-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, V9PejTKTkOY2Oj1x3b1qboGHTjbArnMN8ZqLWMp5K7XKLf9Y+bjvrlHDA77iLfWM qzECxigf1DtlNYp8fL3SKg== /in/edgar/work/0000101265-00-000029/0000101265-00-000029.txt : 20001115 0000101265-00-000029.hdr.sgml : 20001115 ACCESSION NUMBER: 0000101265-00-000029 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 16 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: UIL HOLDINGS CORP CENTRAL INDEX KEY: 0001082510 STANDARD INDUSTRIAL CLASSIFICATION: [4911 ] IRS NUMBER: 061541045 STATE OF INCORPORATION: CT FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-15052 FILM NUMBER: 764032 BUSINESS ADDRESS: STREET 1: 157 CHURCH ST CITY: NEW HAVEN STATE: CT ZIP: 06510 BUSINESS PHONE: 2034992000 MAIL ADDRESS: STREET 1: 157 CHURCH ST CITY: NEW HAVEN STATE: CT ZIP: 06510 10-Q 1 0001.txt UIL HOLDINGS CORP. 10-Q 3RD QTR ENDED 9/30/00 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDING SEPTEMBER 30, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ------------ ------------ COMMISSION REGISTRANT; STATE OF INCORPORATION; I. R. S. EMPLOYER FILE NUMBER ADDRESS; AND TELEPHONE NUMBER IDENTIFICATION NO. ----------- ---------------------------------- ----------------- 1-6788 THE UNITED ILLUMINATING COMPANY 06-0571640 (a Connecticut Corporation) 157 Church Street New Haven, Connecticut 06506 Telephone: (203) 499-2000 1-15995 UIL HOLDINGS CORPORATION 06-1541045 (a Connecticut Corporation) 157 Church Street New Haven, Connecticut 06506 Telephone: (203) 499-2000 NONE (Former name, former address and former fiscal year, if changed since last report.) Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. YES X NO --- --- The number of shares outstanding of UIL Holdings Corporation's only class of common stock, as of September 30, 2000, was 14,321,177. The number of shares outstanding of The United Illuminating Company's only class of common stock, as of September 30, 2000 was 100. - 1 - INDEX PART I. FINANCIAL INFORMATION PAGE NUMBER ------ Item 1. Financial Statements. 4 UIL HOLDINGS CORPORATION Consolidated Statement of Income for the three and nine months ended September 30, 2000 and 1999. 4 Consolidated Balance Sheet as of September 30, 2000 and December 31, 1999. 5 Consolidated Statement of Cash Flows for the three and nine months ended September 30, 2000 and 1999. 7 THE UNITED ILLUMINATING COMPANY Statement of Income for the three and nine months ended September 30, 2000 and 1999. 8 Balance Sheet as of September 30, 2000 and December 31, 1999. 9 Statement of Cash Flows for the three and nine months ended September 30, 2000 and 1999. 11 UIL HOLDINGS CORPORATION\THE UNITED ILLUMINATING COMPANY Notes to Financial Statements. 12 - Statement of Accounting Policies 12 - Capitalization 13 - Short-term Credit Arrangements 14 - Income Taxes 15 - Supplementary Information 17 - Commitments and Contingencies 19 - Capital Expenditure Program 19 - Nuclear Insurance Contingencies 19 - Other Commitments and Contingencies 19 - Connecticut Yankee 19 - Hydro-Quebec 20 - Environmental Concerns 20 - Site Decontamination, Demolition and Remediation Costs 20 - Nuclear Fuel Disposal and Nuclear Plant Decommissioning 21 - Segment Information 22 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. 23 UIL HOLDINGS CORPORATION - Major Influences on Financial Condition 23 - Capital Expenditure Program 25 - Liquidity and Capital Resources 25 - Subsidiary Operations 26 - Results of Operations 27 - Looking Forward 34 THE UNITED ILLUMINATING COMPANY 37 Item 3. Quantitative and Qualitative Disclosure About Market Risk. 37 - 2 - INDEX PART II. OTHER INFORMATION PAGE NUMBER ------ Item 1. Legal Proceedings. 38 Item 6. Exhibits and Reports on Form 8-K. 38 SIGNATURES 41 - 3 - PART I: FINANCIAL INFORMATION ITEM I: FINANCIAL STATEMENTS UIL HOLDINGS CORPORATION CONSOLIDATED STATEMENT OF INCOME (THOUSANDS EXCEPT PER SHARE AMOUNTS) (UNAUDITED)
Three Months Ended Nine Months Ended September 30, September 30, 2000 1999 2000 1999 ---- ---- ---- ---- OPERATING REVENUES (NOTE G) $247,054 $220,527 $646,098 $577,608 ------------- ------------- ------------ ------------- OPERATING EXPENSES Operation Fuel and energy 74,164 51,433 214,503 123,815 Capacity purchased 683 8,428 3,587 26,168 Other 78,458 57,774 196,971 158,125 Maintenance 6,076 5,820 16,895 21,279 Depreciation (Note G) 8,397 13,352 24,567 48,464 Amortization of regulatory assets 17,874 11,444 24,467 24,934 Income taxes (Note F) 18,357 25,773 47,574 55,549 Other taxes (Note G) 11,441 12,918 33,658 38,399 ------------- ------------- ------------ ------------- Total 215,450 186,942 562,222 496,733 ------------- ------------- ------------ ------------- OPERATING INCOME 31,604 33,585 83,876 80,875 ------------- ------------- ------------ ------------- OTHER INCOME AND (DEDUCTIONS) Allowance for equity funds used during construction 138 347 564 614 Other-net (Note G) (2,678) 1,043 (2,254) 903 Non-operating income taxes (Note F) 1,731 1,017 2,983 2,057 ------------- ------------- ------------ ------------- Total (809) 2,407 1,293 3,574 ------------- ------------- ------------ ------------- INCOME BEFORE INTEREST CHARGES 30,795 35,992 85,169 84,449 ------------- ------------- ------------ ------------- INTEREST CHARGES Interest on long-term debt 9,540 9,829 28,659 32,219 Interest on Seabrook obligation bonds owned by the company (1,618) (1,711) (4,853) (5,133) Dividend requirement of mandatorily redeemable securities 1,123 1,203 3,529 3,609 Other interest (Note G) 2,026 1,407 3,052 4,083 Allowance for borrowed funds used during construction (554) (327) (1,296) (1,098) ------------- ------------- ------------ ------------- 10,517 10,401 29,091 33,680 Amortization of debt expense and redemption premiums 571 594 1,710 1,885 ------------- ------------- ------------ ------------- Net Interest Charges 11,088 10,995 30,801 35,565 ------------- ------------- ------------ ------------- NET INCOME 19,707 24,997 54,368 48,884 Premium on preferred stock redemptions - - - 53 Dividends on preferred stock - - - 66 ------------- ------------- ------------ ------------- INCOME APPLICABLE TO COMMON STOCK $19,707 $24,997 $54,368 $48,765 ============= ============= ============ ============= AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC 14,070 14,056 14,072 14,049 AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - DILUTED 14,112 14,058 14,087 14,051 EARNINGS PER SHARE OF COMMON STOCK - BASIC AND DILUTED $1.40 $1.78 $3.86 $3.47 CASH DIVIDENDS DECLARED PER SHARE OF COMMON STOCK $0.72 $0.72 $2.16 $2.16
The accompanying Notes to Financial Statements are an integral part of the financial statements. - 4 - UIL HOLDINGS CORPORATION CONSOLIDATED BALANCE SHEET ASSETS (Thousands of Dollars)
September 30, December 31, 2000 1999* ---- ----- (Unaudited) Utility Plant at Original Cost In service $915,609 $1,007,065 Less, accumulated provision for depreciation 443,286 532,409 ------------- -------------- 472,323 474,656 Construction work in progress 34,963 25,708 Nuclear fuel 23,395 21,101 ------------- -------------- Net Utility Plant 530,681 521,465 ------------- -------------- Other Property and Investments Investment in generation facility 89,847 83,494 Nuclear decommissioning trust fund assets 34,090 28,255 Other 18,381 20,098 ------------- -------------- 142,318 131,847 ------------- -------------- Current Assets Unrestricted cash and temporary cash investments 8,446 39,099 Restricted cash 33,212 29,223 Accounts receivable Customers, less allowance for doubtful accounts of $1,500 and $1,800 60,434 56,057 Other, less allowance for doubtful accounts of $698 and $508 119,698 53,612 Accrued utility revenues 23,375 25,019 Fuel, materials and supplies, at average cost 10,657 9,259 Prepayments 5,342 3,056 Other 9,353 4,801 ------------- -------------- Total 270,517 220,126 ------------- -------------- Deferred Charges Goodwill 24,721 4,827 Unamortized debt issuance expenses 7,473 8,688 Other 1,622 1,272 ------------- -------------- Total 33,816 14,787 ------------- -------------- Regulatory Assets (FUTURE AMOUNTS DUE FROM CUSTOMERS THROUGH THE RATEMAKING PROCESS) Nuclear plant investments-above market 502,906 518,268 Income taxes due principally to book-tax differences 146,744 166,965 Long-term purchase power contracts-above market 132,347 144,406 Connecticut Yankee 30,583 37,013 Unamortized redemption costs 22,574 22,314 Unamortized cancelled nuclear projects 7,901 8,780 Displaced worker protection costs 4,021 5,746 Uranium enrichment decommissioning cost 990 1,040 Other 30,318 5,453 ------------- -------------- Total 878,384 909,985 ------------- -------------- $1,855,716 $1,798,210 ============= ==============
*Derived from audited financial statements The accompanying Notes to Financial Statements are an integral part of the financial statements. - 5 - UIL HOLDINGS CORPORATION CONSOLIDATED BALANCE SHEET CAPITALIZATION AND LIABILITIES (Thousands of Dollars)
September 30, December 31, 2000 1999* ---- ----- (Unaudited) Capitalization (Note B) Common stock equity Common stock $291,342 $292,006 Paid-in capital 2,424 2,253 Capital stock expense (2,170) (2,170) Unearned employee stock ownership plan equity (8,548) (9,261) Retained earnings 199,446 175,470 --------------- --------------- 482,494 458,298 Company-obligated mandatorily redeemable securities of subsidiary holding solely parent company debentures - 50,000 Long-term debt Long-term debt 604,837 605,641 Investment in Seabrook obligation bonds (82,635) (87,413) --------------- --------------- Net long-term debt 522,202 518,228 --------------- --------------- Total 1,004,696 1,026,526 --------------- --------------- Noncurrent Liabilities Purchase power contract obligation 132,347 144,406 Nuclear decommissioning obligation 34,090 28,255 Connecticut Yankee contract obligation 23,134 27,056 Pensions accrued 4,964 19,026 Obligations under capital leases 15,830 16,131 Other 10,833 10,394 --------------- --------------- Total 221,198 245,268 --------------- --------------- Current Liabilities Current portion of long-term debt 859 25,000 Notes payable 80,342 17,131 Accounts payable 34,325 49,069 Accounts payable - APS customers 93,656 56,220 Dividends payable 10,127 10,125 Taxes accrued 9,369 2,570 Interest accrued 13,805 8,433 Obligations under capital leases 398 375 Other accrued liabilities 62,924 39,421 --------------- --------------- Total 305,805 208,344 --------------- --------------- Customers' Advances for Construction 1,872 1,867 --------------- --------------- Regulatory Liabilities (FUTURE AMOUNTS OWED TO CUSTOMERS THROUGH THE RATEMAKING PROCESS) Accumulated deferred investment tax credits 14,881 15,157 Deferred gains on sale of property 15,901 15,901 Customer refund 21,693 18,381 Other 503 2,543 --------------- --------------- Total 52,978 51,982 --------------- --------------- Deferred Income Taxes (FUTURE TAX LIABILITIES OWED TO TAXING AUTHORITIES) 269,167 264,223 Commitments and Contingencies (Note L) --------------- --------------- $1,855,716 $1,798,210 =============== ===============
*Derived from audited financial statements The accompanying Notes to Financial Statements are an integral part of the financial statements. - 6 - UIL HOLDINGS CORPORATION CONSOLIDATED STATEMENT OF CASH FLOWS (THOUSANDS OF DOLLARS) (UNAUDITED)
Three Months Ended Nine Months Ended September 30, September 30, 2000 1999 2000 1999 ---- ---- ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES Net Income $19,707 $24,997 $54,368 $48,884 ------------- ------------ ------------ ------------ Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 26,999 21,200 60,625 62,918 Deferred income taxes 1,416 3,023 7,042 6,838 Deferred income taxes - generation asset sale - - - (70,222) Deferred investment tax credits - net (103) (190) (276) (571) Amortization of nuclear fuel 1,979 1,978 5,772 6,658 Allowance for funds used during construction (693) (674) (1,860) (1,712) CTA and SBC expense deferral (7,888) - (32,904) - Amortization of deferred return - 3,146 - 9,439 Changes in: Accounts receivable - net (45,817) (22,178) (70,463) (11,643) Fuel, materials and supplies (975) (42) (1,398) 170 Prepayments (1,889) (1,985) (2,286) 1,777 Accounts payable 32,673 16,015 22,692 (847) Interest accrued (2,399) (2,462) 5,372 3,951 Taxes accrued (3,119) 6,967 6,799 11,777 Taxes accrued - generation asset sale - (17,555) - 17,556 Other assets and liabilities 2,404 15,933 (1,156) (20,800) ------------- ------------ ------------ ------------ Total Adjustments 2,588 23,176 (2,041) 15,289 ------------- ------------ ------------ ------------ NET CASH PROVIDED BY OPERATING ACTIVITIES 22,295 48,173 52,327 64,173 ------------- ------------ ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES Common stock (347) 284 219 853 Notes payable 66,080 (5,550) 63,211 (43,758) Securities redeemed and retired: Preferred stock - - - (4,299) Company-obligated mandatorily redeemable securities of subsidiary holding solely parent debentures (50,000) - (50,000) - Long-term debt - - (25,750) (211,202) Premium on preferred stock redemptions - - - (53) Lease obligations (95) (88) (279) (259) Dividends Preferred stock - - - (116) Common stock (10,135) (10,114) (30,390) (30,329) ------------- ------------ ------------ ------------ NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 5,503 (15,468) (42,989) (289,163) ------------- ------------ ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES Investment in unregulated businesses - (20,156) - (95,248) Net cash received from sale of generation assets - - - 270,590 Plant expenditures, including nuclear fuel (18,085) (9,770) (40,780) (26,296) Investment in debt securities - - 4,778 5,447 ------------- ------------ ------------ ------------ NET CASH USED IN INVESTING ACTIVITIES (18,085) (29,926) (36,002) 154,493 ------------- ------------ ------------ ------------ CASH AND TEMPORARY CASH INVESTMENTS: NET CHANGE FOR THE PERIOD 9,713 2,779 (26,664) (70,497) BALANCE AT BEGINNING OF PERIOD 31,945 51,225 68,322 124,501 ------------- ------------ ------------ ------------ BALANCE AT END OF PERIOD 41,658 54,004 41,658 54,004 LESS: RESTRICTED CASH 33,212 35,999 33,212 35,999 ------------- ------------ ------------ ------------ BALANCE: UNRESTRICTED CASH $8,446 $18,005 $8,446 $18,005 ============= ============ ============ ============ CASH PAID DURING THE PERIOD FOR: Interest (net of amount capitalized) $10,173 $9,919 $18,732 $24,402 ============= ============ ============ ============ Income taxes $20,000 $33,900 $32,600 $91,850 ============= ============ ============ ============
Note: Cash Flows from Operating Activities for the nine months ended September 30, 1999 were reduced by the current income tax effects of the generation asset sale in the amount of $52,666. The accompanying Notes to Financial Statements are an integral part of the financial statements. - 7 - THE UNITED ILLUMINATING COMPANY STATEMENT OF INCOME (THOUSANDS EXCEPT PER SHARE AMOUNTS) (UNAUDITED)
Three Months Ended Nine Months Ended September 30, September 30, 2000 1999 2000 1999 ---- ---- ---- ---- OPERATING REVENUES (NOTE G) $201,127 $199,071 $546,116 $532,271 ------------- ------------- ------------ ------------- OPERATING EXPENSES Operation Fuel and energy 74,164 51,433 214,503 123,815 Capacity purchased 683 8,428 3,587 26,168 Other 36,338 36,651 104,478 112,328 Maintenance 6,076 5,820 16,895 21,279 Depreciation (Note G) 7,263 12,375 21,508 45,732 Amortization of regulatory assets 17,874 11,444 24,467 24,934 Income taxes (Note F) 19,153 25,910 48,051 57,286 Other taxes (Note G) 11,073 12,918 32,942 38,399 ------------- ------------- ------------ ------------- Total 172,624 164,979 466,431 449,941 ------------- ------------- ------------ ------------- OPERATING INCOME 28,503 34,092 79,685 82,330 ------------- ------------- ------------ ------------- OTHER INCOME AND (DEDUCTIONS) Allowance for equity funds used during construction 138 347 564 614 Other-net (Note G) 1,536 773 2,750 2,071 Non-operating income taxes (Note F) 1,719 1,017 2,970 2,057 ------------- ------------- ------------ ------------- Total 3,393 2,137 6,284 4,742 ------------- ------------- ------------ ------------- INCOME BEFORE INTEREST CHARGES 31,896 36,229 85,969 87,072 ------------- ------------- ------------ ------------- INTEREST CHARGES Interest on long-term debt 9,540 9,829 28,659 32,219 Interest on Seabrook obligation bonds owned by the company (1,618) (1,711) (4,853) (5,133) Interest on debt of associated company 1,134 1,215 3,565 3,646 Other interest (Note G) 1,636 1,407 2,661 4,083 Allowance for borrowed funds used during construction (554) (327) (1,296) (1,098) ------------- ------------- ------------ ------------- 10,138 10,413 28,736 33,717 Amortization of debt expense and redemption premiums 571 594 1,710 1,885 ------------- ------------- ------------ ------------- Net Interest Charges 10,709 11,007 30,446 35,602 ------------- ------------- ------------ ------------- NET INCOME 21,187 25,222 55,523 51,470 Premium on preferred stock redemptions - - - 53 Dividends on preferred stock - - - 66 ------------- ------------- ------------ ------------- INCOME APPLICABLE TO COMMON STOCK $21,187 $25,222 $55,523 $51,351 ============= ============= ============ =============
The accompanying Notes to Financial Statements are an integral part of the financial statements. - 8 - THE UNITED ILLUMINATING COMPANY BALANCE SHEET ASSETS (Thousands of Dollars)
September 30, December 31, 2000 1999* ---- ----- (Unaudited) Utility Plant at Original Cost In service $915,609 $1,007,065 Less, accumulated provision for depreciation 448,147 537,270 ------------- -------------- 467,462 469,795 Construction work in progress 34,963 25,708 Nuclear fuel 23,395 21,101 ------------- -------------- Net Utility Plant 525,820 516,604 ------------- -------------- Other Property and Investments Nuclear decommissioning trust fund assets 34,090 28,255 Other 7,409 39,237 ------------- -------------- 41,499 67,492 ------------- -------------- Current Assets Unrestricted cash and temporary cash investments 3,121 34,969 Restricted cash 3,281 2,339 Accounts receivable Customers, less allowance for doubtful accounts of $1,500 and $1,800 60,434 56,057 Other 92,705 124,722 Accrued utility revenues 23,375 25,019 Fuel, materials and supplies, at average cost 9,408 9,126 Prepayments 5,079 2,780 ------------- -------------- Total 197,403 255,012 ------------- -------------- Deferred Charges Unamortized debt issuance expenses 7,473 8,688 Other 1,120 1,163 ------------- -------------- Total 8,593 9,851 ------------- -------------- Regulatory Assets (FUTURE AMOUNTS DUE FROM CUSTOMERS THROUGH THE RATEMAKING PROCESS) Nuclear plant investments-above market 502,906 518,268 Income taxes due principally to book-tax differences 146,744 166,965 Long-term purchase power contracts-above market 132,347 144,406 Connecticut Yankee 30,583 37,013 Unamortized redemption costs 22,574 22,314 Unamortized cancelled nuclear projects 7,901 8,780 Displaced worker protection costs 4,021 5,746 Uranium enrichment decommissioning cost 990 1,040 Other 30,318 5,453 ------------- -------------- Total 878,384 909,985 ------------- -------------- $1,651,699 $1,758,944 ============= ==============
*Derived from audited financial statements The accompanying Notes to Financial Statements are an integral part of the financial statements. - 9 - THE UNITED ILLUMINATING COMPANY BALANCE SHEET CAPITALIZATION AND LIABILITIES (Thousands of Dollars)
September 30, December 31, 2000 1999* ---- ----- (Unaudited) Capitalization (Note B) Common stock equity Common stock $1 $292,006 Paid-in capital 253,119 2,253 Capital stock expense - (2,170) Unearned employee stock ownership plan equity - (9,261) Retained earnings 212,259 197,000 --------------- --------------- 465,379 479,828 Long-term debt Long-term debt 604,837 656,147 Investment in Seabrook obligation bonds (82,635) (87,413) --------------- --------------- Net long-term debt 522,202 568,734 --------------- --------------- Total 987,581 1,048,562 --------------- --------------- Noncurrent Liabilities Purchase power contract obligation 132,347 144,406 Nuclear decommissioning obligation 34,090 28,255 Connecticut Yankee contract obligation 23,134 27,056 Pensions accrued 4,964 19,026 Obligations under capital leases 15,830 16,131 Other 10,833 10,394 --------------- --------------- Total 221,198 245,268 --------------- --------------- Current Liabilities Current portion of long-term debt 859 25,000 Notes payable - 17,000 Accounts payable 36,225 51,935 Dividends payable 20,000 10,125 Taxes accrued 7,932 2,382 Interest accrued 13,773 8,433 Obligations under capital leases 398 375 Other accrued liabilities 35,426 26,592 --------------- --------------- Total 114,613 141,842 --------------- --------------- Customers' Advances for Construction 1,872 1,867 --------------- --------------- Regulatory Liabilities (FUTURE AMOUNTS OWED TO CUSTOMERS THROUGH THE RATEMAKING PROCESS) Accumulated deferred investment tax credits 14,881 15,157 Deferred gains on sale of property 15,901 15,901 Customer refund 21,693 18,381 Other 6,142 8,182 --------------- --------------- Total 58,617 57,621 --------------- --------------- Deferred Income Taxes (FUTURE TAX LIABILITIES OWED TO TAXING AUTHORITIES) 267,818 263,784 Commitments and Contingencies (Note L) --------------- --------------- $1,651,699 $1,758,944 =============== ===============
*Derived from audited financial statements The accompanying Notes to Financial Statements are an integral part of the financial statements. - 10 - THE UNITED ILLUMINATING COMPANY STATEMENT OF CASH FLOWS (THOUSANDS OF DOLLARS) (UNAUDITED) Three Months Ended Nine Months Ended September 30, September 30, 2000 1999 2000 1999 ---- ---- ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES Net Income $21,187 $25,222 $55,523 $51,471 ------------- ------------ ------------ ------------ Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 25,864 20,222 57,566 60,186 Deferred income taxes 1,526 3,008 6,130 6,580 Deferred income taxes - generation asset sale - - - (70,222) Deferred investment tax credits - net (103) (190) (276) (571) Amortization of nuclear fuel 1,979 1,978 5,772 6,658 Allowance for funds used during construction (693) (674) (1,860) (1,712) CTA and SBC expense deferral (7,888) - (32,904) - Amortization of deferred return - 3,146 - 9,439 Changes in: Accounts receivable - net 40,155 (35,759) 27,640 (104,541) Fuel, materials and supplies (134) 135 (282) (654) Prepayments (1,812) (2,084) (2,299) 1,611 Accounts payable (248) (2,475) (15,710) (21,060) Interest accrued (2,431) (2,462) 5,340 3,951 Taxes accrued (4,033) 7,067 5,550 13,718 Taxes accrued - generation asset sale - (17,555) - 17,556 Other assets and liabilities 40,191 14,934 43,216 (27,663) ------------- ------------ ------------ ------------ Total Adjustments 92,373 (10,709) 97,883 (106,724) ------------- ------------ ------------ ------------ NET CASH PROVIDED BY OPERATING ACTIVITIES 113,560 14,513 153,406 (55,253) ------------- ------------ ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES Common stock (30,273) 284 (29,707) 853 Notes payable (6,500) (3,000) (17,000) (37,000) Securities redeemed and retired: Preferred stock - - - (4,299) Long-term debt (50,506) - (76,256) (211,202) Premium on preferred stock redemptions - - - (53) Lease obligations (95) (88) (279) (259) Dividends Preferred stock - - - (116) Common stock (10,135) (10,114) (30,390) (30,329) ------------- ------------ ------------ ------------ NET CASH USED IN FINANCING ACTIVITIES (97,509) (12,918) (153,632) (282,405) ------------- ------------ ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES Net cash received from sale of generation assets - - - 270,590 Plant expenditures, including nuclear fuel (13,769) (6,964) (35,458) (19,854) Investment in debt securities - - 4,778 5,447 ------------- ------------ ------------ ------------ NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES (13,769) (6,964) (30,680) 256,183 ------------- ------------ ------------ ------------ CASH AND TEMPORARY CASH INVESTMENTS: NET CHANGE FOR THE PERIOD 2,282 (5,369) (30,906) (81,475) BALANCE AT BEGINNING OF PERIOD 4,120 21,478 37,308 97,584 ------------- ------------ ------------ ------------ BALANCE AT END OF PERIOD 6,402 16,109 6,402 16,109 LESS: RESTRICTED CASH 3,281 2,339 3,281 2,339 ------------- ------------ ------------ ------------ BALANCE: UNRESTRICTED CASH $3,121 $13,770 $3,121 $13,770 ============= ============ ============ ============ CASH PAID DURING THE PERIOD FOR: Interest (net of amount capitalized) $9,818 $9,920 $18,377 $24,403 ============= ============ ============ ============ Income taxes $20,000 $33,900 $32,600 $91,850 ============= ============ ============ ============
Note: Cash Flows from Operating Activities for the nine months ended September 30, 1999 were reduced by the current income tax effects of the generation asset sale in the amount of $52,666. The accompanying Notes to Financial Statements are an integral part of the financial statements. - 11 - UIL HOLDINGS CORPORATION THE UNITED ILLUMINATING COMPANY NOTES TO FINANCIAL STATEMENTS HOLDING COMPANY FORMATION On July 20, 2000, UIL Holdings Corporation (UIL Holdings) became the parent company of a holding company system as a result of the corporate restructuring of The United Illuminating Company (UI) and its direct and indirect non-regulated subsidiaries. UI has become a wholly-owned subsidiary of UIL Holdings, and each share of the common stock of UI has been converted into a share of common stock of UIL Holdings. All of UI's interests in all of its direct and indirect non-regulated subsidiaries have been transferred to UIL Holdings and, to the extent new businesses are subsequently acquired or commenced, they will also be financed and owned by UIL Holdings. BASIS OF PRESENTATION The consolidated financial statements of UIL Holdings and its wholly-owned direct subsidiaries, UI and United Resources, Inc. (URI), have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). The Notes to Financial Statements apply to both UIL Holdings and UI. UIL Holdings Consolidated Financial Statements include the accounts of UIL Holdings and its wholly-owned subsidiaries, UI and URI. UIL Holdings prior period consolidated financial statements have been prepared from UI's prior period consolidated financial statements, except that amounts have been reclassified to reflect UIL Holdings structure. The statements reflect all adjustments that are, in the opinion of management, necessary to a fair statement of the results for the periods presented. All such adjustments are of a normal recurring nature. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the SEC. UIL Holdings and UI believe that the disclosures are adequate to make the information presented not misleading. The UIL Holdings' consolidated financial statements and UI financial statements should be read in conjunction with the consolidated financial statements and the notes to consolidated financial statements included in UI's annual report on Form 10-K for the year ended December 31, 1999. Such notes are supplemented as follows: (A) STATEMENT OF ACCOUNTING POLICIES NUCLEAR DECOMMISSIONING TRUSTS External trust funds are maintained to fund the estimated future decommissioning costs of the nuclear generating units in which UI has an ownership interest. These costs are accrued as a charge to depreciation expense over the estimated service lives of the units and are recovered in rates on a current basis. UI paid $3 million into the decommissioning trust funds for Seabrook Unit 1 and Millstone Unit 3 in the first nine months of each of 2000 and 1999. At September 30, 2000, UI's shares of the trust fund balances, which included accumulated earnings on the funds, were $25.2 million and $8.8 million for Seabrook Unit 1 and Millstone Unit 3, respectively. These fund balances are included in "Other Property and Investments" and the accrued decommissioning obligation is included in "Noncurrent Liabilities" on UIL Holdings' Consolidated Balance Sheet and UI's Balance Sheet. COMPREHENSIVE INCOME Comprehensive income for the nine months ended September 30, 2000 and 1999 is equal to net income as reported. NEW ACCOUNTING STANDARDS The Financial Accounting Standards Board Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" will become effective for UIL Holdings in the first quarter of 2001. UI has a contract with a power marketer that includes a financially settled contract for differences related to certain call rights of the power marketer and put rights of UI with respect to UI's entitlements in Seabrook Unit 1 and Millstone Unit 3. This contract will terminate at the earlier of December 31, 2003 or the date that UI sells its - 12 - UIL HOLDINGS CORPORATION THE UNITED ILLUMINATING COMPANY NOTES TO FINANCIAL STATEMENTS - (CONTINUED) interests in these units. Application of the new accounting standard will require the recognition of UI's future obligation for financial settlements under this contract. However, since the costs of this contract are considered in the Competitive Transition Assessment (CTA) mechanism, there is currently no income statement effect. The adoption of this accounting statement will not have any impact on UIL Holdings' results of operations and is not expected to have a material impact on UIL Holdings' financial condition. (B) CAPITALIZATION COMMON STOCK UIL Holdings had 14,321,177 shares of its common stock, without par value, outstanding at September 30, 2000, of which 251,465 shares were unallocated shares held by The United Illuminating Company 401(k)/Employee Stock Ownership Plan (KSOP) and not recognized as outstanding for accounting purposes. UI has entered into an arrangement under which it loaned $11.5 million to the KSOP. The trustee for the KSOP used the funds to purchase shares of UI common stock in open market transactions. On July 20, 2000, effective with the formation of the holding company structure, unallocated shares held by the KSOP were converted into shares of UIL Holdings common stock. The shares will be allocated to employees' KSOP accounts, as the loan is repaid, to cover a portion of the required KSOP contributions. The loan will be repaid by the KSOP over a twelve-year period, using employer contributions and UIL Holdings dividends paid on the unallocated shares of the stock held by the KSOP. As of September 30, 2000, 251,465 shares, with a fair market value of $12.9 million, had been purchased by the KSOP and had not been committed to be released or allocated to KSOP participants. In 1990, UI's Board of Directors and the shareowners approved a stock option plan for officers and key employees of UI. Options to purchase 3,500 shares of stock at an exercise price of $30 per share, 7,800 shares of stock at an exercise price of $39.5625 per share, and 5,000 shares of stock at an exercise price of $42.375 per share have been granted and remained outstanding at September 30, 2000. No options were exercised during the nine months ended September 30, 2000. Effective with the formation of the holding company structure on July 20, 2000, all outstanding options were converted into options to purchase an equivalent number of shares of UIL Holdings common stock. On March 22, 1999, UI's Board of Directors approved a stock option plan for directors, officers and key employees of UI. The plan provides for the awarding of options to purchase up to 650,000 shares of UI's common stock over periods of from one to ten years following the dates when the options are granted. The exercise price of each option cannot be less than the market value of the stock on the date of the grant. On June 28, 1999, UI's shareowners approved the plan. Effective with the formation of the holding company structure on July 20, 2000, all outstanding options were converted into options to purchase an equivalent number of shares of UIL Holdings common stock. Options to purchase 8,575 shares of stock at an exercise price of $43.21875 were exercised during the nine months ended September 30, 2000. Options and reload options to purchase 6,300 shares of stock at an exercise price of $43.50 per share, 132,000 shares of stock at an exercise price of $43.21875 per share, 186,900 shares of stock at an exercise price of $39.40625 per share, 2,170 shares of stock at an exercise price of $53.1250, 382 shares of stock at an exercise price of $52.6875, 1,000 shares of stock at an exercise price of $50.3125 and 407 shares of stock at an exercise price of $53.0625 have been granted and remained outstanding at September 30, 2000. RETAINED EARNINGS RESTRICTION The indenture under which UI has issued $200 million principal amount of Notes places limitations on UI related to the payment of cash dividends on its common stock and the purchase or redemption of its common stock. Retained earnings in the amount of $132.9 million were free from such limitations at September 30, 2000. - 13 - UIL HOLDINGS CORPORATION THE UNITED ILLUMINATING COMPANY NOTES TO FINANCIAL STATEMENTS - (CONTINUED) LONG-TERM DEBT On December 16, 1999, UI borrowed $25 million from the Business Finance Authority of the State of New Hampshire (BFA), representing the proceeds from the issuance by the BFA of $25 million principal amount of tax-exempt Pollution Control Refunding Revenue Bonds (PCRRBs). UI is obligated, under its borrowing agreement with the BFA, to pay to a trustee for the PCRRBs' bondholders such amounts as will be required to pay, when due, the principal of and the premium, if any, and interest on the PCRRBs. The PCRRBs will mature in 2029, and their interest rate is fixed at 5.4% for the three-year period ending December 1, 2002. At December 31, 1999, these proceeds were held by a trustee and were recognized as cash and long-term debt on UI's Balance Sheet. On January 15, 2000, UI used the proceeds of this $25 million borrowing to redeem and repay $25 million of 8.0%, 1989 Series A, Pollution Control Revenue Bonds, an outstanding series of tax-exempt bonds on which UI also had a payment obligation to a trustee for the bondholders. Expenses associated with this transaction, including redemption premiums totaling $750,000 and other expenses of approximately $417,000, were paid by UI. On August 9, 2000, UI initiated the redemption process for $50 million of 9 5/8% Preferred Capital Securities, Series A, due 2025. These securities were issued by United Capital Funding Partnership L. P., a Delaware limited partnership, in April 1995. The securities were redeemed on September 25, 2000 at $25.00 per share, plus accrued dividends to the redemption date of $0.160417 per share. (E) SHORT-TERM CREDIT ARRANGEMENTS On June 26, 2000, UI entered into a Money Market Loan arrangement with Chase Manhattan Bank. On September 29, 2000, this arrangement was transferred to UIL Holdings. This is an uncommitted short-term borrowing arrangement under which Chase Manhattan Bank may make loans totaling up to $150 million to UIL Holdings for fixed maturities from one day up to six months. Chase Securities, Inc. acts as an agent and sells the loans to investors. The fixed interest rates on the loans are determined based on conditions in the financial markets at the time of each loan. As of September 30, 2000, UIL Holdings had loans totaling $30 million outstanding under this arrangement. UI's $60 million revolving credit agreement with a group of banks was terminated on August 3, 2000. UI had no short-term borrowings outstanding under this facility at that time. On August 3, 2000, UIL Holdings entered into a revolving credit agreement with the same group of banks. The borrowing limit of this facility is $97.5 million. The facility permits UIL Holdings to borrow funds at a fluctuating interest rate determined by the prime lending market in New York, and also permits UIL Holdings to borrow money for fixed periods of time specified by UIL Holdings at fixed interest rates determined by the Eurodollar interbank market in London. If a material adverse change in the business, operations, affairs, assets or condition, financial or otherwise, or prospects of UIL Holdings and its subsidiaries, on a consolidated basis, should occur, the banks may decline to lend additional money to UIL Holdings under this revolving credit agreement, although borrowings outstanding at the time of such an occurrence would not then become due and payable. As of September 30, 2000, UIL Holdings had $50 million in short-term borrowings outstanding under this facility. - 14 - UIL HOLDINGS CORPORATION THE UNITED ILLUMINATING COMPANY NOTES TO FINANCIAL STATEMENTS - (CONTINUED) (F) INCOME TAXES UIL HOLDINGS CORPORATION
Three Months Ended Nine Months Ended September 30, September 30, 2000 1999 2000 1999 ---- ---- ---- ---- (000's) (000's) (000's) (000's) Income tax expense consists of: Income tax provisions: Current Federal $12,416 $17,404 $30,612 $93,197 State 2,897 4,519 7,213 24,250 ------------ ------------ ------------ ------------ Total current 15,313 21,923 37,825 117,447 ------------ ------------ ------------ ------------ Deferred Federal 1,124 2,802 6,202 (48,842) State 292 221 840 (14,542) ------------ ------------ ------------ ------------ Total deferred 1,416 3,023 7,042 (63,384) ------------ ------------ ------------ ------------ Investment tax credits (103) (190) (276) (571) ------------ ------------ ------------ ------------ Total income tax expense $16,626 $24,756 $44,591 $53,492 ============ ============ ============ ============ Income tax components charged as follows: Operating expenses $18,357 $25,773 $47,574 $55,549 Other income and deductions - net (1,731) (1,017) (2,983) (2,057) ------------ ------------ ------------ ------------ Total income tax expense $16,626 $24,756 $44,591 $53,492 ============ ============ ============ ============ The following table details the components of the deferred income taxes: Tax gain on sale of generation assets $ - $ - $ - $ (70,222) Seabrook sale/leaseback transaction 576 686 (3,419) (3,478) Pension benefits 2,488 579 5,583 2,684 Accelerated depreciation (1,674) 1,251 (2,379) 3,751 Tax depreciation on unrecoverable plant investment 22 1,186 68 3,560 Unit overhaul and replacement power costs (454) (240) (1,363) 1,978 Conservation and load management (27) (410) (80) (2,155) Postretirement benefits (100) (265) (284) (963) Loss from disposition of property - - (1,420) - Displaced worker protection costs (225) 43 (688) 2,258 Bond redemption costs (256) (253) (329) (761) Cancelled nuclear project (117) (117) (350) (350) Restructuring costs (1,398) - 1,267 - SBC and CTA expense deferral 3,145 - 13,120 - Other - net (564) 563 (2,684) 314 ------------ ------------ ------------ ------------ Deferred income taxes - net $1,416 $3,023 $7,042 ($63,384) ============ ============ ============ ============
- 15 - UIL HOLDINGS CORPORATION THE UNITED ILLUMINATING COMPANY NOTES TO FINANCIAL STATEMENTS - (CONTINUED) THE UNITED ILLUMINATING COMPANY
Three Months Ended Nine Months Ended September 30, September 30, 2000 1999 2000 1999 ---- ---- ---- ---- (000's) (000's) (000's) (000's) Income tax expense consists of: Income tax provisions: Current Federal $13,003 $17,537 $31,824 $94,793 State 3,008 4,538 7,403 24,649 ------------ ------------ ------------ ------------ Total current 16,011 22,075 39,227 119,442 ------------ ------------ ------------ ------------ Deferred Federal 1,213 2,790 5,461 (49,046) State 313 218 669 (14,596) ------------ ------------ ------------ ------------ Total deferred 1,526 3,008 6,130 (63,642) ------------ ------------ ------------ ------------ Investment tax credits (103) (190) (276) (571) ------------ ------------ ------------ ------------ Total income tax expense $17,434 $24,893 $45,081 $55,229 ============ ============ ============ ============ Income tax components charged as follows: Operating expenses $19,153 $25,910 $48,051 $57,286 Other income and deductions - net (1,719) (1,017) (2,970) (2,057) ------------ ------------ ------------ ------------ Total income tax expense $17,434 $24,893 $45,081 $55,229 ============ ============ ============ ============ The following table details the components of the deferred income taxes: Tax gain on sale of generation assets $ - $ - $ - $ (70,222) Seabrook sale/leaseback transaction 576 686 (3,419) (3,478) Pension benefits 2,488 579 5,583 2,684 Accelerated depreciation (1,674) 1,251 (2,379) 3,751 Tax depreciation on unrecoverable plant investment 22 1,186 68 3,560 Unit overhaul and replacement power costs (454) (240) (1,363) 1,978 Conservation and load management (27) (410) (80) (2,155) Postretirement benefits (100) (265) (284) (963) Loss from disposition of property - - (1,420) - Displaced worker protection costs (225) 43 (688) 2,258 Bond redemption costs (256) (253) (329) (761) Cancelled nuclear project (117) (117) (350) (350) Restructuring costs (1,398) - 1,267 - SBC and CTA expense deferral 3,145 - 13,120 - Other - net (454) 548 (3,596) 56 ------------ ------------ ------------ ------------ Deferred income taxes - net $1,526 $3,008 $6,130 ($63,642) ============ ============ ============ ============
- 16 - UIL HOLDINGS CORPORATION THE UNITED ILLUMINATING COMPANY NOTES TO FINANCIAL STATEMENTS - (CONTINUED) (G) SUPPLEMENTARY INFORMATION UIL HOLDINGS CORPORATION
Three Months Ended Nine Months Ended September 30, September 30, 2000 1999 2000 1999 ---- ---- ---- ---- (000's) (000's) (000's) (000's) Operating Revenues - ------------------ Utility Retail $160,028 $191,056 $457,697 $498,985 Wholesale 20,511 3,669 59,083 22,938 Proceeds from Millstone Unit 3 settlement 14,960 - 14,960 - Other 5,628 4,346 14,376 10,348 Non-regulated business unit revenues 45,927 21,456 99,982 45,337 ------------- ------------- ------------- ------------- Total Operating Revenues $247,054 $220,527 $646,098 $577,608 ============= ============= ============= ============= Utility Sales by Class (megawatt-hours) - -------------------------------------- Retail Residential 535,409 604,600 1,543,702 1,581,672 Commercial 657,897 663,457 1,808,518 1,808,369 Industrial 298,806 323,782 870,002 885,041 Other 10,445 11,803 33,945 35,852 ------------- ------------- ------------- ------------- 1,502,557 1,603,642 4,256,167 4,310,934 Wholesale 663,649 62,040 1,932,945 920,623 ------------- ------------- ------------- ------------- Total Sales by Class 2,166,206 1,665,682 6,189,112 5,231,557 ============= ============= ============= ============= Depreciation - ------------ Plant in Service-regulated utility $6,256 $11,347 $18,506 $37,918 Nonutility property-unregulated 1,134 977 3,059 2,732 Amortization of Conservation and Load Management Costs - (50) - 4,786 Nuclear Decommissioning 1,007 1,078 3,002 3,028 ------------- ------------- ------------- ------------- $8,397 $13,352 $24,567 $48,464 ============= ============= ============= ============= Other Taxes - ----------- Charged to: Operating: State gross earnings $6,480 $7,704 $18,035 $19,456 Local real estate and personal property 3,612 4,062 11,310 14,737 Payroll taxes 1,349 1,152 4,313 4,206 ------------- ------------- ------------- ------------- 11,441 12,918 33,658 38,399 Nonoperating and other accounts 197 140 476 432 ------------- ------------- ------------- ------------- Total Other Taxes $11,638 $13,058 $34,134 $38,831 ============= ============= ============= ============= Other Income and (Deductions) - net - ----------------------------------- Interest income $197 $294 $808 $1,423 Equity earnings from Connecticut Yankee 574 197 817 521 Miscellaneous other income and (deductions) - net (3,449) 552 (3,879) (1,041) ------------- ------------- ------------- ------------- Total Other Income and (Deductions) - net ($2,678) $1,043 ($2,254) $903 ============= ============= ============= ============= Other Interest Charges - ---------------------- Notes Payable $702 $698 $1,217 $2,341 Other 1,324 709 1,835 1,742 ------------- ------------- ------------- ------------- Total Other Interest Charges $2,026 $1,407 $3,052 $4,083 ============= ============= ============= =============
- 17 - UIL HOLDINGS CORPORATION THE UNITED ILLUMINATING COMPANY NOTES TO FINANCIAL STATEMENTS - (CONTINUED) THE UNITED ILLUMINATING COMPANY
Three Months Ended Nine Months Ended September 30, September 30, 2000 1999 2000 1999 ---- ---- ---- ---- (000's) (000's) (000's) (000's) Operating Revenues - ------------------ Retail $160,028 $191,056 $457,697 $498,985 Wholesale 20,511 3,669 59,083 22,938 Proceeds from Millstone Unit 3 settlement 14,960 - 14,960 - Other 5,628 4,346 14,376 10,348 ------------- ------------- ------------- ------------- Total Operating Revenues $201,127 $199,071 $546,116 $532,271 ============= ============= ============= ============= Sales by Class (megawatt-hours) - ------------------------------ Retail Residential 535,409 604,600 1,543,702 1,581,672 Commercial 657,897 663,457 1,808,518 1,808,369 Industrial 298,806 323,782 870,002 885,041 Other 10,445 11,803 33,945 35,852 ------------- ------------- ------------- ------------- 1,502,557 1,603,642 4,256,167 4,310,934 Wholesale 663,649 62,040 1,932,945 920,623 ------------- ------------- ------------- ------------- Total Sales by Class 2,166,206 1,665,682 6,189,112 5,231,557 ============= ============= ============= ============= Depreciation - ------------ Plant in Service-regulated utility $6,256 $11,347 $18,506 $37,918 Amortization of Conservation and Load Management Costs - (50) - 4,786 Nuclear Decommissioning 1,007 1,078 3,002 3,028 ------------- ------------- ------------- ------------- $7,263 $12,375 $21,508 $45,732 ============= ============= ============= ============= Other Taxes - ----------- Charged to: Operating: State gross earnings $6,480 $7,704 $18,035 $19,456 Local real estate and personal property 3,589 4,062 11,243 14,737 Payroll taxes 1,004 1,152 3,664 4,206 ------------- ------------- ------------- ------------- 11,073 12,918 32,942 38,399 Nonoperating and other accounts 197 140 476 432 ------------- ------------- ------------- ------------- Total Other Taxes $11,270 $13,058 $33,418 $38,831 ============= ============= ============= ============= Other Income and (Deductions) - net - ----------------------------------- Interest income $197 $294 $808 $1,423 Equity earnings from Connecticut Yankee 574 197 817 521 Miscellaneous other income and (deductions) - net 765 282 1,125 127 ------------- ------------- ------------- ------------- Total Other Income and (Deductions) - net $1,536 $773 $2,750 $2,071 ============= ============= ============= ============= Other Interest Charges - ---------------------- Notes Payable $636 $698 $1,151 $2,341 Other 1,000 709 1,510 1,742 ------------- ------------- ------------- ------------- Total Other Interest Charges $1,636 $1,407 $2,661 $4,083 ============= ============= ============= =============
- 18 - UIL HOLDINGS CORPORATION THE UNITED ILLUMINATING COMPANY NOTES TO FINANCIAL STATEMENTS - (CONTINUED) (L) COMMITMENTS AND CONTINGENCIES CAPITAL EXPENDITURE PROGRAM UIL Holdings' continuing capital expenditure program is presently estimated at $359 million, excluding UI's allowance for funds used during construction (AFUDC), for 2000 through 2004. NUCLEAR INSURANCE CONTINGENCIES The Price-Anderson Act, currently extended through August 1, 2002, limits public liability resulting from a single incident at a nuclear power plant. The first $200 million of liability coverage is provided by purchasing the maximum amount of commercially available insurance. Additional liability coverage will be provided by an assessment of up to $83.9 million per incident, levied on each of the nuclear units licensed to operate in the United States, subject to a maximum assessment of $10 million per incident per nuclear unit in any year. In addition, if the sum of all public liability claims and legal costs resulting from any nuclear incident exceeds the maximum amount of financial protection, each reactor operator can be assessed an additional 5% of $83.9 million, or $4.2 million. The maximum assessment is adjusted at least every five years to reflect the impact of inflation. With respect to each of the two operating nuclear generating units in which UI has an interest, UI will be obligated to pay its ownership and/or leasehold share of any statutory assessment resulting from a nuclear incident at any nuclear generating unit. Based on its interests in these nuclear generating units, UI estimates its maximum liability would be $17.8 million per incident. However, any assessment would be limited to $2.1 million per incident per year. The Nuclear Regulatory Commission requires each operating nuclear generating unit to obtain property insurance coverage in a minimum amount of $1.06 billion and to establish a system of prioritized use of the insurance proceeds in the event of a nuclear incident. The system requires that the first $1.06 billion of insurance proceeds be used to stabilize the nuclear reactor to prevent any significant risk to public health and safety and then for decontamination and cleanup operations. Only following completion of these tasks would the balance, if any, of the segregated insurance proceeds become available to the unit's owners. For each of the two operating nuclear generating units in which UI has an interest, UI is required to pay its ownership and/or leasehold share of the cost of purchasing such insurance. Although each of these units has purchased $2.75 billion of property insurance coverage, representing the limits of coverage currently available from conventional nuclear insurance pools, the cost of a nuclear incident could exceed available insurance proceeds. Under those circumstances, the nuclear insurance pools that provide this coverage may levy assessments against the insured owner companies if pool losses exceed the accumulated funds available to the pool. The maximum potential assessments against UI with respect to losses occurring during current policy years are approximately $3.0 million. OTHER COMMITMENTS AND CONTINGENCIES CONNECTICUT YANKEE On December 4, 1996, the Board of Directors of the Connecticut Yankee Atomic Power Company (Connecticut Yankee) voted unanimously to retire the Connecticut Yankee nuclear plant (the Connecticut Yankee Unit) from commercial operation. UI has a 9.5% stock ownership share in Connecticut Yankee. The power purchase contract under which UI had purchased its 9.5% entitlement to the Connecticut Yankee Unit's power output permits Connecticut Yankee to recover 9.5% of all of its costs from UI. In December of 1996, Connecticut Yankee filed decommissioning cost estimates and amendments to the power contracts with its owners with the Federal Energy Regulatory Commission (FERC). Based on regulatory precedent, this filing requested confirmation that Connecticut Yankee will continue to collect from its owners its decommissioning costs, the unrecovered investment in the Connecticut Yankee Unit and other costs associated with the permanent shutdown of the Connecticut Yankee Unit. On April 7, 2000, Connecticut Yankee reached a settlement agreement with the Connecticut Department of Public Utility Control (DPUC) and the Connecticut Office of Consumer Counsel (two of the intervenors in the FERC proceeding). This agreement was - 19 - UIL HOLDINGS CORPORATION THE UNITED ILLUMINATING COMPANY NOTES TO FINANCIAL STATEMENTS - (CONTINUED) submitted to the FERC, which approved it in all respects on July 26, 2000; and it became effective on August 1, 2000. The agreement allows Connecticut Yankee to earn a return on equity of 6% and stipulates a new decommissioning cost estimate for the Connecticut Yankee Unit for purposes of FERC-approved decommissioning cost collections by Connecticut Yankee through the power contracts with the unit's owners. UI's estimate of its remaining share of Connecticut Yankee costs, including decommissioning, less return of investment (approximately $7.5 million) and return on investment (approximately $3.0 million) at September 30, 2000, is approximately $23.1 million. This estimate, which is subject to ongoing review and revision, has been recorded as an obligation and a regulatory asset on UI's Balance Sheet. HYDRO-QUEBEC UI is a participant in the Hydro-Quebec transmission intertie facility linking New England and Quebec, Canada. Phase I of this facility, which became operational in 1986 and in which UI has a 5.45% participating share, has a 690 megawatt equivalent capacity value; and Phase II, in which UI has a 5.45% participating share, increased the equivalent capacity value of the intertie from 690 megawatts to a maximum of 2000 megawatts in 1991. UI is obligated to furnish a guarantee for its participating share of the debt financing for the Phase II facility. As of September 30, 2000, UI's guarantee liability for this debt was approximately $5.7 million. ENVIRONMENTAL CONCERNS In complying with existing environmental statutes and regulations and further developments in areas of environmental concern, including legislation and studies in the fields of water quality, hazardous waste handling and disposal, toxic substances, and electric and magnetic fields, UI may incur substantial capital expenditures for equipment modifications and additions, monitoring equipment and recording devices, and it may incur additional operating expenses. The total amount of these expenditures is not now determinable. SITE DECONTAMINATION, DEMOLITION AND REMEDIATION COSTS UI has estimated that the total cost of decontaminating and demolishing its Steel Point Station and completing requisite environmental remediation of the site will be approximately $11.3 million, of which approximately $8.6 million had been incurred as of September 30, 2000, and that the value of the property following remediation will not exceed $6.0 million. As a result of a 1992 DPUC retail rate decision, beginning January 1, 1993, UI has been recovering through retail rates $1.075 million of the remediation costs per year. The remediation costs, property value and recovery from customers will be subject to true-up in UI's next retail rate proceeding based on actual remediation costs and actual gain on UI's disposition of the property. UI has been remediating an area of PCB contamination at a site, bordering the Mill River in New Haven, that contains transmission facilities and the deactivated English Station generation facilities. The excavation of contaminated soils and post-remediation monitoring is complete. In addition, UI is currently replacing the bulkhead that surrounds this site, at an estimated cost of $13.5 million. Of this amount, $4.2 million represents the portion of the costs to protect UI's transmission facilities and will be capitalized as plant in service. The remaining estimated cost of $9.3 million was expensed in 1999. UI has conveyed to an unaffiliated entity, Quinnipiac Energy, LLC, (QE) the entire English Station site, reserving to UI permanent easements for the operation of its transmission facilities on the site. UI has funded 61% (approximately $1.2 million) of the environmental remediation costs that will be incurred by QE to bring the site into compliance with applicable Connecticut minimum standards. UI closed on the sale of its Bridgeport Harbor Station and New Haven Harbor Station generating plants in compliance with Connecticut's electric utility industry restructuring legislation on April 16, 1999. Environmental assessments performed in connection with the marketing of these plants indicate that substantial remediation expenditures will be required in order to bring the plant sites into compliance with applicable Connecticut minimum - 20 - UIL HOLDINGS CORPORATION THE UNITED ILLUMINATING COMPANY NOTES TO FINANCIAL STATEMENTS - (CONTINUED) standards. The purchaser of the plants has agreed to undertake and pay for the major portion of this remediation. However, UI will be responsible for remediation of the portions of the plant sites that have been retained by it. (M) NUCLEAR FUEL DISPOSAL AND NUCLEAR PLANT DECOMMISSIONING New Hampshire has enacted a law requiring the creation of a government-managed fund to finance the decommissioning of nuclear generating units in that state. The New Hampshire Nuclear Decommissioning Financing Committee (NDFC) has established $565 million (in 2000 dollars) as the decommissioning cost estimate for Seabrook Unit 1, of which UI's share would be approximately $99 million. This estimate assumes the prompt removal and dismantling of the unit at the end of its estimated 36-year energy producing life. Monthly decommissioning payments are being made to the state-managed decommissioning trust fund. UI's share of the decommissioning payments made during the first nine months of 2000 was $2.5 million. UI's share of the fund at September 30, 2000 was approximately $25.2 million. Connecticut has enacted a law requiring the operators of nuclear generating units to file periodically with the DPUC their plans for financing the decommissioning of the units in that state. The current decommissioning cost estimate for Millstone Unit 3 is $619 million (in 2000 dollars), of which UI's share would be approximately $23 million. This estimate assumes the prompt removal and dismantling of the unit at the end of its estimated 40-year energy producing life. Monthly decommissioning payments, based on these cost estimates, are being made to a decommissioning trust fund managed by Northeast Utilities (NU). UI's share of the Millstone Unit 3 decommissioning payments made during the first nine months of 2000 was $0.5 million. UI's share of the fund at September 30, 2000 was approximately $8.8 million. The current decommissioning cost estimate for the Connecticut Yankee Unit, assuming the prompt removal and dismantling of the unit, is $463 million, of which UI's share would be $44 million. Through September 30, 2000, $218 million has been expended for decommissioning. The projected remaining decommissioning cost is $245 million, of which UI's share would be $23.2 million. The decommissioning trust fund for the Connecticut Yankee Unit is also managed by NU. For UI's 9.5% equity ownership in Connecticut Yankee, decommissioning costs of $1.8 million were funded by UI during the first nine months of 2000, and UI's share of the fund at September 30, 2000 was $30.9 million. - 21 - UIL HOLDINGS CORPORATION THE UNITED ILLUMINATING COMPANY NOTES TO FINANCIAL STATEMENTS - (CONTINUED) (P) SEGMENT INFORMATION UIL Holdings has one reportable operating segment, that of regulated generation, distribution and sale of electricity. The accounting policies used for that segment do not differ from those used for nonreportable operating segments. Revenues from inter-segment transactions are not material, and all of UIL Holdings' revenues are derived in the United States. The following tables reconcile the total assets, revenue from external customers and income (loss) before income taxes of the reportable segment with the total amounts for UIL Holdings: SEPTEMBER 30, DECEMBER 31, 2000 1999 ---- ---- (000's) Total Assets -UI $1,651,699 $1,758,944 Other 204,017 39,266 -------- --------- Total Assets - UIL Holdings $1,855,716 $1,798,210 ========= =========
QUARTER ENDED SEPTEMBER 30, 2000 QUARTER ENDED SEPTEMBER 30, 1999 -------------------------------- -------------------------------- TOTAL TOTAL UI OTHER UIL HOLDINGS UI OTHER UIL HOLDINGS -- ----- ------------ -- ---- ------------ (000's) Revenue from External Customers $201,127 $45,927 $247,054 $199,071 $21,456 $220,527 Income (Loss) Before Income Taxes $38,621 $(2,288) $36,333 $50,115 $(362) $49,753
YEAR TO DATE SEPTEMBER 30, 2000 YEAR TO DATE SEPTEMBER 30, 1999 ------------------------------- ------------------------------- TOTAL TOTAL UI OTHER UIL HOLDINGS UI OTHER UIL HOLDINGS -- ----- ------------ -- ---- ------------ (000's) Revenue from External Customers $546,116 $99,982 $646,098 $532,271 $45,337 $577,608 Income (Loss) Before Income Taxes $100,604 $(1,645) $98,959 $106,699 $(4,323) $102,376
- 22 - ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. UIL HOLDINGS CORPORATION MAJOR INFLUENCES ON FINANCIAL CONDITION UIL Holdings' financial condition will continue to be dependent on the level of UI's utility retail sales and UI's ability to control expenses, as well as on the performance of the non-regulated businesses of UIL Holdings' subsidiaries. The two primary factors that affect utility sales volume are economic conditions and weather. UIL Holdings' financial status and financing capability will continue to be sensitive to many other factors, including conditions in the securities markets, economic conditions, interest rates, the level of UIL Holdings' income and cash flow, and legislative and regulatory developments, including the cost of compliance with increasingly stringent environmental legislation and regulations. On December 31, 1996, the DPUC completed a financial and operational review of UI and ordered a five-year incentive regulation plan for the years 1997 through 2001 (the Rate Plan). The Rate Plan accelerated the amortization and recovery of unspecified assets during 1999-2001 if UI's common equity return on regulated utility investment exceeds 10.5% after recording the amortization. UI's authorized return on regulated utility common equity during the period is 11.5%. Earnings above 11.5%, on an annual basis, are to be utilized one-third for customer price reductions, one-third to increase amortization of assets, and one-third retained as earnings. The Rate Plan includes a provision that it may be reopened and modified upon the enactment of electric utility restructuring legislation in Connecticut. On October 1, 1999, the DPUC issued a decision establishing UI's standard offer customer rates, commencing January 1, 2000, at a level 10% below 1996 rates, as directed by the Restructuring Act described in detail below. These standard offer customer rates are in effect for the period 2000-2001 and supersede the rate reductions for this period that were included in the Rate Plan. The decision also reduced the required amount of accelerated amortization in 2000 and 2001. Under this decision, all other components of the Rate Plan are expected to remain in effect through 2001. The Connecticut Office of Consumer Counsel, the statutory representative of consumer interests in public utility matters, has appealed the DPUC's standard offer decision to the Connecticut Superior Court, challenging the DPUC's determination of UI's average fully-bundled prices in 1996 rates from which a 10% reduction is required by the Restructuring Act. UI and the Connecticut Attorney General are contesting this court challenge of the DPUC's decision. UI is unable to predict, at this time, the outcome of this Superior Court appeal. In April 1998, Connecticut enacted Public Act 98-28 (the Restructuring Act), a massive and complex statute designed to restructure the State's regulated electric utility industry. As a result of the Act, the business of generating and selling electricity directly to consumers is opened to competition. These business activities are separated from the business of delivering electricity to consumers, also known as the transmission and distribution business. The business of delivering electricity remains with the incumbent franchised utility companies (including UI), which continue to be regulated by the DPUC as Distribution Companies. Under the Restructuring Act, effective July 1, 2000, all of UI's customers are able to choose their power supply providers. On and after January 1, 2000, UI is required to offer fully-bundled "standard offer" electric service, under regulated rates, to all customers who do not choose alternate power supply providers. Under current regulatory provisions, UI's financial condition is not affected materially by whether customers choose alternate suppliers to UI's standard offer electric service. The standard offer rates must include the fully-bundled price of generation, transmission and distribution services, the competitive transition assessment, the systems benefits charge and the conservation and renewable energy charges. The fully-bundled standard offer rates must also be at least 10% below the average fully-bundled prices in 1996. On December 28, 1999, UI and Enron Power Marketing, Inc. (EPMI) entered into a Wholesale Power Supply Agreement, a PPA Entitlements Transfer Agreement and related agreements documenting a four-year standard offer power supply arrangement and the assumption of all of UI's long-term purchased power agreements, effective January 1, 2000. Under these agreements, EPMI supplies the generation services needed by UI to meet its standard - 23 - offer obligations for the four-year standard offer period at a fixed price. The agreements with EPMI also include a financially settled contract for differences related to certain call rights of EPMI and put rights of UI with respect to UI's entitlements in Seabrook Unit 1 and in Millstone Unit 3, and UI's provision to EPMI of certain ancillary products and services associated with those nuclear entitlements, which provisions terminate at the earlier of December 31, 2003 or the date that UI sells its nuclear interests. The agreements do not restrict UI's right to sell to third parties UI's ownership interests in those nuclear generation units or the generated energy actually attributable to its ownership interests. Another major component of the Restructuring Act is the collection, by Distribution Companies, of a "competitive transition assessment," a "systems benefits charge," an "energy conservation and load management program charge" and a "renewable energy investment charge." The competitive transition assessment represents costs that have been reasonably incurred by, or will be incurred by, Distribution Companies to meet their public service obligations as electric companies, and that will likely not otherwise be recoverable in a competitive generation and supply market. These costs include above-market long-term purchased power contract obligations, regulatory asset recovery and above-market investments in power plants (so-called stranded costs). The systems benefits charge represents public policy costs, such as generation decommissioning and displaced worker protection costs. Beginning in 2000, a Distribution Company must collect the competitive transition assessment, the systems benefits charge, the energy conservation and load management program charge and the renewable energy investment charge from all Distribution Company customers. The Restructuring Act requires that UI must attempt to divest its ownership interests in its nuclear-fueled power plants prior to 2004 in order to recover any stranded costs associated with its power plants. On October 1, 1998, in its "unbundling plan" filing with the DPUC under the Restructuring Act, and in other regulatory dockets, UI stated that it plans to divest its nuclear generation ownership interests (17.5% of Seabrook Unit 1 in New Hampshire and 3.685% of Millstone Station Unit 3 in Connecticut) by the end of 2003, in accordance with the Restructuring Act. On April 19, 2000, the DPUC approved UI's plan for divesting its ownership interest in Millstone Unit 3 by participating in an auction process for all three of the generating units at Millstone Station to be conducted by a consultant selected by the DPUC. On April 26, 2000, the DPUC selected J. P. Morgan & Co. to conduct this auction, which was concluded on August 7, 2000 when the DPUC and J. P. Morgan & Co. announced that Dominion Resources, Inc. had agreed to purchase Millstone Units 1 and 2, and 93.47% of Millstone Unit 3 for $1.298 billion. The purchase price agreed to for UI's ownership interest in Unit 3, which is subject to adjustments for expenditures and eventualities prior to the date of closing on the sale, is approximately $31 million, exclusive of nuclear fuel. UI's share of the proceeds from the sale of the nuclear fuel inventory at the date of closing on the sale is estimated to be approximately $2.5 million. It is currently estimated that requisite regulatory approvals will be received and the sale will be consummated on or about April 1, 2001. The divestiture process for Seabrook Unit 1 has not yet been determined. On March 24, 1999, UI applied to the DPUC for a calculation of UI's stranded costs that will be recovered by it in the future through the competitive transition assessment under the Restructuring Act. In a decision dated August 4, 1999, the DPUC determined that UI's stranded costs total $801.3 million, consisting of $160.4 million of above-market long-term purchased power contract obligations, $153.3 million of generation-related regulatory assets (net of related tax and accounting offsets), and $487.6 million of above-market investments in nuclear generating units (net of $26.4 million of gains from generation asset sales and other offsets related to generation assets). The DPUC decision provides that these stranded cost amounts are subject to true-ups, adjustments and potential additional future offsets, including the results of UI's divestiture of its ownership interests in Millstone Unit 3 and Seabrook Unit 1, in accordance with the Restructuring Act. UI has amortized less than the expected level of regulatory assets related to stranded costs during the first nine months of 2000, due to timing differences and higher than anticipated costs associated with providing standard offer service to customers. Since stranded costs are intended to be trued-up annually, UI continues to anticipate recovery through the competitive transition assessment of these unamortized costs. - 24 - CAPITAL EXPENDITURE PROGRAM UIL Holdings' 2000-2004 estimated capital expenditure program, excluding UI's allowance for funds used during construction, is presently budgeted as follows:
2000 2001 2002 2003 2004 TOTAL ---- ---- ---- ---- ---- ----- (000's) UI Distribution and Transmission $36,569 $60,496 $40,707 $30,735 $48,737 $217,244 Nuclear Generation (1) 3,177 2,838 - - - 6,015 Nuclear Fuel (1) 10,986 6,498 - - - 17,484 ------ ------ ------ ------ ------ ------- Total UI $50,732 $69,832 $40,707 $30,735 $48,737 $240,743 ------ ------ ------ ------ ------ ------- URI Xcelecom $53,667 $ 6,697 $ 7,337 $12,906 $ 6,677 $ 87,284 American Payment Systems 835 3,313 2,015 2,415 2,415 10,993 United Capital Investments 5,930 12,650 1,400 - - 19,980 ------ ------ ------ ------ ------ ------- Total URI $60,432 $22,660 $10,752 $15,321 $ 9,092 $118,257 ------ ------ ------ ------ ------ ------- Total UIL Holdings $111,164 $92,492 $51,459 $46,056 $57,829 $359,000 ======= ====== ====== ====== ====== =======
(1) Assumes that the sale of UI's interest in Millstone Unit 3 and Seabrook Unit 1 will be completed by April 1, 2001 and December 31, 2001, respectively. LIQUIDITY AND CAPITAL RESOURCES At September 30, 2000, UIL Holdings had $41.7 million of cash and temporary cash investments, a decrease of $26.7 million from the corresponding balance at December 31, 1999. The components of this decrease, which are detailed in the Consolidated Statement of Cash Flows, are summarized as follows: (Millions) Balance, December 31, 1999 $68.3 ---- Net cash provided by operating activities 52.3 Net cash provided by (used in) financing activities: - Financing activities, excluding dividend payments (12.5) - Dividend payments (30.4) Investment in debt securities 4.8 Cash invested in plant, including nuclear fuel (40.8) ------ Net Change in Cash (26.6) ------ Balance, September 30, 2000 $41.7 ===== - 25 - UIL Holdings' capital requirements are presently projected as follows:
2000 2001 2002 2003 2004 ---- ---- ---- ---- ---- (millions) Cash on Hand - Beginning of Year (1) $39.1 $ - $ - $ - $ - Internally Generated Funds less Dividends (2) 81.0 85.0 93.0 85.0 81.0 ----- ---- ---- ---- ---- Subtotal 120.1 85.0 93.0 85.0 81.0 Less: Capital Expenditures (2) UI 50.7 69.8 40.7 30.7 48.7 URI 60.5 22.7 10.8 15.3 9.1 ----- ---- ---- ---- ---- Total 111.2 92.5 51.5 46.0 57.8 Cash Available to pay Debt Maturities and Redemptions 8.9 (7.5) 41.5 39.0 23.2 Less: Maturities and Mandatory Redemptions - - 100.0 100.0 - Optional Redemptions 75.0 - - - - Repayment of Short-Term Borrowings 17.0 - - - - ----- ----- ----- ----- ----- External Financing Requirements (Surplus) (2) $83.1 $7.5 $58.5 $61.0 $(23.2) ==== === ==== ==== =====
(1) Excludes $2.3 million Seabrook Unit 1 operating deposit and restricted cash of American Payment Systems, Inc. of $26.9 million. (2) Internally Generated Funds less Dividends, Capital Expenditures and External Financing Requirements are estimates based on current earnings and cash flow projections. All of these estimates are subject to change due to future events and conditions that may be substantially different from those used in developing the projections. No estimates are included herein to reflect the potential proceeds from future nuclear asset sales. All capital requirements that exceed available cash will have to be provided by external financing. Although there is no commitment to provide such financing from any source of funds, other than a $97.5 million revolving credit agreement with a group of banks, future external financing needs are expected to be satisfied by the issuance of additional short-term and long-term debt. The continued availability of these methods of financing will be dependent on many factors, including conditions in the securities markets, economic conditions, and future income and cash flow. See Item 1, "Notes to Financial Statements," Note (E) for a discussion of UIL Holdings' and UI's short-term credit arrangements. SUBSIDIARY OPERATIONS On July 20, 2000, the corporate restructuring of UI and its direct and indirect non-regulated subsidiaries into a holding company structure was completed. In the holding company structure, UI has become a wholly-owned subsidiary of UIL Holdings, and UI's interests in URI and all of its direct and indirect non-regulated subsidiaries have been transferred to UIL Holdings. UI is a regulated operating electric public utility, established in 1899, that delivers electricity and provides energy-related services to more than 314,000 customers in the greater New Haven, Connecticut, and greater Bridgeport, Connecticut, areas. URI serves as the parent corporation for several non-regulated businesses, each of which is incorporated separately to participate in business ventures that will provide long-term rewards to UIL Holdings shareowners. URI has four wholly-owned subsidiaries. American Payment Systems, Inc. manages a national network of agents for the processing of bill payments made by customers of UI and other companies. Another subsidiary of URI, United Capital - 26 - Investments, Inc., and its subsidiaries, invest in business ventures. A third URI subsidiary, Xcelecom, Inc. (formerly known as Precision Power, Inc.) and its subsidiaries, provide electrical and voice-data-video design, construction, systems integration and services to customers in New England and the neighboring Mid-Atlantic region. URI's fourth subsidiary, United Bridgeport Energy, Inc., is a passive investor in a merchant wholesale electric generating facility located in Bridgeport, Connecticut. RESULTS OF OPERATIONS GENERAL IMPACTS OF CREATION OF A HOLDING COMPANY ON FINANCIAL REPORTS - --------------------------------------------------------------------- As a result of the formation of UIL Holdings Corporation noted above, all subsidiary results are consolidated. For example, revenues from the non-regulated operating companies are reported as revenues, instead of being subordinated to UI and reported as "other net income." This change particularly relates to revenues, operation and maintenance expense, depreciation expense, interest charges, other net income and income taxes. Income from non-regulated passive investments continues to be reported in "other net income." All periods reported herein have been reclassified for consolidated reporting, with no impact on earnings. GENERAL IMPACTS OF CONNECTICUT'S RESTRUCTURING ACT ON FINANCIAL REPORTS - ----------------------------------------------------------------------- On April 16, 1999, UI completed the sale of its operating fossil-fueled generating plants that was required by Connecticut's electric utility industry restructuring legislation. On October 1, 1999, the Department of Public Utility Control (DPUC) issued its decision establishing UI's standard offer customer rates, commencing January 1, 2000, at a level 10% below 1996 rates (about 6% below 1999 rates), as directed by Connecticut's Restructuring Act. As a result of these two and other associated events, the "geography" of UI's costs, particularly with respect to comparisons between the quarters of 2000 and the quarters of 1999, and the quarterly pattern of revenues and earnings comparing 2000 to 1999 have changed. This particularly relates to regulated retail pricing patterns, wholesale revenue and expense, other operating revenues, retail purchased energy and fossil fuel expenses, operation and maintenance expense, depreciation and property taxes. For example, increased purchased energy expenses in 2000 are more than offset by portions of the decreases in miscellaneous operation and maintenance expense, depreciation and property taxes due to the sale of generating plants. The results of these changes are explained below, and in the "Quarterly Earnings Pattern for 2000" portion of the LOOKING FORWARD section. THIRD QUARTER OF 2000 VS. THIRD QUARTER OF 1999 - ----------------------------------------------- Earnings for the third quarter of 2000 reflect the pattern change mentioned above. Earnings were $19.7 million, or $1.40 per share (on both a basic and diluted basis), down $5.3 million, or $.38 per share, from the third quarter of 1999. Excluding a one-time item recorded in the third quarter of 2000, earnings from operations (on both a basic and diluted basis) were $16.7 million or $1.19 per share, down $8.3 million, or $.59 per share, from the third quarter of 1999. The earnings from operations contributed by UI's operations, excluding the Nuclear Division, were $1.04 per share in the third quarter of 2000. The Nuclear Division contributed $.25 per share, for a total UI contribution of $1.29 per share, compared to $1.80 per share in the third quarter of 1999. URI lost $.10 per share in the third quarter of 2000, compared to a loss of $.02 per share in the third quarter of 1999. All earnings per share numbers are based on UIL Holdings shares. The one-time item recorded in the third quarter of 2000 was: EPS - ---------------- ----------------------------------------------- -------------- 2000 Quarter 3 Proceeds from the Millstone Unit 3 litigation settlement(pre-sharing) $ .64 Sharing on Proceeds from the Millstone Unit 3 settlement (.43) ---- Net $ .21 - ---------------- ----------------------------------------------- -------------- This one-time item recorded in the third quarter of 2000 as other operating revenue was a cash receipt, in the amount of $14.9 million before-tax, in settlement of litigation over costs associated with an extended unplanned shutdown of the Millstone Unit 3 nuclear generating unit. - 27 - UI Earnings from Operations - --------------------------- Overall, retail revenue decreased by $31.0 million in the third quarter of 2000 compared to the third quarter of 1999. - ------------------------------------------------------------- ----------------- Total From Retail Revenues: $ millions Operations - ------------------------------------------------------------- ----------------- Revenue from: - ------------------------------------------------------------- ----------------- Estimate of operating Distribution Division component of "weather corrected" retail sales growth, up 2.6% 1.7 - ------------------------------------------------------------- ----------------- Estimate of operating Distribution Division component of weather effect on retail sales (12.1) - ------------------------------------------------------------- ----------------- Estimate of operating Distribution Division component of price reduction (6.4) - ------------------------------------------------------------- ----------------- Sharing revenues from operations (1.6) - ------------------------------------------------------------- ----------------- Other retail price reduction, mix of sales and other (7.3) - ------------------------------------------------------------- ----------------- TOTAL RETAIL REVENUE FROM OPERATIONS (25.7) - ------------------------------------------------------------- ----------------- Sharing revenues from one-time item (5.3) - ------------------------------------------------------------- ----------------- TOTAL RETAIL REVENUE (31.0) - ------------------------------------------------------------- ----------------- Retail fuel and energy expense increased by $22 million in the third quarter of 2000 compared to the third quarter of 1999. UI's operating fossil-fueled generation units were sold on April 16, 1999, and UI receives, and will receive through 2003, its standard offer service requirements through purchased power agreements. These costs are recovered through the Generation Service Charge (GSC) portion of unbundled rates. Wholesale sales margin increased by $16.3 million in the third quarter of 2000 compared to the third quarter of 1999. Margin from the Nuclear Division, which was incorporated in retail rates in 1999, increased by $14.8 million. UI's operating nuclear assets, Seabrook Unit 1 and Millstone Unit 3, supply power solely to the wholesale market in 2000. Overall, the Nuclear Division produced earnings of $.25 per share in the third quarter of 2000, reflecting the wholesale sales margin less operations and maintenance and other costs, including taxes. See the LOOKING FORWARD section for more details. There was a wholesale sales margin loss of $1.5 million from general wholesale activities in the third quarter of 1999. Other operating revenues increased by $1.3 million in the third quarter of 2000 compared to the third quarter of 1999. Other operating revenues include transmission revenues from the New England Power Pool (NEPOOL), which increased by $0.9 million in the third quarter of 2000 compared to the third quarter of 1999, and were offset by an increase in transmission operation expense. UI's operating expenses for operations, maintenance and purchased capacity decreased by $7.8 million in the third quarter of 2000 compared to the third quarter of 1999. The principal components of these expense changes include: - 28 - $millions - ---------------------------------------------------------------------- --------- Capacity expense: - ---------------------------------------------------------------------- --------- Cogeneration (see Note A) (6.8) - ---------------------------------------------------------------------- --------- Other purchases (0.9) - ---------------------------------------------------------------------- --------- TOTAL CAPACITY EXPENSE (7.7) - --------------------------------------------------------------------- ---------- Operating Distribution Division O&M expense: - ---------------------------------------------------------------------- --------- 1999 fossil generation unit operating and maintenance costs (0.2) - ---------------------------------------------------------------------- --------- Pension and other employee benefit costs (2.5) - ---------------------------------------------------------------------- --------- NEPOOL transmission expense 0.9 - ---------------------------------------------------------------------- --------- Other (1.7) - ---------------------------------------------------------------------- --------- TOTAL OPERATING DISTRIBUTION DIVISION (3.5) - ---------------------------------------------------------------------- --------- Other unbundled components of O&M expense: - ---------------------------------------------------------------------- --------- Nuclear Division (see Note B) (1.0) - ---------------------------------------------------------------------- --------- Conservation and Load Management and Renewable Energy (see Note B) 4.4 - ---------------------------------------------------------------------- --------- TOTAL OTHER COMPONENTS 3.4 - ---------------------------------------------------------------------- --------- TOTAL O&M EXPENSE (7.8) - ---------------------------------------------------------------------- --------- Note A: UI's wholesale purchased power agreements were assumed by Enron Power Marketing, Inc. as part of agreements for Enron to supply the power needed by UI to meet its standard offer obligations until the end of the four-year standard offer period and the power needed to serve UI's special contract customers for the remaining contract terms. UI has created a regulatory asset and liability to reflect this transaction, and the regulatory asset is being amortized as part of the Competitive Transition Assessment (CTA). The amortization for the third quarter of 2000 of about $6.7 million is included in the "Amortization of regulatory assets" line of the income statement. Note B: Nuclear Division operation and maintenance expenses are incurred in the production of energy for the wholesale market and are reflected in the Nuclear Division results. These expenses decreased by $1.0 million in the third quarter of 2000 compared to the third quarter of 1999. Conservation and load management and renewable energy costs are pass-through costs recovered in unbundled rates. Other taxes for UI decreased by $1.8 million in the third quarter of 2000 compared to the third quarter of 1999. About $1.2 million of the decrease was a Gross Earnings tax reduction from lower retail sales. The rest was primarily a decrease in property taxes due principally to the generating plant sale in April of 1999. Depreciation expense for UI decreased by $5.1 million in the third quarter of 2000 compared to the third quarter of 1999. All of this decrease was due to the shifting of depreciation on nuclear plant stranded assets from depreciation expense to amortization of regulatory assets. Amortization of regulatory assets increased by $6.4 million in the third quarter of 2000 compared to the third quarter of 1999. With three exceptions, these costs, as recorded in 2000, are associated solely with either the Competitive Transition Assessment (CTA) or the Systems Benefits Charge (SBC). The exceptions are described in the following paragraph. The CTA and SBC amortization components in the third quarter of 2000 amounted to $13.6 million (pre-tax) and were: nuclear assets (from depreciation) $5.1 million, purchased power contracts (in place of purchased power expense) $6.7 million, displaced worker costs $0.6 million, and other $1.2 million. However, because the result of these amortizations produced returns on both the CTA and SBC below the 11.5% return allowed, about $8.2 million (before-tax) of amortization was deferred for the third quarter of 2000. The elimination (completed in 1999) of $3.1 million (after-tax) of amortization of Seabrook Nuclear Station deferred return also reduced amortization expense in the third quarter of 2000 compared to the third quarter of 1999. - 29 - The exceptions noted in the previous paragraph are amortizations that apply to the operating Distribution Division. They include the amortization of Retail Access assets, $0.1 million (pre-tax), and accelerated amortizations (both scheduled and "sharing" amortization). On December 31, 1996, the Connecticut Department of Public Utility Control issued an order that implemented a five-year Rate Plan to reduce UI's regulated retail prices and accelerate the recovery of certain "regulatory assets." According to the Rate Plan, under which UI is currently operating, "accelerated" amortization of past regulated utility investments is scheduled for every year that the Rate Plan is in effect, contingent upon UI earning a 10.5% return on regulated utility common equity. Beginning in 2000, these accelerated amortizations are charged to the operating Distribution Division, although they reduce CTA plant costs and rate base. About $2.2 million (after-tax) of accelerated amortization was charged in the third quarter of 2000, compared to about $3.0 million (after-tax) in the third quarter of 1999, for a decrease of $0.8 million. Additionally, $10.1 million (before-tax, $8.8 million after-tax) of sharing amortization was recorded in the third quarter of 2000 compared to $5.0 million (after-tax) that was recorded in the third quarter of 1999. Interest charges for UI, including "Dividend requirement of mandatorily redeemable securities," continued on a downward trend, decreasing by $1.4 million in the third quarter of 2000, compared to the third quarter of 1999. This decrease was applied to the various unbundled components in 2000. URI Earnings from Operations - ---------------------------- Overall, the consolidated non-regulated businesses operating under the parent, URI, after corporate parent-allocated interest, lost approximately $1.5 million, or $.10 per share, in the third quarter 2000, compared to losses of about $0.2 million, or $.02 per share, in the third quarter of 1999. Operation expenses for the URI businesses, including cost of goods sold, selling and administrative expenses, increased by $20.0 million in the third quarter of 2000, compared to the third quarter of 1999, almost entirely as the result of companies acquired by URI's subsidiary Xcelecom, Inc. (formerly known as Precision Power, Inc.). Depreciation expense for the URI businesses increased by $0.2 million. Interest charges for URI increased by $1.7 million in the third quarter of 2000, compared to the third quarter of 1999. The results of each of the subsidiaries of URI for the third quarter of 2000, as presented below, reflect the allocation of debt costs from the parent based on a capital structure, including an equity component, and an interest rate deemed to be appropriate for that type of business. American Payment Systems, Inc. (APS) earned approximately $0.5 million, or $.03 per share, in the third quarter of 2000, about the same level it earned in the third quarter of 1999. Xcelecom, Inc. earned approximately $0.6 million, or $.04 per share, in the third quarter of 2000, compared to a loss of approximately $0.8 million, or $.06 per share, in the third quarter of 1999. The improvement was the result of cost reduction efforts and acquisitions. On May 11, 1999, URI's subsidiary United Bridgeport Energy, Inc. (UBE), increased its 4% passive investment in Bridgeport Energy LLC (BE) to 33 1/3%. The second phase of BE's merchant wholesale electric generating project went into commercial operation in July 1999, adding 180 megawatts of generation capacity for a total of 520 megawatts. UBE lost approximately $1.6 million, or $.11 per share, in the third quarter of 2000, compared to earnings of about $0.4 million, or $.03 per share, in the third quarter of 1999. The third quarter 2000 loss was the result of mild weather that depressed energy sales prices, high gas prices that further reduced margins, and a contract termination charge completing the elimination of a contractual liability that will benefit UBE's earnings in future periods. United Capital Investments, Inc. (UCI) lost $.01 per share in the third quarter of 2000 compared to a break even in the third quarter of 1999. URI, the holding company for all non-regulated businesses, lost $0.05 per share in the third quarter of 2000, compared to a loss of $.02 per share for the third quarter of 1999. Some financial leveraging, and strategic and administrative costs for the subsidiaries of URI are retained by the holding company. - 30 - FIRST NINE MONTHS OF 2000 VS. FIRST NINE MONTHS OF 1999 - ------------------------------------------------------- Earnings for the first nine months of 2000 were $54.4 million, or $3.86 per share (on both a basic and diluted basis), up $5.6 million, or $.39 per share, from the first nine months of 1999. Excluding one-time items recorded in both periods, earnings from operations (on both a basic and diluted basis) were up $5.3 million, or $.37 per share, from the first nine months of 1999. The earnings from operations contributed by UI's operations, excluding the Nuclear Division, were $3.24 per share in the first nine months of 2000. The Nuclear Division contributed $.64 per share, for a total UI contribution of $3.88 per share, compared to $3.61 per share in the first nine months of 1999. URI, on a consolidated basis, lost $.08 per share in the first nine months of 2000, compared to a loss of $.18 per share in the first nine months of 1999. All earnings per share numbers are based on UIL Holdings shares. The one-time item recorded in the first nine months of 2000 was: EPS - ----------------- ------------------------------------------------ ------------- 2000 Quarter 2 Impairment loss on property in North Haven $(.15) - ----------------- ------------------------------------------------ ------------- 2000 Quarter 3 Proceeds from the Millstone Unit 3 litigation settlement (pre-sharing) $ .64 Sharing on proceeds from the Millstone Unit 3 litigation settlement $(.43) ---- Net $ .21 - ----------------- ------------------------------------------------ ------------- The one-time item recorded in the first nine months of 1999 was: EPS - ----------------- ------------------------------------------------ ------------- 1999 Quarter 1 Purchased power expense refund $ .12 Sharing due to refund $(.08) ----- Net $ .04 - ----------------- ------------------------------------------------ ------------- The one-time item recorded in the third quarter of 2000 as other operating revenue was a cash receipt, in the amount of $14.9 million before-tax, in settlement of litigation over costs associated with an extended unplanned shutdown of the Millstone Unit 3 nuclear generating unit. On June 14, 2000, the Connecticut Department of Public Utility Control approved a sale of property by UI to Souwestcon Properties, Inc., a wholly-owned subsidiary of URI. The sale price of the property was $1.2 million, and the property had a book value of $4.7 million. As a result of the transaction, UI recognized an impairment loss of $3.5 million (before-tax) or $2.1 million (after-tax) in June 2000. UI Earnings from Operations - --------------------------- Overall, retail revenue decreased by $41.3 million in the first nine months of 2000, compared to the first nine months of 1999.
- ------------------------------------------------------------ ------------ ---------- ------- From From Retail Revenues: $ millions Operations One-time Total - ------------------------------------------------------------ ------------ ---------- ------- Revenue from: - ------------------------------------------------------------ ------------ ---------- ------- Sharing: for 1999 one-time item - 1.0 1.0 - ------------------------------------------------------------ ------------ ---------- ------- Sharing: for 2000 one-time item (5.3) (5.3) - ------------------------------------------------------------ ------------ ---------- ------- Estimate of operating Distribution Division component of "real" retail sales growth, up 1.7% 1.3 - 1.3 - ------------------------------------------------------------ ------------ ---------- ------- Estimate of operating Distribution Division component of "leap year day" retail sales growth, up 0.3% 0.6 - 0.6 - ------------------------------------------------------------ ------------ ---------- ------- Estimate of operating Distribution Division component of weather effect on retail sales (12.4) - (12.4) - ------------------------------------------------------------ ------------ ---------- ------- Estimate of operating Distribution Division component of price reduction (12.7) - (12.7) - ------------------------------------------------------------ ------------ ---------- ------- Sharing revenues from operations (1.6) (1.6) - ------------------------------------------------------------ ------------ ---------- ------- Other retail price reduction, mix of sales and other (12.2) - (12.2) - ------------------------------------------------------------ ------------ ---------- ------- TOTAL RETAIL REVENUE (37.0) (4.3) (41.3) - ------------------------------------------------------------ ------------ ---------- -------
- 31 - Retail fuel and energy expense increased by $95.8 million in the first nine months of 2000 compared to the first nine months of 1999. UI's operating fossil-fueled generation units were sold on April 16, 1999, and UI receives, and will receive through 2003, its standard offer service requirements through purchased power agreements. These costs are recovered through the Generation Service Charge (GSC) portion of unbundled rates. Wholesale sales margin increased by $43.9 million in the first nine months of 2000 compared to the first nine months of 1999. Margin from the Nuclear Division, which was incorporated in retail rates in 1999, increased by $43.3 million. UI's operating nuclear assets, Seabrook Unit 1 and Millstone Unit 3, supply power solely to the wholesale market in 2000. Overall, the Nuclear Division produced earnings of $.64 per share in the first nine months of 2000, reflecting the wholesale sales margin less operations and maintenance and other costs, including taxes. See the LOOKING FORWARD section for more details. There was margin loss of $0.6 million from general wholesale activities in the first nine months of 1999. Other operating revenues increased by $4.0 million in the first nine months of 2000 compared to the first nine months of 1999. Other operating revenues include transmission revenues from the New England Power Pool (NEPOOL), which increased by $3.6 million in the first nine months of 2000 compared to the first nine months of 1999. These were partly offset by an increase in transmission operation expense of $2.9 million. UI's operating expenses for operations, maintenance and purchased capacity decreased by $34.8 million in the first nine months of 2000 compared to the first nine months of 1999. The principal components of these expense changes include: $millions - ---------------------------------------------------------------------- --------- Capacity expense: - ---------------------------------------------------------------------- --------- Cogeneration (see Note A) (20.9) - ---------------------------------------------------------------------- --------- Other purchases (1.7) - ---------------------------------------------------------------------- --------- TOTAL CAPACITY EXPENSE (22.6) - ---------------------------------------------------------------------- --------- Operating Distribution Division O&M expense: - ---------------------------------------------------------------------- --------- 1999 fossil generation unit operating and maintenance costs (7.2) - ---------------------------------------------------------------------- --------- Pension and other employee benefit costs (7.5) - ---------------------------------------------------------------------- --------- NEPOOL transmission expense 2.9 - ---------------------------------------------------------------------- --------- Other (8.1) - ---------------------------------------------------------------------- --------- TOTAL OPERATING DISTRIBUTION DIVISION (19.9) - ---------------------------------------------------------------------- --------- Other unbundled components of O&M expense: - ---------------------------------------------------------------------- --------- Nuclear Division (see Note B) (5.1) - ---------------------------------------------------------------------- --------- Conservation and Load Management, Renewable Energy and System Benefits (see Note B) 12.8 - ---------------------------------------------------------------------- --------- TOTAL OTHER COMPONENTS 7.7 - ---------------------------------------------------------------------- --------- TOTAL O&M EXPENSE (34.8) - ---------------------------------------------------------------------- --------- Note A: UI's wholesale purchased power agreements were assumed by Enron Power Marketing, Inc. as part of agreements for Enron to supply the power needed by UI to meet its standard offer obligations until the end of the four-year standard offer period and the power needed to serve UI's special contract customers for the remaining contract terms. UI has created a regulatory asset and liability to reflect this transaction, and the regulatory asset is being amortized as part of the CTA. The amortization for the first nine months of 2000 of about $20.0 million is included in the "Amortization of regulatory assets" line of the income statement. Note B: Nuclear Division operation and maintenance expenses are incurred in the production of energy for the wholesale market and are reflected in the Nuclear Division results. About $2.5 million of the reduction was due to the absence of - 32 - refueling outage costs incurred in the first six months of 1999. Conservation and load management and renewable energy costs are pass-through costs recovered in unbundled rates. Other taxes for UI decreased by $4.7 million in the first nine months of 2000, compared to the first nine months of 1999. About $1.4 million of the decrease was a Gross Earnings tax reduction from lower revenues. About $4.0 million of the decrease was primarily a decrease in property taxes due principally to the generating plant sale in April of 1999. Depreciation expense decreased by $23.9 million in the first nine months of 2000 compared to the first nine months of 1999. About $15.3 million of the decrease was due to the shifting of depreciation on nuclear plant stranded assets from depreciation expense to amortization of regulatory assets. About $4.8 million of the decrease was due to the completion of depreciation of conservation assets in the first half of 1999, and another $2.8 million was due to the generation asset sale in 1999. Other UI depreciation expenses decreased by $1.3 million. Amortization of regulatory assets decreased by $0.5 million in the first nine months of 2000 compared to the first nine months of 1999. With three exceptions, these costs, as recorded in 2000, are associated solely with either the CTA or the SBC. The exceptions are described in the following paragraph. The CTA and SBC amortization components in the first nine months of 2000 amounted to $38.8 million (pre-tax) and were: nuclear assets (from depreciation) $15.4 million, purchased power contracts (in place of purchased power expense) $20.1 million, displaced worker costs $1.9 million, and other $1.4 million. However, because the result of these amortizations produced returns on both the CTA and SBC below the 11.5% return allowed, $32.2 million (before-tax) of amortization was deferred for the first nine months of 2000. The elimination (completed in 1999) of $9.4 million (after-tax) of amortization of Seabrook Nuclear Station deferred return also reduced amortization expense in the first nine months of 2000 compared to the first nine months of 1999. The exceptions noted in the previous paragraph are amortizations that apply to the operating Distribution Division. They include the amortization of Retail Access assets, $1.0 million (pre-tax), and accelerated amortizations (both scheduled and "sharing" amortization). On December 31, 1996, the Connecticut Department of Public Utility Control issued an order that implemented a five-year Rate Plan to reduce UI's regulated retail prices and accelerate the recovery of certain "regulatory assets." According to the Rate Plan, under which UI is currently operating, "accelerated" amortization of past regulated utility investments is scheduled for every year that the Rate Plan is in effect, contingent upon UI earning a 10.5% return on regulated utility common equity. Beginning in 2000, these accelerated amortizations are charged to the operating Distribution Division, although they reduce CTA plant costs and rate base. About $6.7 million (after-tax) of accelerated amortization was charged in the first nine months of 2000, compared to about $9.1 million (after-tax) in 1999, for a decrease of $2.4 million. Additionally, $10.1 million (before-tax, $8.8 million after-tax) of sharing amortization was recorded in the first nine months of 2000 compared to $5.5 million (after-tax) that was recorded in the first nine months of 1999. Interest charges for UI, including "Dividend requirement of mandatorily redeemable securities," continued on a downward trend, decreasing by $8.6 million in the first nine months of 2000, compared to the first nine months of 1999. Most of the reduction in UI's interest charges occurred after the generation asset sale, which was completed on April 16, 1999. UI used proceeds received from the sale of plant to pay off $205 million of debt. The decrease in UI's interest charges was applied to the various unbundled components in 2000. URI Earnings from Operations - ---------------------------- Overall, the consolidated non-regulated businesses operating under the parent, URI, after corporate parent-allocated interest, lost approximately $1.1 million, or $.08 per share, in the first nine months of 2000, compared to losses of about $2.6 million, or $.18 per share, in the first nine months of 1999. Operation expenses for the URI businesses, including cost of goods sold, selling and administrative expenses, increased by $46.7 million in the first nine months of 2000, compared to the first nine months of 1999, almost entirely as the result of incorporating acquired companies. Other taxes for URI increased by $0.7 million, reflecting the expansion of these businesses. Depreciation expense for the URI businesses increased by $0.3 million. - 33 - Interest charges for URI increased by $5.4 million in the first nine months of 2000, compared to the first nine months of 1999. The results of each of the subsidiaries of URI for the first nine months of 2000, as presented below, reflect the allocation of debt costs from the parent based on a capital structure, including an equity component, and an interest rate, deemed to be appropriate for that type of business. APS earned approximately $1.8 million, or $.13 per share, in the first nine months of 2000, reflecting an increase of $1.0 million, or $.07 per share, over the first nine months of 1999. Xcelecom, Inc. earned approximately $0.7 million, or $.05 per share, in the first nine months of 2000, compared to a loss of approximately $2.4 million, or $.17 per share, in the first nine months of 1999. The improvement was the result of cost reduction efforts and acquisitions. On May 11, 1999, URI's subsidiary United Bridgeport Energy, Inc. (UBE), increased its 4% passive investment in Bridgeport Energy LLC (BE) to 33 1/3%. The second phase of BE's merchant wholesale electric generating project went into commercial operation in July 1999, adding 180 megawatts of generation capacity for a total of 520 megawatts. UBE lost approximately $2.7 million, or $.19 per share, in the first nine months of 2000, compared to earnings of about $0.8 million, or $.06 per share, in the first nine months of 1999. The 2000 loss was the result of mild weather that depressed energy sales prices, high gas prices that further reduced margins, an extended shutdown throughout the first half of the year, and a contract termination charge completing the elimination of a contractual liability that will benefit UBE's earnings in future periods. UCI earned $.08 per share in the first nine months of 2000, compared to a loss of $.05 per share in the first nine months of 1999. URI, the holding company for all non-regulated businesses, lost $0.15 per share in the first nine months of 2000, compared to a loss of $.08 per share for the first nine months of 1999. Some financial leveraging, and strategic and administrative costs for the subsidiaries of URI are retained by the holding company. LOOKING FORWARD (THE FOLLOWING DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS, WHICH ARE SUBJECT TO UNCERTAINTIES WITH RESPECT TO IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE CURRENTLY EXPECTED, INCLUDING GENERAL ECONOMIC CONDITIONS, LEGISLATIVE AND REGULATORY CHANGES, DEMAND FOR ELECTRICITY AND OTHER PRODUCTS AND SERVICES, CHANGES IN ACCOUNTING PRINCIPLES, POLICIES OR GUIDELINES, AND OTHER ECONOMIC, COMPETITIVE, GOVERNMENTAL AND TECHNOLOGICAL FACTORS AFFECTING THE OPERATIONS, MARKETS, PRODUCTS, SERVICES AND PRICES OF UI AND URI'S SUBSIDIARIES. READERS ARE CAUTIONED THAT UIL HOLDINGS REGARDS SPECIFIC NUMBERS AS ONLY THE "MOST LIKELY" TO OCCUR WITHIN A RANGE OF POSSIBLE VALUES.) ALL EARNINGS PER SHARE NUMBERS ARE BASED ON UIL HOLDINGS SHARES. Five-year Rate Plan - ------------------- On December 31, 1996, the Connecticut Department of Public Utility Control (DPUC) issued an order (the Order) that implemented a five-year regulatory framework (Rate Plan) to reduce UI's regulated retail prices and accelerate the recovery of certain "regulatory assets," beginning with deferred conservation costs. UI has operated under the terms of this Order since January 1, 1997. The Order's schedule of price reductions and accelerated amortizations was based on a DPUC pro-forma financial analysis that anticipated UI would be able to implement such changes and earn an allowed annual return on common equity invested in regulated utility assets of 11.5% over the period 1997 through 2001. The Order established a set formula to share (see "Sharing Implementation" below) any regulated utility income that would produce a return above the 11.5% level: one-third to be applied to customer price reductions, one-third to be applied to additional amortization of regulatory assets, and one-third to be retained by shareowners. Regulated utility income for this purpose is inclusive of earnings from operations and one-time items. - 34 - Sharing Implementation - ---------------------- "Sharing" in any particular year will result only if UI's regulated operating Distribution Division exceeds its allowed return of 11.5% on regulated utility common equity. Regulated utility earnings will not likely ever exceed the sharing level before the third quarter of any year that "sharing" is in effect. Assuming the sharing level of earnings is exceeded in the third quarter of any particular year, then earnings in the third quarter that exceed that level and all positive regulated utility earnings recorded in the fourth quarter of that year will be subject to "sharing." A look at 2000; continued growth of non-regulated operating businesses value - ---------------------------------------------------------------------------- On January 1, 2000, UI completed the restructuring process required by the Connecticut electric utility industry restructuring legislation enacted in 1998, and its regulated business became an electricity delivery business. All customers are now seeing at least a 10% reduction in their electric rates from 1996 levels. The framework of the current Rate Plan, including the "sharing" mechanism, is expected to continue at least through 2001. Regulatory decisions during 1999 did not alter UI's allowed return of 11.5% on regulated utility equity, and did not impinge on UI's ability to achieve that return. On July 24, 2000 and October 23, 2000, UIL Holdings estimated its year 2000 earnings would be in the range of $4.25-$4.35 per share. The October 23 estimate contained a revised mix of UI and URI earnings. UIL Holdings maintains this estimate at this time. This range reflects growth in earnings per share from operations of 16% to 19% over 1999 results of $3.67 per share. If UI were to earn 11.5% on regulated utility equity, including the Nuclear Division, that level of earnings would generate $3.35-$3.45 per share for UIL Holdings. The operation of UI's nuclear entitlements at the high availability rates experienced in the first nine months of 2000 have produced additional earnings, and are expected to produce additional earnings for the year, although a seven-week refueling outage began on October 21, 2000 for the Seabrook nuclear generating unit. It is expected that sharing will be reduced from the 1999 levels, due to mandates in the 1998 restructuring legislation. UIL Holdings expects sharing to contribute no more than $.45-$.55 per share to earnings in 2000, exclusive of one-time items. UIL Holdings' non-regulated businesses, under the parent URI, are expected to impact earnings by $.00-$(.10) per share in 2000. This compares to the previous estimate made on July 24, 2000 of $.25-$.30 per share. The principal reason for the drop in the estimate is the third quarter results of UBE, including weak sales results due to mild weather conditions and high gas prices, and to the contract termination charge taken in that quarter. Those results have reduced UBE's earnings estimate for the year to a loss of $.15-$.20 per share from the previous estimate of a positive $.05 per share. APS is expected to contribute about $.10-$.15 per share to UIL Holdings earnings in 2000, consistent with the July 24, 2000 estimate. Xcelecom, Inc. is expected to be profitable in the fourth quarter of 2000, resulting in UIL Holdings earnings for the year of $.08-$.10 per share. UCI is expected to contribute about $.08-$.10 per share to UIL Holdings earnings for the year. URI, the holding company for the non-regulated subsidiaries, is expected to lose approximately $.20 per share for the year, reflecting financial leverage and ongoing strategic and administrative costs associated with UIL Holdings' efforts to continue growing the non-regulated businesses. As stated previously, as a result of management's continued confidence in the potential of the non-regulated businesses, UIL Holdings is evaluating further investments in this area. Near-term losses could be incurred due to these new growth initiatives, if the potential for future benefits warrants such losses. - 35 - Quarterly Earnings Pattern for 2000 - ----------------------------------- The quarterly earnings pattern for 2000 will be somewhat smoother than the earnings pattern for 1999. The primary reason is the new regulated utility pricing structure set by the Department of Public Utility Control (DPUC), effective January 1, 2000, to implement standard offer customer rates at a level 10% below 1996 rates. Overall, the implementation of the new rates will produce a retail price reduction of about 6% compared to 1999 retail revenues, excluding any further reduction resulting from earnings sharing. In 2000, all of the unbundled rate components, except for the component attributable to the operating Distribution Division, reflect fixed pricing within each rate class. That is, the seasonality previously associated with historical underlying costs of those rate components, the largest of which is the CTA for recovery of stranded costs, has been eliminated. Only the operating Distribution Company component maintains a seasonal pricing structure, and that component is expected to produce an average price for the year of about 4.2 cents per kilowatthour. UI is allowed to earn an 11.5% return on the equity portions of CTA and the SBC rate base (the latter is minimal). For the most part, the regulatory assets that are being recovered through the CTA are being amortized on a straight-line basis. If CTA revenues do not produce the allowed return, then deferred accounting is used to "true-up" to the allowed return. This true-up adjusts for sales volume fluctuations as well as pricing factors. A similar adjustment, on a much less significant scale, applies to the SBC component. The generation service, conservation and renewables charges are pass-through charges. The only retail sales volume fluctuations that flow to net income are those that apply to the operating Distribution Division component of rates. Thus, a 1% sales volume increase will produce additional sales margin of about $2.4 million in 2000, whereas it produced additional sales margin of about $6.0 million in 1999. The other UI earnings component that can vary significantly is the Nuclear Division component. UI's operating nuclear assets, Seabrook Unit 1 and Millstone Unit 3, are supplying power solely to the wholesale market beginning in 2000. Unit outages, whether scheduled or unscheduled, will result in lowered sales, and unscheduled outages could result in higher maintenance expenses. Actual 2000 results may vary depending on changes due to weather, economic conditions, sales mix (the usage pattern of the Distribution Division's retail customers) and UIL Holdings' ability to control expenses, as well as the performance of URI and other unanticipated events. UIL Holdings' current overall estimate of earnings per share from operations for 2000 is $4.25-$4.35 and the estimates of quarterly results are as follows: Earnings per share from operations: Estimated Actual Quarter 2000 Range 1999 ------- ---------- ---- 1 $1.20 (Actual) $ .66 2 $1.41 (Actual) .99 3 $1.19 (Actual) 1.78 4 $ .45 - $ .55 .24 ---- $3.67 A look at 2001; continued growth of non-regulated operating businesses value - ---------------------------------------------------------------------------- Currently, UIL Holdings is estimating earnings for 2001 to be in the range of $4.05-$4.25 per share. UI is expected to produce earnings in 2001 of $3.75-$3.85 per share. Sharing in the regulated utility is not currently expected to produce any significant earnings in 2001. The largest single influence on this forecasted downturn in UI's earnings from 2000 is additional scheduled non-cash amortization. The non-regulated businesses are expected to produce earnings in 2001 of $.30-$.45 per share. APS's traditional contracted walk-in payments business should produce earnings at or above the 2000 level, but its total earnings should decrease from the 2000 level by about 25% to $.08-$.10 per share. This decrease is due to higher selling and other costs that are expected to be incurred to significantly increase the number of agents and introduce new products. Xcelecom's earnings are expected to be - 36 - $.40-$.50 per share, reflecting a full year's impact of the acquisitions completed in 2000. Passive investments, including UCI and UBE, are currently expected to break even in 2001, but could experience substantial variation, depending on financial and energy market conditions. URI's financial leverage, strategic and administrative costs are expected to offset some of these earnings and should reduce total URI earnings by $.20-$.30 per share. THE UNITED ILLUMINATING COMPANY The United Illuminating Company is a wholly-owned subsidiary of UIL Holdings Corporation (UIL Holdings). Refer to UIL Holdings' "Management's Discussion and Analysis of Financial Condition and Results of Operations" for information relating to the following: Major Influences on Financial Condition Capital Expenditure Program Liquidity and Capital Resources Results of Operations Looking Forward This discussion should be read in conjunction with UI's annual report on Form 10-K for the year ended December 31, 1999, UI's current report on Form 8-K filed March 22, 2000, UI's quarterly reports on Form 10-Q for the fiscal quarters ended March 31, 2000 and June 30, 2000, UI's current report on Form 8-K filed July 21, 2000, UIL Holdings' current report on Form 8-K filed July 21, 2000, and the financial statements and "Notes to Financial Statements" in Item 1 of this quarterly report on Form 10-Q. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK. Each of UIL Holdings and UI believes that it has no material quantitative or qualitative exposure to market risk associated with activities in derivative financial instruments, other financial instruments or derivative commodity instruments. - 37 - PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS. See UI's Quarterly Reports (Form 10-Q) for the quarterly periods ending March 31, 2000 and June 30, 2000. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits.
Exhibit Table Item Exhibit Number Number Description ---------- ------- ----------- (3) 3.1f Copy of Certificate Amending Certificate of Incorporation of The United Illuminating Company, dated July 21, 2000, amending Exhibit 3.1a.* (3) 3.3 Copy of Certificate of Incorporation of UIL Holdings Corporation, as amended through July 20, 2000. (3) 3.4 Copy of ByLaws of UIL Holdings Corporation, as amended through July 20, 2000. (10) 10.21b+ Copy of First Amendment, made as of the close of business on July 20, 2000, to The United Illuminating Company Phantom Stock Option Agreement, dated as of February 23, 1998, between The United Illuminating Company and Nathaniel D. Woodson, amending Exhibit 10.21**. (10) 10.23b+ Copy of First Amendment to The United Illuminating Company 1990 Stock Option Plan, as previously amended through August 22, 1994, effective immediately prior to the close of business on July 20, 2000, amending Exhibit 10.23***. (10) 10.23c+ Copy of Instrument of Assumption of Stock Option Plans, made as of 10.24a+ July 21, 2000, between UIL Holdings Corporation and The United Illuminating Company, with respect to Exhibits 10.23***, 10.23b and 10.24****. (10) 10.25c+ Copy of Second Amendment to The United Illuminating Company Non-Employee Directors Common Stock and Deferred Compensation Plan, as previously amended and restated through December 13, 1999, made as of the close of business on July 20, 2000, amending Exhibit 10.25a#. (10) 10.25d+ Copy of Instrument of Assignment and Assumption of Non-Employee Directors Common Stock and Deferred Compensation Plan, made as of July 21, 2000, between The United Illuminating Company and UIL Holdings Corporation, with respect to Exhibits 10.25a#, 10.25b## and 10.25c. (10) 10.28+ Copy of Employment Agreement, made as of June 12, 2000, between The United Illuminating Company and Gregory E. Sages.
- 38 -
Exhibit Table Item Exhibit Number Number Description ---------- ------- ----------- (10) 10.29+ Copy of Employment Agreement, made as of June 26, 2000, between The United Illuminating Company and Susan E. Allen. (10) 10.30+ Copy of Resolution adopted by the Board of Directors of The United Illuminating Company on June 26, 2000, and effective at the close of business on July 20, 2000, amending Section 7 of each of the Employment Agreement Exhibits 10.12a###, 10.13a###, 10.14a###, 10.15a###, 10.16a###, 10.17a###, 10.18###, 10.19a###, 10.20a**, 10.28 and 10.29. (10) 10.31+ Copy of UIL Holdings Corporation Change in Control Severance Plan. (10) 10.32+ Copy of UIL Holdings Corporation Non-Employee Directors Change in Control Severance Plan. (21) 21b List of subsidiaries of UIL Holdings Corporation, superseding Exhibit 21a####. (27) 27 Financial Data Schedule.
- ---------------------------------- + Management contract or compensatory plan or arrangement. * Filed with Annual Report (Form 10-K) of The United Illuminating Company for fiscal year ended December 31, 1995. ** Filed with Quarterly Report (Form 10-Q) of The United Illuminating Company for fiscal quarter ended March 31, 1998. *** Filed with Annual Report (Form 10-K) of The United Illuminating Company for fiscal year ended December 31, 1996. **** Filed with Quarterly Report (Form 10-Q) of The United Illuminating Company for fiscal quarter ended March 31, 1999. # Filed March 29, 1996, with proxy material for Annual Meeting of the Shareowners of The United Illuminating Company. ## Filed with Annual Report (Form 10-K) of The United Illuminating Company for fiscal year ended December 31, 1999. ### Filed with Quarterly Report (Form 10-Q) of The United Illuminating Company for fiscal quarter ended September 30, 1997. #### Filed with Quarterly Report (Form 10-Q) of The United Illuminating Company and UIL Holdings Corporation for fiscal quarter ended June 30, 2000. - 39 - (b) Reports on Form 8-K. UIL HOLDINGS CORPORATION: Item Financial Reported Statements Date of Report -------- ---------- -------------- 5 None July 20, 2000 THE UNITED ILLUMINATING COMPANY: Item Financial Reported Statements Date of Report -------- ---------- -------------- 5 None July 20, 2000 - 40 - SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. THE UNITED ILLUMINATING COMPANY Date 11/14/2000 Signature /s/ Robert L. Fiscus --------------- ------------------------------------------- Robert L. Fiscus Vice Chairman of the Board of Directors and Chief Financial Officer - 41 - SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. UIL HOLDINGS CORPORATION Date 11/14/2000 Signature /s/ Robert L. Fiscus ----------------- ---------------------------------------- Robert L. Fiscus Vice Chairman of the Board of Directors and Chief Financial Officer - 42 - EX-3.1F 2 0002.txt CERT AMEND CERT OF INCORP-UNTD ILLUM 7/21/00 EXHIBIT 3.1f THE UNITED ILLUMINATING COMPANY (A SPECIALLY CHARTERED STOCK CORPORATION) CERTIFICATE AMENDING CERTIFICATE OF INCORPORATION BY ACTIONS OF BOARD OF DIRECTORS AND SHAREHOLDERS 1. The name of the corporation is THE UNITED ILLUMINATING COMPANY (the "Company"). 2. The Certificate of Incorporation of the Company is amended only by the following resolution: RESOLVED: That the Certificate of Incorporation of the Company be and it hereby is amended by amending Section 5 of said Certificate of Incorporation to read as follows: Section 5. All corporate powers of the Company shall be exercised by or --------- under authority of, and the business and affairs of the Company 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 Company. 3. The above resolution was recommended to the shareholders of the Company by the Company's Board of Directors, and was adopted on July 21, 2000 by a dated and signed unanimous written consent of the shareholders of the Company. 4. Relative to the approval of the amendment by the Company's shareholders: (A) the designation of the shares of the only shareholder voting group entitled to vote on the amendment was Common Stock; and (B) the number of outstanding shares of Common Stock entitled to vote on approval of the amendment was 100, each share being entitled to one vote; and (C) all of the outstanding shares of Common Stock entitled to vote on approval of the amendment were owned by one person; and (D) said one person consented in writing to the adoption of the above resolution by a writing dated and signed by said person on July 21, 2000. WE, THE UNDERSIGNED, being the Chairman of the Board of Directors, President and Chief Executive Officer, and the Corporate Secretary, of The United Illuminating Company, hereby declare, under penalties of false statement, that the statements made in the foregoing certificate are true. Dated at New Haven, Connecticut, this 21st day of July, 2000. THE UNITED ILLUMINATING COMPANY /s/ Nathaniel D. Woodson ------------------------------------------- Nathaniel D. Woodson Chairman of the Board of Directors, President and Chief Executive Officer /s/ Susan E. Allen ------------------------------------------ Susan E. Allen Corporate Secretary 2 EX-3.3 3 0003.txt CERT OF INCORP-UIL HOLDINGS CORP THRU 7/20/00 EXHIBIT 3.3 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. No shares of the Preferred Stock - $100 Par Value of the Corporation shall be issued where such issuance, or the preferences, limitations or relative rights of such shares, will have the effect, directly or indirectly, of precluding or inhibiting a person or group of persons from seeking to obtain control of the management or business and affairs of the Corporation by acquiring or offering to acquire Common Stock shares of the Corporation, or by soliciting proxies from the owners of Common Stock shares of the Corporation for voting such shares at a meeting of the shareowners of the Corporation, or by any other lawful means. (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 Board of Directors of the Corporation, with those of the other shares of the Preferred Stock - $25 Par Value of the Corporation. No shares of the Preferred Stock - $25 Par Value of the Corporation shall be issued where such issuance, or the preferences, limitations or relative rights of such shares, will have the effect, directly or indirectly, of precluding or inhibiting a person or group of persons from seeking to obtain control of the management or business and affairs of the Corporation by acquiring or offering to acquire Common Stock shares of the Corporation, or by soliciting proxies from the owners of Common Stock shares of the Corporation for voting such shares at a meeting of the shareowners of the Corporation, or by any other lawful means. (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 2 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. No shares of the Preference Stock of the Corporation shall be issued where such issuance, or the preferences, limitations or relative rights of such shares, will have the effect, directly or indirectly, of precluding or inhibiting a person or group of persons from seeking to obtain control of the management or business and affairs of the Corporation by acquiring or offering to acquire Common Stock shares of the Corporation, or by soliciting proxies from the owners of Common Stock shares of the Corporation for voting such shares at a meeting of the shareowners of the Corporation, or by any other lawful means. 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. 3 EX-3.4 4 0004.txt BYLAWS OF UIL HOLDINGS CORPORATION EXHIBIT 3.4 BYLAWS OF UIL HOLDINGS 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. 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. 2 SECTION 2. NUMBER AND TERM OF OFFICE. The number of directorships shall be twelve. 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. 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. 3 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. 4 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. 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 5 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 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 6 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 7 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 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 8 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. 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. 9 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. 10 EX-10.21B 5 0005.txt 1ST AMEND-PHAN.STK OPT PLAN-N. WOODSON & UI EXHIBIT 10.21b FIRST AMENDMENT TO THE UNITED ILLUMINATING COMPANY PHANTOM STOCK OPTION AGREEMENT This FIRST AMENDMENT, made as of the close of business on the 20th day of July, 2000, to the Phantom Stock Option Agreement, made as of the 23rd day of February, 1998, (the "Agreement") between THE UNITED ILLUMINATING COMPANY, a Connecticut corporation, (the "Company") and NATHANIEL D. WOODSON, an individual, (the "Executive"), WITNESSETH THAT: (1) The Company and the Executive hereby agree to amend the Agreement as set forth in Sections (2) and (3) below. (2) Section 3 is amended to read as follows: 3. Payment Upon Exercise. On each date that the Executive or his personal ---------------------- representative exercises one or more Options, the Company shall become obligated to pay the Executive or his personal representative, in cash, an amount equal to the excess of the fair market value of the Common Stock of UIL Holdings Corporation on that date over the Exercise Price, multiplied by the number of options exercised. "Fair market value" shall be the average of the high and low sale prices of shares of the Common Stock of UIL Holdings Corporation on the New York Stock Exchange composite tape on the exercise date or, if there is no sale on such date, then such average price on the last previous day on which at least one sale shall have been reported. The Company shall discharge each payment obligation to the Executive or his personal representative on or before the second business day following the exercise date. (3) Section 6 is amended to read as follows: 6. Adjustments. In the event of a recapitalization, reclassification, stock ----------- split, stock dividend, combination of shares, or any other similar change in the capital structure of UIL Holdings Corporation, an appropriate adjustment shall be made in the number and or kind of shares covered by the Options and/or in the Exercise Price of the Options. In the event of any merger, consolidation or other reorganization in which the Company is not the surviving or continuing corporation, all Options shall be assumed by the surviving or continuing corporation. (4) All the terms and conditions of the Agreement, as amended hereby, are and shall remain in full force and effect. (5) This First Amendment to the Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together shall constitute one in the same instrument. IN WITNESS WHEREOF, the parties hereto have executed this instrument as of the day and year first above written. THE UNITED ILLUMINATING COMPANY ATTEST: By /s/ Albert N. Henricksen /s/ Susan E. Allen ---------------------------- ------------------------------------- Albert N. Henricksen Susan E. Allen Its Group Vice President Its Vice President Investor Relations Support Services and Corporate Secretary /s/ Nathaniel D. Woodson ---------------------------- Nathaniel D. Woodson 2 EX-10.23B 6 0006.txt 1ST AMEND UNITED ILLUM 1990 STK OPT PLAN EXHIBIT 10.23b FIRST AMENDMENT TO THE UNITED ILLUMINATING COMPANY 1990 STOCK OPTION PLAN This FIRST AMENDMENT, effective immediately prior to the close of business on the 20th day of July, 2000, to The United Illuminating Company 1990 Stock Option Plan, as adopted January 22, 1990, (the "Plan"), WITNESSETH THAT: (1) Pursuant to Section 10. of the Plan, it is amended as set forth in Section (2) below. (2) Section 6. is amended by adding thereto the following sentence: "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 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." (3) All the terms and conditions of the Plan, as amended hereby, are and shall remain in full force and effect. THE UNITED ILLUMINATING COMPANY By /s/Albert N. Henricksen -------------------------- Albert N. Henricksen Its Group Vice President Support Services EX-10.23C,EX-10.24A 7 0007.txt INSTRU ASSMPTN STK OPT PLAN BETW UI & UIL HLD EXHIBIT 10.23c EXHIBIT 10.24a INSTRUMENT OF ASSUMPTION OF STOCK OPTION PLANS This Instrument of Assumption of Stock Options (the "Instrument of Assumption"), made as of the 21st day of July, 2000, by UIL Holdings Corporation, a Connecticut corporation ("UIL") in favor of The United Illuminating Company, a Connecticut corporation ("UI"), WITNESSETH THAT: WHEREAS, effective at the close of business on July 20, 2000, and pursuant to an Agreement and Plan of Merger and Share Exchange, dated as of January 24, 2000, among UIL, UI and United Mergings, Inc., UI became a wholly-owned subsidiary of UIL, and each outstanding share of UI's Common Stock was automatically converted into and exchanged for one share of UIL's Common Stock; and WHEREAS, UI has had in effect since January 22, 1990 a 1990 Stock Option Plan for certain of its key employees, which Plan, as amended immediately prior to the close of business on the 20th day of July, 2000, includes the following provision: "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 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 become the Administrator of this Plan on the effective date of the share exchange."; and WHEREAS, UI has had in effect since March 22, 1999, a 1999 Stock Option Plan, which Plan includes the following provision: "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 become the Administrator of this Plan on the effective date of the share exchange." NOW THEREFORE, in consideration of the premises, UIL hereby acknowledges that it has assumed and become responsible for the performance of all of the terms, conditions, covenants and agreements of each of the aforesaid Stock Option Plans on the part of UI thereunder, including, without limitation, the obligation to issue shares of Common Stock of UIL upon the exercise of Stock Options (as that term is defined in said Stock Option Plans), pursuant to and in accordance with the terms and conditions of said Stock Option Plans; and UIL does hereby covenant and agree to hold harmless UI from and against any claims, demands, suits, actions, damages or expenses, including but not limited to attorneys' fees, arising out of or in any way connected with any default or alleged default on the part of UIL in the faithful performance of the terms, conditions, covenants and agreements contained in said Stock Option Plans. This Instrument of Assumption shall be governed by and construed in accordance with the laws of the State of Connecticut. IN WITNESS WHEREOF, UIL has caused this Instrument of Assumption to be executed as of the day and year first above written. UIL HOLDINGS CORPORATION By: s/s Robert L. Fiscus ------------------------------------------------ Robert L. Fiscus Its Vice Chairman of the Board of Directors, Chief Financial Officer, Treasurer and Secretary 2 EX-10.25C 8 0008.txt 2ND AMND NON-EMPL DIR COM STK & DEF COMP PLN EXHIBIT 10.25c SECOND AMENDMENT TO THE UNITED ILLUMINATING COMPANY NON-EMPLOYEE DIRECTORS COMMON STOCK AND DEFERRED COMPENSATION PLAN This SECOND AMENDMENT, made as of the close of business on the 20th day of July, 2000, to The United Illuminating Company Non-Employee Directors Common Stock and Deferred Compensation Plan, as originally adopted on December 22, 1980, and previously amended and restated on July 23, 1990, December 17, 1990 and May 15, 1996, and further amended effective December 13, 1999, (the "Plan"), WITNESSETH THAT: (1) Pursuant to Section 8.01 of the Plan, it is amended as set forth in Sections (2), (3), (4) and (5) below. (2) Section 1.01 is amended to read as follows: 1.01 THE PLAN. This Non-Employee Directors Common Stock and Deferred Compensation Plan (the "Plan"), is established for the benefit of the Eligible Directors of UIL Holdings Corporation (the "Company"). (3) Subsection 2.01(f) is amended to read as follows: (f) "Company" shall mean UIL Holdings Corporation and any successor. (4) Subsection 2.01(i) is amended to read as follows: (i) "Eligible Director" shall mean a person who renders or has rendered service to the Company or The United Illuminating Company on or after May 15, 1996 at a time when he or she is or was not an employee of the Company or The United Illuminating Company. (5) Subsection 2.01(p) is amended to read as follows: (p) "Service" shall mean service as a Director, including service as a member of a committee or committees of the Board, and service as a member of the Board of Directors, including service as a member of a committee or committees of the Board of Directors, of The United Illuminating Company. (6) All the terms and condition of the Plan, as amended hereby, are and shall remain in full force and effect. THE UNITED ILLUMINATING COMPANY By /s/ Albert N. Henricksen ------------------------------- Albert N. Henricksen Its Group Vice President Support Services 2 EX-10.25D 9 0009.txt INSTRU NON-EMPL DIR CMN STK & DEF CMP PLN EXHIBIT 10.25d INSTRUMENT OF ASSIGNMENT AND ASSUMPTION OF NON-EMPLOYEE DIRECTORS COMMON STOCK AND DEFERRED COMPENSATION PLAN THIS INSTRUMENT (the "Assignment and Assumption Agreement"), made as of the 21st day of July, 2000, by and between The United Illuminating company, a Connecticut corporation (the "Assignor"), and UIL Holdings Corporation, a Connecticut corporation (the "Assignee"). WITNESSETH THAT: WHEREAS, effective at the close of business on July 20, 2000, and pursuant to an Agreement and Plan of Merger and Share Exchange, dated as of January 24, 2000, among Assignor, Assignee and United Mergings, Inc., Assignor became a wholly-owned subsidiary of Assignee, and each outstanding share of Assignor's Common Stock was automatically converted into and exchanged for one share of Assignee's Common Stock; and WHEREAS, effective at the close of business on July 20, 2000, each non-employee Director of Assignor was duly elected a Director of Assignee; and WHEREAS, Assignor has had in effect since December 22, 1980 a compensation plan for its non-employee Directors, which plan, as amended and restated on July 23, 1990, December 17, 1990, May 15, 1996, December 13, 1999, and as of the close of business on July 20, 2000, has provided for the payment to non-employee Directors of Assignor of portions of their compensation for service as Directors in shares of Assignor's Common Stock, and has allowed non-employee Directors of Assignor to defer the payment of part of the fees payable to them for service as Directors of Assignor, all as set forth and described in said Non-Employee Directors Common Stock and Deferred Compensation Plan, as amended and restated (the "Plan"); and WHEREAS, the Plan, as amended by said amendment as of the close of business on July 20, 2000, has become the Plan of Assignee; and WHEREAS, Assignor desires to assign and Assignee desires to assume, all of Assignor's right and interest in and to, and all of the obligations and liabilities arising out of the Plan, NOW THEREFORE, in consideration of the premises, Assignor and Assignee hereby agree as follows: 1. Assignor assigns, transfers and delivers to Assignee, and Assignee hereby assumes, all of Assignor's right and interest in and to, and all of the obligations and liabilities arising out of, the Plan. 2. Assignee assumes and agrees to perform all of the terms, conditions, covenants and agreements of the Plan on the part of the Company (as that term is defined in the Plan) thereunder, including, without limitation, all obligations of Assignor to individuals who have served as Directors of Assignor at any time since December 22, 1980, and to their beneficiaries, spouses, legal guardians or conservators; and Assignee does hereby covenant and agree to hold harmless Assignor from and against any claims, demands, suits, actions, damages or expenses, including but not limited to attorneys' fees, arising out of or in any way connected with any default or alleged default on the part of Assignee in faithful performance of the terms, conditions, covenants and agreements contained in the Plan. 3. This Assignment and Assumption Agreement may not be modified in any manner or terminated, except by an instrument in writing executed by the parties hereto. 4. This Assignment and Assumption Agreement shall be governed by and construed in accordance with the laws of the State of Connecticut. IN WITNESS WHEREOF, the parties have caused this Assignment and Assumption Agreement to be executed as of the day and year first written above. ASSIGNOR: THE UNITED ILLUMINATING COMPANY By: /s/ Robert L. Fiscus ------------------------------------------------ Robert L. Fiscus Its: Vice Chairman of the Board of Directors and Chief Financial Officer And by: /s/ Charles J. Pepe -------------------------------------------- Charles J. Pepe Its: Treasurer ASSIGNEE: UIL HOLDINGS CORPORATION By: /s/Robert L. Fiscus ------------------------------------------------ Robert L. Fiscus Its: Vice Chairman of the Board of Directors Chief Financial Officer, Treasurer and Secretary 2 EX-10.28 10 0010.txt EMPLOYMT AGRMT - GREGORY E. SAGES EXHIBIT 10.28 EMPLOYMENT AGREEMENT THIS AGREEMENT, made as of the 12th day of June, 2000, between THE UNITED ILLUMINATING COMPANY, a Connecticut Corporation (the Company) and GREGORY E. SAGES, an individual (the Officer), WITNESSETH THAT WHEREAS, the Company desires to employ the Officer as Vice President Finance of the Company, and the Officer desires to be employed by the Company as Vice President Finance. NOW THEREFORE, in consideration of the foregoing and the respective covenants and agreements of the parties herein contained, and the services to be rendered to the Company pursuant hereto, and in order to provide an incentive to the Officer to remain in the employ of the Company hereafter and, in particular, in the event of any Change in Control (as herein defined) of the Company, thereby establishing and preserving continuity of management, the Parties hereby agree as follows: (1) EMPLOYMENT The Company hereby agrees to employ Gregory E. Sages, and Gregory E. Sages hereby agrees to serve the Company, at the pleasure of the Board of Directors of the Company, all upon the terms and conditions set forth herein. (2) POSITION AND DUTIES The Officer shall be employed by the Company as Vice President Finance, or in such other equivalent or higher officership position as the Company's Board of Directors may determine. The Officer shall accept such employment and shall perform and discharge, faithfully, diligently and to the best of the Officer's abilities, the duties and obligations of the Officer's office and such other duties as may from time to time be assigned to the Officer by, or at the direction of, the Board of Directors of the Company, and shall devote substantially all of the Officer's working time and efforts to the business and affairs of the Company. Although a Change in Control of the Company shall not affect the obligations of the Company and the Officer as set forth in the two preceding sentences, at and after the date of any Change in Control the Company's employment of the Officer shall also be without diminishment in the Officer's management responsibilities, duties or powers. (3) PLACE OF PERFORMANCE In his employment by the Company, the Officer shall be based at the executive offices of the Company situated within the Company's statutory service area. (4) COMPENSATION (a) Base Salary. During the term of the Officer's employment hereunder, the Officer shall receive a base salary (Base Salary) at an annual rate of One Hundred Sixty-Five Thousand Dollars ($165,000). The Officer's Base Salary rate shall be reviewed by the Board of Directors of the Company contemporaneously with each review of the salary rates of the Company's other officers by said Board of Directors, and may be revised upwards as a result of any such review. The Officer's Base Salary may be revised downwards by said Board of Directors contemporaneously with any general reduction of the salary rates of the Company's other officers. (b) Incentive Compensation. During the term of the Officer's employment hereunder, the Officer shall be eligible to be designated by the Board of Directors of the Company as a participant in each incentive compensation program established for all officers of the Company. For purposes of this Agreement, Total Compensation is defined, as the sum of the Officer's Base Salary and any amount paid or payable pursuant to this Section (4)(b). (c) Business Expenses. During the term of the Officer's employment hereunder, the Officer shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by the Officer (in accordance with the policies and procedures established by the Board of Directors of the Company from time to time for all of the Company's officers) in performing services hereunder, provided that the Officer properly accounts therefor. (d) Benefit Programs. During the term of the Officer's employment hereunder, the Officer shall be entitled to participate in and receive full benefits under all of the Company's employee benefit plans, programs and arrangements for its officers, including, without limitation, its retirement and pension plan programs. Nothing paid to the Officer under any such plan, program or arrangement presently in effect or made available by the Company in the future shall be deemed to be in lieu of compensation to the Officer under any other Section of this Agreement. (e) Vacations and Holidays. During the term of the Officer's employment hereunder, the Officer shall be entitled to the number of paid vacation days in each calendar year determined by the Board of Directors of the Company from time to time for all of the Company's officers, and shall also be entitled to all paid holidays afforded by the Company to its employees. (5) TERMINATION (a) The Officer's employment hereunder shall terminate upon the Officer's death. - 2 - (b) The Board of Directors of the Company may terminate the Officer's employment hereunder at any time, with or without Cause. Prior to the date of a Change in Control, the Company shall be deemed to have Cause to terminate the Officer's employment hereunder only upon the Officer's (A) continued failure to perform and discharge the duties or obligations of the Officer's office, or such other duties as may from time to time be assigned to the Officer by, or at the direction of, the Board of Directors, faithfully, diligently, to the best of the Officer's abilities, and in accordance with standards accepted in the electric utility industry, in the opinion of a majority of the members of the Board of Directors of the Company, or (B) misconduct that is injurious to the Company, or (C) conviction of a felony involving the personal dishonesty or moral turpitude of the Officer, or (D) total and permanent physical or mental disability, or (E) absence from work on a full-time basis, due to physical or mental illness, for an uninterrupted 365-day period. On and after the date of a Change in Control, the Company shall be deemed to have Cause to terminate the Officer's employment hereunder only upon the Officer's (F) conviction of a felony involving the personal dishonesty or moral turpitude of the Officer, or (G) total and permanent physical or mental disability, or (H) absence from work on a full-time basis, due to physical or mental illness, for an uninterrupted 365-day period. (c) The Officer may terminate the Officer's employment hereunder, upon at least thirty (30) days' prior Notice of Termination delivered to the Company, for failure of the Company to observe and perform one or more of its obligations under Sections (1), (2), (3) and/or (4) hereof, which failure the Company fails to remedy within such notice period (a Breach by the Company) at a time when the Officer is not in default of any of the Officer's obligations under Sections (1) and/or (2) hereof. The Officer may terminate his employment hereunder in the absence of a Breach by the Company, effective upon at least six (6) months' prior Notice of Termination delivered to the Company. (d) Notice of Termination. Any termination of employment, by the Company or by the Officer, shall be communicated by delivery of a written Notice of Termination to the other party. (e) Date of Termination. For purposes of this Agreement, the Date of Termination is defined as: if the Officer's employment is terminated (A) by his death, the date of his death, or (B) pursuant to Section (5)(b) or Section (5)(c) hereof, the date specified in the Notice of Termination. (6) CONSEQUENCES OF TERMINATION (a) If the Officer's employment terminates by reason of the Officer's death, the Company shall pay to the persona - 3 - representative and/or spouse of the Officer the Officer's Total Compensation earned prior to the Date of Termination, any amounts payable pursuant to Sections (4)(c) and (4)(d) hereof and any benefits or amounts payable under any deferred compensation plan in which the Officer had been a participant, and the Company shall have no further obligation under this Agreement. (b) If the Officer terminates the Officer's employment hereunder in the absence of a Breach by the Company and upon at least six (6) months' prior Notice of Termination, the Company shall pay to the Officer and/or the Officer's personal representative and/or spouse the Officer's Total Compensation earned prior to the Date of Termination, any amounts payable pursuant to Sections (4)(c) and (4)(d) hereof and any benefits or amounts payable under any deferred compensation plan in which the Officer had been a participant, and the Company shall have no further obligation to the Officer and/or the Officer's personal representative and/or spouse under this Agreement or on account of, or arising out of, the termination of the Officer's employment. (c) If the Company terminates the Officer's employment hereunder for Cause, or if the Officer terminates the Officer's employment hereunder in the absence of a Breach by the Company and upon less than six (6) months' prior Notice of Termination, the Company shall pay to the Officer the Officer's full Base Salary earned prior to the Date of Termination, any amounts payable pursuant to Sections (4)(c) and (4)(d) hereof and any benefits or amounts payable under any deferred compensation plan in which the Officer had been a participant, and, provided that the Company is not in default of any of its obligations hereunder, the Company shall have no further obligation to the Officer under this Agreement or on account of, or arising out of, the termination of the Officer's employment. (d) If the Company terminates the Officer's employment hereunder without Cause, or if the Officer terminates the Officer's employment hereunder on account of a Breach by the Company: (i) The Company shall pay to the Officer the Officer's Total Compensation earned prior to the Date of Termination, any amounts payable pursuant to Sections 4(c) and 4(d) hereof and any benefits or amounts payable under any deferred compensation plan in which the Officer had been a participant. (ii) The Company shall afford the Officer the severance benefits set forth on Schedule A attached hereto. (iii) The payment to, and acceptance by, the Officer of any sum of money or benefit prescribed in this Section (6)(d) shall effect and evidence a release by the Officer of any - 4 - and all claims against the Company on account of, or arising out of, the termination of the Officer's employment. (7) CHANGE IN CONTROL For purposes of this Agreement, Change in Control shall mean any of the following events: (a) any merger or consolidation of the Company with any corporate shareholder or group of corporate shareholders holding twenty-five percent (.25) or more of the Common Stock of the Company or with any other corporation or group of corporations which is, or after such merger or consolidation would be, or be affiliated with, a shareholder owning at least twenty-five percent (.25) of the Common Stock of the Company; or (b) any sale, lease, exchange, mortgage, pledge, transfer or other disposition to or with any shareholder or group of shareholders holding twenty-five percent (.25) or more of the Common Stock of the Company, or any affiliate of such shareholder or group of shareholders, of any assets of the Company having an aggregate fair market value of $50 million or more; or (c) the issuance or sale by the Company of any securities of the Company to any shareholder or group of shareholders holding twenty-five percent (.25) or more of the Common Stock of the Company, or to any affiliate of such shareholder or group of shareholders, in exchange for cash, securities or other consideration having an aggregate fair market value of $50 million or more; or (d) the implementation of any plan or proposal for the liquidation or dissolution of the Company proposed by or on behalf of any shareholder or group of shareholders owning at least twenty-five percent (.25) of the Common Stock of the Company, or any affiliate of such shareholder or group of shareholders; or (e) any reclassification of securities (including a reverse stock split), or recapitalization of the Company or any other transaction which has the effect, directly or indirectly, of increasing the proportionate share of outstanding shares of any class of equity securities, or securities convertible into any equity securities, of the Company, which is directly or indirectly owned by a shareholder or group of shareholders owning at least twenty-five percent (.25) of the Common Stock of the Company, or any affiliate of such shareholder or group of shareholders. The Board of Directors of the Company may, from time to time, by the affirmative vote of not less than a majority of the entire membership of said Board of Directors, at a meeting of said Board of Directors called and held for the purpose, modify the phrase "twenty-five percent (.25)" in one or more of the - 5 - foregoing Sections (7)(a), (7)(b), (7)(c), (7)(d) and/or (7)(e) to a lesser percentage, but not less than twenty percent (.20). (8) ADDITIONAL CONSEQUENCES OF A CHANGE IN CONTROL (a) In the event that a Change in Control has been approved by all necessary shareholder, creditor and regulatory actions, the Company will, not later than the day prior to the date of the Change in Control, pay to the Trustee of The United Illuminating Company Supplemental Retirement Benefit Trust established pursuant to the Agreement, made as of the 1st day of June, 1995 between the Company and State Street Bank and Trust Company, as Trustee, for the benefit of the Officer, cash in an amount equal to: (A) In the event that the Officer's employment has been terminated or will be terminated prior to the date of the Change in Control, a sum, calculated by the Company's independent certified public accountants, reasonably sufficient to pay and discharge the largest of the Company's future obligations, if any, to the Officer and/or his personal representative and/or spouse, under Section (6)(a), Section (6)(b) or Section (6)(d) hereof; or (B) in the event that the Officer's employment has not been terminated and will not be terminated prior to the date of the Change in Control, a sum, calculated by the Company's independent certified public accountants, reasonably sufficient to pay and discharge the Company's obligations to the Officer under Section (6)(d) hereof assuming, for purposes of such calculation, that the Officer's employment is terminated under said Section (6)(d) by a Notice of Termination delivered on the date of the Change in Control and specifying an immediate Date of Termination. (b) On and after the date of the Change in Control, the Officer's Base Salary may not be reduced by the Board of Directors to an annual rate less than the rate fixed by the Board of Directors of the Company as a result of its most recent review of salary rates, pursuant to Section (4)(a) hereof, prior to the date of the Change in Control. (9) TAX SAVINGS PROVISION If any portion of the payments which the Officer has the right to receive from the Company, or any affiliated entity, hereunder would constitute "excess parachute payments" (as defined in Section 280G of the Internal Revenue Code, and not governed by the terms defined in this Agreement) subject to the excise tax imposed by Section 4999 of the Internal Revenue Code, such excess parachute payments shall be reduced to the largest amount that will result in no portion of such excess parachute payments being subject to the excise tax imposed by Section 4999 of the Internal Revenue Code. - 6 - (10) SUCCESSORS; BINDING AGREEMENT (a) The Company shall pay to the Officer and/or the Officer's personal representative and/or spouse all legal fees and expenses and court costs, if any, incurred by the Officer and/or the Officer's representative and/or spouse in successful litigation to enforce the Officer's rights under this Agreement. (b) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company, by agreement in form and substance reasonably satisfactory to the Officer, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain such agreement by the effectiveness of any such succession shall be a breach of this Agreement and shall entitle the Officer to compensation from the Company in the same amount and upon the same terms as the Officer would be entitled to hereunder if the Officer terminated the Officer's employment upon Breach by the Company, except that, for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. As used in this Agreement, the term "the Company" shall include The United Illuminating Company, any parent and any successor to the business or assets of either as aforesaid which executes and delivers the agreement provided for in this Section (10) or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law. (c) This Agreement and all rights of the Officer hereunder shall inure to the benefit of and be enforceable by the Officer's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Officer should die while any amounts would still be payable to the Officer hereunder if the Officer had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the Officer's devisee, legatee or other designee or, if there be no such designee, to the Officer's estate. (11) NOTICE For the purpose of this Agreement, notices and all other communications to either party hereunder provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States certified or registered mail, return receipt requested, postage prepaid, addressed, in the case of the Company, to The United Illuminating Company, 157 Church Street, New Haven, Connecticut, Attention: Secretary, or, in the case of the Officer, to the Officer at 157 Church Street, New Haven Connecticut, or to such other address as either party shall designate by giving written notice of such change to the other party. - 7 - (12) MISCELLANEOUS No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is approved by the Board of Directors of the Company and agreed to in a writing signed by the Officer and such officer of the Company as may be specifically authorized by the Board of Directors of the Company. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of any similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party that are not set forth expressly in this Agreement. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Connecticut. (13) VALIDITY The validity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. (14) SURVIVAL The provisions of this Agreement shall not survive the termination of this Agreement or of the Officer's employment hereunder, except that the provisions of Sections (4), (6), (8), (9), (10), and (11) hereof shall survive such termination and shall be binding upon the Company's successors and assigns. (15) COUNTERPARTS This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date and year first above written. Attest: THE UNITED ILLUMINATING COMPANY /s/ Susan E. Allen By: /s/ Nathaniel D. Woodson - --------------------------- --------------------------- Secretary Chairman, President and Chief Executive Officer /s/ Gregory E. Sages --------------------------- Gregory E. Sages - 8 - SCHEDULE A Severance Benefits ------------------ The Company shall: (i) pay to the Officer, within 30 days, a lump sum payment in an amount equal to two (2) times the Officer's Total Compensation immediately prior to the date of his termination; and (ii) maintain in full force and effect, for the continued benefit of the Officer for the period ending on the second anniversary of the date of his termination, all employee benefit plans and programs in which the Officer was entitled to participate immediately prior to the date of his termination, provided that the Officer's continued participation is possible under the general terms and provisions of such plans and programs and applicable law and, if the Officer's participation in any such plan or program is barred as a result of his termination, the Company shall arrange to provide the Officer with benefits substantially similar on an after-tax basis to those that he would have been entitled to receive under such plan or program; and (iii) afford to the Officer the addition of two (2) years of service deemed as an employee of the Company in the calculation of the benefits payable to the Officer under the retiree medical benefit plan(s) of the Company and in the calculation of the benefits payable to the Officer as a supplemental retirement benefit under his Employment Agreement. EX-10.29 11 0011.txt EMPLOYMENT AGRMT - SUSAN E. ALLEN EXHIBIT 10.29 EMPLOYMENT AGREEMENT THIS AGREEMENT, made as of the 26th day of June, 2000, between THE UNITED ILLUMINATING COMPANY, a Connecticut corporation (the Company) and SUSAN E. ALLEN, an individual (the Officer), WITNESSETH THAT WHEREAS, the Company desires to employ the Officer as Vice President Investor Relations and Corporate Secretary of the Company, and the Officer desires to be employed by the Company as Vice President Investor Relations and Corporate Secretary. NOW THEREFORE, in consideration of the foregoing and the respective covenants and agreements of the parties herein contained, and the services to be rendered to the Company pursuant hereto, and in order to provide an incentive to the Officer to remain in the employ of the Company hereafter and, in particular, in the event of any Change in Control (as herein defined) of the Company, thereby establishing and preserving continuity of management, the Parties hereby agree as follows: (1) EMPLOYMENT The Company hereby agrees to employ the Officer, and the Officer hereby agrees to serve the Company, at the pleasure of the Board of Directors of the Company, all upon the terms and conditions set forth herein. (2) POSITION AND DUTIES The Officer shall be employed by the Company as Vice President Investor Relations and Corporate Secretary, or in such other equivalent or higher officership position as the Company's Board of Directors may determine. The Officer shall accept such employment and shall perform and discharge, faithfully, diligently and to the best of the Officer's abilities, the duties and obligations of the Officer's office and such other duties as may from time to time be assigned to the Officer by, or at the direction of, the Board of Directors of the Company, and shall devote substantially all of the Officer's working time and efforts to the business and affairs of the Company. Although a Change in Control of the Company shall not affect the obligations of the Company and the Officer as set forth in the two preceding sentences, at and after the date of any Change in Control the Company's employment of the Officer shall also be without diminishment in the Officer's management responsibilities, duties or powers. (3) PLACE OF PERFORMANCE In the Officer's employment by the Company, the Officer shall be based at the executive offices of the Company situated within the Company's statutory service area. (4) COMPENSATION (a) Base Salary. During the term of the Officer's employment hereunder, the Officer shall receive a base salary (Base Salary) at an annual rate of One Hundred Thousand Dollars ($100,000). The Officer's Base Salary rate shall be reviewed by the Board of Directors of the Company contemporaneously with each review of the salary rates of the Company's other officers by said Board of Directors, and may be revised upwards as a result of any such review. The Officer's Base Salary may be revised downwards by said Board of Directors contemporaneously with any general reduction of the salary rates of the Company's other officers. (b) Incentive Compensation. During the term of the Officer's employment hereunder, the Officer shall be eligible to be designated by the Board of Directors of the Company as a participant in each incentive compensation program established for all officers of the Company. For purposes of this Agreement, Total Compensation is defined, as the sum of the Officer's Base Salary and any amount paid or payable pursuant to this Section (4)(b). (c) Business Expenses. During the term of the Officer's employment hereunder, the Officer shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by the Officer (in accordance with the policies and procedures established by the Board of Directors of the Company from time to time for all of the Company's officers) in performing services hereunder, provided that the Officer properly accounts therefor. (d) Benefit Programs. During the term of the Officer's employment hereunder, the Officer shall be entitled to participate in and receive full benefits under all of the Company's employee benefit plans, programs and arrangements for its officers, including, without limitation, its retirement and pension plan programs. Nothing paid to the Officer under any such plan, program or arrangement presently in effect or made available by the Company in the future shall be deemed to be in lieu of compensation to the Officer under any other Section of this Agreement. (e) Vacations and Holidays. During the term of the Officer's employment hereunder, the Officer shall be entitled to the number of paid vacation days in each calendar year determined by the Board of Directors of the Company from time to time for all of the Company's officers, and shall also be entitled to all paid holidays afforded by the Company to its employees. - 2 - (5) TERMINATION (a) The Officer's employment hereunder shall terminate upon the Officer's death. (b) The Board of Directors of the Company may terminate the Officer's employment hereunder at any time, with or without Cause. Prior to the date of a Change in Control, the Company shall be deemed to have Cause to terminate the Officer's employment hereunder only upon the Officer's (A) continued failure to perform and discharge the duties or obligations of the Officer's office, or such other duties as may from time to time be assigned to the Officer by, or at the direction of, the Board of Directors, faithfully, diligently, to the best of the Officer's abilities, and in accordance with standards accepted in the electric utility industry, in the opinion of a majority of the members of the Board of Directors of the Company, or (B) misconduct that is injurious to the Company, or (C) conviction of a felony involving the personal dishonesty or moral turpitude of the Officer, or (D) total and permanent physical or mental disability, or (E) absence from work on a full-time basis, due to physical or mental illness, for an uninterrupted 365-day period. On and after the date of a Change in Control, the Company shall be deemed to have Cause to terminate the Officer's employment hereunder only upon the Officer's (F) conviction of a felony involving the personal dishonesty or moral turpitude of the Officer, or (G) total and permanent physical or mental disability, or (H) absence from work on a full-time basis, due to physical or mental illness, for an uninterrupted 365-day period. (c) The Officer may terminate the Officer's employment hereunder, upon at least thirty (30) days' prior Notice of Termination delivered to the Company, for failure of the Company to observe and perform one or more of its obligations under Sections (1), (2), (3) and/or (4) hereof, which failure the Company fails to remedy within such notice period (a Breach by the Company) at a time when the Officer is not in default of any of the Officer's obligations under Sections (1) and/or (2) hereof. The Officer may terminate the Officer's employment hereunder in the absence of a Breach by the Company, effective upon at least six (6) months' prior Notice of Termination delivered to the Company. (d) Notice of Termination. Any termination of employment, by the Company or by the Officer, shall be communicated by delivery of a written Notice of Termination to the other party. (e) Date of Termination. For purposes of this Agreement, the Date of Termination is defined as: if the Officer's employment is terminated (A) by the Officer's death, the date of the Officer's death, or (B) pursuant to Section (5)(b) or Section (5)(c) hereof, the date specified in the Notice of Termination. - 3 - (6) CONSEQUENCES OF TERMINATION (a) If the Officer's employment terminates by reason of the Officer's death, the Company shall pay to the personal representative and/or spouse of the Officer the Officer's Total Compensation earned prior to the Date of Termination, any amounts payable pursuant to Sections (4)(c) and (4)(d) hereof and any benefits or amounts payable under any deferred compensation plan in which the Officer had been a participant, and the Company shall have no further obligation under this Agreement. (b) If the Officer terminates the Officer's employment hereunder in the absence of a Breach by the Company and upon at least six (6) months' prior Notice of Termination, the Company shall pay to the Officer and/or the Officer's personal representative and/or spouse the Officer's Total Compensation earned prior to the Date of Termination, any amounts payable pursuant to Sections (4)(c) and (4)(d) hereof and any benefits or amounts payable under any deferred compensation plan in which the Officer had been a participant, and the Company shall have no further obligation to the Officer and/or the Officer's personal representative and/or spouse under this Agreement or on account of, or arising out of, the termination of the Officer's employment. (c) If the Company terminates the Officer's employment hereunder for Cause, or if the Officer terminates the Officer's employment hereunder in the absence of a Breach by the Company and upon less than six (6) months' prior Notice of Termination, the Company shall pay to the Officer the Officer's full Base Salary earned prior to the Date of Termination, any amounts payable pursuant to Sections (4)(c) and (4)(d) hereof and any benefits or amounts payable under any deferred compensation plan in which the Officer had been a participant, and, provided that the Company is not in default of any of its obligations hereunder, the Company shall have no further obligation to the Officer under this Agreement or on account of, or arising out of, the termination of the Officer's employment. (d) If the Company terminates the Officer's employment hereunder without Cause, or if the Officer terminates the Officer's employment hereunder on account of a Breach by the Company: (i) The Company shall pay to the Officer the Officer's Total Compensation earned prior to the Date of Termination, any amounts payable pursuant to Sections 4(c) and 4(d) hereof and any benefits or amounts payable under any deferred compensation plan in which the Officer had been a participant. (ii) The Company shall afford the Officer the severance benefits set forth on Schedule A attached hereto. - 4 - (iii) The payment to, and acceptance by, the Officer of any sum of money or benefit prescribed in this Section (6)(d) shall effect and evidence a release by the Officer of any and all claims against the Company on account of, or arising out of, the termination of the Officer's employment. (7) CHANGE IN CONTROL For purposes of this Agreement, Change in Control of the Company shall mean any of the following events: (a) any merger or consolidation of the Company with any corporate shareowner or group of corporate shareowners holding twenty-five percent (.25) or more of the Common Stock of UIL Holdings Corporation (or a successor to UIL Holdings Corporation, whether direct or indirect, by purchase, merger, consolidation or otherwise - a "Successor"), or with any other corporation or group of corporations that is, or after such merger or consolidation would be, or be affiliated with, a shareowner or group of shareowners owning at least twenty-five percent (.25) of the Common Stock of UIL Holdings Corporation or a Successor, or (b) any sale, lease, exchange, mortgage, pledge, transfer or other disposition of any assets of the Company having an aggregate fair market value of $50 million or more to or with any shareowner or group of shareowners holding twenty-five percent (.25) or more of the Common Stock of UIL Holdings Corporation or a Successor, or to or with any affiliate of any such shareowner or group of shareowners; or (c) the issuance or sale by the Company, or the sale by UIL Holdings Corporation or a Successor, in exchange for cash, securities or other consideration having an aggregate fair market value of $50 million or more, of any securities of the Company to any shareowner or group of shareowners holding twenty-five percent (.25) or more of the Common Stock of UIL Holdings Corporation or a Successor, or to any affiliate of any such shareowner or group of shareowners; or (d) the implementation of any plan or proposal for the liquidation or dissolution of the Company, or of UIL Holdings Corporation or a Successor, proposed by or on behalf of any shareowner or group of shareowners owning at least twenty-five percent (.25) of the Common Stock of UIL Holdings Corporation or a Successor, or by or on behalf of any affiliate of any such shareowner or group of shareowners; or (e) any reclassification of securities (including a reverse stock split), or recapitalization, of UIL Holdings - 5 - Corporation or a Successor, 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 UIL Holdings Corporation or a Successor, which class of securities is directly or indirectly owned by a shareowner or group of shareowners owning at least twenty-five percent (.25) of the Common Stock of UIL Holdings Corporation or a Successor, or by any affiliate of any such shareowner or group of shareowners. The Board of Directors of the Company may, from time to time, by the affirmative vote of not less than a majority of the entire membership of said Board of Directors, at a meeting of said Board of Directors called and held for the purpose, modify the phrase "twenty-five percent (.25)" in one or more of the foregoing Sections (7)(a), (7)(b), (7)(c), (7)(d) and/or (7)(e) to a lesser percentage, but not less than twenty percent (.20). (8) ADDITIONAL CONSEQUENCES OF A CHANGE IN CONTROL (a) In the event that a Change in Control has been approved by all necessary shareholder, creditor and regulatory actions, the Company will, not later than the day prior to the date of the Change in Control, pay to the Trustee of The United Illuminating Company Supplemental Retirement Benefit Trust established pursuant to the Agreement, made as of the 1st day of June, 1995 between the Company and State Street Bank and Trust Company, as Trustee, for the benefit of the Officer, cash in an amount equal to: (A) In the event that the Officer's employment has been terminated or will be terminated prior to the date of the Change in Control, a sum, calculated by the Company's independent certified public accountants, reasonably sufficient to pay and discharge the largest of the Company's future obligations, if any, to the Officer and/or his personal representative and/or spouse, under Section (6)(a), Section (6)(b) or Section (6)(d) hereof; or (B) in the event that the Officer's employment has not been terminated and will not be terminated prior to the date of the Change in Control, a sum, calculated by the Company's independent certified public accountants, reasonably sufficient to pay and discharge the Company's obligations to the Officer under Section (6)(d) hereof assuming, for purposes of such calculation, that the Officer's employment is terminated under said Section (6)(d) by a Notice of Termination delivered on the date of the Change in Control and specifying an immediate Date of Termination. (b) On and after the date of the Change in Control, the Officer's Base Salary may not be reduced by the Board of Directors to an annual rate less than the rate fixed by the Board of Directors of the Company as a result of its most recent review of salary rates, pursuant to Section (4)(a) hereof, prior to the date of the Change in Control. - 6 - (9) TAX SAVINGS PROVISION If any portion of the payments which the Officer has the right to receive from the Company, or any affiliated entity, hereunder would constitute "excess parachute payments" (as defined in Section 280G of the Internal Revenue Code, and not governed by the terms defined in this Agreement) subject to the excise tax imposed by Section 4999 of the Internal Revenue Code, such excess parachute payments shall be reduced to the largest amount that will result in no portion of such excess parachute payments being subject to the excise tax imposed by Section 4999 of the Internal Revenue Code. (10) SUCCESSORS; BINDING AGREEMENT (a) The Company shall pay to the Officer and/or the Officer's personal representative and/or spouse all legal fees and expenses and court costs, if any, incurred by the Officer and/or the Officer's representative and/or spouse in successful litigation to enforce the Officer's rights under this Agreement. (b) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company, by agreement in form and substance reasonably satisfactory to the Officer, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain such agreement by the effectiveness of any such succession shall be a breach of this Agreement and shall entitle the Officer to compensation from the Company in the same amount and upon the same terms as the Officer would be entitled to hereunder if the Officer terminated the Officer's employment upon Breach by the Company, except that, for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. As used in this Agreement, the term "the Company" shall include The United Illuminating Company, any parent and any successor to the business or assets of either as aforesaid which executes and delivers the agreement provided for in this Section (10) or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law. (c) This Agreement and all rights of the Officer hereunder shall inure to the benefit of and be enforceable by the Officer's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Officer should die while any amounts would still be payable to the Officer hereunder if the Officer had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the Officer's devisee, legatee or other designee or, if there be no such designee, to the Officer's estate. - 7 - (11) NOTICE For the purpose of this Agreement, notices and all other communications to either party hereunder provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States certified or registered mail, return receipt requested, postage prepaid, addressed, in the case of the Company, to The United Illuminating Company, 157 Church Street, New Haven, Connecticut, Attention: Secretary, or, in the case of the Officer, to the Officer at 157 Church Street, New Haven Connecticut, or to such other address as either party shall designate by giving written notice of such change to the other party. (12) MISCELLANEOUS No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is approved by the Board of Directors of the Company and agreed to in a writing signed by the Officer and such officer of the Company as may be specifically authorized by the Board of Directors of the Company. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of any similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party that are not set forth expressly in this Agreement. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Connecticut. (13) VALIDITY The validity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. (14) SURVIVAL The provisions of this Agreement shall not survive the termination of this Agreement or of the Officer's employment hereunder, except that the provisions of Sections (4), (6), (8), (9), (10), and (11) hereof shall survive such termination and shall be binding upon the Company's successors and assigns. (15) COUNTERPARTS This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. - 8 - IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date and year first above written. Attest: THE UNITED ILLUMINATING COMPANY /s/ Charles J. Pepe By: /s/ Nathaniel D. Woodson - -------------------------- ----------------------------- Assistant Secretary Chairman, President and Chief Executive Officer /s/ Susan E. Allen ----------------------------- Susan E. Allen - 9 - SCHEDULE A Severance Benefits ------------------ The Company shall: (i) pay to the Officer, within 30 days, a lump sum payment in an amount equal to two (2) times the sum of the Officer's Base Salary rate immediately prior to the date of the Officer's termination and the target amount payable to the Officer under any annual Executive Incentive Compensation Program of the Company; and (ii) maintain in full force and effect, for the continued benefit of the Officer for the period ending on the second anniversary of the date of his termination, all employee benefit plans and programs in which the Officer was entitled to participate immediately prior to the date of the Officer's termination, provided that the Officer's continued participation is possible under the general terms and provisions of such plans and programs and applicable law and, if the Officer's participation in any such plan or program is barred as a result of the Officer's termination, the Company shall arrange to provide the Officer with benefits substantially similar on an after-tax basis to those that the Officer would have been entitled to receive under such plan or program; and (iii) afford to the Officer the addition of two (2) years of service deemed as an employee of the Company in the calculation of the benefits payable to the Officer under the retiree medical benefit plan(s) of the Company and in the calculation of the benefits payable to the Officer as a supplemental retirement benefit under the Officer's Employment Agreement. EX-10.30 12 0012.txt RESLTN AMEND SEC 7 OF VARIOUS EMPL AGRMTS EXHIBIT 10.30 RESOLUTION ADOPTED BY THE BOARD OF DIRECTORS OF THE UNITED ILLUMINATING COMPANY JUNE 26, 2000 RESOLVED: That, effective at the close of business on the Effective Date of the Merger and the Share Exchange pursuant to that certain Agreement and Plan of Merger and Share Exchange, dated as of January 24, 2000, among the Company, UIL Holdings Corporation and United Mergings, Inc. (hereinafter in this Resolution and the succeeding eleven Resolutions referred to as the "Effective Time"), Section (7) CHANGE IN CONTROL of the Employment Agreement between the Company and Nathaniel D. Woodson, made as of February 23, 1998, as amended to date; the Amended and Restated Employment Agreement, effective as of March 1, 1997, between the Company and Robert L. Fiscus, as amended to date; the Amended and Restated Employment Agreement, effective as of March 1, 1997, between the Company and James F. Crowe, as amended to date; the Employment Agreement, dated as of March 1, 1997, between the Company and Albert N. Henricksen, as amended to date; the Employment Agreement, dated as of March 1, 1997, between the Company and Anthony J. Vallillo, as amended to date; the Employment Agreement, dated as of March 1, 1997, between the Company and Rita L. Bowlby, as amended to date; the Employment Agreement, dated as of March 1, 1997, between the Company and Stephen F. Goldschmidt, as amended to date; the Employment Agreement, dated as of March 1, 1997, between the Company and James L. Benjamin; the Employment Agreement, dated as of March 1, 1997, between the Company and Charles J. Pepe, as amended to date; the Employment Agreement, dated as of June 12, 2000, between the Company and Gregory E. Sages; and the Employment Agreement, dated as of June 26, 2000, between the Company and Susan E. Allen, be amended to read as follows: "(7) CHANGE IN CONTROL For purposes of this Agreement, Change in Control of the Company shall mean any of the following events: (a) any merger or consolidation of the Company with any corporate shareowner or group of corporate shareowners holding twenty-five percent (.25) or more of the Common Stock of UIL Holdings Corporation (or a successor to UIL Holdings Corporation, whether direct or indirect, by purchase, merger, consolidation or otherwise - a "Successor"), or with any other corporation or group of corporations that is, or after such merger or consolidation would be, or be affiliated with, a shareowner or group of shareowners owning at least twenty-five percent (.25) of the Common Stock of UIL Holdings Corporation or a Successor, or (b) any sale, lease, exchange, mortgage, pledge, transfer or other disposition of any assets of the Company having an aggregate fair market value of $50 million or more to or with any shareowner or group of shareowners holding twenty-five percent (.25) or more of the Common Stock of UIL Holdings Corporation or a Successor, or to or with any affiliate of any such shareowner or group of shareowners; or (c) the issuance or sale by the Company, or the sale by UIL Holdings Corporation or a Successor, in exchange for cash, securities or other consideration having an aggregate fair market value of $50 million or more, of any securities of the Company to any shareowner or group of shareowners holding twenty-five percent (.25) or more of the Common Stock of UIL Holdings Corporation or a Successor, or to any affiliate of any such shareowner or group of shareowners; or (d) the implementation of any plan or proposal for the liquidation or dissolution of the Company, or of UIL Holdings Corporation or a Successor, proposed by or on behalf of any shareowner or group of shareowners owning at least twenty-five percent (.25) of the Common Stock of UIL Holdings Corporation or a Successor, or by or on behalf of any affiliate of any such shareowner or group of shareowners; or (e) any reclassification of securities (including a reverse stock split), or recapitalization, of UIL Holdings Corporation or a Successor, 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 UIL Holdings Corporation or a Successor, which class of securities is directly or indirectly owned by a shareowner or group of shareowners owning at least twenty-five percent (.25) of the Common Stock of UIL Holdings Corporation or a Successor, or by any affiliate of any such shareowner or group of shareowners. The Board of Directors of the Company may, from time to time, by the affirmative vote of not less than a majority of the entire membership of said Board of Directors, at a meeting of said Board of Directors called and held for the purpose, modify the phrase "twenty-five percent (.25)" in one or more of the foregoing Sections (7)(a), (7)(b), (7)(c), (7)(d) and/or (7)(e) to a lesser percentage, but not less than twenty percent (.20)." - 2 - EX-10.31 13 0013.txt CHNGE IN CONTRL SEVERANCE PLN - UIL HOLDINGS EXHIBIT 10.31 UIL HOLDINGS CORPORATION -------------------------------- CHANGE IN CONTROL SEVERANCE PLAN -------------------------------- ARTICLE I PURPOSE OF PLAN 1.1 The purpose of the UIL Holdings Corporation Change in Control Severance Plan ("Plan") is to provide the officers and certain key employees of UIL Holdings Corporation and its wholly-owned direct and indirect subsidiary corporations (each a "Company") with appropriate assurances of continued income and other benefits for a reasonable period of time in the event that the individual's employment by a Company is terminated by such Company (or a successor to such Company, whether direct or indirect, by purchase, merger, consolidation or otherwise - a "Successor") under any of the circumstances described herein, thereby encouraging the continued attention and dedication of each such officer or key employee to the continued success of such Company. ARTICLE II ELIGIBILITY FOR PARTICIPATION 2.1 The Board of Directors of UIL Holdings Corporation (the "Board") shall in its absolute discretion select the persons to be covered by the Plan (each a "Participant") from time to time, and shall notify each Participant of this selection and provide to each Participant a copy of the Plan. 2.2 Participation in the Plan shall not in any respect be deemed to grant the Participant a right to continued participation in the Plan; nor shall participation in the Plan be deemed to grant the Participant a right to continued employment by a Company. A Participant may be a party to an Employment Agreement with a Company that provides for the payment of benefits to such Participant in the event of a Change in Control of such Company, as the term Change in Control is defined herein, in which case and event the benefits payable in aggregate to such Participant shall be the greater amount provided for in the Plan or in such Participant's Employment Agreement. ARTICLE III TERM 3.1 Except under the circumstances described in Section 3.3 below, the Board (or the governing body of a Successor to UIL Holdings Corporation) may, by written notice to all Participants that shall take effect not less than twelve (12) months after the date of such notice, terminate or suspend the Plan, or amend the Plan so as to impair the rights of all Participants in the Plan. 3.2 Except under the circumstances described in Section 3.3 below, the Board (or such governing body) may, by written notice to any Participant that shall take effect not less than twelve (12) months after the date of such notice, terminate the participation of such Participant in the Plan, or amend the Plan so as to impair the rights of such Participant in the Plan. 3.3 Termination or suspension of the Plan, or any amendment of the Plan that impairs the rights of any Participant, occurring on or after a Change in Control, as that term is defined herein, shall not take effect until twenty-four (24) months after the occurrence of such Change in Control. 3.4 Subject to Sections 3.1, 3.2 and 3.3 above, the Board (or such governing body) may, at any time and from time to time, modify or amend, in whole or in part, any or all of the provisions of the Plan, or suspend or terminate it entirely. ARTCLE IV ELIGIBILITY FOR BENEFITS 4.1 For the purpose of the Plan, Change in Control of a Company shal mean any of the following events: (a) any merger or consolidation of such Company with any corporate shareowner or group of corporate shareowners holding twenty-five percent (.25) or more of the Common Stock of UIL Holdings Corporation (or a successor to UIL Holdings Corporation, whether direct or indirect, by purchase, merger, consolidation or otherwise - a "Successor"), or with any other corporation or group of corporations that is, or after such merger or consolidation would be, or be affiliated with, a shareowner or group of shareowners owning at least twenty-five percent (.25) of the Common Stock of UIL Holdings Corporation or a Successor, or (b) any sale, lease, exchange, mortgage, pledge, transfer or other disposition of any assets of such Company having an aggregate fair market value of $50 million or more to or with any shareowner or group of shareowners holding twenty-five 2 percent (.25) or more of the Common Stock of UIL Holdings Corporation or a Successor, or to or with any affiliate of any such shareowner or group of shareowners; or (c) the issuance or sale by such Company, or the sale by UIL Holdings Corporation or a Successor, in exchange for cash, securities or other consideration having an aggregate fair market value of $50 million or more, of any securities of such Company to any shareowner or group of shareowners holding twenty-five percent (.25) or more of the Common Stock of UIL Holdings Corporation or a Successor, or to any affiliate of any such shareowner or group of shareowners; or (d) the implementation of any plan or proposal for the liquidation or dissolution of such Company, or of UIL Holdings Corporation or a Successor, proposed by or on behalf of any shareowner or group of shareowners owning at least twenty-five percent (.25) of the Common Stock of UIL Holdings Corporation or a Successor, or by or on behalf of any affiliate of any such shareowner or group of shareowners; or (e) any reclassification of securities (including a reverse stock split), or recapitalization, of UIL Holdings Corporation or a Successor, 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 UIL Holdings Corporation or a Successor, which class of securities is directly or indirectly owned by a shareowner or group of shareowners owning at least twenty-five percent (.25) of the Common Stock of UIL Holdings Corporation or a Successor, or by any affiliate of any such shareowner or group of shareowners. The Board of Directors of such Company may, from time to time, by the affirmative vote of not less than a majority of the entire membership of said Board of Directors, at a meeting of said Board of Directors called and held for the purpose, modify the phrase "twenty-five percent (.25)" in one or more of the foregoing Sections (7)(a), (7)(b), (7)(c), (7)(d) and/or (7)(e) to a lesser percentage, but not less than twenty percent (.20). 4.2 If a Company (or its Successor) terminates a Participant's employment involuntarily other than for Cause, as defined in Section 4.4 below, during the twenty-four (24) months following a Change in Control, the benefits described in Article V hereof shall become payable to the Participant. 4.3 Subject to the provisions of Section 4.5 below, if a Participant terminates his or her employment during the twenty-four (24) months following a Change in Control and within ninety (90) days following the occurrence of one or more of the events constituting Constructive Termination, as herein defined, the benefits described in Article V hereof shall become payable to the Participant. For the purposes of the Plan, Constructive Termination shall mean any of the following events: 3 (a) The assignment to a Participant without his or her written consent of any duties materially inconsistent with such Participant's position, duties, responsibilities and status with a Company immediately prior to the Change in Control, or any diminishment in such Participant's management responsibilities, duties or powers as in effect immediately prior the Change in Control, or the removal from or failure to re-elect him or her to any such position or office, except in the event of termination of such Participant's employment for Cause, death or mandatory retirement; or (b) A reduction in the Participant's base annual salary rate, unless such reduction is part of and consistent with a general reduction of the base annual salary rates of the other officers and key employees of his or her Company (or its Successor); or (c) A failure to increase the Participant's base annual salary rate on a basis consistent (as to frequency and amount) with the base annual salary rates of the other officers and key employees of his or her Company (or its Successor); or (d) A failure to continue the Participant's participation in the benefit plans of his or her Company (or its Successor) on substantially the same basis, both in terms of the amount of benefits provided and the level of the Participant's participation relative to other officers and key employees of such Company. 4.4 For the purposes of the Plan, a Company (or its Successor) shall be deemed to have Cause to terminate a Participant's employment only upon such Participant's (A) conviction of a felony involving personal dishonesty or moral turpitude, (B) total and permanent physical or mental disability, or (c) absence from work on a full-time basis, due to physical or mental illness, for an uninterrupted 365-day period. 4.5 The provisions of Section 4.3 above shall be inoperative unless, (A) within thirty (30) days after an occurrence that the Participant considers to be an event constituting Constructive Termination, the Participant gives notice to the Board (or the governing body of a Successor to UIL Holdings Corporation) stating that in his or her opinion such event has occurred and setting forth in reasonable detail the relevant facts and circumstances, and (B) within thirty (30) days after receipt of such notice (the "30-day cure period") the Participant's Company (or its Successor) has failed to remedy or otherwise cure the situation to the Participant's satisfaction or to persuade the Participant that the facts and circumstances do not constitute an event constituting Constructive Termination. If the Participant's Company (or its Successor) shall, within such 30-day cure period, remedy or otherwise cure the situation, a recurrence thereof or another occurrence constituting Constructive Termination shall constitute a new event for purposes of Section 4.2 above and the provisions of clause (B) of this Section 4.5 shall not apply upon such recurrence or new occurrence. In the event that a Participant and his or her Company (or its Successor) shall, after expiration of the 30-day cure period (or, if there is no 30-day cure period, ten (10) days after the giving of the notice referred to in clause (A) of this Section 4.5) remain in 4 substantial disagreement as to whether or not an event has occurred that constitutes Constructive Termination, the disagreement shall be resolved by arbitration, as follows: The non-employee members of the Board (or the governing body of a Successor to UIL Holdings Corporation), by a majority vote of such members, shall, promptly on the request of the Participant or his or her Company (or its Successor), appoint an arbitrator, who shall not be a member of the Board (or the governing body of a Successor to UIL Holdings Corporation) or an officer or employee of any Company (or its Successor), to determine whether an event constituting Constructive Termination has occurred. The person so appointed shall determine all procedural matters relating to the arbitration. The decision of the arbitrator shall be conclusive and binding upon the Participant and his or her Company (or its Successor), and judgment upon such determination may be entered in any court having jurisdiction. Nothing herein shall require a Participant to remain in the employ of a Company (or its Successor) beyond the expiration of any 30-day cure period in order to qualify for compensation under Section 4.3 above; but if the Participant remains in the employ of the Company (or such Successor) thereafter, the twenty-four (24) month and ninety (90) day periods of Section 4.3 above shall be deemed extended by the number of days elapsed from the earlier of (a) expiration of any 30-day cure period, or (b) the appointment of the arbitrator, to the date on which notice of the arbitrator's decision is served on the Participant. 4.6 Any termination of a Participant by his or her Company (or its Successor) for Cause shall be given in writing and shall specify the relevant facts and circumstances. 4.7 In no event shall the voluntary resignation or retirement of a Participant give rise to any benefits under the Plan. ARTICLE V BENEFITS 5.1 In the event of termination covered by Section 4.2 or Section 4.3 above, the Participant shall be entitled to receive: (a) If the Participant is the Chief Executive Officer of a Company (or its Successor), (i) such Company (or such Successor) shall pay such Participant, within thirty (30) days, a lump sum amount equal to three (3) times such Participant's Total Compensation immediately prior to the date of his or her termination; and (ii) such Company (or such Successor) shall maintain in full force and effect, for the continued benefit of such Participant for the period ending on the third anniversary of the date of his or her termination, all employee benefit plans and programs in which such Participant was entitled to participate immediately prior to the date of his or her termination, provided that such Participant's continued participation is possible under the general terms and provisions of such plans and programs and applicable law and, if such Participant's 5 participation in any such plan or program is barred as a result of his or her termination, such Company (or such Successor) shall arrange to provide such Participant with benefits substantially similar on an after-tax basis to those that he or she would have been entitled to receive under such plan or program; and (iii) such Participant shall receive the addition of three (3) years of service deemed as an employee of such Company (or such Successor) in the calculation of the benefits payable to such Participant under the retiree medical benefit plan(s) of such Company (or such Successor) and in the calculation of any benefits payable to such Participant as a supplemental retirement benefit under his or her Employment Agreement. (b If the Participant is an Officer of a Company (or its Successor) other than the Chief Executive Officer, (i) such Company (or such Successor) shall pay such Participant, within thirty (30) days, a lump sum amount equal to two (2) times such Participant's Total Compensation immediately prior to the date of his or her termination; and (ii) such Company (or such Successor) shall maintain in full force and effect, for the continued benefit of such Participant for the period ending on the second anniversary of the date of his or her termination, all employee benefit plans and programs in which such Participant was entitled to participate immediately prior to the date of his or her termination, provided that such Participant's continued participation is possible under the general terms and provisions of such plans and programs and applicable law and, if such Participant's participation in any such plan or program is barred as a result of his or her termination, such Company (or such Successor) shall arrange to provide such Participant with benefits substantially similar on an after-tax basis to those that he or she would have been entitled to receive under such plan or program; and (iii) such Participant shall receive the addition of two (2) years of service deemed as an employee of such Company (or such Successor) in the calculation of the benefits payable to such Participant under the retiree medical benefit plan(s) of such Company (or such Successor) and in the calculation of any benefits payable to such Participant as a supplemental retirement benefit under his or her Employment Agreement. (c) If the Participant is not an Officer of a Company (or its Successor), (i) such Company (or such Successor) shall pay such Participant, within thirty (30) days, a lump sum amount equal to such Participant's Total Compensation immediately prior to the date of his or her termination; and (ii) the Company (or such Successor) shall maintain in full force and effect, for the continued benefit of such Participant for the period ending on the first anniversary of the date of his or her termination, all employee benefit plans and programs in which such Participant was entitled to participate immediately prior to the date of his or her termination, provided that such Participant's continued participation is possible under the general terms and provisions of such plans and programs and applicable law and, if such Participant's participation in any such plan or program is barred as a result of his or her termination, the Company (or such Successor) shall arrange to provide such Participant with benefits substantially similar on an after-tax basis to those that he or she would have been entitled to receive under such plan or program; and (iii) such Participant shall receive the addition of one (1) year of service deemed as an employee of such Company (or such Successor) in the calculation of the benefits payable to such Participant 6 under the retiree medical benefit plan(s) of such Company (or such Successor) and in the calculation of the benefit payable to such Participant under the Pension Plan of such Company (or such Successor). (d) For purposes of the Plan, Total Compensation is defined as the sum of a Participant's base annual salary rate immediately prior to the date of such Participant's termination and the target amount payable to such Participant under any annual Executive Incentive Compensation Program of a Company (or its Successor). (e) The Participant will not be required to mitigate the amount of any payment or health insurance benefit provided for in this Section 5.1 by seeking other employment or otherwise; provided, however, that if the Participant obtains other employment that offers employee health insurance benefit plans or programs to the Participant, the Participant shall enroll in all such health insurance plans and programs and the employee health insurance benefits payable under any corresponding health insurance plan or program provided to the Participant under the Plan shall be reduced by the health insurance benefits payable under such other plan or program. 5.2 If, for purposes of the excise tax imposed by Section 4999 of the Internal Revenue Code: (a) The payments that a Participant is entitled to receive under the Plan, together with any other payment or distribution by a Company (or its Successor) to or for the benefit of the Participant (whether paid or payable or distributed or distributable) pursuant to the Plan or otherwise, would be less than or equal to 3.2 times the "base amount" of such Participant's compensation (as defined in Section 280G of the Internal Revenue Code, and not governed by any term(s) defined in the Plan), any portion of such payments that would constitute "excess parachute payments" (as defined in said Section 280G) subject to such excise tax shall be reduced to the largest amount that will result in no portion of such excess parachute payments being subject to such excise tax. (b) The payments that a Participant is entitled to receive under the Plan, together with any other payment or distribution by a Company (or its Successor) to or for the benefit of the Participant (whether paid or payable or distributed or distributable) pursuant to the Plan or otherwise, would be more than 3.2 times the "base amount" of such Participant's compensation (as defined in Section 280G of the Internal Revenue Code, and not governed by any term(s) defined in the Plan), but not more than 4.0 times such "base amount," such Participant shall be entitled to receive an additional payment (the "Gross-Up Payment") in an amount equal to (i) the amount of the excise tax imposed on the Participant in respect of the payments he or she is entitled to receive (the "Excise Tax"), plus (ii) all federal, state and local income, employment and excise taxes (including any interest or penalties imposed with respect to such taxes) imposed on the Participant in respect of the Gross-Up Payment, such that after payment of all such taxes (including any applicable interest or penalties) on the Gross-Up Payment, the Participant retains a portion of the Gross-Up Payment equal to the Excise Tax. 7 (c) The payments that a Participant is entitled to receive under the Plan, together with any other payment or distribution by a Company (or its Successor) to or for the benefit of the Participant (whether paid or payable or distributed or distributable) pursuant to the Plan or otherwise, would be more than 4.0 times the "base amount" of such Participant's compensation (as defined in Section 280G of the Internal Revenue Code, and not governed by any term(s) defined in the Plan), the portion of such payments that would constitute "excess parachute payments" (as defined in said Section 280G) subject to said excise tax shall be reduced to the largest amount that will not cause the payments that such Participant is entitled to receive to exceed 4.0 times such "base amount," and the provisions of (b) above shall apply. 5.3 Not later than the day prior to the date of the Change in Control, UIL Holdings Corporation will cause to be paid to the Trustee of The United Illuminating Company Supplemental Retirement Benefit Trust established pursuant to the Agreement, made as of the 1st day of June, 1995 and as amended effective December 31, 1995 and December 13, 1999, between said Company and State Street Bank and Trust Company, as Trustee, cash in an amount equal to a sum, calculated by said Company's independent certified public accountants, reasonably sufficient to pay and discharge each Company's future obligations, if any, to all Participants in the Plan assuming, for purposes of such calculation, that the employment of all of the Participants is terminated on the date of the Change in Control. ARTICLE VI GENERAL PROVISIONS 6.1 UIL Holdings Corporation will use its best efforts to require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the businesses or assets of said Company to assume and adopt the Plan. If said Company fails to obtain such agreement prior to the effective date of any such succession, (a) any Participant who is not offered a position, duties, responsibilities, compensation and status that are equivalent in all material respects to his or her position, duties, responsibilities, compensation and status with his or her Company immediately prior to the succession may terminate his or her employment within thirty (30) days of such succession and treat such termination as an involuntary termination under Section 4.2 above after a Change in Control, entitling such Participant to the benefits provided him or her in Article V hereof in respect of such a termination; (b) any Participant who is offered a position, duties, responsibilities, compensation and status that are equivalent in all material respects to his or her position, duties, responsibilities, compensation and status immediately prior to the succession shall thereafter have no rights under the Plan, unless during the twenty-four (24) months following such succession (i) the Participant's employment shall be terminated otherwise than for Cause, as defined in Section 4.4 above, or (ii) such Participant shall terminate his or her employment within ninety (90) days following the occurrence of one or more of the events constituting Constructive 8 Termination as described in Section 4.3 above, in either of which cases the benefits to which such Participant would be entitled under Article V hereof in respect of a Constructive Termination after a Change in Control under Section 4.3 above shall become payable to him or her; and (c) UIL Holdings Corporation shall remain liable for the payment of any benefits to which the Participant may become entitled under the foregoing clauses (a) and (b) of this Section 6.1 6.2 If any Participant receiving benefits under Article V of this Plan should die while any amounts are still payable to him or her thereunder, all such amounts shall be paid to the Participant's designated beneficiary or, if no designation has been made, to his or her spouse, if any, and if none, to his or her children then living, if any, in equal payments, and if none, to the Participant's personal representatives. 6.3 In the event that a Participant institutes any legal action to enforce his or her rights under the Plan, and provided that he or she is the prevailing party, such Participant shall be entitled to recover from UIL Holdings Corporation (or its Successor) any actual and documented expenses for reasonable attorney's fees and disbursements incurred by him or her. 6.4 Any dispute or controversy, except a disagreement described in the second paragraph of Section 4.5, arising under or in connection with the Plan shall be settled exclusively by arbitration in New Haven, Connecticut, in accordance with the rules of the American Arbitration Association then in effect; and judgment may be entered on the arbitration award in any court having jurisdiction. 6.5 Any notice or other communication pursuant to the Plan intended for a Participant shall be deemed given when personally delivered to such Participant or sent to such Participant by registered or certified mail, return receipt requested, at such Participant's residence address as it appears on the records of the Participant's Company (or its Successor), or at such other address as such Participant shall have specified by notice to such Company (or its Successor) in the manner herein provided. Any notice or other communication pursuant to the Plan intended for the Participant's Company (or its Successor) shall be deemed given when personally delivered to the Secretary or Assistant Secretary of UIL Holdings Corporation (or its Successor), or sent to the attention of the Secretary or Assistant Secretary by registered or certified mail, return receipt requested, at its headquarters at 157 Church Street, New Haven, Connecticut, or at such other address as said Company (or its Successor) shall have specified by notice to all of the Participants in the manner herein provided. 6.6 A Participant may not assign, anticipate, transfer, pledge, hypothecate or alienate in any manner any interest arising under the Plan, nor shall any such interest be subject to attachment, bankruptcy proceedings or to any other legal processes or to the interference or control of creditors or others. 9 6.7 It is intended that the decision of the Board (or the governing Board of a Successor to UIL Holdings Corporation) or its designated arbitrator as specified in the Plan shall be exclusive and final with respect to the interpretation or application of the Plan. If any body of law should be used or applied in determining the meaning or effect of the Plan, it shall be the law of the State of Connecticut. 6.8 In the event any provision of the Plan, if challenged, would be declared invalid, illegal or unenforceable, such provision shall be construed and enforced as if it had been more narrowly drawn so as not to be illegal, invalid or unenforceable and the validity, legality and enforceability of the remaining provisions shall not be affected or impaired thereby. 10 EX-10.32 14 0014.txt NON-EMPL DIR CHNGE IN CONTRL SEVERANCE PLAN EXHIBIT 10.32 UIL HOLDINGS CORPORATION ------------------------ NON-EMPLOYEE DIRECTORS ---------------------- CHANGE IN CONTROL SEVERANCE PLAN -------------------------------- ARTICLE I PURPOSE OF PLAN 1.1 The purpose of The UIL Holdings Corporation Non-Employee Directors Change in Control Severance Plan (the "Corporation" and the "Plan," respectively) is to provide the non-employee directors of the Corporation ("Directors") with appropriate assurances of continued income for a reasonable period of time in the event that the individual's service as a director of the Corporation (or a successor to the Corporation, whether direct or indirect, by purchase, merger, consolidation or otherwise -- a "Successor") is terminated under any of the circumstances described herein, thereby encouraging the continued attention and dedication of the Directors to the continued success of the Corporation. ARTICLE II ELIGIBILITY FOR PARTICIPATION 2.1 All Directors shall, during the term of their service on the Board of Directors of the Corporation (the "Board") be covered by the Plan (each a "Participant"). The Secretary of the Corporation shall provide to each Participant a copy of the Plan. ARTICLE III TERM 3.1 Except under the circumstances described in Section 3.3 below, the Board (or the governing body of its Successor) may, at any time and from time to time, modify or amend, in whole or in part, any or all of the provisions of the Plan, or suspend or terminate it entirely. 3.2 Except under the circumstances described in Section 3.3 below, the Board (or the governing body of its Successor), may, at any time, by written notice to any Participant, terminate the participation of such Participant in the Plan or amend the Plan so as to impair the rights of such Participant in the Plan. 3.3 Termination or suspension of the Plan, or termination of any Participant's participation in the Plan, or any amendment of the Plan that impairs the rights of any Participant, occurring on or after the date of a Change in Control, as that term is defined herein, shall not take effect until the date of the Annual Meeting of the Shareowners of the Corporation (or its Successor) next following the date of such Change in Control. ARTICLE IV ELIGIBILITY FOR BENEFITS 4.1 For the purpose of the Plan, Change in Control shall mean any of the following events: (a) any merger or consolidation of the Corporation (or its Successor) with any corporate shareholder or group of corporate shareholders holding twenty-five percent (.25) or more of the Common Stock of the Corporation (or its Successor) or with any other corporation or group of corporations which is, or after such merger or consolidation would be, or be affiliated with, a shareholder owning at least twenty-five percent (.25) of the Common Stock of the Corporation (or its Successor); or (b) any sale, lease, exchange, mortgage, pledge, transfer or other disposition to or with any shareholder or group of shareholders holding twenty-five percent (.25) or more of the Common Stock of the Corporation (or its Successor), or any affiliate of such shareholder or group of shareholders, of any assets of the Corporation (or its Successor) having an aggregate fair market value of $50 million or more; or (c) the issuance or sale by the Corporation (or its Successor) of any securities of the Corporation (or its Successor) to any shareholder or group of shareholders holding twenty-five percent (.25) or more of the Common Stock of the Corporation (or its Successor), 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 Corporation (or its Successor) 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 Corporation (or its Successor), or any affiliates of such shareholder or group of shareholders; or (e) any reclassification of securities (including a reverse stock split), or recapitalization of the Corporation (or its Successor) 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 Corporation (or its Successor), which is directly or indirectly owned by a shareholder or group of shareholders owning at least twenty-five percent (.25) of the 2 Common Stock of the Corporation (or its Successor), or any affiliate of such shareholder or group of shareholders. The Board may, from time to time, by affirmative vote of not less than a majority of the entire membership of the Board, at a meeting of the Board called and held for the purpose, modify the phrase "twenty-five percent (.25)" in one or more of (a), (b), (c), (d) and/or (e) above to a lesser percentage, but not less than twenty-percent (.20). 4.2 The benefits described in Article V hereof shall become payable to a Participant: (a) in the event that, after a Change in Control has been approved by all necessary shareowner, creditor and regulatory actions, the Participant's service as a Director is terminated, involuntarily and other than by a judicial proceeding pursuant to Section 33-743 of the General Statues of Connecticut (Revision of 1958) on the effective date of the Plan and as that statute may be amended from time to time ("Statutory Removal"), prior to the date of the Change in Control; or (b) if the Participant's service as a Director is terminated on the date of a Change in Control or on the date of any termination of the Corporation (or its Successor's) existence; or (c) if the Participant's service as a Director is terminated, involuntarily and other than by Statutory Removal, following the date of a Change in Control and prior to the date of the Annual Meeting of the Shareowners of the Corporation (or a Successor) next following the date of a Change in Control. 4.3 In no event shall the voluntary resignation of a Participant give rise to any benefits under the Plan. ARTICLE V BENEFITS 5.1 In the event of a termination covered by Section 4.2 above, the Corporation (or its Successor) shall pay such Participant within thirty (30) days a lump sum amount equal to such Participant's Total Remuneration. For purposes of the Plan, Total Remuneration is defined as the sum of a Participant's annual retainer fee, plus, if the Participant is a Committee Chairperson, the annual fee payable to such Participant for service as a Chairperson, plus an amount equal to the product of the fee payable for each meeting of the Board attended by the Participant multiplied by ten, each of said fees as in effect immediately prior to the termination of the Participant's service. 3 ARTICLE VI PROVISIONS 6.1 If any Participant receiving benefits under Article V of this Plan should die while any amounts are still payable to him or her thereunder, all such amounts shall be paid to the Participant's designated beneficiary or, if no designation has been made, to his or her spouse, if any, and if none, to his or her children then living, if any, in equal payments, and if none, to the Participant's personal representatives. 6.2 In the event that a Participant institutes any legal action to enforce his or her rights under the Plan, and provided that he or she is the prevailing party, such Participant shall be entitled to recover from the Corporation (or its Successor) any actual and documented expenses for reasonable attorney's fees and disbursements incurred by him or her. 6.3 Any dispute or controversy arising under or in connection with the Plan shall be settled exclusively by arbitration in New Haven, Connecticut, in accordance with the rules of the American Arbitration Association then in effect; and judgment may be entered on the arbitration award in any court having jurisdiction. 6.4 Any notice or other communication pursuant to the Plan intended for a Participant shall be deemed given when personally delivered to such Participant or sent to such Participant by registered or certified mail, return receipt requested, at such Participant's residence address as it appears on the records of the Corporation (or its Successor), or at such other address as such Participant shall have specified by notice to the Corporation (or its Successor) in the manner herein provided. Any notice or other communication pursuant to the Plan intended for the Corporation (or its Successor) shall be deemed given when personally delivered to the Secretary or Assistant Secretary of the Corporation (or its Successor), or sent to the attention of the Secretary or Assistant Secretary by registered or certified mail, return receipt requested, at its headquarters at 157 Church Street, New Haven, Connecticut, or at such other address as the Corporation (or its Successor) shall have specified by notice to all of the Participants in the manner herein provided. 6.5 A Participant may not assign, anticipate, transfer, pledge, hypothecate or alienate in any manner any interest arising under the Plan, nor shall any such interest be subject to attachment, bankruptcy proceedings or to any other legal processes or to the interference or control of creditors or others. 6.6 In the event any provision of the Plan, if challenged, would be declared invalid, illegal or unenforceable, such provision shall be construed and enforced as if it had been more narrowly drawn so as not to be illegal, invalid or unenforceable, and the validity, legality and enforceability of the remaining provisions shall not be affected or impaired thereby. 4 EX-21 15 0015.txt SUBSIDIARIES OF THE REGISTRANT EXHIBIT NO. 21B LIST OF SUBSIDIARIES OF THE UNITED ILLUMINATING COMPANY -------------------------------
STATE OR JURISDICTION OF INCORPORATION OR NAME UNDER WHICH NAME OF SUBSIDIARY ORGANIZATION SUBSIDIARY DOES BUSINESS ------------------ --------------------- ------------------------ United Resources, Inc. Connecticut United Resources, Inc. Xcelecom, Inc.* Connecticut Xcelecom, Inc. American Payment Systems, Inc.* Connecticut American Payment Systems, Inc. United Bridgeport Energy, Inc.* Connecticut United Bridgeport Energy, Inc. United Capital Investments, Inc.* Connecticut United Capital Investments, Inc. Precision Power, Inc.** Connecticut Precision Power, Inc. McPhee Electric Ltd., LLC** Connecticut McPhee Electric Ltd., LLC McPhee Utility Power and Signal, Ltd.** Connecticut McPhee Utility Power and Signal, Ltd. Thermal Energies, Inc.** Connecticut Thermal Energies, Inc. Precision Constructors, Inc.** Connecticut Precision Constructors, Inc. Allan Electric Co., Inc.** New Jersey Allan Electric Co., Inc. The DataStore, Incorporated** New Jersey The DataStore Incorporated Orlando Diefenderfer Electrical Pennsylvania Orlando Diefenderfer Electrical Contractors, Contractors, Inc.** Inc. Souwestcon Properties, Inc.*** Connecticut Souwestcon Properties, Inc.
- ---------------------- * Subsidiary of United Resources, Inc. ** Subsidiary of Xcelecom, Inc. *** Subsidiary of United Capital Investments, Inc. EX-27 16 0016.txt FDS -- 9 MOS. OF 2000
UT 1,000 9-MOS DEC-31-2000 JAN-01-2000 SEP-30-2000 PER-BOOK 530,681 142,318 270,517 33,816 878,384 1,855,716 282,794 254 199,446 482,494 0 0 522,202 0 80,342 0 859 0 15,830 398 753,591 1,855,716 646,098 47,574 514,648 562,222 83,876 1,293 85,169 30,801 54,368 0 54,368 30,392 31,578 52,327 3.86 3.86
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