers,
the reporting of which is not to be construed as an admission of beneficial
ownership. Each of the persons included in the foregoing table has sole
voting and investment power as to the shares of Common Stock beneficially
owned, directly or indirectly, by him or her, except for the following (i)
as to which such powers are shared: 17,591 shares with respect to Mr.
Fiscus, 110 shares with respect to Mr. Thomas, 706 shares with respect to
Mr. Crowe, 422 shares with respect to Mr. Henricksen and 19,018 shares with
respect to all directors and officers as a group, (ii) as to which such
powers are held by other people or entities: 149 shares with respect to Mr.
Carson, 700 shares with respect to Mr. Fiscus, 2,035 shares with respect to
Ms. Henley-Cohn, 659 shares with respect to Mr. O'Keefe, 50 shares with
respect to Mr. Thomas, 5,000 shares with respect to Mr. Woodson, 10 shares
with respect to Mr. Crowe, and 8,823 shares with respect to all directors
and officers as a group.
(2) The number of shares includes those held for the benefit of officers in
UI's Employee Stock Ownership Plan and, in the cases of Robert L. Fiscus,
10,500 shares, and all directors and officers as a group, 16,300 shares,
that may be acquired currently through the exercise of stock options under
the Company's 1990 Stock Option Plan.
(3) Includes Stock Units, for which neither investment nor voting power is held
as follows: 3,009 shares with respect to Ms. Albright, 4,710 shares with
respect to Mr. Breslawsky, 7,754 shares with respect to Mr. Carson, 2,741
shares with respect to Mr. Croweak, 400 shares with respect to Ms.
Henley-Cohn, 224 shares with respect to Mr. Lahey, 2,082 shares with
respect to Mr. McFadden, 4,151 shares with respect to Mr. O'Keefe and 787
shares with respect to Mr. Thomas. These Stock Units are in stock accounts
under UI's Non-Employee Directors' Common Stock and Deferred Compensation
Plan, described below at "Director Compensation". Stock Units in this plan
are payable, in an equivalent number of shares of UI Common Stock, upon
termination of service on the Board of Directors.
(4) Mr. Grossi served as Chief Executive Officer of UI from January 1, 1998 to
May 20, 1998. He retired as an officer and director on December 31, 1998.
The number of shares of Common Stock beneficially owned by each of the
persons included in the foregoing table is less than 1% of the 14,334,922 shares
of Common Stock outstanding as of March 11, 1999. The number of shares of Common
Stock beneficially owned by all of the directors and officers as a group
represents approximately 0.7% of the outstanding shares of Common Stock as of
March 11, 1999.
14
<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires UI's
directors and officers, and persons who own more than ten percent of a
registered class of UI's equity securities, to file with the Securities and
Exchange Commission (SEC) and The New York Stock Exchange initial reports of
ownership and reports of changes in ownership of Common Stock and other equity
securities of UI. Directors, officers and certain greater-than-ten-percent
shareowners are required by SEC regulations to furnish UI with copies of all
Section 16(a) forms they file.
To UI's knowledge, based solely on review of reports furnished to UI and
written representations that no other reports were required, during the fiscal
year ended December 31, 1998 all Section 16(a) filing requirements applicable to
its directors, officers and greater-than-ten-percent shareowners were complied
with.
EXECUTIVE COMPENSATION
The following table shows the annual and long-term compensation, for
services in all capacities to UI for the years 1998, 1997 and 1996, of the two
persons who served as the chief executive officer during 1998 and of the four
other most highly compensated persons during 1998 who were serving as executive
officers at December 31, 1998:
<TABLE>
<CAPTION>
Long-term Compensation
----------------------------------
Annual Compensation Securities
Name and -------------------------- Underlying All Other
Principal Position(1) Year Salary($) Bonus($)(2) Options/SARs(#) LTIP Payouts($) Compensation(5)
--------------------- ---- --------- ----------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Richard J. Grossi 1998 $331,000 $95,000 $375,165(3) $2,342,459
Chairman of the Board of Directors 1997 $324,000 $125,000 $119,700(4) $6,925
and Chief Executive Officer 1996 $318,000 $125,000 $6,287
Nathaniel D. Woodson 1998 $341,668 $105,000 80,000(6) $38,756
President and Chief Executive
Officer
Robert L. Fiscus 1998 $224,900 $55,000 $260,691(3) $7,745
Vice Chairman of the Board of 1997 $220,400 $70,000 $59,850(4) $7,360
Directors and Chief Financial 1996 $218,400 $66,000 $6,692
Officer
James F. Crowe 1998 $181,200 $37,000 $200,531(3) $7,235
Group Vice President 1997 $177,600 $55,000 $42,750(4) $6,830
1996 $176,600 $51,000 $6,235
Anthony J. Vallillo 1998 $175,700 $46,000 $72,191(3) $6,679
Group Vice President 1997 $170,000 $55,000 $6,840(4) $6,144
1996 $125,875 $36,000 $5,701
Albert N. Henricksen 1998 $147,650 $36,000 $96,255(3) $6,876
Group Vice President 1997 $140,600 $38,000 $13,680(4) $6,401
1996 $136,900 $37,000 $5,871
</TABLE>
- -----------------------
(1) None of the persons named received any cash compensation in any of the years
shown other than the amounts appearing in the columns captioned "Salary,"
"Bonus," "LTIP Payouts" and "All Other Compensation." None of these persons
received, in any of the years shown, any cash-equivalent form of
compensation, other than through participation in UI's group life, health
and hospitalization plans, which are available on a uniform basis to all
salaried employees of UI and the dollar value of which, together with the
dollar value of all other non-cash perquisites and other personal benefits
received by such person, did not exceed the lesser of $50,000 or 10% of the
total salary and bonus compensation received by him for such year.
15
<PAGE>
(2) The amounts appearing in this column are awards earned in the years 1996,
1997 and 1998 pursuant to the Executive Incentive Compensation Program
described below.
(3) This is the amount earned for the 1996-1998 performance period under the
1996 Long-Term Incentive Program as described below. The cash payouts were
made in March 1999.
(4) This is the amount earned for the 1995-1997 performance period under the
1993 Dividend Equivalent Program. Under this program, which was terminated
when the Long-Term Incentive Program described below was established in
1996, each officer of UI was awarded a number of Dividend Equivalent Units
(Units) prior to the 1995 commencement of the performance period and, due to
the ranking of UI's total shareowner return during the performance period
relative to the total shareowner returns of a preselected peer group of
companies, the officer earned a number of Units and a cash payment equal to
that number of Units multiplied by the sum of all dividends paid per share
on UI Common Stock during the performance period. The cash payments were
made in February, 1998.
(5) The amounts appearing in this column, except the amounts shown for Messrs.
Grossi and Woodson, are cash contributions by UI to its Employee Stock
Ownership Plan (ESOP) on behalf of each of the persons named for (i) a match
of pre-tax elective deferral contributions by him to UI's 401(k) Plan from
his salary and bonus compensation (included in the columns captioned
"Salary" and "Bonus"), and (ii) an additional contribution by UI equal to
25% of the dividends paid on his shares in the ESOP. Cash contributions of
$7,353 and $5,403 were made on behalf of Messrs. Grossi and Woodson,
respectively, for these purposes during 1999, and are included in the
amounts appearing in this column for each of them. Mr. Grossi retired on
December 31, 1998, at which time there was payable to him, under the terms
of his employment agreement with UI, a supplemental retirement benefit
having a net present lump sum value of $2,335,106. Mr. Woodson was
reimbursed, during 1998, for $33,353 of his relocation expenses when he
moved from Pennsylvania to Connecticut at the commencement of his employment
by UI.
(6) These are phantom stock options on shares of UI Common Stock, granted to Mr.
Woodson in February of 1998, at the time of his employment by UI as its
President. The options are exercisable at the rate of 16,000 options on each
of the first five anniversaries of the grant date during the term of Mr.
Woodson's employment agreement with UI, which is described below.
UI's Executive Incentive Compensation Program was established in 1985 for
the purposes of (i) helping to attract and retain executives and key managers of
high ability, (ii) heightening the motivation of those executives and key
managers to attain goals that are in the interests of shareowners and customers,
and (iii) encouraging effective management teamwork among the executives and key
managers of UI. Under this program, cash awards may be made each year to
officers and key employees based on their achievement of pre-established
performance levels with respect to specific shareowner goals, customer goals and
individual goals for the preceding year, and upon an assessment of the officers'
performance as a group with respect to strategic opportunities during that year.
Eligible officers, performance levels and specific goals are determined each
year by directors who are not employees of UI, and incentive awards are paid
following action by the Board of Directors after the close of the year.
Incentive awards are made from individual target incentive award amounts, which
are prescribed percentages of the individual participants' salaries, ranging
from 20% to 35% depending on each participant's payroll salary grade. A
participant may, by achieving his or her pre-established performance levels with
respect to specific shareowner goals, customer goals and individual goals for a
year, become eligible for an incentive award of up to 150% of his or her target
incentive award amount for that year.
The Company's 1996 Long-Term Incentive Program was established for the
purposes of (i) promoting the long-term success of UI by attracting, retaining
and providing financial incentives to key employees who are in a position to
make significant contributions toward that success, (ii) linking the interests
of these key employees to the interests of the shareowners, and (iii)
encouraging these key employees to maintain proprietary interests in UI and
achieve extraordinary job performance levels. Under the program, an initial
three-year Performance Period commenced on January 1, 1996, three-year
Performance Periods commenced on January 1, 1997, January 1, 1998 and January 1,
1999, and a series of three-year Performance Periods will commence on January 1,
2000 and on each January 1 thereafter to and including January 1, 2005. The
Board of Directors designates the officers, if any, who will be participants in
the program for each Performance Period, the number of Contingent Performance
Shares to be awarded each officer-participant for that Performance Period, and a
peer group of companies comparable to UI for that Performance Period. Each
Contingent Performance Share is a share unit, equivalent to one share of UI
Common Stock, credited to an officer-participant's performance share account in
the program on a conditional basis at the beginning of a Performance Period. At
the end of each Performance Period, the number of Performance Shares earned for
the Performance Period is calculated on the basis of UI's total shareowner
return during the Performance Period relative to the peer group of companies
preselected
16
<PAGE>
by the Board of Directors for that Performance Period. Total shareowner return
for UI, and for each member of the peer group, for a Performance Period is
measured by the formula:
Change in Market Price from + Dividends Declared During the Period
Beginning to End of Period
-----------------------------------------------------------------------------
Market Price at Beginning of Period
If UI's total shareowner return for the Performance Period ranks at the
ninetieth percentile among the total shareowner returns of the peer group
companies, the number of Performance Shares earned by the officer-participant is
equal to the number of Contingent Performance Shares awarded to that
officer-participant at the commencement of the Performance Period. If UI's total
shareowner return ranks below the thirtieth percentile among those of the peer
group companies, no Performance Shares are earned for the Performance Period. If
UI's total shareowner return ranks between the thirtieth and the ninetieth
percentiles, the number of Performance Shares earned is calculated from a scale
rising from 15% to 100%. On each dividend payment date with respect to the
Company's Common Stock, the earned Performance Shares in an
officer-participant's Performance Share account are credited with an additional
number of Performance Shares in an amount equal to the dividend payable on the
earned Performance Shares in the account divided by the market price of UI
Common Stock on the dividend payment date. Upon the termination of an
officer-participant's employment by UI, the officer-participant is paid, in
cash, an amount equal to the number of earned Performance Shares in his or her
Performance Share account multiplied by the market price of UI Common Stock on
the employment termination date. An officer-participant is also entitled to
payment at any time, in cash, of the value of the earned Performance Shares in
his or her Performance Share account, provided that the officer-participant is
in compliance with the minimum stock ownership requirement for such officer
prescribed by the Board of Directors at that time. In 1998, for the 1998-2000
three-year Performance Period, the Board of Directors awarded Messrs. Grossi,
Woodson, Fiscus, Crowe, Vallillo and Henricksen 8,000, 5,000, 4,000, 2,500,
2,500 and 2,500 Contingent Performance Shares, respectively, under the 1996
Long-Term Incentive Program. The Board of Directors has not made any award of
Contingent Performance Shares in 1999, for the 1999-2001 three-year Performance
Period. See "PROPOSAL 1 - APPROVAL OF 1999 STOCK OPTION PLAN."
UI has entered into an employment agreement with Mr. Woodson, which will
continue in effect until terminated by UI at any time or by the officer on six
months' notice. This agreement provides that the annual salary rate of Mr.
Woodson will be $400,000, subject to upward revision by the Board of Directors
at such times as the salary rates for other officers of UI are reviewed by the
Directors, and subject to downward revision by the Board of Directors
contemporaneously with any general reduction of the salary rates of other
officers of UI, except in the event of a change in control of UI. The salary
paid to Mr. Woodson in 1998, shown on the above table, was paid pursuant to this
agreement. This agreement also provides that when the officer's employment by UI
terminates after he has served in accordance with its terms, UI will pay him an
annual supplemental retirement benefit in an amount equal to the excess, if any,
of (A) over (B), where (A) is 2.0% of his highest three-year average total
salary and bonus compensation from UI times the number of years (not to exceed
30) of his deemed service as an employee of UI, and (B) is the annual benefit
payable to him under UI's pension plan. If UI terminates the officer's
employment without cause, he will be paid the actuarial present value of this
supplemental retirement benefit and either a severance payment of up to two
years compensation at his then-current salary and bonus rate, or an increase of
a total of six years of age and/or service in the calculation of his retirement
benefit, at his election.
UI has also entered into employment agreements with Messrs. Fiscus and
Crowe, each of which will continue in effect until terminated by UI on three
years' notice or by the officer on six months' notice. These agreements provide
that the annual salary rates of Messrs. Fiscus and Crowe will be $218,400 and
$176,600, respectively, subject to upward revision by the Board of Directors at
such times as the salary rates of other officers of are reviewed by the
directors, and subject to downward revision by the Board of Directors
contemporaneously with any general reduction of the salary rates of other
officers of UI, except in the event of a change in control of UI. The salaries
paid to Messrs. Fiscus and Crowe in 1996, 1997 and 1998, shown on the above
table, were paid pursuant to these agreements. Each of these agreements also
provides that when the officer's employment by UI terminates after he has served
in accordance with its terms, UI will pay him an annual supplemental retirement
benefit in an amount equal to the excess, if any, of (A) over (B), where (A) is
2.2% of his highest three-year average total salary and bonus compensation from
UI times the number of years (not to exceed 30) of his service deemed as an
employee of UI, and (B) is the annual benefit payable to him under UI's pension
plan. If UI terminates the officer's employment without cause, he will be paid
the actuarial present value of this supplemental retirement benefit and, if the
termination occurs in connection with a change in control of the UI, the officer
will be entitled to either a severance payment of two years compensation at his
then-current salary and
17
<PAGE>
bonus rate, or an increase of a total of six years of age and/or service in the
calculation of his retirement benefit, at his election.
UI has also entered into employment agreements with Messrs. Vallillo and
Henricksen, each of which will continue in effect until terminated by UI at any
time or by the officer on six months' notice. These agreements provide that the
annual salary rates of Messrs. Vallillo and Henricksen will be $140,000 and
$136,900, respectively, subject to upward revision by the Board of Directors at
such times as the salary rates for other officers of UI are reviewed by the
Directors, and subject to downward revision by the Board of Directors
contemporaneously with any general reduction of the salary rates of other
officers of UI, except in the event of a change in control of UI. The salaries
paid to Messrs. Vallillo and Henricksen in 1996, 1997 and 1998, shown on the
above table, were paid pursuant to these agreements. Each of these agreements
also provides that when the officer's employment by UI terminates after he has
served in accordance with its terms, UI will pay him an annual supplemental
retirement benefit in an amount equal to the excess, if any, of (A) over (B),
where (A) is 2.0% of his highest three-year average total salary and bonus
compensation from UI times the number of years (not to exceed 30) of his service
as an employee of UI, and (B) is the annual benefit payable to him under UI's
pension plan. If UI terminates the officer's employment without cause, he will
be paid the actuarial present value of this supplemental retirement benefit and
either a severance payment of two years compensation at his then-current salary
and bonus rate, or an increase of a total of six years of age and/or service in
the calculation of his retirement benefit, at his election.
A trust fund has been established by UI for the funding of the supplemental
retirement benefits accruing under the employment agreements with Messrs.
Woodson, Fiscus, Crowe, Vallillo and Henricksen, and to ensure the performance
of UI's other payment obligations under each of these employment agreements in
the event of a change in control of UI.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants Potential Realizable Value
- ------------------------------------------------------------------------------------ at Assumed Annual
Number of % of Total Rates of Stock Price
Securities Options/SARs Appreciation for Option
Underlying Granted to Exercise Option Term
Options/SARs Employees in or Base Price Expiration ---------------------------
Name Granted (#) Fiscal Year ($/Share) Date 5%($) 10%($)
- ---- ----------- ----------- --------- ---- ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
Nathaniel D. Woodson 80,000(1) 100% $45.1563 Feb. 23, 2008 $1,806,520 $3,612,504
</TABLE>
- -------------------
(1) These are phantom stock options on shares of UI Common Stock, granted to Mr.
Woodson on February 23, 1998, at the time of his employment by UI as its
President. The options are exercisable at the rate of 16,000 options on each of
the first five anniversaries of the grant date during the term of Mr. Woodson's
employment agreement with UI, which is described above.
18
<PAGE>
STOCK OPTION EXERCISES IN 1998 AND YEAR-END OPTION VALUES
The following table shows aggregated Common Stock option exercises during
1998 by the chief executive officers and each of the other four most highly
compensated executive officers of UI, including the aggregate value of gains
realized on the dates of exercise. In addition, this table shows the number of
shares covered by both exercisable and non-exercisable options as of December
31, 1998. Also reported are the values as of December 31, 1998 for
"in-the-money" options, calculated as the positive spread between the exercise
price of existing options and the year-end fair market value of UI's Common
Stock.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options/SARs
Shares Options/SARs At FY-end(#) At FY-end ($)(2)
Acquired On Value ---------------------------- ----------------------------
Name Exercise(#) Realized($)(1) Exercisable Not Exercisable Exercisable Not Exercisable
---- ------------------------ ----------- --------------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Richard J. Grossi...........41,000 $459,900 0 0 $ 0 $ 0
Robert L. Fiscus............30,000 397,551 10,500 0 158,813 0
James F. Crowe.............. 7,500 60,938 0 0 0 0
Anthony J. Vallillo......... 1,200 8,400 0 0 0 0
Albert N. Henricksen........ 2,400 19,900 0 0 0 0
Nathaniel D. Woodson....... 0 0 0 80,000 0 507,496
</TABLE>
- -------------------------
(1) Fair market value at exercise date less exercise price.
(2) Fair market value of shares at December 31, 1998 ($51 1/2) less exercise
price.
RETIREMENT PLANS
The following table shows the estimated annual benefits payable as a single
life annuity under UI's qualified defined benefit pension plan on retirement at
age 65 to persons in the earnings classifications and with the years of service
shown. Retirement benefits under the plan are determined by a fixed formula,
based on years of service and the person's average annual earnings from UI
during the three years during which the person's earnings from UI were the
highest, applied uniformly to all persons.
<TABLE>
<CAPTION>
Average
Annual Earnings During Estimated Annual Benefits Payable At Age 65(3)
the Highest 3 --------------------------------------------------------------------------
Years of Service(1)(2) 20 Years(4) 25 Years(4) 30 Years(4) 35 Years(4) 40 Years(4)
---------------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
$100,000 $ 37,117 $ 46,397 $ 46,997 $ 47,597 $ 48,197
$150,000 $ 57,117 $ 71,397 $ 71,997 $ 72,597 $ 73,197
$200,000 $ 74,929 $ 94,112 $114,432 $115,032 $115,632
$250,000 $ 87,831(2) $110,598(2) $114,432(2) $115,032(2) $115,632(2)
$300,000 $ 87,831(2) $110,598(2) $114,432(2) $115,032(2) $115,632(2)
$350,000 $ 87,831(2) $110,598(2) $114,432(2) $115,032(2) $115,632(2)
$400,000 $ 87,831(2) $110,598(2) $114,431(2) $115,032(2) $115,632(2)
$450,000 $ 87,831(2) $110,598(2) $114,431(2) $115,032(2) $115,632(2)
</TABLE>
- -------------------------
(1) Earnings include annual salary and cash bonus awards paid pursuant to
UI's Executive Incentive Compensation Program. See "Executive
Compensation" above.
19
<PAGE>
(2) Internal Revenue Code Section 401(a)(17) limits earnings used to
calculate qualified plan benefits to $160,000 for 1998. This limit was
used in the preparation of this table. (In addition, qualified plan
benefits cannot exceed an Internal Revenue Code Section 415(b) limit of
$125,000 for 1998). The Board of Directors has adopted a supplemental
executive retirement plan that has permitted the Directors to award
supplemental retirement benefits to Messrs. Grossi, Woodson, Fiscus,
Crowe, Vallillo and Henricksen and to other officers individually
selected by the Directors in amounts sufficient to prevent these Internal
Revenue Code limitations from adversely affecting their retirement
benefits determined by the pension plan's fixed formula.
(3) The amounts shown in the table are not subject to any deduction for
Social Security or other offset amounts.
(4) As of their last employment anniversary dates, Messrs. Grossi, Woodson,
Fiscus, Crowe, Vallillo and Henricksen had accrued 41, 1, 26, 34, 30, and
35 years of service, respectively.
* * * *
BOARD OF DIRECTORS
COMPENSATION AND EXECUTIVE DEVELOPMENT COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
All of the members of the Compensation and Executive Development Committee
of the Board of Directors (the Committee) are non-employee Directors.
The Committee formulates all of the objectives and policies relative to the
compensation of the officers of UI, subject to approval by the entire Board of
Directors; and the Committee recommends to the Board of Directors all of the
elements of the officers' compensation arrangements, including the design and
adoption of compensation programs, the identity of program participants, salary
grades and structure, annual payments of salaries and any awards under the
annual incentive compensation program and the long-term incentive program.
UI's basic executive compensation program consists of three components:
annual salaries, bonuses under an annual incentive compensation program, and
long-term incentive program awards. The overall objective of this program is to
attract and retain qualified executives and to produce strong financial
performance for the benefit of UI's shareowners while providing a high level of
customer service and value for its customers. Accordingly, all of the
Committee's decisions, in 1998 and in prior years, have ultimately been based on
the Committee's assessment of UI's overall performance relative to other
electric utilities of comparable size, the compensation practices and programs
of other companies that are most likely to compete with UI for services of
executive officers, UI's strategic objectives, and the challenges it faces.
The Committee formulates annual salary ranges for officers by periodic
comparisons to rates of pay for comparable positions in other electric utilities
as reported in the Edison Electric Institute's Executive Compensation Survey
(the EEI Survey). Within the applicable range, each individual officer's annual
salary is then set at a level that will compensate the officer for day-to-day
performance, in the light of the officer's level of responsibility, past
performance, prior year's salary and bonus, and potential future contributions
to UI's strategic objectives.
As described in detail above at "Executive Compensation", UI's annual bonus
program and its long-term incentive program have somewhat different purposes.
Under the annual Executive Incentive Compensation Program, cash awards may be
made each year to officers based on their achievement of performance levels
formulated by the Committee with respect to (1) specific shareowner goals, (2)
specific customer goals, (3) specific team/individual goals, and (4) a
qualitative assessment of the officers' performance as a group with respect to
strategic opportunities of UI during that year. UI's Long-Term Incentive Program
rewards officers for achieving a return to shareowners over three-year periods
of time. The Long-Term Incentive Program links long-term incentive awards to
total return to shareowners compared to a peer group of electric utilities.
Although this program is designed to provide strong incentives for superior
future performance, it also encourages officers to continue serving UI, because
the earning of each incentive award is conditioned upon the officer's continued
service for the award's three-year performance period.
For 1998, the annual bonus opportunities of UI's officers were targeted by
the Committee such that the combination of each officer's 1998 salary and annual
Executive Incentive Compensation Program award, assuming that pre-established
performance goals were met, would approximate, on average, the 50th percentile
of compensation for comparable positions as reported in the 1997 EEI Survey.
Goals were established to focus the officers' attention on a
20
<PAGE>
"balanced scorecard," covering financial, operational, customer and human
resource measures. A prerequisite threshold level of recurring earnings per
share was specified in order for any bonus to be earned. For 1998 the
pre-established performance goals, accounting for 50% of each officer's bonus
award, included measures of: recurring earnings per share from operations,
recurring cash from operations available to pay down debt, sales revenues,
utility costs, customer satisfaction, reliability, safety, innovation and
training. For each of the business unit leaders, the President, the Chief
Financial Officer and the Chief Executive Officer, 30% of the bonus award for
1998 was based on the achievement of business unit "balanced scorecard" goals.
The remaining 20% of each officer's bonus award for 1998 was based on the
Committee's qualitative assessment of the performance of UI's officers as a
group with respect to 1998 strategic opportunities. For 1998, this assessment
focused on the officers' achievements in the development and implementation of a
comprehensive plan to prepare for the eventuality of either retail customer
choice or some other form of competition that is more intense than the current
framework. The comprehensive plan was to include items such as: addressing the
issues of (i) price, (ii) past investment costs and (iii) ratio of Common Stock
equity to total capitalization; and meeting the objectives of UI's becoming
competitive in both the customer and financial markets.
Some of the officers' achievements with respect to 1998 pre-established
performance goals were especially strong, including 150% of the recurring cash
available to pay down debt goal and 150% of the sales revenue goal. The
recurring earnings per share from operations goal was achieved at 68%, between
the threshhold and target levels, and the utility costs goal did not achieve the
threshhold level. For the remaining goals, innovation, safety and training,
achievements were 0%, 71% and 117%, respectively. Business unit leader,
President, Chief Financial Officer and Chief Executive Officer achievements of
business unit goals ranged between 50% and 117% of the several goals.
Overall, the Committee's bonus awards for 1998 under the Executive
Incentive Compensation Program ranged between 71% and 105% of the
pre-established targeted awards, depending on the individual officer's
achievements, reflecting a strong performance by UI's officers.
Under the Company's Long-Term Incentive Program, a total of 30,400
Contingent Performance Shares were awarded in 1998 to 11 officers of the Company
for the three-year Performance Period 1998-2000.
During 1998, UI conducted, with the assistance of an outside compensation
consulting firm, an extensive competitive review of its executive compensation
program. The review found executive pay levels to be well-aligned with
comparably-sized utility companies and resulted in modifications to the
long-term incentive component of the executive pay program, as detailed below,
in recognition of the utility industry's transition to a more competitive
environment.
As a result of this competitive review of UI's executive compensation
program, the Committee recommended and Board approved a change in the long-term
incentive plan to be effective in 1999. Stock options, granted under the
proposed 1999 Stock Option Plan, if it is approved by the shareowners, will
replace contingent performance shares as the form of long-term incentive. The
Committee believes that the use of stock options provides an even stronger link
between the officers and the interests of shareowners, as options only provide
the optionee value once the stock price appreciates above the grant price.
Long-term incentives, in recognition of the increasingly competitive
business environment for utilities, are based on a competitive blend of utility
and general industry award levels. It is the intention of the Compensation and
Executive Development Committee (the Committee) to transition, over a period of
several years, to a 50%/50% blend of median utility and general industry
long-term incentive awards.
The options will be granted to officers annually, as approved by the
Committee. The number of options granted to each officer in 1999 will be based
on a competitive blend of median EEl (utility) and general industry long-term
award levels for comparably sized companies. Grants made in 1999 will be based
on a weighted blend of 70% EEl and 30% general industry competitive long-term
incentive data. The partial use of general industry data recognizes the more
competitive environment for utilities and was deemed by the Committee to be an
important step toward ensuring UI's ability to continue attracting, retaining
and motivating experienced executive talent given similar changes in the
compensation programs at other utilities.
It is not expected that any compensation paid to an executive officer
during 1999 will become non-deductible under Internal Revenue Code Section
162(m) (the "million dollar pay cap").
21
<PAGE>
CHIEF EXECUTIVE OFFICER COMPENSATION FOR 1998
In March of 1998, the Committee recommended, and the Board of Directors
approved, a 1998 annual salary of $333,200 for Mr. Grossi, as Chairman of the
Board of Directors and Chief Executive Officer of the Company. This annual
salary was below the median salary for this officership position at other
electric utilities of comparable size, as reported in the 1997 EEI Survey; but
it was consistent with the Committee's judgment that a greater proportion of the
targeted combination of base salary and targeted annual performance bonus should
be shifted to the performance bonus component of his compensation. Mr. Grossi's
annual bonus performance target for 1998 under the Executive Incentive
Compensation Program was set at $116,620, consisting of a prerequisite
threshhold level recurring earning per share from operations goal and
pre-established goals with respect to recurring cash from operations available
to pay down debt, sales revenues, utility costs, customer satisfaction,
reliability, innovation, safety, training, business unit, and strategic
opportunities, as detailed above. At the conclusion of 1998, the Committee
recommended, and the Board of Directors approved, a 1998 bonus award of $95,000
to Mr. Grossi, representing 81% of his targeted annual performance bonus based
on the achievements as described above.
Mr. Woodson succeeded Mr. Grossi as Chief Executive Officer on May 20,
1998. In March of 1998, the Committee recommended, and the Board of Directors
approved, a 1998 annual salary of $400,000 for Mr. Woodson, as Chief Executive
Officer and President of the Company. This annual salary was between the median
and the 75th percentile salary for this officership position at other electric
utilities of comparable size, as reported in the 1997 EEI Survey; and below the
25th percentile of general industry sample for companies of similar size. It was
the Committee's judgment that the salary was appropriate for an executive with
the skills and abilities of Mr. Woodson to lead UI forward in the competitive
business environment. Mr. Woodson's prorated annual bonus performance target for
1998 under the Executive Incentive Compensation Program was set at $119,692,
consisting of a prerequisite threshhold level recurring earning per share from
operations goal and pre-established goals with respect to recurring cash from
operations available to pay down debt, sales revenues, utility costs, customer
satisfaction, reliability, innovation, safety, training, business unit, and
strategic opportunities, as detailed above. At the conclusion of 1998, the
Committee recommended, and the Board of Directors approved, a 1998 bonus award
of $105,000 to Mr. Woodson, representing 88% of his prorated targeted annual
performance bonus based on the achievements as described above.
The Committee's qualitative assessment of the performance of the officers
as a group with respect to strategic opportunities during 1998 was positive and,
in the judgment of the Committee, reflected favorably on Messrs. Grossi's and
Woodson's leadership.
COMPENSATION AND EXECUTIVE DEVELOPMENT COMMITTEE
Marc C. Breslawsky, Chair
Thelma R. Albright
David E. A. Carson
Betsy Henley-Cohn
James A. Thomas
* * * *
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No director of UI who served as a member of the Compensation and Executive
Development Committee during 1998 was, during 1998 or at any time prior thereto,
an officer or employee of UI. During 1998, no director of UI was an executive
officer of any other entity on whose Board of Directors an executive officer of
UI served.
DIRECTOR COMPENSATION
Directors who are employees of UI receive no compensation for their service
as directors of UI.
22
<PAGE>
The remuneration of non-employee directors of the Company includes an annual
retainer fee of $21,000, payable $9,000 for service during the first quarter of
the year and $4,000 each for service during the second, third and fourth
quarters of the year (the $9,000 retainer fee payable for service during the
first quarter of the year is payable in shares of UI Common Stock or by credit
to a stock account under the Non-Employee Directors' Common Stock and Deferred
Compensation Plan described below), plus a fee of $1,000 for each meeting of the
Board of Directors or committee of the Board of Directors attended. Committee
chairpersons receive an additional fee of $750 per quarter year. Non-employee
directors are also provided travel/accident insurance coverage in the amount of
$200,000.
UI's Non-Employee Directors' Common Stock and Deferred Compensation Plan
(the "Plan") has two features: a mandatory Common Stock feature; and an optional
Deferred Compensation feature. Each non-employee director has two accounts in
the Plan: a stock account for the accumulation of units that are equivalent to
shares of Common Stock ("Stock Units"), and on which amounts equal to cash
dividends on the shares of UI Common Stock represented by Stock Units in the
account accrue as additional Stock Units; and a cash account for accumulation of
the director's fees payable in cash that the director elects to defer, and on
which interest accrues at the prime rate in effect at the beginning of each
month at Citibank, N.A.
Under the Common Stock feature of the Plan, a credit of Stock Units to each
non-employee director's stock account in the Plan is made on or about the first
day of March in each year, unless the director elects to receive shares of UI
Common Stock in lieu of having an equivalent number of Stock Units so credited
to his or her stock account. Each annual credit consists of a number of whole
and fractional Stock Units equal to the sum of 200 plus the quotient resulting
from dividing the retainer fee for the first quarter of the year by the market
value of UI Common Stock on the date of the credit.
Under the Deferred Compensation feature of the Plan, a non-employee director
may elect to defer receipt of all or part of (i) his or her retainer fee for
service during the second, third and fourth quarters of each year, (ii) his or
her committee chairperson fees, and/or (iii) his or her meeting fees, which are
payable in cash. All amounts deferred are credited when payable, at the
director's election, to either the director's cash account or to the director's
stock account (in a number of whole and fractional Stock Units based on the
market value of UI Common Stock on the date the fee is payable) in the Plan.
All amounts credited to a non-employee director's cash account or stock
account in the Plan are at all times fully vested and nonforfeitable, and are
payable only upon termination of the director's service on the Board of
Directors. At that time, the cash account is payable in cash and the stock
account is payable in an equivalent number of shares of UI Common Stock.
In the event that the corporate reorganization into a holding company
structure is consummated, the directors of UI will continue their service as
directors of UI and become directors of Holdings, and their compensation will
continue on the same terms. At the time of effectiveness of the Plan of
Exchange, Holdings will automatically assume all of UI's obligations under the
Plan, and all Stock Units in Plan accounts will become equivalent to shares of
Holdings Common Stock.
23
<PAGE>
SHAREOWNER RETURN PRESENTATION
Set forth below is a line graph comparing the yearly change in the Company's
cumulative total shareowner return on its Common Stock with the cumulative total
return on the S&P Composite-500 Stock Index, the S&P Public Utility Index and
the S&P Electric Power Companies Index for the period of five fiscal years
commencing 1994 and ending 1998.
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
UIL $100 $ 83 $111 $103 $157 $193
S&P 500 100 101 139 170 227 292
S&P PUB. UTY. 100 93 129 133 164 188
S&P EL. CO. 100 87 113 113 141 163
</TABLE>
* ASSUMES THAT THE VALUE OF THE INVESTMENT IN THE COMPANY'S COMMON STOCK AND
EACH INDEX WAS $100 ON DECEMBER 31, 1993 AND THAT ALL DIVIDENDS WERE
REINVESTED. FOR PURPOSES OF THIS GRAPH, THE YEARLY CHANGE IN CUMULATIVE
SHAREOWNER RETURN IS MEASURED BY DIVIDING (I) THE SUM OF (A) THE CUMULATIVE
AMOUNT OF DIVIDENDS FOR THE YEAR, ASSUMING DIVIDEND REINVESTMENT, AND (B) THE
DIFFERENCE IN THE FAIR MARKET VALUE AT THE END AND THE BEGINNING OF THE YEAR,
BY (II) THE FAIR MARKET VALUE AT THE BEGINNING OF THE YEAR. THE CHANGES
DISPLAYED ARE NOT NECESSARILY INDICATIVE OF FUTURE RETURNS MEASURED BY THIS
OR ANY METHOD.
EMPLOYMENT OF INDEPENDENT PUBLIC ACCOUNTANTS:
The Board of Directors of UI, at a meeting held on January 25, 1999, and in
accordance with the recommendation of its Audit Committee, voted to employ the
firm of PricewaterhouseCoopers LLP to make an audit of the books and affairs of
UI for the fiscal year 1999. One or more representatives of
PricewaterhouseCoopers LLP will attend the annual meeting, will be afforded the
opportunity to make a statement if they desire to do so, and will be available
to answer questions that may be asked by shareowners.
If the shareowners do not, by the affirmative vote of a majority of the
shares of Common Stock represented at the meeting, approve the employment of
PricewaterhouseCoopers LLP as independent public accountants, their employment
will be reconsidered by the Board of Directors.
24
<PAGE>
PROPOSAL 1 - APPROVAL OF 1999 STOCK OPTION PLAN:
In 1990, UI's shareowners approved, and UI established, a 1990 Stock
Option Plan, pursuant to which a total of 669,800 stock options were granted by
the Board of Directors during the years 1990 through 1994. No stock options were
granted in 1995 and, in 1996, the Board of Directors replaced the 1990 Stock
Option Plan with the Long-Term Incentive Program described at "EXECUTIVE
COMPENSATION." At the present time, only 16,300 unexercised stock options remain
outstanding and unexercised under the 1990 Plan.
The Board of Directors now believes that the shareowners' interests
will be better served going forward if the long-term incentive program for
management is once again based on stock options. Accordingly, the Board of
Directors has made no awards of Contingent Performance Shares in 1999 for the
1999-2001 three-year Performance Period under the 1966 Long-Term Incentive
Program, and the directors intend to substitute, for these awards, grants of
stock options under the proposed 1999 Stock Option Plan (the "Plan"), which the
Board of Directors approved on March 22, 1999 and recommends that the
shareowners approve.
The Plan is intended to promote the profitability of UI and its
subsidiaries by: (i) providing directors, officers and certain key full-time
employees with incentives to contribute to the success of UI, and (ii) enabling
UI to attract, retain and reward the best available directors and managerial
employees. If approved, the Plan is effective as of March 22, 1999 and, unless
terminated sooner by the Board of Directors, will terminate on March 21, 2009.
After termination, no further options will be granted under the Plan, although
options outstanding on the termination date will not be cancelled by the
termination. The full text of the Plan is set forth in the attached Exhibit A to
this Proxy Statement and Prospectus. The following description and discussion of
the Plan is qualified in its entirety by reference to Exhibit A.
A maximum of 650,000 shares of UI Common Stock may be purchased
pursuant to the Plan, and the maximum number of shares that may be purchased
through options granted in any one year to any employee may not exceed 50,000.
The shares acquired will be authorized but unissued shares. Options under the
Plan may be granted as Incentive Stock Options ("ISOs"), intended to qualify for
favorable tax treatment under federal tax law, or as Nonqualified Stock Options
("NSOs"). When ISOs or NSOs become exercisable and are exercised by the optionee
to whom they have been granted, the optionee pays to UI the exercise price per
share fixed on the date of the option grant and receives shares of UI Common
Stock equal to the number of ISOs or NSOs exercised. All proceeds received by UI
from the exercise of options will be used for general corporate purposes.
The Plan requires that the exercise price per share for all options
be equal to or greater than the fair market value of the Common Stock on the
date of the creation of the option. In the case of the creation of any ISO
for an optionee who, at the time of the grant, owns more than 10% of the
total combined voting power of all classes of stock of UI or any of its
subsidiaries, the Plan requires that the option exercise price per share be
equal to or greater than 110% of the fair market value of shares of Common
Stock on the date the option is created. No option may be repriced after the
date of its creation. Fair market value on any date is determined by
averaging the high and low sales prices on that date of the Common Stock on
the New York Stock Exchange. The exercise price of an option is payable in
cash, by check, or in shares of UI Common Stock having a fair market value on
the date the option is exercised equal to the option exercise price of the
options being exercised, or any combination of cash, check and such shares.
A Committee of UI's Board of Directors, exclusive of any Director who
is, or within the previous twelve months has been, an employee, administers the
Plan. The Committee selects the optionees, determines the number of stock
options to be granted to each optionee, whether such stock options will be NSOs
or ISOs, and whether any stock option will include a right to purchase an
additional share of Common Stock contingent upon the option holder's having
exercised the stock option and having paid its exercise price in full in shares
of UI Common Stock (a "Reload Right"). The Committee also determines the period
within which each stock option granted will be exercisable, and may provide that
the stock options will become exercisable in installments. The following rules
must be observed: (i) no stock option may be exercisable less than one year, or
more than ten years, from the date it is granted, (ii) no more than 1/3 of the
number of stock options granted to any optionee on any date may first become
exercisable in any twelve-month period, (iii) in the case of the grant of an ISO
to an optionee who, at the time of the grant, owns more than 10% of the total
combined voting power of all classes of stock of UI or any of its subsidiaries,
in no event may such stock option be exercisable more than five years from the
date it is granted, (iv) in the case of ISOs, the number of stock options
granted to an optionee on any date which may first become exercisable in any
calendar year must be limited to $100,000 divided by the exercise price per
share, (v) an option arising from the exercise of a Reload Right cannot be
exercised before the
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six-month anniversary of the date when the Reload Right was exercised, and it
will expire on the same date on which the option from which it arose would have
expired if it had not been exercised, (vi) except as otherwise provided in the
Plan, an employee optionee may exercise a stock option only if he or she is, and
has continuously been since the date of the stock option was granted, a
full-time employee of the Company or one of its subsidiaries.
Upon the termination of a director optionee's service as a director, or
of an employee optionee's full-time employment as a result of retirement, death
or disability, all of the optionee's options that are not then exercisable will
become immediately exercisable. Upon the termination of an employee optionee's
full-time employment for any other reason, all of the optionee's options that
are not then exercisable will automaically expire. Stock options exercisable on
the date of termination due to death will be exercisable for a period of one
year after the date of death. ISOs exercisable on the date of termination due to
retirement will be exercisable for a period of three months after such
termination. ISOs exercisable on the date of termination due to a disability
will be exercisable for a period of one year after such termination. NSOs
exercisable on the date of termination due to retirement or disability will be
exercisable for a period of three years after such termination. All stock
options exercisable on the date of voluntary or involuntary termination of
full-time employment due to any cause other than death, retirement or disability
will be exercisable as follows: ISOs will be exercisable within three months
after the date of termination and NSOs will be exercisable within five months
after the date of termination. However, if an optionee is terminated for cause
or engages in an occupation or business that is a competitor of UI or any of its
subsidiaries, all of such optionee's unexercised stock options may be cancelled
by the Board of Directors.
In the event of a change of control of UI (other than pursuant to the
Plan of Exchange), all stock options that have been granted and have not expired
or been exercised will become immediately exercisable.
The Board of Directors will have authority to modify or terminate the
Plan and may suspend and, if suspended, reinstate the Plan. However, the Board
of Directors will not be permitted to alter or impair any stock option
previously granted under the Plan without the optionee's consent; and no
modification or termination may, without the prior approval of UI's Common Stock
shareowners: (i) increase (except in the case of a readjustment of the Common
Stock or a recapitalization) the 650,000 maximum number of shares that may be
acquired by participants under the Plan, (ii) reduce the option price that is
established under the Plan, (iii) extend the maximum option term under the Plan
beyond ten years, or (iv) change the Plan's eligibility requirements.
UI believes that under present federal tax laws, the grant of stock
option will create no tax consequences for an optionee or UI. The optionee will
have no taxable income upon exercising an ISO (except that the alternative
minimum tax may apply) and UI will receive no deduction when an ISO is
exercised. Upon exercising an NSO, the optionee must generally recognize
ordinary income equal to the "spread" between the exercise price and the fair
market value of the Common Stock on the date of exercise. However, optionees who
are subject to certain federal securities law restrictions will, unless they
elect otherwise, generally not recognize ordinary compensation income from the
exercise of a NSO until such restrictions lapse. UI will be entitled to a
deduction for federal income tax purposes at the same time and in the same
amount as an optionee is required to recognize ordinary compensation income as
described above. The tax treatment to an optionee of a disposition of shares
acquired under the Plan depends on how long the shares have been held and on
whether such shares were acquired by exercising an ISO or by exercising an NSO.
Generally, there will be no tax consequences to UI in connection with a
disposition of shares acquired under an option, except that UI will be entitled
to a deduction in the case of a disposition of shares acquired under an ISO
before the applicable ISO holding periods have been satisfied.
On March 22, 1999, the Board of Directors granted, subject to
shareowner approval of the Plan, ________ NSOs, with Reload Rights, to ____
directors and key employees, as follows:
These NSOs will become exercisable in three equal installments. One-third of
each optionee's NSOs will first become exercisable on March 22 in each of the
years 2000, 2001 and 2002. All of these NSOs will expire, unless sooner
exercised or terminated, on March 21, 2009.
The option exercise price per share for all of these NSOs is the fair
market value of the Common Stock on March 22, 1999, which was $_____.
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In the event that the corporate reorganization into a holding company
structure is consummated, the Plan will automatically be assumed by and become
the stock option plan of Holdings, and all options granted and outstanding at
the time of the Share Exchange will be automatically converted into options to
acquire Holdings Common Stock on the same terms.
Although authorized but unissued shares of UI Common Stock are
available for issuance from time to time by the Board of Directors without
approval by the shareowners, the 1999 Stock Option Plan is subject to shareowner
approval under the listing requirements of the New York Stock Exchange.
Accordingly, it is proposed that the shareowners vote at the meeting to approve
the Plan. Approval of the proposal requires the affirmative vote of the holders
of a majority of UI's issued and outstanding Common Stock represented at the
meeting. The issuance of authorized but unissued shares of the UI's Common Stock
pursuant to the Plan is also subject to approval by the Connecticut Department
of Public Utility Control (the "DPUC"). Although approval by the DPUC does not
require a specific finding as to the fairness of the security issue to the
Company's shareowners, the Department does consider, among other things, the
effect of proposed issues on the capital structure of UI.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
"FOR" PROPOSAL 1 - APPROVAL OF 1999 STOCK OPTION PLAN
PROPOSAL 2 - APPROVAL OF HOLDING COMPANY STRUCTURE
GENERAL
The Board of Directors and management of UI consider it to be in the
best interests of UI, its shareowners and customers to change the corporate
organization of UI into a holding company structure. The holding company
structure will be accomplished through a reverse triangular merger pursuant to
the Plan of Exchange and in accordance with the Connecticut Business Corporation
Act ("CBCA"). Consummation of the Plan of Exchange will result in UI becoming a
wholly-owned subsidiary of Holdings, a newly-formed Connecticut corporation, and
the present holders of UI Common Stock becoming the holders of Holdings Common
Stock. In order to implement the Plan of Exchange, UI has formed Holdings as
UI's wholly-owned subsidiary. Holdings, in turn, has formed its own wholly-owned
Connecticut corporation subsidiary named United Mergings, Inc. ("Mergings").
When the Plan of Exchange is put into effect (the "Effective Time"), the
following events will occur in order to create the holding company structure:
o Mergings will merge with and into UI with UI being the
surviving corporation.
o Each outstanding share of Mergings Common Stock will be
automatically converted into one share of UI Common Stock.
o Each outstanding share of UI Common Stock (excluding shares
with respect to which dissenters' rights have been properly
exercised) will be automatically converted into one share of
Holdings Common Stock.
o Each share of Holdings Common stock owned by UI will
automatically be cancelled.
The Board of Directors of UI has unanimously approved, and has
recommended that UI's shareowners approve, the Plan of Exchange, which is
subject to shareowner and regulatory approvals. See "REQUIRED SHAREOWNER
APPROVAL" and "REQUIRED REGULATORY APPROVALS." A copy of the Plan of Exchange is
attached to this Proxy Statement and Prospectus as Exhibit B and is incorporated
herein by this reference. The Share Exchange will not result in the recognition
of gain or loss by UI's shareowners for federal income tax purposes. See
"CERTAIN FEDERAL INCOME TAX CONSEQUENCES."
The other securities of UI will not be affected by the Plan of
Exchange, and each will remain an outstanding security of UI. UI will also
continue to own all of the general partnership interests in United Capital
Funding Partnership L.P. and UI will continue to guarantee the 9 5/8% Preferred
Capital Securities, Series A (Liquidation Preference $25 per Security) of such
partnership after the Merger.
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ORGANIZATION OF HOLDINGS AND MERGINGS
HOLDINGS
Holdings was incorporated under the laws of the State of Connecticut on
March 22, 1999. Holdings was organized to become the parent of UI and
currently has only nominal equity capital and no debt. Before the Effective
Time, the only business of Holdings will be the execution, delivery and
performance of the Plan of Exchange and the assets of Holdings will consist only
of (a) $1,000 in cash, representing one half of the equity capital contributed
by UI, the owner of 100 shares of Holdings Common Stock and Holdings' sole
shareholder, and (b) 100 shares of Mergings Common Stock, which constitutes all
of the issued and outstanding shares of Mergings Common Stock and which was
acquired by Holdings with the other half of the equity capital contributed to it
by UI. The officers of Holdings prior to the Effective Time will be Nathaniel D.
Woodson, Chairman of the Board of Directors and Chief Executive Officer, Robert
L. Fiscus, Vice Chairman of the Board of Directors and Chief Financial Officer,
and Kurt Mohlman, Treasurer and Secretary; and the directors of Holdings prior
to the Effective Time will be Messrs. Woodson and Fiscus. At the Effective Time,
all of the shares of Holdings Common Stock held by UI will be cancelled, and the
other directors of UI will become additional directors of Holdings. See
"DIRECTORS AND MANAGEMENT OF HOLDINGS." The principal executive offices of
Holdings are now, and will remain after the consummation of the Plan of
Exchange, at 157 Church Street, New Haven, Connecticut 06510.
MERGINGS
Mergings was incorporated under the laws of the State of Connecticut on
March 22, 1999. Mergings was organized as a wholly-owned subsidiary of
Holdings to facilitate the Plan of Exchange. At the Effective Time, Mergings
will cease to exist as a result of its merger with and into UI. Mergings has
only nominal equity capital and no debt. Prior to the Effective Time, the only
business of Mergings will be the execution, delivery and the performance of the
Plan of Exchange and the assets of Mergings will consist only of $1,000 in cash,
representing the equity capital contributed by Holdings, the owner of 100 shares
of Mergings' Common Stock and Mergings' sole shareowner. The officers and
directors of Mergings prior to the Effective Time will be Messrs. Woodson,
Fiscus and Mohlman, each holding the same offices in Mergings as he holds in
Holdings. At the Effective Time, all 100 of the shares of Mergings Common Stock
owned by Holdings will be automatically converted into an equal number of shares
of UI Common Stock and Holdings will become the sole shareowner of UI.
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ORGANIZATIONAL CHARTS
The following charts demonstrate the differences between UI's present
organizational structure and the organizational structure of Holdings after the
Merger.
UI's current corporate structure is as follows:
THE UNITED ILLUMINATING COMPANY
EXISTING UNIT ORGANIZATION
--------------------------------------
The United Illuminating
Company
United Resources, Inc.
American Payment Precision Power, Thermal United Bridgeport
Systems, Inc. Inc. Energies, Inc. Energy, Inc.
Precision
Constructors,
Inc.
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The reorganized corporate structure after the consummation of the Plan
of Exchange is expected to be as follows:
THE UNITED ILLUMINATING COMPANY
REORGANIZED UNIT ORGANIZATION
--------------------------------------
UIL Holdings
Corporation
The United Illuminating United Resources, Inc.
Company
American Payment Precision Power, Thermal United Bridgeport
Systems, Inc. Inc. Energies, Inc. Energy, Inc.
Precision
Constructors,
Inc.
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REASONS FOR THE PLAN OF EXCHANGE
GENERAL
The Board of Directors of UI considered many factors in its decision to
recommend the Plan of Exchange. A summary of all of the material factors
considered by the Board of Directors in approving and recommending the Plan of
Exchange appears below.
COMPETING IN A NEW REGULATORY ENVIRONMENT
The Board of Directors has determined that, in order to facilitate the
clear functional unbundling and separation of UI's Distribution Company assets
and operations from its unregulated assets and operations, UI's corporate
organization ought to be restructured. In addition to this purpose, the
corporate reorganization proposed, a holding company structure, will also afford
UI the managerial, structural and financial flexibility necessary to meet
challenges in the future competitive marketplace. It will also promote prudent
and efficient management of the Distribution Company, because management will be
better able to identify costs, and cost causation, by function. And the holding
company structure proposed will, by assuring that unregulated business
activities are not conducted in subsidiaries of the Distribution Company,
provide more definitive insulation of the Distribution Company's customers from
actual or perceived risks associated with those unregulated business activities.
The electric energy industry is becoming more competitive at both the
wholesale and retail levels, due to a variety of regulatory, economic and
technological developments. The more important of these developments from UI's
perspective are described below. UI believes that it can optimize its ability to
participate in the changing electric energy industry and its various business
segments by creating the holding company structure. As described in detail in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in UI's 1998 Annual Report to Shareowners, Connecticut has enacted a
massive and complex statute that is designed to cause a restructuring of the
State's regulated electric utility industry. The business of generating and
supplying electricity directly to consumers will be price-deregulated and opened
to competition beginning in the year 2000. At that time, these business
activities will be separated from the business of delivering electricity to
consumers, which is also known as the transmission and distribution business.
Incumbent franchised utility companies, including UI, will remain in the
transmission and distribution business and will continue to be regulated by the
Connecticut Department of Public Utility Control as Distribution Companies. In
compliance with the restructuring statute, UI has filed with the DPUC an
"unbundling" plan. The plan states that UI intends to retain all of its
transmission and distribution assets and operations and remain a franchised,
regulated Distribution Company. The plan also states that UI's transmission and
distribution assets and operations will be legally and functionally separated
from its unregulated generation assets and operations and all of its other
unregulated assets and operations, including those of UI's existing
subsidiaries.
INCREASED FLEXIBILITY
UI is subject to Title 16 of the Connecticut General Statutes and the
rules and regulations promulgated thereunder. Title 16 imposes limitations and
conditions on UI's operations and its ability to obtain financing. These limits
and the delay caused by the required DPUC approval process represent a
significant constraint on UI's ability to compete with unregulated companies.
Historically, UI has been able to compete successfully notwithstanding these
statutory restrictions because most of its competition was similarly regulated.
However, with the unbundling of the electric energy industry and entry by
non-regulated entities into business segments that were previously engaged in
only by regulated utilities, UI's ability to compete successfully is greatly
diminished.
Holdings' unregulated subsidiaries will be able to engage in
unregulated utility business segments and obtain debt and equity financing
without having to comply with Title 16 and without first having to obtain DPUC
approval. Following the restructuring, the unregulated subsidiaries will engage
only in businesses that are not regulated by the DPUC. Such businesses may, of
course, encounter competitive and other factors not generally experienced by UI,
and may have different, and perhaps greater, investment risks than those
involved in the regulated electric energy business of UI. Any losses incurred by
such businesses will not be recoverable through UI's rates.
As of December 31, 1998, UI had $1,891 million of consolidated assets.
The unregulated assets of UI's subsidiaries represented approximately 2% of UI's
total consolidated assets. For 1998, UI had $686 million of annual
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operating revenues from its utility operations, and UI's unregulated
subsidiaries had annual operating revenues of $62 million.
OTHER BENEFITS OF THE HOLDING COMPANY STRUCTURE
Following is a summary of some of the other substantial benefits that
may be derived from operating through the holding company structure.
o The separation of UI's regulated utility operations from
Holdings operations in other non-regulated business segments
will help avoid any perception of cross-subsidization that
might otherwise arise if all operations were performed by UI
or a subsidiary of UI.
o The business risk from the unregulated operations of Holdings
and its subsidiaries will not be transferred to UI's utility
operations.
o UI will obtain additional legal protection from the
liabilities of the unregulated subsidiaries of Holdings and,
similarly, each of Holdings' unregulated subsidiaries will
obtain additional legal protection from the liabilities of
each other unregulated subsidiary and from the liabilities of
UI.
o The holding company structure will permit the use of financing
techniques that are more suited to the particular
requirements, characteristics and risks of Holdings'
unregulated businesses without affecting the creditworthiness
of UI.
PLAN OF EXCHANGE
The Plan of Exchange, a copy of which is attached hereto as Exhibit B,
has been unanimously approved by the Boards of Directors of UI, Holdings and
Mergings, by UI as the sole shareowner of Holdings, and by Holdings as the sole
shareowner of Mergings. Pursuant to its terms, at the Effective Time, the
following events will occur: (i) Mergings will merge with and into UI with UI
being the surviving corporation; (ii) each outstanding share of Merging's Common
Stock will be automatically converted into one share of UI Common Stock; (iii)
each outstanding share of UI Common Stock (excluding shares with respect to
which dissenters' rights have been properly exercised) will be automatically
converted into one share of Holdings Common Stock; (iv) each share of Holdings
Common Stock owned by UI will automatically be cancelled.
Neither the Certificate of Incorporation of UI, nor UI's Bylaws, will
be affected by the Plan of Exchange. Holdings is governed by its own separate
Certificate of Incorporation that was filed with the Secretary of State of the
State of Connecticut on March 22, 1999 and by its own separate Bylaws.
Holding's Certificate of Incorporation and Bylaws are patterned on contemporary
Connecticut business corporation models. Copies of these documents are attached
to this Proxy Statement and Prospectus as Exhibits D and E. See "DESCRIPTION OF
HOLDINGS CAPITAL STOCK" for a discussion of the relative rights of a shareowner
of UI prior to the Effective Time and a shareowner of Holdings at and after the
Effective Time.
The other outstanding securities of UI, including its debt instruments,
will not be affected by the Plan of Exchange and each will remain an outstanding
security of UI. UI will also continue to own all of the general partnership
interests in United Capital Funding Partnership L.P. and UI will continue to
guarantee the 9 5/8 % Preferred Capital Securities, Series A (Liquidation
Preference $25 per Security) of that partnership after the Effective Time.
REQUIRED SHAREOWNER APPROVAL
Under Connecticut law, the Plan of Exchange must be approved by
two-thirds of the voting power of each voting group entitled to vote on it. The
holders of UI Common Stock are the only voting group entitled to vote on the
Plan of Exchange. Approval of the Plan of Exchange, therefore, requires the
affirmative vote of two-thirds of the issued and outstanding shares of UI's
Common Stock shareowners voting as a group. Since the voting requirement for
approval of the Merger relates to outstanding shares (as opposed to shares voted
at the Meeting), broker non-votes and abstentions both will have the legal
effect of negative votes.
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DISSENTERS' RIGHTS
The Connecticut Business Corporation Act (the "CBCA") provides
dissenters' rights of appraisal for the owners of UI Common Stock who object to
the Plan of Exchange and meet the requisite statutory requirements contained in
Sections 33-855 through 33-872 of the CBCA. Under the CBCA, if the Plan of
Exchange is approved by UI shareowners and is consummated, any owner of UI
Common Stock who wishes to assert dissenters' rights must do all of the
following: (a) deliver to UI, before the vote is taken, written notice of his,
her or its intent to demand payment for his, her or its shares of UI Common
Stock, (b) not vote such shares in favor of the Plan of Exchange, and (c) upon
receipt of a Dissenters' Notice from UI, demand payment, certify whether the
shareowner acquired beneficial ownership of the shares before the date set forth
in the Dissenters' Notice, and deposit the certificate or certificates
representing such shareowner's shares in accordance with the terms of the
Dissenters' Notice. At the Effective Time, UI will pay to such shareowner the
amount UI estimates to be the "fair value" of such shares of UI Common Stock as
of the time immediately prior to the Effective Time.
A shareowner who does not satisfy each of the requirements listed in
the preceding paragraph will not be entitled to payment for such shareowner's
shares of UI Common Stock under the dissenters' rights provisions of the CBCA
and will be bound by the terms of the Plan of Exchange. Notwithstanding the
foregoing, a shareowner who satisfies requirements (a) and (b) in the preceding
paragraph, but acquired beneficial ownership of his, her or its shares on or
after the announcement date set forth in the Dissenters' Notice from UI (see
"Notice and Demand" below) will be entitled to payment. UI may, however, elect
to withhold such payment unless such shareowner agrees to accept, in full
satisfaction of such shareowner's demand, the amount offered by UI.
A shareowner of record may assert dissenters' rights as to fewer than
all the shares registered in such shareowner's name only if such shareowner (a
"Partial Dissenter") dissents with respect to all shares beneficially owned by
any one person and notifies UI in writing of the name and address of each person
on whose behalf such shareowner of record asserts dissenters' rights. The rights
of a Partial Dissenter are determined as if the shares as to which such Partial
Dissenter dissents and such Partial Dissenter's other shares were registered in
the names of the different beneficial owners. A beneficial shareowner may assert
dissenters' rights as to shares held on such beneficial shareowner's behalf only
if (a) such beneficial shareowner submits to UI the record shareowner's written
consent to the dissent not later than the time the beneficial shareowner asserts
dissenter's rights, and (b) such beneficial shareowner does so with respect to
all shares of which such beneficial shareowner is the beneficial owner or over
which such beneficial shareowner has power to direct the vote.
Set forth below is a more detailed summary of the procedures relating
to the exercise of dissenters' rights under the CBCA. The following summary does
not purport to be a complete statement of, and is qualified in its entirety by
reference to, the provisions of Sections 33-855 through 33-372 of the CBCA, a
copy of which is attached to this Proxy Statement and Prospectus as Exhibit C
hereto and to any amendments to such sections that may be adopted after the date
of this Proxy Statement and Prospectus.
WRITTEN NOTICE
The CBCA requires that an owner of UI Common Stock who wishes to assert
dissenters' rights (a) deliver to UI before the vote on approval of the Plan of
Exchange is taken, written notice of such shareowner's intent to demand payment
for shares of UI Common Stock if the proposed Plan of Exchange is consummated
and (b) not vote such shares of UI Common Stock in favor of the Plan of Exchange
proposal. ANY NOTICE BY A DISSENTING SHAREOWNER MUST BE RECEIVED BY UI AT 157
CHURCH STREET, NEW HAVEN, CONNECTICUT 06510, ATTENTION: TREASURER AND SECRETARY,
PRIOR TO THE VOTE'S BEING TAKEN AT THE ANNUAL MEETING.
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NOTICE AND DEMAND
Within ten days after the date on which the Plan of Exchange is
approved by UI shareowners at the Annual Meeting, UI must deliver a written
Dissenters' Notice to each dissenting shareowner. The Dissenters' Notice will
o state where the payment demand must be sent and where and when
certificates for certificated shares of UI Common Stock must
be deposited,
o inform holders of uncertificated shares of Common Stock to
what extent transfer of the shares will be restricted after
the payment demand is received,
o supply a form for demanding payment that (a) includes the
date, which was October 1, 1998, of the first announcement
to the news media of the terms of the proposed Plan of
Exchange and (b) requires that the shareowner asserting
dissenter's rights certify whether or not he, she or it
acquired beneficial ownership of UI Common Stock before that
date,
o prescribe a date by which UI must receive the payment demand,
which date will be not less than 30 nor more than 60 days from
the date such Dissenters' Notice is delivered to the
dissenting shareowner, and
o be accompanied by a copy of Sections 33-855 through 33-872 of
the CBCA, inclusive.
A dissenting shareowner who wishes to assert dissenters' rights must make the
payment demand, certify whether such dissenting shareowner acquired beneficial
ownership of the shares of UI Common Stock before the October 1, 1998
announcement date set forth in the Dissenters' Notice, and deposit the UI Common
Stock certificates in accordance with the terms of the Dissenters' Notice.
At the Effective Time, UI must pay each dissenting shareowner that has
complied with the applicable provisions of the CBCA the amount estimated to be
the fair value of such dissenting shareholder's shares of UI Common Stock and
provide to each such dissenting shareholder certain financial data relating to
UI and other specified information as required by the CBCA. If the Effective
Time is not within 60 days after the date set for demanding payment and
depositing share certificates, UI will return the deposited certificates and, if
the Plan of Exchange is subsequently effected, UI will deliver a new Dissenters'
Notice and repeat the payment demand procedure. If payment is not made on the
date of the Effective Time, then UI will be obligated to pay accrued interest
from the Effective Time until the date of payment, at the average rate paid by
UI on its principal bank loans.
UI may elect to withhold payment from a dissenting shareholder who
acquired beneficial ownership of UI Common Stock after the October 1, 1998 date
set forth in the Dissenters' Notice as the date of the first announcement of the
terms of the proposed Plan of Exchange. If UI so elects to withhold payment, it
must, after the Effective Time, estimate the fair value of the shares of UI
Common Stock and pay, to each such dissenting shareowner who agrees to accept it
in full satisfaction of such shareowner's payment demand, such amount plus
accrued interest from the Effective Time until the date of payment at the
average rate paid by UI on its principal bank loans and provide certain other
specified information, as set forth in the CBCA, to each such dissenting
shareowner.
COURT PROCEEDINGS
If a dissenting shareowner believes that the amount offered or paid is
less than the fair value of such dissenting shareholder's shares of UI Common
Stock, that dissenting shareowner may, within 30 days after the payment was made
or offered, notify UI in writing of such dissenting shareowner's own estimate of
the fair value of the shares of UI Common Stock, and demand payment of such fair
value (less any payments previously received by such dissenting shareowner). A
dissenting shareowner waives the right to demand payment as described in this
paragraph unless such dissenting shareowner notifies UI thereof within 30 days
after UI has made or offered payment for such dissenting shareowner's shares of
UI Common Stock. If a dissenting shareowner's payment demand remains unsettled
in accordance with his, her or its own estimate of the fair value of the UI
Common Stock, UI must (a) commence a proceeding in the Connecticut Superior
Court within 60 days after receiving the shareowner's notice, to determine the
fair value of the shares of UI Common Stock, or (b) pay to such dissenting
shareowner the fair value demanded. The
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costs of a court proceeding, including the reasonable compensation and expenses
of appraisers appointed by the court, will generally be assessed against UI. The
court may, however, assess such court costs, including the fees and expenses of
counsel and experts, against any party thereto, including UI or any dissenting
shareowner, if such party is found by the court to have acted arbitrarily,
vexatiously or not in good faith with respect to the exercise of dissenters'
rights under the CBCA.
REQUIRED REGULATORY APPROVALS
In addition to the shareowner approval described above, UI must obtain
the approval of the DPUC, under the Connecticut General Statutes, the Federal
Energy Regulatory Commission (the "FERC") under the Federal Power Act, and the
Nuclear Regulatory Commission (the "NRC"), under the Atomic Energy Act, in order
to consummate the Plan of Exchange. Following is a description of the status of
UI's applications with each such governmental agency.
On November 13, 1998 UI filed with the DPUC an application for approval
to establish a holding company structure. Public hearings on the application
were held by the DPUC on February 18, 1999 and March 8, 1999. As part of its
review of the application, the DPUC is considering the financial, technological
and managerial suitability and responsibility of UI and the ability of UI to
continue to provide safe, adequate and reliable service to the public though its
plant, equipment and manner of operation if the application were to be approved.
An application was filed with the FERC on March __, 1999 for
approval of the Plan of Exchange. The application will be approved by FERC if it
finds that the Plan of Exchange is consistent with the public interest.
An application was filed with the NRC on March ___, 1999 for
approval of the Plan of Exchange. The application will be approved by the NRC if
it finds that [CRITERIA TO BE INSERTED].
The consummation of the Plan of Exchange is conditioned upon the
receipt of all of the foregoing governmental approvals.
REGULATION OF HOLDINGS
At the Effective Time, Holdings will become a holding company within
the meaning of the Public Utility Holding Company Act of 1935 (the "PUHCA").
However, Holdings will be entitled to file an annual exemption statement with
the Securities and Exchange Commission (the "SEC") claiming exemption under
Section 3(a)(1) of the PUHCA, and thereby become and remain exempt from all
provisions of the PUHCA except Section 9(a)(2), which requires prior SEC
approval of certain acquisitions of utility entities. The basis for this
exemption will be that both Holdings and UI, as Holdings' only public utility
subsidiary, will be incorporated in the same State, will be predominantly
intrastate in character and will carry on their businesses substantially in
their State of incorporation - Connecticut. The exemption will be available only
so long as the utility business of UI, and of any other utility company
subsidiary that Holdings may create or acquire and from which Holdings derives a
material part of its income, is predominantly intrastate in nature. The
exemption may also be revoked if the SEC determines that the exemption may be
detrimental to the public interest or the interests of investors or consumers.
Holdings has no present plan to engage in any activity that would require it to
register as a public utility holding company subject to regulation under the
PUHCA.
So long as Holdings is not a public utility, it will not be subject
under present Connecticut or federal law to regulation by the DPUC, the FERC or
the NRC.
BUSINESS OF HOLDINGS
See "ORGANIZATION OF HOLDINGS AND MERGINGS - HOLDINGS" for a
description of the organization of Holdings and its operations prior to the
Effective Time of the Plan of Exchange.
Once the Plan of Exchange is consummated, Holdings will be a holding
company that owns all of the Common Stock of UI. Holdings will be able to
engage, directly or though subsidiaries, in other businesses that are unrelated
to the
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principal regulated utility business of UI. Holdings will obtain financing for
its operations from dividends and other distributions it receives from UI and
its other subsidiaries, borrowings and the sale of its own equity and debt
securities.
UI has one wholly-owned subsidiary, United Resources, Inc., a
Connecticut corporation ("URI"), that presently serves as the parent corporation
for several unregulated business corporations, each of which is incorporated
separately in the State of Connecticut. UI will transfer its stock of URI to
Holdings immediately after the Effective Time. This transfer will complete the
corporate restructuring by separating Holdings regulated and unregulated
business segments. URI's four subsidiaries engage in the different businesses
described below:
o American Payment Systems, Inc., URI's largest subsidiary,
manages a national network of agents for the processing of
bill payments made by customers of UI and other utilities.
o Thermal Energies, Inc. is participating in the development of
district heating and cooling facilities in the downtown New
Haven, Connecticut, area, including the energy center for an
office tower and participation as a 52% partner in the energy
center for a city hall and office tower complex.
o Precision Power, Inc. provides power-related equipment and
services to the owners of commercial buildings and industrial
facilities.
o United Bridgeport Energy, Inc. is participating in a merchant
wholesale electric generating facility being constructed at
the Bridgeport Harbor Station generating plant.
AMENDMENT OR TERMINATION
UI and Holdings may amend, modify or supplement the Plan of Exchange in
such manner as may be agreed upon by the Boards of Directors of UI and Holdings
at any time before or after approval of the Plan of Exchange by the shareowners
of UI; provided, however, that no amendment, modification or supplement will be
made which would, in the judgment of the Board of Directors of UI, materially
and adversely affect the shareowners of UI.
UI may terminate the Plan of Exchange at any time before or after its
approval by UI's shareowners, by action of the Board of Directors of UI, if UI's
Board determines, in its sole discretion, that the Share Exchange would be
inadvisable or not in the best interests of UI or its shareowners. In making
such determination, UI's Board would consider, among other things, the nature of
DPUC approval and of any conditions imposed upon Holdings or UI in connection
with obtaining such approval, the nature of the FERC approval under the Federal
Power Act, the nature of the NRC approval under the Atomic Energy Act, the
nature of any further regulatory approval requirements not now anticipated, the
failure to receive a favorable confirming opinion of counsel as described under
"CERTAIN FEDERAL INCOME TAX CONSEQUENCES," or demands for cash payments, if any,
made by owners of UI Common Stock seeking to exercise statutory dissenters'
rights as described under "DISSENTERS' RIGHTS." UI is unable to predict under
what other circumstances the Plan of Exchange might be terminated and abandoned.
EFFECTIVE DATE OF THE SHARE EXCHANGE
The Share Exchange will become effective upon the filing of a
Certificate of Merger and Share Exchange with the Secretary of the State of
Connecticut on a date to be selected by UI and Holdings as provided in the Plan
of Exchange. Subject to the receipt of required regulatory and shareholder
approvals, it is expected that the effective date will occur on July 1, 1999
or as soon thereafter as is practicable. UI has no control over the timing of
required regulatory approvals. UI cannot predict when, or if, such regulatory
approvals will be obtained. See also "AMENDMENT OR TERMINATION".
EXCHANGE OF STOCK CERTIFICATES NOT REQUIRED
If the Share Exchange is effected, it will not be necessary for owners
of UI Common Stock to make a physical exchange their existing stock certificates
for stock certificates of Holdings. The owners of UI Common Stock will
automatically become the owners of shares of Holdings Common Stock on a
share-for-share basis. The present stock certificates of UI will automatically
represent shares of Holdings Common Stock. After the Share Exchange, as
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presently outstanding certificates of UI Common Stock are presented for
transfer, new certificates bearing Holdings name "UIL Holdings Corporation" will
be issued.
Holdings may elect to offer direct registration to owners of its Common
Stock. Through the direct registration system, a Holdings shareowner may elect
to have a statement-based account, rather than having to keep track of share
certificates. This would eliminate the risk of loss, theft or destruction of
share certificates and provide convenience to Holdings and its shareowners.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following general discussion summarizes certain federal income tax
considerations relating to the Plan of Exchange. This summary is included for
general information only. It does not discuss all aspects of federal taxation
that may be relevant to a particular owner of UI Common Stock in light of the
personal tax circumstances of the owner or to certain types of owners of UI
Common Stock subject to special treatment under the federal income tax laws.
Consummation of the Plan of Exchange is conditioned upon the receipt,
on or before the Effective Time, of a confirmatory opinion of Wiggin & Dana,
general counsel to UI, satisfactory to the Board of Directors of UI, to the
effect that:
o The Share Exchange will be treated as a transfer of all of the
outstanding UI Common Stock by the owners thereof to Holdings
solely in exchange for all of the outstanding Holdings Common
Stock, in an exchange qualifying for nonrecognition under
Section 351 of the Internal Revenue Code of 1986, as amended
(the "Code").
o No gain or loss will be recognized by the owners of UI Common
Stock as a result of the Share Exchange.
o The tax basis of the shares of Holdings Common Stock received
in the Share Exchange by a UI shareowner will have the same
tax basis as the shares of UI Common Stock that such UI
shareowner owned immediately prior to the Share Exchange, and
the holding period for such shares of Holdings Common Stock
will include the period during which such UI shareowner held
such shares of UI Common Stock, provided that such shares of
UI Common Stock were held as capital assets at the Effective
Time.
o No income, gain or loss will be recognized by Holdings as a
result of the Share Exchange.
o Gain or loss will be recognized by UI shareowners who properly
perfect their dissenters' rights under the CBCA, measured by
the difference between the amount of cash received (other than
any amount constituting interest, which should be ordinary
income to such shareowners) and the basis of the shares of UI
Common Stock exchanged therefor. Such gain or loss will be
capital gain or loss provided that the shares of UI Common
Stock were held as capital assets at the Effective Time, and
will be long-term capital gain or loss if such shares were
held for more than one year at such time.
The foregoing discussion is for general information only and does not
constitute tax advice. Although such statements and conclusions represent the
legal judgment of Wiggin & Dana, such judgment is not binding in any manner upon
the Internal Revenue Service. The discussion is based on existing federal income
tax law, regulations, judicial interpretations, and other published guidance,
all of which are subject to change and differing interpretation. The discussion
is limited to a summary of material federal income tax consequences of the Plan
of Exchange to UI shareowners and Holdings. It does not address the tax
consequences of any other transaction, including any corporate restructuring
transaction that may be undertaken in connection with the Plan of Exchange. The
discussion also does not address non-income, state, local or foreign tax
consequences associated with the Plan of Exchange. It does not address all
aspects of federal income taxation that may be relevant in the particular
circumstances of each shareowner or to certain types of shareowners (including
insurance companies, tax-exempt entities, financial institutions or
broker-dealers, foreign corporations, foreign estates and trusts, persons who
are not citizens or residents of the United States, and persons who acquired UI
Common Stock pursuant to an employee stock purchase plan, or otherwise as
compensation).
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Each UI shareowner is urged to consult his, her or its own tax advisor
as to the particular tax consequences of the Share Exchange for such shareowner,
including the effect and applicability of federal, state, local and foreign
income and other tax laws.
DESCRIPTION OF HOLDINGS CAPITAL STOCK
GENERAL
Holdings has 39,000,000 shares of authorized capital stock, consisting
of 30,000,000 shares of common stock, no par value per share, 1,000,000 shares
of preferred stock, $100 par value per share, 4,000,000 shares of preferred
stock, $25 par value per share, and 4,000,000 shares of preference stock, $25
par value per share. There are 100 shares of Holdings Common Stock presently
outstanding, all of which are owned of record and beneficially by UI, and no
shares of Holdings preferred stock or preference stock are outstanding.
Upon consummation of the Plan of Exchange, Holdings will have issued
and outstanding a number of shares of its Common Stock that is equal to the
number of shares of UI Common Stock that were issued and outstanding immediately
prior to the Effective Time, owned by those persons who owned UI Common Stock
immediately prior to the Effective Time, except for the number of shares owned
by those persons who properly exercise their dissenters' rights. The number and
designation of the authorized shares of capital stock of Holdings and the
absence of outstanding shares of Holdings preferred stock and preference stock
will not change as a result of the Plan of Exchange.
The following is a summary of certain rights and privileges of the
owners of Holdings capital stock. This summary does not purport to be complete.
Reference is made to Holdings certificate of incorporation and to the laws of
the State of Connecticut, the following information being qualified in its
entirety by such reference. Holdings Certificate of Incorporation and Bylaws, as
they will be in effect at and after the Effective Time, are set forth in
Exhibits D and E, respectively, attached to this Proxy Statement and Prospectus.
PREFERRED STOCK
Holdings authorized preferred stock will be issuable in one or more
series, from time to time, as the Board of Directors of Holdings may determine.
Each series of Holdings preferred stock will be issued in such number of shares
and will have such relative rights, preferences and limitations and such
conversion and redemption terms as are prescribed by resolutions of the Board of
Directors of Holdings, all to the extent and in the manner provided by
applicable law.
PREFERENCE STOCK
Holdings authorized preference stock will be issuable in one or more
series, from time to time, as the Board of Directors of Holdings may determine.
Each series of Holdings preference stock will be issued in such number of shares
and will have such relative rights, preferences and limitations and such
conversion and redemption terms as are provided by resolutions of the Board of
Directors of Holdings, all to the extent and in the manner provided by
applicable law.
COMMON STOCK
DIVIDEND RIGHTS. Subject to the limitations, if any, specified with
respect to the preferred stock and the preference stock, or any series thereof,
issued by Holdings from time to time, dividends may be paid on shares of
Holdings common Stock, out of the funds legally available therefor, when and as
declared by Holdings Board of Directors.
LIQUIDATION RIGHTS. Subject to the limitations, if any, specified with
respect to the preferred stock and the preference stock, or any series thereof,
issued by Holdings from time to time, in the event of any dissolution or other
winding up of Holdings, whether voluntary or involuntary, the assets of Holdings
available for payment and distribution to shareholders will be distributed
ratably to the holders of Holdings Common Stock.
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VOTING RIGHTS. Except as otherwise provided in any statute of the State
of Connecticut or as otherwise specified with respect to the preferred stock or
any series thereof of Holdings, all voting power vests exclusively in the owners
of Holdings Common Stock.
MISCELLANEOUS. Holdings Common Stock has no cumulative voting rights,
preemptive or conversion rights or redemption or sinking fund provisions, and
the outstanding shares of Holdings Common Stock will be fully paid and
non-assessable. Except for restrictions on transfer imposed upon Holdings Common
Stock as the result of any applicable laws, including applicable federal and
state securities laws, Holdings Common Stock is freely transferable and not
subject to any restrictions on alienability.
LISTING OF HOLDINGS COMMON STOCK
Holdings will apply to have its common stock listed on the New York
Exchange. It is expected that such listing will become effective at the
Effective Time, subject to the rules of the New York Stock Exchange. Holdings
expects to use "____" as its stock exchange ticker symbol, which is the symbol
currently used for UI. Information concerning the stock exchange ticker symbol
and quotation listings in newspapers will be announced to shareowners as soon as
it is available. Holdings reserves the right to terminate its listing on any
exchange in the future, upon notice to shareowners and compliance with its
listing agreements.
DIVIDENDS
Holdings does not now, nor does it intend to, conduct directly any
business operations from which it will derive any revenues. Dividends on
Holdings Common Stock will depend upon the earnings, financial condition and
capital requirements of UI and, to a lesser extent, Holdings' other
subsidiaries. In addition, payment of dividends on the UI Common Stock will
continue to be subject to the rights of owners of any outstanding UI preferred
stock and preference stock with respect to dividends.
Holdings expects to declare and pay quarterly dividends on its Common
Stock on the same schedule as that now followed by UI with respect to UI Common
Stock dividends. The quarterly dividend most recently declared by the UI Board
of Directors on UI Common Stock was 72 cents per share, payable on April 1, 1999
to owners of record at the close of business on March 11, 1999.
DIRECTORS AND MANAGEMENT OF HOLDINGS
The Directors of UI will also become the Directors of Holdings at the
effective time, and they will serve as the directors of Holdings until the first
annual meeting of shareowners of Holdings following the Effective Time.
Information concerning UI's nominees for election as directors is set forth at
"NOMINEES FOR ELECTION AS DIRECTORS," above in this Proxy Statement and
Prospectus.
The following persons, each of who is currently an executive officer of
UI, will hold, at least initially, in addition to the office held by him with
UI, the following office of Holdings:
<TABLE>
<CAPTION>
NAME TITLE
- ---- -----
<S> <C>
Nathaniel D. Woodson Chairman of the Board of Directors and Chief
Executive Officer
Robert L. Fiscus Vice Chairman of the Board of Directors and
Chief Financial Officer
Kurt Mohlman Treasurer and Secretary
</TABLE>
Information concerning UI's executive officers is set forth in UI's
Annual Report on Form 10-K for the fiscal year ended December 31, 1998. Such
information is incorporated herein by reference.
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<PAGE>
OFFICER EMPLOYMENT CONTRACTS
UI has entered into employment agreements with its officers, each
of which includes provisions that will become applicable if there is a change in
control of UI. None of these provisions will become applicable by reason of the
implementation of the Plan of Exchange.
STOCK OPTION AND OTHER PLANS
If the Plan of Exchange is consummated, the UI Dividend Reinvestment
and Common Stock Purchase Plan and all employee stock option, stock ownership
and stock purchase plans will be assumed by Holdings and Holdings Common Stock
will be delivered instead of UI Common Stock pursuant to such plans. See
"PROPOSAL 1 - APPROVAL OF STOCK OPTION PLAN."
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for UI Common Stock is American Stock
Transfer & Trust Company. American Stock Transfer & Trust Company will also be
the transfer agent and registrar for Holdings Common Stock.
FINANCIAL STATEMENTS
UI's Annual Report on Form 10-K for the fiscal year ended December 31,
1998 contains UI's consolidated financial statements and certain other financial
information. Copies of such consolidated financial statements and other
financial information are also included in UI's Annual Report to Shareowners,
which is mailed to owners of record of UI Common Stock. Additional copies of the
Annual Report to Shareowners may be obtained without charge upon request as
stated under "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE," above.
Separate financial statements of Holdings are not presented in this
Proxy Statement and Prospectus because Holdings is an inactive company without
material assets or liabilities or an operating history. Pro forma financial
effects of the Plan of Exchange are not set forth herein since, on a
consolidated basis, no change will result from the Plan of Exchange.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 2 - APPROVAL OF
HOLDING COMPANY STRUCTURE.
DATE FOR SUBMISSION OF PROPOSALS BY SECURITY HOLDERS:
Shareowners who intend to present proposals for action at the 2000 Annual
Meeting of the Shareowners are advised that such proposals must be received at
the principal executive offices of the Company by November 30, 1999 in order to
be included in the Company's proxy statement and form of proxy for that meeting.
- -------------------------
By Order of the Board of Directors
March 30, 1999 KURT MOHLMAN, TREASURER AND SECRETARY
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EXHIBIT A
THE UNITED ILLUMINATING COMPANY
1999 STOCK OPTION PLAN
1. PURPOSE.
The purpose of The United Illuminating Company 1999 Stock Option Plan
("the Plan") is to promote the profitability of The United Illuminating Company
("the Company") and its Subsidiaries by providing members of the Company's Board
of Directors, officers and certain key employees ("Optionees") with incentives
to contribute to the success of the Company and by enabling the Company to
attract, retain and reward the best available Directors and managerial
employees. The Plan shall be effective on March 22, 1999 (the "Effective Date").
On and after the Effective Date, the Administrator shall have the
authority to grant Nonqualified Stock Options and Incentive Stock Options in
accordance with the terms of the Plan.
For purposes of the Plan, the term "Incentive Stock Option" shall have
the meaning set forth in 422 of the Internal Revenue Code of 1986, as amended
("the Code"); a "Nonqualified Stock Option" shall be any option to purchase from
the Company a share of its no par value Common Stock ("Common Stock") other than
an Incentive Stock Option; and "Stock Options" shall refer collectively to
Incentive Stock Options and Nonqualified Stock Options. The term "Subsidiary" or
"Subsidiaries" of an entity shall mean one or more corporations, a majority of
the outstanding shares of voting stock of which is owned directly or indirectly
by that entity.
2. ADMINISTRATION.
The Plan shall be administered by a Committee of the Company's Board of
Directors, as it may be constituted from time to time, which Committee shall
consist of no less than three members and shall not include any member of said
Board who is, or within twelve (12) months prior to the exercise of any
discretion under this Plan has been, an employee of the Company or its
Subsidiaries. Each member of the Committee (the "Administrator") shall be an
"outside director" as such term is defined in Section 162(m) of the Code and a
"non-employee director" under Section 16(b) of the Securities Exchange Act of
1934, as amended. The Administrator is authorized to interpret the Plan in
accordance with its terms and may, from time to time, prescribe, adopt, amend
and rescind any rules and regulations it deems appropriate for the
administration of the Plan and for the continued qualification under the Code of
any Incentive Stock issued hereunder. Decisions of the Administrator on all
matters relating to the Plan shall be conclusive and binding on the Company, its
shareowners and Plan participants.
The validity, construction and effect of the Plan, and any rules and
regulations relating thereto, shall be determined in accordance with the laws of
Connecticut and applicable federal law.
3. SHARES AVAILABLE FOR THE PLAN.
Subject to the adjustments prescribed in Section 6, a maximum of
650,000 shares of Common Stock may be purchased pursuant to the Plan, and the
maximum aggregate number of shares that may be covered by Stock Options granted
in any one year to any Optionee who is an employee of the Company (an
"employee-Optionee") shall not exceed 50,000. If any Stock Option granted under
the Plan expires or terminates unexercised or, for any reason, becomes
unexercisable, the unpurchased shares represented by such Stock Option shall
thereafter be available for further grants under the Plan. If the exercise price
of any Stock Option is paid by the Optionee's surrendering a share or shares of
Common Stock, either actually or by attestation, only the number of shares of
Common Stock issued net of the shares tendered shall be deemed purchased for
purposes of calculating the maximum number of shares that may be purchased
pursuant to the Plan.
4. PARTICIPATION.
The Administrator shall, from time to time, select those members of the
Board of Directors, officers and key full-time employees of the Company to whom
Stock Options shall be granted, and shall determine (i) the number of
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Stock Options to be granted to each such individual, (ii) whether such Stock
Options shall be Nonqualified or Incentive Stock Options, or some combination
thereof, (iii) the periods within which such Stock Options shall be exercisable,
and (iv) whether any such Stock Option shall include a right to purchase an
additional share of Common Stock (a "Reload Right") contingent upon Optionee's
having exercised such Stock Option and having paid the exercise price in full by
surrendering, either actually, or by attestation, a share or shares of Common
Stock having a Fair Market Value on the date of the exercise equal to the
exercise price of such Stock Option. A grant of Stock Options at any time shall
neither guarantee nor preclude a grant to such Optionee at any later time.
Participation in the Plan shall be limited to those members of the
Board of Directors, officers and key full-time employees of the Company selected
by the Administrator in its sole discretion. Members of the Board of Directors
who are not employees of the Company shall not be eligible to receive Incentive
Stock Options. Nothing in the Plan or in any Stock Option granted shall confer
any right on an employee to continue in the employ of the Company or shall
interfere in any way with the right of the Company to terminate an employee's
employment at any time.
5. TERMS AND CONDITIONS OF OPTIONS.
The Stock Options granted shall be subject to the following terms and
conditions:
(a) EXERCISE PRICE OF STOCK OPTIONS. Regardless of whether the Stock
Option granted is a Nonqualified or Incentive Stock Option, the purchase
price per share deliverable upon the exercise of each Stock Option shall not
be less than 100% of the Fair Market Value of shares of Common Stock on the
date the Stock Option is granted or, in the case of a Stock Option arising
from the exercise of a Reload Right, on the date that the Reload Right is
exercised. No Stock Option may be repriced by the Administrator. In the case
of the grant of any Incentive Stock Option to an Optionee who, at the time of
the grant, owns more than 10% of the total combined voting power of all
classes of stock of the Company or any of its Subsidiaries, the option
exercise price per share shall not be less than 110% of the Fair Market Value
of shares of Common Stock on the date the Stock Option is granted or, in the
case of a Reload Right, on the date that the Reload Right is exercised. "Fair
Market Value" on any date shall be the average of the high and low sales
price of shares of Common Stock on the New York Stock Exchange composite
tape, or such other recognized market source as may be designated by the
Administrator from time to time, on such date. If there is no sale on such
date, then such average price on the last previous day on which a sale is
reported shall govern.
(b) The exercise price of a Stock Option shall be payable in cash or by
the Optionee's surrendering, either actually or by attestation, a share or
shares of Common Stock having a Fair Market Value on the date of exercise equal
to the exercised price of such Stock Option, or in any combination thereof, as
determined by the Administrator.
(c) TERM AND EXERCISABILITY OF STOCK OPTIONS. The Administrator shall
determine the period within which each Stock Option granted shall be exercisable
and may provide that a number of Stock Options shall become exercisable in
installments; provided, however, that
(i) except as provided in subsection (h)(iv) of this Section 5, in
no event shall any Stock Option be exercisable less than one
year, or more than ten years, from the date it is granted;
(ii) except as provided in subsection (h)(iv) of this Section 5, no
more than one-third of the number of Stock Options granted to
an Optionee on any date may first become exercisable in any
twelve-month period;
(iii) in the case of the grant of an Incentive Stock Option to an
Optionee who, at the time of the grant, owns more than 10% of
the total combined voting power of all classes of stock of the
Company or any of its Subsidiaries, in no event shall such
Stock Option be exercisable more than five years from the date
of the grant;
(iv) in the case of Incentive Stock Options, except as provided in
subsection (h)(iv) of this Section 5, the number of Stock
Options granted to an Optionee on any date that may first
become exercisable in any calendar year shall be limited to
$100,000 divided by the exercise price per Stock Option, as
determined in accordance with Section 422(d) of the Code and
regulations issued thereunder; and
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(v) a Stock Option arising from the exercise of a Reload Right
shall become exercisable on the six-month anniversary of the
date when the Reload Right was exercised and shall expire on
the same date on which the Stock Option from which it arose
would have expired if it had not been exercised.
(d) CONTINUED EMPLOYMENT. Except as otherwise provided in subsection
(f) of this Section 5, an employee-Optionee may exercise a Stock only (i) if he
or she is, and has continuously been since the date the Stock Option was
granted, a full-time employee of the Company or one of its Subsidiaries.
(e) SHAREOWNER RIGHTS. Prior to the exercise of a Stock Option and
delivery of the Common Stock shares purchased thereby, the Optionee shall have
no right to dividends nor be entitled to voting or any other rights on account
of such Stock Option.
(f) EXERCISABILITY OF OPTIONS UPON CERTAIN EVENTS. Upon the termination
of an Optionee's service as a Director of the Company, or of an
employee-Optionee's full-time employment, as a result of retirement, death or
disability, all Stock Options of the Optionee that have not expired or been
exercised, shall become immediately exercisable. Upon the termination of an
employee-Optionee's full-time employment for any other reason, including but not
limited to voluntary or involuntary termination, all of the Optionee's Stock
that are not then exercisable shall automatically expire. An employee-Optionee
shall be considered "retired" or "disabled" for purposes of the Plan if he or
she is entitled to a service pension, disability pension, disability benefit or
disability allowance under the Company's pension or disability plan.
(i) UPON DEATH. If an Optionee's service as a Director, or an
employee-Optionee's full-time employment, is terminated by
death, such Optionee's legal representative or successor by
bequest or the laws of descent and distribution (each a
"Successor in Interest") may exercise, in whole or in part,
Stock Options exercisable by such Optionee on the date of his
or her death, from time to time within one year after such
Optionee's date of death.
(ii) UPON RETIREMENT, OR TERMINATION DUE TO DISABILITY. If an
employee-Optionee's full-time employment is terminated due to
retirement or disability, such Optionee, or his or her
guardian or Successor in Interest, may exercise, in whole or
in part: (A) Nonqualified Stock Options exercisable by such
Optionee on the date of termination of his or her full-time
employment, from time to time within three years after such
date; and (B) Incentive Stock Options, exercisable by such
Optionee on the date of his or her retirement, from time to
time within three months after such date.
(iii) UPON VOLUNTARY OR INVOLUNTARY TERMINATION OF SERVICE. Upon a
voluntary or involuntary termination of an employee-Optionee's
full-time employment due to any cause other than the death,
retirement or disability, such Optionee, or his or her
Successor in Interest, may exercise, in whole or in part: (A)
Nonqualified Stock Options, exercisable by such Optionee on
the date of termination of his or her full-time employment,
from time to time within five months after such date; and (B)
Incentive Stock Options exercisable by such Optionee on such
date, from time to time within three months after such date;
provided, however, that if an employee-Optionee is terminated
for cause (as determined by the Administrator), or if an
employee-Optionee, at any time after his or her voluntary or
involuntary termination of full-time employment, engages in
any occupation or business that, in the opinion of the
Administrator, is a competitor of the Company or any of its
Subsidiaries, all of such Optionee's unexercised Stock Options
may be canceled by the Administrator.
(iv) Upon A CHANGE OF CONTROL. In the event of a change of control
of the Company, all Stock Options that have been granted and
have not expired or been exercised, shall become immediately
exercisable. Change in Control of the Company 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 that is or
after such merger or consolidation would be
affiliated with a shareholder owning at least
twenty-five percent (.25) of the Common Stock of the
Company; or
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(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 Administrator may, from time to time, by the affirmative vote of
not less than a majority of the entire membership of the Administrator,
modify the phrase "twenty-five percent (.25)" in one or more of the
foregoing subsections (A), (B), (C), (D) and/or (E) to a lesser
percentage, but not less than twenty percent (.20).
Transfer from the Company to a Subsidiary, from a Subsidiary to the Company, and
from one Subsidiary to another, shall not be considered a termination of
employment. Nor shall it be considered a termination of employment if an
Optionee is placed on a military or sick leave or such other leave of absence,
which is considered as continuing intact the employment relationship; in such a
case, the employment relationship shall be continued until the date when an
employee's right to reemployment shall no longer be guaranteed either by law or
by contract.
(g) TRANSFERABILITY. Except as otherwise permitted by the
Administrator, Stock Options are not transferable otherwise than by the
Optionee's will or by the laws of descent and distribution.
(h) LISTING. REGISTRATION AND/OR APPROVALS. Each Stock Option granted
shall be subject to the requirement that if at any time the Administrator
determines it is necessary or desirable to list, register or qualify any shares
of Common Stock subject to such Option upon any securities exchange or under any
state or federal law, or to obtain the consent or approval of any governmental
regulatory body as a condition of, or in connection with, the granting of such
Stock Option or the issue or purchase of shares of Common Stock thereunder, no
such Stock Option may be exercised in whole or in part unless such listing,
registration, qualification, consent or approval shall have been effected or
obtained, free of any conditions not acceptable to the Administrator.
(i) OPTION AGREEMENT Each person to whom a Stock Option is granted
shall, as a condition to the receipt thereof, enter into an agreement with the
Company, which shall contain such provisions, consistent with the provisions of
the Plan, as may be prescribed by the Administrator.
6. ADJUSTMENTS.
In the event of a reorganization, recapitalization, stock split, stock
dividend, combination of shares, merger, consolidation, distribution of assets,
or any other change in the corporate structure or shares of the Company, the
Administrator shall make such adjustments as it deems appropriate in the number
and kind of shares which may be purchased pursuant to the Plan, in the number
and kind of shares covered by the Stock Options granted and in the exercise
price of outstanding Stock Options. In the event of any merger, consolidation or
other reorganization in which
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exercise price of outstanding Stock Options. In the event of any merger,
consolidation or other reorganization in which the Company is not the surviving
or continuing corporation, all Stock Options granted hereunder and outstanding
on the date of such event shall be assumed by the surviving or continuing
corporation. In the event of any reorganization in which all of the shares of
the Company's Common Stock are exchanged for shares of the common stock of
another corporation, all Stock Options granted hereunder and outstanding on the
effective date of the share exchange shall be automatically converted into stock
options and reload options to purchase shares of the other corporation on
identical terms, and the other corporation shall assume this Plan, and the Board
of Directors of the other corporation, excluding any member of said Board who
is, or within twelve (12) months prior to the exercise of any discretion under
this Plan has been an employee of the other corporation, its subsidiaries, the
Company or its Subsidiaries, shall be and become the Administrator of this Plan
on the effective date of the share exchange.
7. TERMINATION AND MODIFICATION OF THE PLAN.
The Administrator, without approval of the shareholders of the Company,
may modify or terminate the Plan and from time to time may suspend, and if
suspended, may reinstate any or all of the provisions of the Plan, except that
no such modification or termination of the Plan may, without the consent of an
Optionee, alter or impair any Stock Option previously granted under the Plan and
that no modification shall become effective without prior approval of the Common
Stock shareowners of the Company that would: (a) increase (except in the case of
a readjustment of the Common Stock or a recapitalization) the maximum number of
shares for which Stock Options may be granted under the Plan; (b) reduce the
option price that may be established under the Plan; (c) extend the maximum
option term under the Plan beyond ten years, or (d) change the Plan's
eligibility requirements. Anything in the preceding sentence or elsewhere in any
provision of the Plan to the contrary notwithstanding, if the Company enters
into a transaction that is intended to be accounted for using the
pooling-of-interests method of accounting, but it is determined by the
Administrator that any Stock Option, or the Plan or any provision thereof could
reasonably be expected to preclude such treatment, then the Administrator may
modify (to the minimum extent required) or revoke (if necessary) such Stock
Option or the Plan to the extent that the Administrator determines that such
modification or revocation is necessary to enable the transaction to be subject
to pooling-of-interests accounting. Unless previously terminated, the Plan shall
terminate on March 21, 2009.
9. EFFECTIVE DATE.
The effective date of the Plan shall be March 22, 1999; provided,
however, that if the Plan is not approved by the shareowners of the Company on
or before January 21, 2000, the Plan and any and all Stock Options granted
thereunder shall be and become null and void, and of no effect, on January 22,
2000.
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EXHIBIT B
AGREEMENT AND PLAN OF MERGER AND SHARE EXCHANGE
AGREEMENT AND PLAN OF MERGER AND SHARE EXCHANGE, dated as of March 23,
1999 (this "Agreement"), by and among The United Illuminating Company, a
specially chartered Connecticut corporation ("UI"), UIL Holdings Corporation, a
Connecticut corporation ("Holdings"), and United Mergings, Inc., a Connecticut
corporation ("Mergings").
WHEREAS, the authorized capital stock of UI consists of (a) 30,000,000
shares of common stock, without par value (the "UI Common Stock"), (b) 1,119,612
shares of preferred stock, $100.00 par value per share, (c) 2,400,000 shares of
preferred stock, $25.00 par value per share, and (d) 5,000,000 shares of
preferred stock designated as preference stock, $25.00 par value per share; and
WHEREAS, the authorized capital stock of Holdings consists of
30,000,000 shares of common stock, without par value (the "Holdings Common
Stock"), of which 100 shares are issued and outstanding as of the date hereof
and held beneficially and of record by UI, (b) 1,000,000 shares of preferred
stock, $100.00 par value per share, (c) 4,000,000 shares of preferred stock,
$25.00 par value per share, and (d) 4,000,000 shares of preferred stock
designated as preference stock, $25.00 par value per share; and
WHEREAS, the authorized capital stock of Mergings consists of 10,000
shares of common stock, without par value (the "Mergings Common Stock") of which
100 shares are issued and outstanding as of the date hereof and held
beneficially and of record by Holdings; and
WHEREAS, the respective Boards of Directors of UI, Holdings and
Mergings have deemed it advisable and in the best interests of UI, Holdings and
Mergings and their respective shareholders that (i) Mergings be merged with and
into UI, with UI being the surviving corporation, (ii) each outstanding share of
Mergings Common Stock be converted into one share of UI Common Stock, (iii) each
outstanding share of UI Common Stock (excluding shares with respect to which
dissenters' rights have been properly exercised) be converted into one share of
Holdings Common Stock, and (iv) each share of Holdings Common Stock owned by UI
be cancelled, all upon the terms and conditions herein provided (the "Plan of
Merger and Share Exchange"); and
WHEREAS, UI, as the sole shareowner of Holdings, and Holdings as the
sole shareowner of Mergings, have each approved the Plan of Merger and Share
Exchange, and the Board of Directors of UI has recommended that the shareowners
of UI who are entitled to vote thereon approve the Plan of Merger and Exchange
at the Annual Meeting of the Shareowners of UI to be held on May 19, 1999,
NOW, THEREFORE, in consideration of the mutual agreements and covenants
set forth herein, UI, Holdings and Mergings hereby agree to merge and exchange
shares in accordance with the following plan:
ARTICLE I
MERGER AND SHARE EXCHANGE
On the Effective Date (as defined in Article III hereof) (i) Mergings
shall be merged (the "Merger") with and into UI, with UI being the surviving
corporation (UI, as constituted after the Effective Time, is sometimes referred
to herein as the "Surviving Corporation"), (ii) each outstanding share of
Mergings Common Stock shall be automatically converted into and exchanged for
one share of UI Common Stock, (iii) each outstanding share of UI Common Stock
(excluding shares with respect to which dissenters' rights have been properly
exercised) shall be automatically converted into and exchanged for one share of
Holdings Common Stock, and (iv) each share of Holdings Common Stock owned by UI
shall be automatically cancelled. The exchange of shares of UI Common Stock for
shares of Holdings Common Stock, the related exchange of shares of Mergings
Common Stock for shares of UI Common Stock and the related cancellation of
shares of Holdings Common Stock owned by UI, are hereinafter referred to as the
"Share Exchange".
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None of the other securities of UI, including its issued and
outstanding preferred stock and preference stock, if any, shall be converted,
exchanged or otherwise affected by the Merger or the Share Exchange.
ARTICLE II
EFFECT OF MERGER AND SHARE EXCHANGE
The Merger and the Share Exchange shall be effected in accordance with,
and be subject to, the provisions of the applicable statutes of the State of
Connecticut. The effect of the Merger and the Share Exchange shall be that
provided herein and in Section 33-820 of the Connecticut Business Corporation
Act ("CBCA").
ARTICLE III
EFFECTIVE DATE
Subject to the satisfaction or waiver of the conditions and obligations
of the parties hereto, the Merger and the Share Exchange shall be effective at
the close of business on the date of the filing of a Certificate of Merger and
Share Exchange with the Secretary of the State of the State of Connecticut (the
"Effective Date").
ARTICLE IV
TERMS AND CONDITIONS OF MERGER AND SHARE EXCHANGE
A. On the Effective Date, the Certificate of Incorporation of UI as in
existence on the Effective Date shall, without any further action on the part of
the shareowners of UI or Mergings, be the Certificate of Incorporation of the
Surviving Corporation. The Bylaws of UI shall be the Bylaws of the Surviving
Corporation until altered, amended or repealed.
B. On the Effective Date, (i) each certificate that prior thereto
represented an outstanding share or outstanding shares of UI Common Stock shall
be deemed for all corporate purposes to evidence the ownership of the same
number of shares of Holdings Common Stock, (ii) each certificate that prior
thereto represented outstanding shares of Mergings Common Stock shall be deemed
for all corporate purposes to evidence the ownership of the same number of
shares of the Surviving Corporation's Common Stock, and (iii) each certificate
held by UI that prior thereto represented outstanding shares of Holdings Common
Stock shall be cancelled.
C. On and after the Effective Date, the members of the Board of
Directors of UI shall be the members of the Board of Directors of the Surviving
Corporation, the officers of UI shall be the officers of the Surviving
Corporation, and said directors shall hold office until the next annual meeting
of the shareowners of the Surviving Corporation or as otherwise provided by law
or the Bylaws of the Surviving Corporation.
ARTICLE V
CONDITIONS PRECEDENT
The consummation of the Merger and the Share Exchange is subject to the
following conditions precedent:
A. the approval of the Plan of Merger and Share Exchange by the
shareowners of UI;
B. the approval for listing, upon official notice of issuance, by the
New York Stock Exchange, of the Holdings Common Stock to be issued in accordance
with the Plan of Merger and Share Exchange;
C. the receipt of such orders, authorizations, approvals or waivers
from regulatory bodies, boards or agencies as are required in connection with
the Merger and the Share Exchange;
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D. the receipt by UI of a tax opinion acceptable to UI's Board of
Directors as to the federal income tax consequences of the Merger and the Share
Exchange;
E. the satisfaction of the respective obligations of the parties hereto
in accordance with the terms and conditions herein contained; and
F. the execution and filing of the appropriate Certificate of Merger
and Share Exchange with the Secretary of the State of the State of Connecticut.
ARTICLE VI
AMENDMENTS, MODIFICATIONS, WAIVERS AND TERMINATION
This Agreement may be amended, modified or supplemented, or compliance
with any provision or condition hereof may be waived, at any time, by the mutual
consent of the Boards of Directors of UI, Holdings and Mergings; provided,
however, that no such amendment, modification, supplement or waiver shall be
made or effected, if such amendment, modification, supplement or waiver, in the
judgment of the Board of Directors of UI, would materially and adversely affect
the shareowners of UI.
This Agreement may be terminated and the Plan of Merger and Share
Exchange and related transactions abandoned at any time prior to the time the
Certificate of Merger and Share Exchange is filed with the Secretary of the
State of the State of Connecticut, if the Board of Directors of UI determines,
in its sole discretion, that consummation of the Merger and the Share Exchange
would be inadvisable or not in the best interests of UI or its shareowners.
ARTICLE VII
SHAREOWNER APPROVAL
This Agreement shall be submitted to the shareowners of UI entitled to
vote with respect to the Plan of Merger and Share Exchange for their approval as
provided by the CBCA. UI, as the sole shareowner of Holdings, and Holdings, as
the sole shareowner of Mergings, have each authorized and approved the Plan of
Merger and Share Exchange.
ARTICLE VIII
FURTHER ASSURANCES
In case at any time after the Effective Date any further action is
necessary or desirable to carry out the purposes of this Agreement, each of the
parties will take such further action (including the execution and delivery of
such further instruments and documents) as any other party may request, all at
the sole cost and expense of the requesting party.
IN WITNESS WHEREOF, each of the corporate parties hereto, pursuant to
authority granted by their respective Boards of Directors, has caused this
Agreement and Plan of Merger and Share Exchange to be executed by its duly
authorized officer, as of the date first above written.
THE UNITED ILLUMINATING COMPANY
By: ____________________________________
Name: Robert L. Fiscus
Title: Vice Chairman of the Board of Directors
and Chief Financial Officer
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UIL HOLDINGS CORPORATION
By: ___________________________________
Name: Robert L. Fiscus
Title: Vice Chairman of the Board of Directors
and Chief Financial Officer
UNITED MERGINGS, INC.
By: ___________________________________
Name: Robert L. Fiscus
Title: Vice Chairman of the Board of Directors
and Chief Financial Officer
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EXHIBIT C
COPY OF
SECTIONS 33-855 THROUGH 33-872
OF THE
CONNECTICUT BUSINESS CORPORATION ACT
PART XIII. DISSENTERS' RIGHTS
(A) RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
Section 33-855. DEFINITIONS
As used in sections 33-855 to 33-872, inclusive:
(1) "Corporation" means the issuer of the shares held by a dissenter
before the corporate action or the surviving or acquiring corporation by merger
or share exchange of that issuer.
(2) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under section 33-856 and who exercises that right when and in
the manner required by sections 33-860 to 33-868, inclusive.
(3) "Fair value", with respect to a dissenter's shares, means the value
of the shares immediately before the effectuation of the corporate action to
which the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action.
(4) "Interest" means interest from the effective date of the corporate
action until the date of payment, at the average rate currently paid by the
corporation on its principal bank loans or, if none, at a rate that is fair and
equitable under all the circumstances.
(5) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(6) "Beneficial shareholder" means the person who is a beneficial owner
of shares held in a voting trust or by a nominee as the record shareholder.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
Section 33-856. RIGHT TO DISSENT
(a) A shareholder is entitled to dissent from, and obtain payment of
the fair value of his shares in the event of, any of the following corporate
actions:
(1) Consummation of a plan of merger to which the corporation is a
party (A) if shareholder approval is required for the merger by section 33-817
or the certificate of incorporation and the shareholder is entitled to vote on
the merger or (B) if the corporation is a subsidiary that is merged with its
parent under section 33-818;
(2) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, if the shareholder
is entitled to vote on the plan;
(3) Consummation of a sale or exchange of all, or substantially all, of
the property of the corporation other than in the usual and regular course of
business, if the shareholder is entitled to vote on the sale or exchange,
including a sale in dissolution, but not including a sale pursuant to court
order or a sale for cash pursuant to a plan by which all or
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substantially all of the net proceeds of the sale will be distributed to the
shareholders within one year after the date of sale;
(4) An amendment of the certificate of incorporation that materially
and adversely affects rights in respect of a dissenter's shares because it: (A)
Alters or abolishes a preferential right of the shares; (B) creates, alters or
abolishes a right in respect of redemption, including a provision respecting a
sinking fund for the redemption or repurchase, of the shares; (C) alters or
abolishes a preemptive right of the holder of the shares to acquire shares or
other securities; (D) excludes or limits the right of the shares to vote on any
matter, or to cumulate votes, other than a limitation by dilution through
issuance of shares or other securities with similar voting rights; or (E)
reduces the number of shares owned by the shareholder to a fraction of a share
if the fractional share so created is to be acquired for cash under section
33-668; or
(5) Any corporate action taken pursuant to a shareholder vote to the
extent the certificate of incorporation, bylaws or a resolution of the board of
directors provides that voting or nonvoting shareholders are entitled to dissent
and obtain payment for their shares.
(b) Where the right to be paid the value of shares is made available to
a shareholder by this section, such remedy shall be his exclusive remedy as
holder of such shares against the corporate transactions described in this
section, whether or not he proceeds as provided in sections 33-855 to 33-872,
inclusive.
Section 33-857. DISSENT BY NOMINEES AND BENEFICIAL OWNERS
(a) A record shareholder may assert dissenters' rights as to fewer than
all the shares registered in his name only if he dissents with respect to all
shares beneficially owned by any one person and notifies the corporation in
writing of the name and address of each person on whose behalf he asserts
dissenters' rights. The rights of a partial dissenter under this subsection are
determined as if the shares as to which he dissents and his other shares were
registered in the names of different shareholders.
(b) A beneficial shareholder may assert dissenters' rights as to the
shares held on his behalf only if: (1) He submits to the corporation the record
shareholder's written consent to the dissent not later than the time the
beneficial shareholder asserts dissenters' rights; and (2) he does so with
respect to all shares of which he is the beneficial shareholder or over which he
has power to direct the vote.
Sections 33-858, 33-859. RESERVED FOR FUTURE USE
(B) PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
Section 33-860. NOTICE OF DISSENTERS' RIGHTS
(a) If proposed corporate action creating dissenters' rights under
section 33-856 is submitted to a vote at a shareholders' meeting, the meeting
notice shall state that shareholders are or may be entitled to assert
dissenters' rights under sections 33-855 to 33-872, inclusive, and be
accompanied by a copy of said sections.
(b) If corporate action creating dissenters' rights under section
33-856 is taken without a vote of shareholders, the corporation shall notify in
writing all shareholders entitled to assert dissenters' rights that the action
was taken and send them the dissenters' notice described in section 33-862.
Section 33-861. NOTICE OF INTENT TO DEMAND PAYMENT
(a) If proposed corporate action creating dissenters' rights under
section 33-856 is submitted to a vote at a shareholders' meeting, a shareholder
who wishes to assert dissenters' rights (1) shall deliver to the corporation
before the vote is taken written notice of his intent to demand payment for his
shares if the proposed action is effectuated and (2) shall not vote his shares
in favor of the proposed action.
(b) A shareholder who does not satisfy the requirements of subsection
(a) of this section is not entitled to payment for his shares under sections
33-855 to 33-872, inclusive.
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Section 33-862. DISSENTERS' NOTICE
(a) If proposed corporate action creating dissenters' rights under
section 33-856 is authorized at a shareholder's meeting, the corporation shall
deliver a written dissenters' notice to all shareholders who satisfied the
requirements of section 33-861.
(b) The dissenters' notice shall be sent no later than ten days after
the corporate action was taken and shall:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(3) Supply a form for demanding payment that includes the date of the
first announcement to news media or to shareholders of the terms of the proposed
corporate action and requires that the person asserting dissenters' rights
certify whether or not he acquired beneficial ownership of the shares before
that date;
(4) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than thirty nor more than sixty days after
the date the subsection (a) of this section notice is delivered; and
(5) Be accompanied by a copy of sections 33-855 to 33-872, inclusive.
Section 33-863. DUTY TO DEMAND PAYMENT
(a) A shareholder sent a dissenters' notice described in section 33-862
must demand payment, certify whether he acquired beneficial ownership of the
shares before the date required to be set forth in the dissenters' notice
pursuant to subdivision (3) of subsection (b) of said section and deposit his
certificates in accordance with the terms of the notice.
(b) The shareholder who demands payment and deposits his share
certificates under subsection (a) of this section retains all other rights of a
shareholder until these rights are cancelled or modified by the taking of the
proposed corporate action.
(c) A shareholder who does not demand payment or deposit his share
certificates where required, each by the date set in the dissenters' notice, is
not entitled to payment for his shares under sections 33-855 to 33-872,
inclusive.
Section 33-864. SHARE RESTRICTIONS
(a) The corporation may restrict the transfer of uncertificated shares
from the date the demand for their payment is received until the proposed
corporate action is taken or the restrictions released under section 33-866.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are cancelled or modified by the taking of the proposed corporate action.
Section 33-865. Payment
(a) Except as provided in section 33-867, as soon as the proposed
corporate action is taken, or upon receipt of a payment demand, the corporation
shall pay each dissenter who complied with section 33-863 the amount the
corporation estimates to be the fair value of his shares, plus accrued interest.
(b) The payment shall be accompanied by: (1) The corporation's balance
sheet as of the end of a fiscal year ending not more than sixteen months before
the date of payment, an income statement for that year, a statement of changes
in shareholders' equity for that year and the latest available interim financial
statements, if any; (2) a statement of the corporation's estimate of the fair
value of the shares; (3) an explanation of how the interest was calculated; (4)
a
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statement of the dissenter's right to demand payment under section 33-860; and
(5) a copy of sections 33-855 to 33-872, inclusive.
Section 33-866. FAILURE TO TAKE ACTION. (a) If the corporation does not take
the proposed action within sixty days after the date set for demanding payment
and depositing share certificates, the corporation shall return the deposited
certificates and release the transfer restrictions imposed on uncertified
shares.
(b) If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under section 33-862 and repeat the payment demand procedure.
Section 33-867. AFTER-ACQUIRED SHARES. (a) A corporation may elect to withhold
payment required by section 33-865 from a dissenter unless he was the beneficial
owner of the shares before the date set forth in the dissenters' notice as the
date of the first announcement to news media or to shareholders of the terms of
the proposed corporate action.
(b) To the extent the corporation elects to withhold payment under
subsection (a) of this section, after taking the proposed corporate action, it
shall estimate the fair value of the shares, plus accrued interest, and shall
pay this amount to each dissenter who agrees to accept it in full satisfaction
of his demand. The corporation shall send with its offer a statement of its
estimate of the fair value of the shares, an explanation of how the interest was
calculated and a statement of the dissenters' rights to demand payment under
section 33-868.
Section 33-868. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR OFFER
(a) A dissenter may notify the corporation in writing of his own
estimate of the fair value of his shares and amount of interest due, and demand
payment of his estimate, less any payment under section 33-865, or reject the
corporation's offer under section 33-867 and demand payment of the fair value of
his shares and interest due, if:
(1) The dissenter believes that the amount paid under section 33-865 or
offered under section 33-867 is less than the fair value of his shares or that
the interest due is incorrectly calculated;
(2) The corporation fails to make payment under section 33-865 within
sixty days after the date set for demanding payment; or
(3) The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within sixty days after the date set for
demanding payment.
(b) A dissenter waives his right to demand payment under this section
unless he notifies the corporation of his demand in writing under subsection (a)
of this section within thirty days after the corporation made or offered payment
for his shares.
Section 33-869, 33-870. RESERVED FOR FUTURE USE
(C) JUDICIAL APPRAISAL OF SHARES
Section 33-871. COURT ACTION
(a) If a demand for payment under section 33-868 remains unsettled, the
corporation shall commence a proceeding within sixty days after receiving the
payment demand and petition the court to determine the fair value of the shares
and accrued interest. If the corporation does not commence the proceeding within
the sixty-day period, it shall pay each dissenter whose demand remains unsettled
the amount demanded.
(b) The corporation shall commence the proceeding in the superior court
for the judicial district where a corporation's principal office or, if none in
this state, its registered office is located. If the corporation is a foreign
corporation without a registered office in this state, it shall commence the
proceeding in the superior court for the judicial
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district where the registered office of the domestic corporation merged with or
whose shares were acquired by the foreign corporation was located.
(c) The corporation shall make all dissenters, whether or not residents
of this state, whose demands remain unsettled parties to the proceeding as in an
action against their shares and all parties must be served with a copy of the
petition. Nonresidents may be served by registered or certified mail or by
publication as provided by law.
(d) The jurisdiction of the court in which the proceeding is commenced
under subsection (b) of this section is plenary and exclusive. The court may
appoint one or more persons as appraisers to receive evidence and recommend
decision on the question of fair value. The appraisers have the powers described
in the order appointing them, or in any amendment to it. The dissenters are
entitled to the same discovery rights as parties in other civil proceedings.
(e) Each dissenter made a party to the proceeding is entitled to
judgment (1) for the amount, if any, by which the court finds the fair value of
his shares, plus interest, exceeds the amount paid by the corporation, or (2)
for the fair value, plus accrued interest, of his after-acquired shares for
which the corporation elected to withhold payment under section 33-867.
Section 33-872. COURT COSTS AND COUNSEL FEES
(a) The court in an appraisal proceeding commenced under section 33-871
shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court. The court shall
assess the costs against the corporation, except that the court may assess costs
against all or some of the dissenters, in amounts the court finds equitable, to
the extent the court finds the dissenters acted arbitrarily, vexatiously or not
in good faith in demanding payment under section 33-868.
(b) The court may also assess the fees and expenses of counsel and
experts for the respective parties, in amounts the courts finds equitable: (1)
Against the corporation and in favor of any or all dissenters if the court finds
the corporation did not substantially comply with the requirements of sections
33-860 to 33-868, inclusive; or (2) against either the corporation or a
dissenter, in favor of any other party, if the court finds that the party
against whom the fees and expenses are assessed acted arbitrarily, vexatiously
or not in good faith with respect to the rights provided by sections 33-855 to
33-872, inclusive.
(c) If the court finds that the services of counsel for any dissenter
were of substantial benefit to other dissenters similarly situated, and that the
fees for those services should not be assessed against the corporation, the
court may award to these counsel reasonable fees to be paid out of the amounts
awarded the dissenters who were benefited.
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EXHIBIT D
CERTIFICATE OF INCORPORATION
OF
UIL HOLDINGS CORPORATION
SECTION 1. The name of the corporation is UIL HOLDINGS CORPORATION (the
"Corporation").
SECTION 2. The purpose of the Corporation is to engage in the
businesses and activities that a corporation is authorized to engage in by
virtue of the Connecticut Business Corporation Act in effect on the effective
date hereof and as it may be amended or superseded from time to time after the
effective date hereof.
SECTION 3. The street address of the Corporation's initial registered
office is 157 Church Street, New Haven, Connecticut; and the name of the
corporation's initial registered agent at that office is Kurt Mohlman.
SECTION 4. The name of the Corporation's incorporator is Robert L.
Fiscus, whose address is 86 Cricket Lane, Shelton, Connecticut.
SECTION 5. The classes of shares, and the number of shares of each
class, that the Corporation is authorized to issue are as follows:
(a) COMMON STOCK. Thirty million (30,000,000) shares of a class of
shares designated "Common Stock," without par value. The Common Stock shares of
the Corporation shall have unlimited voting rights and shall be entitled to
receive the net assets of the Corporation upon its dissolution. Each share of
the Common Stock of the Corporation shall have preferences, limitations and
relative rights that are identical with those of the other shares of the Common
Stock of the Corporation.
(b) PREFERRED STOCK - $100 PAR VALUE. One million (1,000,000) shares of
a class of shares designated "Preferred Stock - $100 Par Value," having a par
value of $100 per share. Before the issuance of any shares of the Preferred
Stock - $100 Par Value of the Corporation, the Board of Directors of the
Corporation shall determine the preferences, limitations and relative rights,
within the limits prescribed by statute, of such class of shares that shall be
identical among all of the shares of such class of shares. Shares of the
Preferred Stock - $100 Par Value of the Corporation shall be issued in one or
more series. Before the issuance of the shares of any series of the Preferred
Stock - $100 Par Value, the Board of Directors of the Corporation shall give
such series a distinguishing designation and shall determine the preferences,
limitations and relative rights, within the limits prescribed by statute, of
such series of shares. Each share of a series of the Preferred Stock - $100 Par
Value of the Corporation shall have preferences, limitations and relative rights
that are identical with those of the other shares of such series of shares and,
except to the extent otherwise provided in the description of the preferences,
limitations and relative rights prescribed for such series of shares by the
Board of Directors of the Corporation, with those of the other shares of the
Preferred Stock - $100 Par Value of the Corporation.
(b) PREFERRED STOCK - $25 PAR VALUE. Four million (4,000,000) shares of
a class of shares designated "Preferred Stock - $25 Par Value," having a par
value of $25 per share. Before the issuance of any shares of the Preferred Stock
- - $25 Par Value of the Corporation, the Board of Directors of the Corporation
shall determine the preferences, limitations and relative rights, within the
limits prescribed by statute, of such class of shares that shall be identical
among all of the shares of such class of shares. Shares of the Preferred Stock -
$25 Par Value of the Corporation shall be issued in one or more series. Before
the issuance of the shares of any series of the Preferred Stock - $25 Par Value,
the Board of Directors of the Corporation shall give such series a
distinguishing designation and shall determine the preferences, limitations and
relative rights, within the limits prescribed by statute, of such series of
shares. Each share of a series of the Preferred Stock - $25 Par Value of the
Corporation shall have preferences, limitations and relative rights that are
identical with those of the other shares of such series of shares and, except to
the extent otherwise provided in the description of the preferences, limitations
and relative rights prescribed for such series of shares by the
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Board of Directors of the Corporation, with those of the other shares of the
Preferred Stock - $25 Par Value of the Corporation.
(b) PREFERENCE STOCK. Four million (4,000,000) shares of a class of
shares designated "Preference Stock," having a par value of $25 per share.
Before the issuance of any shares of the Preference Stock of the Corporation,
the Board of Directors of the Corporation shall determine the preferences,
limitations and relative rights, within the limits prescribed by statute, of
such class of shares that shall be identical among all of the shares of such
class of shares. Shares of the Preference Stock of the Corporation shall be
issued in one or more series. Before the issuance of the shares of any series of
the Preference Stock, the Board of Directors of the Corporation shall give such
series a distinguishing designation and shall determine the preferences,
limitations and relative rights, within the limits prescribed by statute, of
such series of shares. Each share of a series of the Preference Stock of the
Corporation shall have preferences, limitations and relative rights that are
identical with those of the other shares of such series of shares and, except to
the extent otherwise provided in the description of the preferences, limitations
and relative rights prescribed for such series of shares by the Board of
Directors of the Corporation, with those of the other shares of the Preference
Stock of the Corporation.
SECTION 6. All corporate powers of the Corporation shall be exercised
by or under authority of, and the business and affairs of the Corporation shall
be managed under the direction of, a Board of Directors consisting of not less
than three nor more than fifteen individuals, with the number fixed in, and
increased or decreased from time-to-time by amendment of, the Bylaws of the
Corporation, each of which individuals shall be a shareowner of the Corporation.
SECTION 7. No person who is or was a director of the Corporation shall
be personally liable to the Corporation or its shareowners for monetary damages
for breach of duty as a director in an amount that exceeds the compensation
received by the director for serving the Corporation during the year of the
violation, if such breach did not (A) involve a knowing and culpable violation
of law by the director, (B) enable the director or an associate, as defined in
Section 33-840 of the Connecticut General Statutes on the effective date hereof
and as it may be amended or superseded from time to time after the effective
date hereof, to receive an improper personal economic gain, (C) show a lack of
good faith and a conscious disregard for the duty of the director to the
Corporation under circumstances in which the director was aware that his or her
conduct or omission created an unjustifiable risk of serious injury to the
Corporation, (D) constitute a sustained and unexcused pattern of inattention
that amounted to an abdication of the director's duty to the Corporation, or (E)
create liability under Section 33-757 of the Connecticut General Statutes as
constituted on the effective date hereof and as it may be amended or superseded
from time to time after the effective date hereof.
SECTION 8. The Corporation shall be obligated to indemnify a director
for liability, as defined in subdivision (5) of Section 33-770 of the
Connecticut General Statutes on the effective date hereof and as it may be
amended or superseded from time to time after the effective date hereof, to any
person for any action taken, or any failure to take any action, as a director,
except liability that (a) involved a knowing and culpable violation of law by
the director, (b) enabled the director or an associate, as defined in Section
33-840 of the Connecticut General Statutes on the effective date hereof and as
it may be amended or superseded from time to time after the effective date
hereof, to receive an improper personal gain, (c) showed a lack of good faith
and a conscious disregard for the duty of the director to the Corporation under
circumstances in which the director was aware that his conduct or omission
crated an unjustifiable risk of serious injury to the Corporation, (d)
constituted a sustained and unexcused pattern of inattention that amounted to an
abdication of the director's duty to the Corporation or (e) created liability
under Section 33-757 of the Connecticut General Statutes as constituted on the
effective date hereof and as it may be amended or superseded from time to time
after the effective date hereof.
Dated at New Haven, Connecticut, this 17th day of March, 1999.
-------------------------------------------
Robert L. Fiscus
Incorporator
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EXHIBIT E
BYLAWS
OF
UIL HOLDINGS CORPORATION
(A CONNECTICUT CORPORATION)
--------------------
ARTICLE I.
OFFICES.
SECTION 1. PRINCIPAL OFFICE. The location of the principal office of the
Corporation shall be in the Town of New Haven County of New Haven in the State
of Connecticut.
SECTION 2. OTHER OFFICES. The Corporation may also have other offices at such
other places within or without the State of Connecticut as the Board of
Directors or the President may from time to time determine or as the business of
the Corporation may require.
ARTICLE II.
MEETINGS OF SHAREOWNERS.
SECTION 1. ANNUAL MEETING. The annual meeting of the shareowners shall be held
at the principal office of the Corporation in the State of Connecticut, or at
such other place as the Board of Directors or the President may determine, on
the first Wednesday of April in each year, unless another date shall be
designated by the Board of Directors, in which case such meeting shall be held
on the date so designated, for the purpose of electing a Board of Directors and
for the transaction of any other business that may legally come before the
meeting.
SECTION 2. SPECIAL MEETINGS. Special meetings of the shareowners may be called
at any time by the President, or in his absence or disability by a Vice
President, and shall be called on the request in writing or by a vote of a
majority of the Board of Directors or upon the written request of the holders of
not less than 35 percent of the voting power of all shares entitled to vote at
the meeting. Special meetings of the shareowners may be held at such place
within the State of Connecticut as is specified in the notice or call of such
meeting.
SECTION 3. NOTICE OF MEETINGS. A written or printed notice of each meeting of
shareowners, stating the place, day and hour of the meeting and the general
purpose or purposes for which it is called, shall be mailed, postage prepaid, by
or at the direction of the Secretary, to each shareowner of record entitled to
vote at such meeting, addressed to the shareowner at the shareowner's last known
post office address as last shown on the stock records of the Corporation, not
less than ten days nor more than sixty days before the date of the meeting.
SECTION 4. QUORUM. At any meeting of the shareowners, the owners of a majority
of the voting power of the shares entitled to vote, present in person or by
proxy, shall constitute a quorum for such meeting, except as otherwise expressly
provided by statute, the Certificate of Incorporation of the Corporation or
these Bylaws. In the absence of a quorum, the owners of a majority of the voting
power of the shares entitled to vote, present in person or by proxy, may adjourn
the meeting to a new date, time or place, from time to time, not exceeding
thirty days at any one time, without further notice, until a quorum shall
attend, and thereupon any business may be transacted that might have been
transacted at the meeting as originally called.
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Except where otherwise expressly provided by statute, the Certificate of
Incorporation of the Corporation or these Bylaws, when a quorum is present at
any duly held meeting, directors shall be elected by a plurality of the votes
cast by the owners of the voting power of shares entitled to vote in the
election of directors, and any other action to be voted on shall be approved if
the votes favoring the action cast by the owners of the voting power of the
shares entitled to vote on the matter exceed the votes opposing the action cast
by such shareowners.
SECTION 5. VOTING. Each owner of a share that may be voted on a particular
subject matter at any meeting of shareowners shall be entitled to one vote, in
person or by proxy, for each such share standing in his name on the books of the
Corporation on the record date for such meeting. All voting at meetings of
shareowners shall be by voice vote, except that the vote for the election of
directors shall be by ballot and except where a vote by ballot is required by
law or is determined to be appropriate by the officer presiding at such meeting.
SECTION 6. INSPECTORS OF PROXIES AND TELLERS. The Board of Directors or, in the
absence of action by the Board of Directors, the President or, in the absence or
disability of the President, the chairman of the meeting may appoint two persons
(who may be officers or employees of the Corporation) to serve as Inspectors of
Proxies and the same persons or two other persons (who may be officers or
employees of the Corporation) to serve as Tellers at any meeting of shareowners.
The determination by such persons of the validity of proxies and the count of
shares voted shall be final and binding on all shareowners.
ARTICLE III.
DIRECTORS.
SECTION 1. GENERAL POWERS. The property, affairs and business of the Corporation
shall be managed by its Board of Directors, which may exercise all the powers of
the Corporation except such as are by law or statute or by the Certificate of
Incorporation of the Corporation or by these Bylaws expressly conferred upon or
reserved to the shareowners.
SECTION 2. NUMBER AND TERM OF OFFICE. The number of directorships shall be
thirteen. Directors shall be elected to hold office until the next annual
meeting of the shareowners and until their successors shall have been elected
and qualified.
SECTION 3. VACANCIES. Subject to the provisions of the second paragraph of this
Section, in case of any vacancy among the directors through death, resignation,
disqualification, failure of the shareowners to elect as many directors as the
number of directorships fixed by Section 2 of this Article III, or any other
cause except the removal of a director, the directors in office, although less
than a quorum, by the affirmative vote of the majority of such other directors,
or the sole director in office if there be only one, may fill such vacancy;
provided that the shareowners entitled to vote may also fill any such vacancy.
If any such vacancy occurs in respect of a director elected by a particular
class of shares voting as a class, and if such class is still entitled to fill
such directorship, the remaining directors elected by such class, by the
affirmative vote of a majority of such remaining directors, or the sole
remaining director so elected if there be only one, may fill such vacancy;
provided the shareowners of such class may also fill any such vacancy.
The resignation of a director shall be effective at the time specified therein
and, unless otherwise specified therein, the acceptance of a resignation shall
not be necessary to make it effective.
SECTION 4. REMOVAL OF DIRECTORS. Any director may be removed from office either
with or without cause at any time, and another person may be elected in his or
her stead to serve for the remainder of his or her term at any special meeting
of the shareowners called for the purpose, by vote of a majority of all the
shares outstanding and entitled to vote.
SECTION 5. PLACE OF MEETING. The directors may hold their meetings and have one
or more offices and keep the books of the Corporation (except as otherwise at
any time may be provided by law or statute) at such place or places within or
without the State of Connecticut as the Board of Directors may from time to time
determine.
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SECTION 6. ORGANIZATION MEETINGS OF THE BOARD. The newly elected Board of
Directors may meet for the purpose of organization, for the election of
officers, and for the transaction of other business, immediately following the
adjournment of the annual meeting of the shareowners or at such other time and
place as shall be fixed by the shareowners at the annual meeting, and if a
quorum be then present no prior notice of such meeting shall be required to be
given to the directors. The time and place of such organization meeting may also
be fixed by written consent of the newly elected directors, or such organization
meeting may be called by the President upon reasonable notice.
SECTION 7. REGULAR MEETINGS. Regular meetings of the Board of Directors shall be
held at such times and places within or without the State of Connecticut as the
Board of Directors shall from time to time designate.
SECTION 8. SPECIAL MEETINGS. Special meetings of the Board of Directors may be
called at any time by the Chairman of the Board of Directors (if one there be)
or by the President or, in the absence or disability of the President, by a Vice
President, or by a majority of the directors, and shall be called upon the
written request of two directors. Special meetings of the Board shall be held at
such place, either within or without the State of Connecticut, as shall be
specified in the call of the meeting.
SECTION 9. NOTICE OF MEETINGS. The Secretary of the Corporation shall give
reasonable notice to each director of each regular or special meeting, either by
mail, telegraph, telefax, electronic mail, telephone or personally, which notice
shall state the time and place of the meeting.
SECTION 10. QUORUM. A majority of the number of directorships shall constitute a
quorum for the transaction of business, except where otherwise provided by
statute or by these Bylaws, but a majority of those present at any regular or
special meeting, if there be less than a quorum, may adjourn the same from time
to time without notice until a quorum be had. The act of a majority of the
directors present at any meeting at which there is a quorum shall be the act of
the Board of Directors, except as otherwise may be provided by statute or by
these Bylaws.
SECTION 11. COMPENSATION OF DIRECTORS. The Board of Directors shall have
authority to fix the compensation of directors and of members of committees of
the directors, including reasonable allowances for expenses incurred in
connection with their duties.
SECTION 12. ACTION WITHOUT MEETING. If all of the directors severally or
collectively consent in writing to any action taken or to be taken by the
Corporation, and the number of such directors constitutes a quorum for such
action, such action shall be as valid corporate action as though it had been
authorized at a meeting of the Board of Directors. The Secretary shall file each
such consent with the minutes of the meetings of the Board of Directors.
ARTICLE IV.
EXECUTIVE COMMITTEE AND OTHER COMMITTEES.
SECTION 1. APPOINTMENT. The Board of Directors, by resolution adopted by the
affirmative vote of directors holding a majority of the directorships, may
appoint an Executive Committee, consisting of four or more directors, one of
whom shall be the Chairman of the Board of Directors (if one there be) to serve
during the pleasure of the Board, and may fill vacancies in such committee. The
Executive Committee shall have and may exercise all of the authority of the
Board of Directors, except as otherwise may be provided by statute or by these
Bylaws.
SECTION 2. MINUTES. The Executive Committee shall keep regular minutes of its
proceedings and report the same to the Board of Directors.
SECTION 3. OTHER COMMITTEES. The Board of Directors, by resolution adopted by
the affirmative vote of directors holding a majority of the directorships, shall
appoint an Audit Committee and may appoint any other committee or committees
consisting of two or more directors to serve during the pleasure of the Board,
which committees shall have and may exercise such authority of the Board of
Directors as shall be provided in such resolution.
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ARTICLE V.
OFFICERS, AGENTS AND ATTORNEYS.
SECTION 1. EXECUTIVE OFFICERS. The executive officers of the Corporation shall
be a Chairman of the Board of Directors, if the Board of Directors so determine,
and a President, one or more Vice Presidents, a Secretary and a Treasurer, all
of whom shall be elected by the Board of Directors. The Board of Directors may
also appoint such additional officers, including, but not limited to, one or
more Assistant Secretaries and Assistant Treasurers, as in their judgment may be
necessary, who shall have authority to perform such duties as may from time to
time be designated by the Board of Directors or by the President. Any two of
said offices may be held by the same person, except that the same person shall
not be President and a Vice President.
SECTION 2. POWERS AND DUTIES OF THE CHAIRMAN OF THE BOARD OF DIRECTORS. The
Chairman of the Board of Directors (if one there be) when present shall preside
at all meetings of the Board of Directors and of the shareowners. He or she
shall have such powers and shall perform such duties as may from time to time be
assigned to him by the Board of Directors.
If so designated by the Board of Directors, the Chairman of the Board of
Directors shall be the chief executive officer of the Corporation and, as such,
he or she, and not the President, shall have and possess all of the powers and
discharge all of the duties assigned to the President in these Bylaws, except
that (1) in the absence, disability or death of the Chairman of the Board of
Directors, the President shall have and possess all of such powers and discharge
all of such duties, (2) the Board of Directors may delegate one or more of such
powers and duties to the President, (3) the Chairman of the Board of Directors
shall not have the power or duty of signing certificates for the shares of the
Corporation and (4) both the Chairman of the Board of Directors and the
President shall be included among those officers who may act with respect to
shares of other corporations held by the Corporation and who may sign or
countersign checks, drafts and notes of the Corporation under the provisions of
Sections 5 and 6, respectively, of Article VII of these Bylaws.
SECTION 3. POWERS AND DUTIES OF THE PRESIDENT. The President shall be the chief
executive officer of the Corporation unless the Board of Directors designates
the Chairman of the Board of Directors as the chief executive officer of the
Corporation; he or she may sign, with the Secretary or an Assistant Secretary or
the Treasurer or an Assistant Treasurer, certificates for the shares of the
Corporation, and he or she shall sign and execute, in the name of the
Corporation, all deeds, mortgages, bonds, contracts or other instruments
authorized by the Board of Directors, except in cases where the signing and
execution thereof shall be delegated by the Board of Directors or by these
Bylaws to some other officer or agent of the Corporation; and, in general, shall
perform all the duties incident to the office of the President; provided,
however, that any or all of the powers and duties of the President above set
forth may be delegated by the Board of Directors by vote or by a contract of the
Corporation approved by the Board of Directors, to some other officer, agent or
employee of the Corporation. In the absence of the Chairman of the Board of
Directors, or if there shall be no Chairman of the Board of Directors, the
President shall preside at all meetings of the Board of Directors and of the
shareowners.
SECTION 4. POWERS AND DUTIES OF THE VICE PRESIDENTS. In the absence, disability
or death of the President, a Vice President shall have and possess all the
powers and discharge all the duties of the President, and the Board of Directors
may designate the particular Vice President, if more than one, thus to possess
the powers and discharge the duties of the President. Any Vice President may
also sign, with the Secretary or an Assistant Secretary or the Treasurer or an
Assistant Treasurer, certificates for the shares of the Corporation, and shall
perform such other duties as from time to time may be assigned to him or her by
the Board of Directors or by the President.
SECTION 5. POWERS AND DUTIES OF THE SECRETARY. It shall be the duty of the
Secretary to act as Secretary of all meetings of the Board of Directors and of
the shareowners of the Corporation and keep the minutes thereof in a proper book
or books to be provided for that purpose; he shall see that all notices required
to be given by the Corporation are duly given or served; he may sign, with the
President or a Vice President, certificates for the shares of the Corporation;
he shall have the custody of the seal of the Corporation and, on behalf of the
Corporation, he may attest and affix the corporate seal to such instruments as
may require the same; and he shall in general perform all of the duties incident
to the office of Secretary, and such other duties as may from time to time be
assigned to him by the Board of Directors or by the President.
SECTION 6. POWERS AND DUTIES OF THE TREASURER. The Treasurer shall have the care
and custody of all the funds and securities of the Corporation which may come
into his or her hands and shall deposit all such funds to the credit of the
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Corporation in such banks, trust companies or other depositaries as shall be
designated by the Board of Directors or pursuant to its authorization; he or she
shall enter, or cause to be entered, regularly, in books to be kept by him or
her for that purpose, full and adequate account of all moneys received and paid
by him or her on account of the Corporation, and shall render a detailed
statement of his or her accounts and records to the Board of Directors as often
as it shall require the same; he or she may endorse for deposit or collection
all negotiable instruments requiring endorsement for or on behalf of the
Corporation; he or she may sign all receipts and vouchers for payments made to
the Corporation; he or she may sign, with the President or a Vice President,
certificates for the shares of the Corporation; and he or she shall in general
perform all the duties incident to the office of Treasurer, and such other
duties as may from time to time be assigned to him or her by the Board of
Directors or by the President.
SECTION 7. POWERS AND DUTIES OF ASSISTANT SECRETARY AND ASSISTANT TREASURER. In
the absence, disability or death of the Secretary or whenever the convenience of
the Corporation shall make it advisable, an Assistant Secretary shall have and
possess all the powers and discharge all the duties of the Secretary; and in the
absence, disability or death of the Treasurer or whenever the convenience of the
Corporation shall make it advisable, an Assistant Treasurer shall have and
possess all the powers and discharge all the duties of the Treasurer.
SECTION 8. AGENTS AND ATTORNEYS. The Board of Directors may appoint such agents,
attorneys and representatives of the Corporation with such powers and to perform
such acts and duties on behalf of the Corporation as the Board of Directors may
determine, so far as the same shall not be inconsistent with the law or statutes
of the State of Connecticut, the Certificate of Incorporation of the
Corporation, or these Bylaws.
SECTION 9. SALARIES. The salaries of the officers, including the Chairman of the
Board of Directors (if one there be) and the President, may be fixed from time
to time by the Board of Directors, and no officer shall be prevented from
receiving a salary by reason of the fact that he or she is also a director of
the Corporation.
SECTION 10. CERTAIN OFFICERS TO GIVE BONDS. Every officer, agent or employee of
the Corporation who may receive, handle or disburse money for its account or who
may have any of the Corporation's property in his or her custody or be
responsible for its safety or preservation, may be required, in the discretion
of the Board of Directors or the Executive Committee to give bond, in such sum
and with such sureties and in such form as shall be satisfactory to the Board of
Directors or the Executive Committee, for the faithful performance of the duties
of his or her office and for the restoration to the Corporation, in the event of
his or her death, resignation or removal from office, of all books, papers,
vouchers, moneys and other property of whatsoever kind in his or her custody
belonging to the Corporation.
SECTION 11. REMOVAL OF OFFICERS. Any officer elected or appointed by the
directors may be removed at any time, with or without cause, by the affirmative
vote of a majority of all of the directors, but nothing in this Section shall
operate to invalidate, impair or otherwise affect any employment contract
entered into by the Corporation which contract has been authorized or ratified
by the affirmative vote of a majority of all the directors. The election or
appointment of an officer for a given term shall not of itself create contract
rights.
SECTION 12. VACANCIES. All vacancies among the officers from whatsoever cause
may be filled by the Board of Directors.
ARTICLE VI.
SHARES AND CERTIFICATES FOR SHARES.
SECTION 1. CERTIFICATES OF SHARES. Every shareowner of the Corporation shall be
entitled to a certificate or certificates, signed by, or, if the certificates
are signed by a transfer agent acting on behalf of the Corporation, bearing the
facsimile signatures of, the President or a Vice President and the Treasurer or
an Assistant Treasurer or the Secretary or an Assistant Secretary, and under the
seal of the Corporation or with a facsimile of such seal affixed, certifying the
number and class of shares of the Corporation owned by such shareowner. The
names and addresses of all persons owning
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shares of the Corporation, with the number of shares owned by each and the date
or dates of issue of the shares held by each, shall be entered in books kept for
that purpose by the proper officers or agents of the Corporation.
The Corporation shall be entitled to treat the owner of record of any share or
shares as the owner in fact thereof and, accordingly, shall not be bound to
recognize any equitable or other claim to or interest in such share or shares on
the part of any other person, whether or not it has actual or other notice
thereof, save as expressly provided by the statutes of the State of Connecticut
or the United States of America.
SECTION 2. LOST CERTIFICATES. If a share certificate be lost, destroyed or
mutilated, another may be issued in its stead upon satisfactory proof of such
loss, destruction or mutilation and upon the giving of a bond of indemnity
satisfactory to the Corporation, unless this requirement be dispensed with by
the President, a Vice President, the Treasurer, or the Board of Directors, and
upon compliance with such other conditions as the Board of Directors may
require.
SECTION 3. TRANSFERS. Shares shall be transferable on the records of the
Corporation by the owner of record thereof, or by such owner's attorney
thereunto duly authorized, upon the surrender and cancellation of a certificate
or certificates for a like number of shares of the same class and of the same
series where there are more than one series in a class, with such proof of the
authenticity of the signature of such holder or of such attorney and such proof
of the authority of such attorney as the Corporation may require.
SECTION 4. REGULATIONS. The Board of Directors may make such regulations as it
may deem expedient concerning the issue, transfer and registration of shares.
SECTION 5. TRANSFER AGENT AND REGISTRAR. The Board of Directors may appoint one
or more transfer agents and registrars, or a transfer agent only, and may
require all share certificates to bear the signature of such a transfer agent,
and, if a registrar shall also have been appointed, the signature of such a
registrar.
SECTION 6. RECORD DATE. The Board of Directors, by resolution, may fix a date as
the record date for the purpose of determining the shareowners entitled to
notice of and to vote at any meeting of shareowners or any adjournment thereof,
or entitled to receive payment of any dividend or other distribution, or for any
other purpose, such date in any case to be not earlier than the date such action
is taken by the Board of Directors and not more than seventy days, and, in case
of a meeting of shareowners, not less than ten full days, immediately preceding
the date on which the particular event requiring such determination of
shareowners is to occur. If no record date is so fixed, the date on which notice
of a meeting is mailed shall be the record date for the determination of
shareowners entitled to notice of and to vote at such meeting and the date on
which the resolution of the Board of Directors declaring such dividend or other
distribution is adopted shall be the record date for the determination of
shareowners entitled to receive payment of such dividend or other distribution.
Shareowners actually of record at a record date shall be the only shareowners
entitled to receive notice of or to vote at the meeting, or receive the dividend
or other distribution, or otherwise participate in respect of the event or
transaction, to which such date relates, except as otherwise provided by
statute.
ARTICLE VII.
Miscellaneous.
SECTION 1. SEAL. The seal of the Corporation shall be circular in form and shall
bear the name of the Corporation around the circumference and the figures "1999"
in the center.
SECTION 2. FISCAL YEAR. The fiscal year of the Corporation shall end December
31st in each year, or otherwise, as the Board of Directors may determine.
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SECTION 3. INSPECTION OF BOOKS. The Board of Directors shall determine from time
to time whether and, if allowed, when and under what conditions and regulations
the accounts and books of the Corporation (except such as may by statute be
specifically required to be open to inspection), or any of them, shall be open
to the inspection of the shareowners, and the shareowners' rights in this
respect are and shall be restricted and limited accordingly.
SECTION 4. WAIVER OF NOTICE. Whenever any notice of time, place, purpose or any
other matter, including any special notice or form of notice, is required or
permitted to be given to any person by law or statute, the Certificate of
Incorporation, these Bylaws or a resolution of shareowners or directors, a
written waiver of notice signed by the person or persons entitled to such
notice, whether before or after the time stated therein, shall be equivalent to
the giving of such notice. The Secretary shall cause any such waiver to be filed
with or entered upon the records of the Corporation or, in the case of a waiver
of notice of a meeting, the records of the meeting. The attendance of any person
at a meeting without protesting, prior to or at the commencement of the meeting,
the lack of proper notice shall be deemed to be a waiver by such person of
notice of such meeting.
SECTION 5. VOTING SHARES OF OTHER CORPORATIONS. Unless otherwise ordered by the
Board of Directors or by the Executive Committee, the President, the Secretary
or the Treasurer shall have full power and authority on behalf of the
Corporation to attend and to act and vote at any meetings of shareholders of any
corporation in which the Corporation may hold shares, and at any such meeting
shall possess and exercise any and all the rights and powers incident to the
ownership of such shares and which as the owner thereof the Corporation might
have possessed and exercised if present; or the President may in his or her
discretion give a proxy or proxies in the name of the Corporation to any other
person or persons, who may vote said shares and exercise any and all other
rights in regard to it as here accorded to the officers. The Board of Directors
by resolution from time to time may limit or curtail such power.
SECTION 6. AUDITS. The Board of Directors of the Corporation shall cause an
audit of the books and affairs of the Corporation to be made annually during the
period between the close of each fiscal year and the next annual meeting, such
audit to be made by such firm or individuals, not associated or connected with
the Corporation, as the directors may determine.
ARTICLE VIII.
AMENDMENTS.
These Bylaws may be altered, amended, added to or repealed (a) by the
affirmative vote of the owners of a majority of the voting power of shares
entitled to vote thereon or (b) by the affirmative vote of directors holding a
majority of the directorships. Any notice of a meeting of the shareowners or of
the Board of Directors at which these Bylaws are to be altered, amended, added
to or repealed shall include notice of such proposed action.
63
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PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 33-772 of the Connecticut Business Corporation Act (the "CBCA")
provides that a corporation must indemnify a director who was wholly successful,
on the merits or otherwise, in the defense of any proceeding to which he was a
party because he was a director of the corporation against reasonable expenses
incurred by him in connection with the proceeding. In addition, Section 33-771
of the CBCA permits Connecticut corporations to indemnify an individual who is a
party to a proceeding because he is a director against liability incurred in the
proceeding if: (A) he conducted himself in good faith; (B) He reasonably
believed (i) in the case of conduct in his official capacity, that his conduct
was in the best interests of the corporation: and (ii) in all other cases, that
his conduct was at least not opposed to the best interests of the corporation;
and (C) in the case of any criminal proceeding, he had no reasonable cause to
believe his conduct was unlawful. Section 33-776 of the CBCA provides that a
Connecticut corporation may indemnify an officer, employee or agent of the
corporation who is a party to a proceeding because he is an officer, employee or
agent of the corporation to the same extent that a director may be indemnified
under Section 33-771 of the CBCA, as described above. An officer, employee or
agent of a Connecticut corporation who is not a director is entitled to
mandatory indemnification under Section 33-772 to the same extent to which a
director may be entitled to indemnification under such Section, as described
above.
Section 7 of the registrant's certificate of incorporation provides in
pertinent part that no person who is or was a director of the Corporation shall
be personally liable to the Corporation or its shareowners for monetary damages
for breach of duty as a director in an amount that exceeds the compensation
received by the director for serving the Corporation during the year of the
violation, if such breach did not (A) involve a knowing and culpable violation
of law by the director, (B) enable the director or an associate, as defined in
Section 33-840 of the CBCA to receive an improper personal economic gain, (C)
show a lack of good faith and a conscious disregard for the duty of the director
to the Corporation under circumstances in which the director was aware that his
or her conduct or omission created an unjustifiable risk of serious injury to
the Corporation, (D) constitute a sustained and unexcused pattern of inattention
that amounted to an abdication of the director's duty to the Corporation, or (E)
create liability under Section 33-757 of the CBCA.
Section 8 of the registrant's certificate of incorporation provides in
pertinent part that the Corporation shall be obligated to indemnify a director
for liability, as defined in subdivision (5) of Section 33-770 of the CBCA to
any person for any action taken, or any failure to take any action, as a
director, except liability that (a) involved a knowing and culpable violation of
law by the director, (b) enabled the director or an associate, as defined in
Section 33-840 of the Connecticut General Statutes to receive an improper
personal gain, (c) showed a lack of good faith and a conscious disregard for the
duty of the director to the Corporation under circumstances in which the
director was aware that his conduct or omission crated an unjustifiable risk of
serious injury to the Corporation, (d) constituted a sustained and unexcused
pattern of inattention that amounted to an abdication of the director's duty to
the Corporation or (e) created liability under Section 33-757 of the CBCA.
Section 33-777 of the CBCA provides that a Connecticut corporation may
purchase and maintain insurance on behalf of an individual who is a director,
officer, employee or agent of the corporation or who, while a director, officer,
employee or agent of the corporation, serves at the corporation's request as a
director, officer, partner, trustee, employee or agent of another domestic or
foreign corporation, partnership, joint venture, trust, employee benefit plan or
other entity, against liability asserted against or incurred by him in that
capacity or arising from his status as a director, officer, employee or agent,
whether or not the corporation would have power to indemnify against the same
liability.
II-1
<PAGE>
The registrant's excess liability insurance policy indemnifies its
directors, officers and employees for any and all sums that they shall be
legally obligated to pay and shall pay or by final judgment be adjudged to pay
as damages, judgments, settlements and costs, charges and expenses arising from
any claim or claims that may be made, and for which the registrant has not
provided reimbursement, by reason of such director or officer or employee's
being or having been a director, officer or employee of the registrant or of
another corporation for which he or she is serving or has served at the request
of the registrant as a director, officer or employee.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) EXHIBITS.
The exhibits designated by an asterisk are filed herewith. Exhibits not
so designated have been provided to the Commission, and are incorporated herein
by reference.
Exhibit No. Description
- ----------- -----------
2.1 Agreement and Plan of Merger and Share Exchange, dated March
____, 1999, among the registrant, The United Illuminating
Company and United Mergings, Inc. (incorporated by reference
to Exhibit B to the Proxy Statement and Prospectus included
herein).
3.1 Certificate of Incorporation of the registrant (incorporated
by reference to Exhibit D to the Proxy Statement and
Prospectus included herein).
3.2 Bylaws of the registrant (incorporated by reference to Exhibit
E to the Proxy Statement and Prospectus included herein).
5* Opinion of Wiggin & Dana re legality.
8* Opinion re tax matters (included in Exhibit No. 5*).
23.1 The consent of Wiggin & Dana is contained in the Opinion of
Wiggin & Dana filed as Exhibit 5 and 8.
23.2* Consent of PricewaterhouseCoopers LLP.
24 Power of Attorney is set forth on the signature page to this
registration statement.
99 Form of Proxy.
(b) FINANCIAL STATEMENTS.
The United Illuminating Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1998 contains The United Illuminating Company's
consolidated financial statements and certain other financial information.
Copies of such consolidated financial statements and other financial information
are also included in The United Illuminating Company's Annual Report to
Shareowners, which is mailed to owners of record of UI Common Stock. Additional
copies of the Annual Report to Shareowners may be obtained without charge upon
request as stated under "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE,"
above.
Separate financial statements of Holdings are not presented in
this Proxy Statement and Prospectus because Holdings is an inactive company
without material assets or liabilities or an operating
II-2
<PAGE>
history. Pro forma financial effects of the Plan of Exchange are not set forth
herein since, on a consolidated basis, no change will result from the Plan of
Exchange.
ITEM 22. UNDERTAKINGS
A. The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement to include
any material information with respect to the plan of distribution not previously
disclosed in the registration statement or any material change to such
information in the registration statement.
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
B. The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in this
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
C. (1) The undersigned registrant hereby undertakes as follows:
that prior to any public reoffering of the securities registered hereunder
through use of a prospectus which is a part of this registration statement, by
any person or party who is deemed to be an underwriter within the meaning of
Rule 145(c), the issuer undertakes that such reoffering prospectus will contain
the information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form.
(2) The registrant undertakes that every prospectus: (i) that
is filed pursuant to paragraph (1) immediately preceding, or (ii) that purports
to meet the requirements of Section 10(a)(3) of the Act and is used in
connection with an offering of securities subject to Rule 415, will be filed as
a part of an amendment to the registration statement and will not be used until
such amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial BONA FIDE offering thereof.
D. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against
II-3
<PAGE>
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director or controlling person of the registrant in the successful
defense of any action suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
E. The undersigned registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the prospectus pursuant
to Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
F. The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-4
<PAGE>
POWER OF ATTORNEY
Each director and/or officer of the registrant whose signature appears below
hereby appoints the Agent for Service named in this registration statement, as
his attorney-in-fact to sign in his name and behalf, in any and all capacities
stated below, and to file with the Securities and Exchange Commission, any and
all amendments, including post-effective amendments, to this registration
statement.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the city of New Haven,
State of Connecticut on March 24, 1999.
UIL HOLDINGS CORPORATION
By /s/ Robert L. Fiscus
---------------------------
ROBERT L. FISCUS
(VICE CHAIRMAN OF THE BOARD OF DIRECTORS
AND CHIEF FINANCIAL OFFICER)
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Nathaniel D. Woodson Director, Chairman of the March 24, 1999
- --------------------------------------- Board of Directors, President and
NATHANIEL D. WOODSON Chief Executive Officer
(PRINCIPAL EXECUTIVE OFFICER)
/s/ Robert L. Fiscus Director, Vice Chairman of the Board March 24, 1999
- --------------------------------------- of Directors and Chief Financial Officer
ROBERT L. FISCUS
(PRINCIPAL FINANCIAL OFFICER)
/s/ Kurt Mohlman Director, Treasurer and Secretary March 24, 1999
- ---------------------------------------
KURT MOHLMAN
</TABLE>
II-5
<PAGE>
EXHIBITS 5 AND 8
[LETTERHEAD OF WIGGIN & DANA]
March 22, 1999
UIL Holdings Corporation
157 Church Street
New Haven, Connecticut 06506
Ladies and Gentlemen:
We have acted as counsel to UIL Holdings Corporation, a Connecticut
corporation (the "Company"), in connection with (i) the preparation and filing
of the Company's Registration Statement on Form S-4 (the "Registration
Statement") with the Securities and Exchange Commission (the "Commission")
relating to the registration under the Securities Act of 1933, as amended (the
"Securities Act") of 15,001,292 shares (the "Shares") of the common stock,
without par value, of the Company (the "UIL Common Stock"), (ii) the merger (the
"Merger") of the Company's wholly-owned subsidiary, United Mergings, Inc., a
Connecticut corporation ("Mergings"), with and into The United Illuminating
Company, a specially-chartered Connecticut corporation and the holder of all of
the issued and outstanding capital stock of the Company ("UI"), and (iii) the
related share exchange (the "Exchange") whereby each issued and outstanding
share of Mergings common stock will be converted into one share of UI common
stock, without par value (the "UI Common Stock") and each outstanding share of
UI Common Stock (excluding shares with respect to which dissenters' rights have
been properly exercised) will be automatically converted into one share of UIL
Common Stock.
In connection with this opinion, we have reviewed and relied upon
originals or copies, certified or otherwise authenticated to our satisfaction,
of the following: (i) the Registration Statement, (ii) the Certificate of
Incorporation and Bylaws of the Company as currently in effect, (iii) the
Agreement and Plan of Merger and Share Exchange (the "Agreement"), among the
Company, UI and Mergings, attached as Exhibit B to the Proxy Statement and
Prospectus forming a part of the Registration Statement, (iv) certain
resolutions adopted or proposed to be adopted by the Board of Directors of the
Company and UI relating to the transactions contemplated by the Registration
Statement, and (v) such other records, documents and instruments as we have
deemed necessary or appropriate in order to express the opinions hereinafter set
forth.
We have assumed, with your consent, that (i) the Merger and the
Exchange will be effected in accordance with the Agreement and the laws of the
State of Connecticut and in the manner described in the Registration Statement,
(ii) all the provisions of the Agreement will be complied with, (iii) the
Agreement and the Proxy Statement and Prospectus describe the entire transaction
and all related transactions, (iv) the facts and representations made to us by
officers
<PAGE>
UIL Holdings Corporation
March 22, 1999
Page 2
and directors of the Company and UI are true and correct, (v) the proposed
resolutions to be adopted by the Board of Directors of the Company and UI will
be duly approved and adopted prior to the effective date of the Merger and Share
Exchange, and (vi) there will be no change in any of the facts or
representations material to this opinion between the date of this opinion and
the effective time of the Merger and Share Exchange.
Based upon the foregoing and upon such investigation as we have deemed
necessary, we are of the opinion that the Shares registered by the Registration
Statement will be duly authorized and validly issued, and fully paid and
non-assessable when (i) the Registration Statement shall have become effective
under the Securities Act, (ii) the requisite approval for consummation of the
Merger and the Share Exchange shall have been obtained from the owners of the UI
Common Stock and UI as the sole owner of the UIL Common Stock, (iii) UI and the
Company shall have received all necessary regulatory approvals required to
consummate the Merger and the Share Exchange, and (iv) the Merger and the Share
Exchange shall have been consummated in accordance with the terms of the
Agreement and the laws of the State of Connecticut.
We are further of the opinion that the statements contained in the
Proxy Statement and Prospectus under the caption "PROPOSAL 2 - APPROVAL OF
HOLDING COMPANY STRUCTURE - Certain Federal Income Tax Consequences" describing
certain Federal income tax consequences to holders of UI common stock, as
qualified therein, constitutes an accurate description, in general terms, of the
indicated United States Federal income tax consequences of the Merger and the
Share Exchange.
As members of the Connecticut bar, we do not hold ourselves out as
experts of the laws of other jurisdictions other than the laws of the United
States and all of the opinions set forth above are limited to the laws of the
State of Connecticut and the United States, and we do not express any opinion
concerning any other law.
This letter is not being delivered for the benefit of, nor may it be
relied upon by, the owners of UI Common Stock or any other party other than the
Company.
We hereby consent to the filing of this opinion with the Commission as
Exhibits 5 and 8 to the Registration Statement. We further consent to the use of
the name of this firm in the Registration Statement and in the Proxy Statement
and Prospectus forming a part thereof. In giving this consent, we do not thereby
admit that we are within the category of persons whose consent is required
pursuant to Section 7 of the rules and regulations of the Commission.
Very truly yours,
WIGGIN & DANA
By: /s/ William C. Baskin, Jr.
--------------------------------------
William C. Baskin, Jr.
<PAGE>
EXHIBIT 23.2
[LETTERHEAD OF PRICEWATERHOUSECOOPERS LLC]
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Proxy Statement and
Prospectus constituting part of the Registration Statement of UIL Holdings
Corporation on Form S-4 of our reports dated February 12, 1999 appearing on page
86 and page 89 of The United Illuminating Company's Annual Report on Form 10-K
for the year ended December 31, 1998.
<PAGE>
EXHIBIT 99
THE UNITED ILLUMINATING COMPANY
NOTICE OF THE ANNUAL MEETING OF THE SHAREOWNERS
TO THE SHAREOWNERS:
Notice is hereby given that the Annual Meeting of the Shareowners of
The United Illuminating Company will be held at the New Haven Lawn Club, 193
Whitney Avenue, New Haven, Connecticut, on Wednesday, May 19, 1999 at one
o'clock in the afternoon, for the following purposes:
1. To elect a Board of Directors for the ensuing year.
2. To vote on the approval of the employment, by the Board of Directors, of
PricewaterhouseCoopers LLP as the firm of independent public accountants to
audit the books and affairs of the Company for the fiscal year 1999.
3. To vote on the approval of a 1999 Stock Option Plan.
4. To vote on a proposal to reorganize the Company into a holding company
structure.
5. To transact such other business as may properly come before the meeting or
any adjournments thereof.
The Board of Directors has fixed the close of business on March 11, 1999 as
the record date for determination of the shareowners of the Company entitled to
notice of, and to vote at, the meeting and any adjournments thereof.
Regardless of whether you plan to attend the meeting, please fill in,
sign, date and return promptly the attached proxy in the accompanying envelope,
which requires no postage if mailed in the United States. [TO BE INCLUDED ONLY
ON PROXIES FURNISHED TO EMPLOYEE-PARTICIPANTS IN THE COMPANY'S KSOP BENEFIT
PLAN: Failure to submit your vote will result in the KSOP Trustee voting your
KSOP shares in proportion to votes received from other KSOP participants. The
Trustee for the unallocated shares will then vote the unallocated shares in the
Plan in the same proportions as the allocated KSOP shares are voted by the KSOP
Trustee.]
Dated at New Haven, Connecticut, this 30th day of March, 1999.
By Order of the Board of Directors
Kurt Mohlman, TREASURER AND SECRETARY
- --------------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT
In order to save the Company the expense of further solicitation to ensure that
a quorum is present at the Annual Meeting, please mail your proxy promptly -
regardless of the number of shares you own, and regardless of whether you plan
to attend the meeting.
- --------------------------------------------------------------------------------
A DIAGRAM SHOWING THE LOCATION OF THE NEW HAVEN LAWN CLUB APPEARS ON THE INSIDE
OF THE BACK COVER OF THE PROXY STATEMENT.
DETACH PROXY CARD HERE
<TABLE>
<CAPTION>
(1) ELECTION OF BOARD OF ( ) FOR all nominees ( )WITHHOLD AUTHORITY to vote *EXCEPTIONS
DIRECTORS listed below for all nominees listed below
<S> <C> <C> <C>
</TABLE>
Nominees: Thelma R. Albright, Marc C. Breslawsky, David E.A. Carson,
John F. Croweak, Robert L. Fiscus, Betsy Henley-Cohn, John L.
Lahey, F. Patrick McFadden, Jr., Frank R. O'Keefe, Jr., James
A. Thomas, and, in their discretion, such other person or
persons as the present Board of Directors shall determine, if
one or more of said nominees is unable to serve.
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, MARK
THE "EXCEPTIONS" BOX AND WRITE THAT NOMINEE'S NAME IN THE
SPACE PROVIDED BELOW.)
* Exceptions___________________________________________________________________
(2) APPROVAL OF THE EMPLOYMENT OF PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT
PUBLIC ACCOUNTANTS FOR FISCAL YEAR 1999. (Proposed by the Board of
Directors.)
( ) FOR ( ) AGAINST ( ) ABSTAIN
<PAGE>
(3) APPROVAL OF 1999 STOCK OPTION PLAN. (Proposed by the Board of Directors.)
( ) FOR ( ) AGAINST ( ) ABSTAIN
(4) APPROVAL OF REORGANIZATION INTO A HOLDING COMPANY STR5UCTURE. (Proposed by
the Board of Directors.)
( ) FOR ( ) AGAINST ( ) ABSTAIN
(5) IN THE PROXY'S DISCRETION ON ANY OTHER MATTERS THAT MAY PROPERLY COME
BEFORE SAID MEETING OR ANY ADJOURNMENT THEREOF.
When signing as attorney, executor, administrator, trustee or
guardian, give title as such. If signer a corporation, sign in the
corporate name by duly authorized officer.
Dated _______________________________________________
______________________________________________________
______________________________________________________
PLEASE SIGN HERE
<PAGE>
THE UNITED ILLUMINATING COMPANY
COMMON STOCK PROXY
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John L. Lahey, or F. Patrick McFadden,
Jr. (in the absence of Mr. Lahey), or Betsy Henley-Cohn (in the absence of
Messrs. Lahey and McFadden), as proxy, for and in the name of the undersigned
and with all powers the undersigned would possess if personally present, to vote
all shares of the Common Stock of The United Illuminating Company that the
undersigned is entitled to vote at the Annual Meeting of the Shareowners to be
held on Wednesday, May 19, 1999, and at any adjournments thereof.
THIS PROXY, WHEN PROPERLY SIGNED AND RETURN TO THE COMPANY, WILL BE
VOTED IN THE MANNER INDICATED ON THE REVERSE SIDE. UNLESS OTHERWISE DIRECTED ON
THE REVERSE SIDE, THE UNDERSIGNED'S VOTE WILL BE CAST FOR THE ELECTION OF ALL
NOMINEES LISTED TO THE BOARD OF DIRECTORS AND FOR ITEM (2), (3) AND (4).
(Continued and to be signed and dated, on reverse side.)
