Document:

uil_exh10-37.htm

    EXHIBIT
      10.37

    

    EMPLOYMENT
      AGREEMENT

    

    

    THIS
      AGREEMENT ( the “Agreement”)
is made as of the 26th
      day of
January,
      2004, between
      The United Illuminating Company, a Connecticut Corporation (the “Company”) and
      Anthony J. Vallillo (the “Executive”),

    

    

    WITNESSETH
      THAT

    

    WHEREAS,
      the Executive previously has
      been employed by the Company as its President and Chief Operating Officer,
      and
      is covered by the terms of a certain employment agreement with the Company
      dated
      as of March 1, 1997; and

    

    WHEREAS,
      the Company desires to
      continue to employ the Executive as the President and Chief Operating Officer
      of
      the Company, and the Executive desires to be so employed by the Company, and
      the
      parties desire to be bound by the terms of this revised employment Agreement
      (the “Agreement”), which shall supersede and replace all provisions of the prior
      employment agreement;

    

    NOW
      THEREFORE, in consideration of the
      foregoing and the respective covenants and agreements of the parties herein
      contained, and the services to be rendered to the Company pursuant hereto,
      the
      parties hereby agree as follows:

    

     

    (1) EMPLOYMENT;
      TERM

     

     

    (a) The
      Company hereby agrees to employ the Executive, and the Executive hereby agrees
      to serve the Company, at the pleasure of the Board of Directors of the Company
      (the “Company Board”) and the Board of Directors of UIL Holdings Corporation
      (the “UIL Board”), all upon the terms and conditions set forth
      herein.

     

     

    (b) The
      term
      of this Agreement shall be for a period commencing on the date hereof and ending
      on the second anniversary of the date hereof, unless this Agreement is earlier
      terminated as provided in Section 4 (the “Initial Term”).  Unless the
      Company has provided the Executive with at least ninety (90) days prior written
      notice of its decision not to renew this Agreement after the Initial Term or
      any
      subsequent term, this Agreement shall be automatically renewed for a successive
      one year term (the Initial Term and any renewal term being referred to as the
      “Term”). For
      purposes of this Agreement, a non-renewal at the election of the Company at
      the
      end of a Term shall constitute a termination of this Agreement without cause,
      and shall be governed by the provisions of Section 6(c). In no event shall
      the
      Company give notice of a non-renewal from the time that an impending Change
      in
      Control (as hereinafter defined) is announced through the date of the
      consummation of such Change in Control.

     

    
      
        
        

         

      

      
         

        
          

        

      

      
         

      

    

    (2)           
      POSITION AND DUTIES

    

    (a)
      The Executive shall be employed by
      the Company as its President and Chief Operating Officer, or in such other
      equivalent or higher officership position as the UIL Board may determine. The
      Executive shall:

    

    (i)
      accept such employment and perform
      and discharge, faithfully, diligently and to the best of the Executive's
      abilities, the duties and obligations of the Executive's office and such other
      duties as may from time to time be assigned to the Executive by, or at the
      direction of, the Company Board and UIL Board; and

    

    (ii)  devote
      substantially
      all of the Executive's working time and efforts to the business and affairs
      of
      the Company.

    

    (b)
      Prior to a Change in Control, in
      the event that the Executive is named by the UIL Board to a officer position
      higher in rank or compensation than that applicable at the commencement of
      the
      Initial Term, nothing in this Agreement shall obligate the Company to continue
      such Executive in such higher position; and the Company shall not be deemed
      in
“Breach” of the Agreement (as defined in Section 5(d)) for failure to continue
      the Executive in such higher officership.

    

    (c)
      If the Executive is a participant
      in the UIL Holdings Corporation Change in Control Severance Plan (the “UIL CIC
      Plan II”) as of a Change in Control as therein defined, then for the twenty-four
      month period after such Change in Control, the Company’s employment of the
      Executive shall be without diminishment in the Executive's management
      responsibilities, duties or powers. In the event that the Executive’s employment
      is not so continued, the Executive may claim to have suffered a Constructive
      Termination, in accordance with the terms of the UIL CIC Plan II.

    

    (3)           
      PLACE OF PERFORMANCE

    

    In
      his employment by the Company, the
      Executive shall be based within a fifty (50)-mile radius of the current
      executive offices of the Company in New Haven, Connecticut..

    

    

    (4)           
      COMPENSATION

    

    (a)
Base
      Salary.  During the Initial Term of the Executive's employment
      hereunder, the Executive shall receive a base salary (“Base Salary”) at an
      annual rate of Two Hundred Ninety Five Thousand Two Hundred Dollars
      ($295,200.00), payable in accordance with the then customary payroll practices
      of the Company.  The Executive's performance and Base Salary shall be
      reviewed by the UIL Board at least annually, and may be revised upward as a
      result of any such review.  The Executive’s Base Salary may be revised
      downward by the UIL Board contemporaneously with any general reduction of the
      salary rates of the Company’s other officers.

    
      
         

      

      
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    (b)
Incentive
      Compensation.  During the Term of the Executive’s employment
      hereunder, the Executive shall be eligible to be designated by the Company
      Board, or by the UIL Board in the event that the plan is a UIL plan, as a
      participant in each annual short-term incentive compensation program, and any
      long-term incentive program, maintained for management employees of the Company;
      provided, however, that entitlement to participation, and continued
      participation, in any long-term equity incentive program shall be conditioned
      upon the Executive fully complying with any stock ownership and retention
      guidelines from time to time established and promulgated by the UIL
      Board.

    

    For
      purposes of this Agreement, the Executive’s “Accrued Incentive
      Compensation” shall mean the amount of any annual short-term incentive
      compensation earned with respect to the calendar year ended prior to the Date
      of
      Termination (as defined in Section 5) but not yet paid as of the Executive’s
      Date of Termination.

    

    The
      Executive’s “Stub-Period
      Incentive Compensation” shall mean the annual short-term incentive
      compensation being earned in the year in which the Executive terminates
      employment, pro-rated for the year in which he terminates service, and shall
      be
      equal to that short-term annual incentive compensation payment to which the
      Executive would be entitled, if any, under the terms of the Company’s executive
      incentive compensation plan, calculated as if he had been employed by the
      Company on the last day of the year including his Date of Termination, and
      had
      achieved personal goals ‘at target’, but based on actual performance with
      respect to the achievement of UIL and Company financial goals (collectively
      referred to as “Company goals”), multiplied by a fraction, the numerator of
      which is the number of days which have elapsed in such year through the Date
      of
      Termination and the denominator of which is 365.  UIL shall determine
      in its discretion the composition of the Executive’s scorecard, and what
      constitutes a ‘personal goal’ and ‘Company goal’; provided generally that an
      Executive’s ‘personal goals’ shall include, for example, his strategic
      opportunities, leadership, and balance scorecard goals, other than business
      unit
      and UIL total financial goals, and Company goals shall include, for example,
      UIL
      and business unit financial goals based on earnings per share, cash flow, and
      all other goals not defined as personal goals.  In the event that the
‘gate’, if any, is not achieved with respect to Company goals, then no
      Stub-Period Incentive Compensation will be paid.  Any Stub-Period
      Incentive Compensation payable upon termination of the Executive shall be paid
      in accordance with Section 6(e) of this Agreement.

    

    (c)
Change
      in
      Control Severance Plan. The Executive
      shall be
      designated by the UIL Board as an individual covered by the UIL Holdings
      Corporation Change in Control Severance Plan II (the “UIL CIC Plan II”), subject
      to all of the terms and provisions of the UIL CIC Plan II as it may be amended
      from time to time.  For purposes of this Agreement, “Change in
      Control” shall have the meaning set forth in the UIL CIC Plan II.  Nothing in this
      subsection, however, shall entitle the Executive to continued participation
      in
      such Plan should the UIL Board determine otherwise in accordance with the terms
      of that Plan. In no event shall the Executive be entitled to participate in
      the
      UIL CIC Plan II if he is still a participant under the terms of the UIL Change
      in Control Severance Plan (restated effective October 24, 2003), and in no
      event
      shall he be entitled to benefits under both plans. By signing this Agreement,
      the Executive hereby relinquishes any claim he might have under the CIC Plan
      I
      now or in the future.

    
      
         

      

      
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    (d)
Business
      Expenses.  During the Term, the Executive shall be entitled to
      receive prompt reimbursement for all reasonable employment- related business
      expenses incurred by the Executive, in accordance with the policies and
      procedures established by the Company Board from time to time for all of the
      Company's officers, provided that the Executive properly accounts
      therefor.

    

    (e)
Benefit
      Programs.  During the Term of the Executive's employment
      hereunder and to the extent he meets the applicable eligibility requirements,
      the Executive shall be entitled to participate in and receive benefits under
      all
      of the Company's employee benefit plans, programs and arrangements for its
      similarly situated officers on the same terms and conditions that apply to
      such
      officers, including, without limitation, any plan or program of an affiliated
      company in which the Company is a participating employer, but only for so long
      as the Company remains a participating employer.  Except as otherwise
      expressly provided, nothing paid to the Executive under any such plan, program
      or arrangement presently in effect or made available by the Company in the
      future shall be deemed to be in lieu of compensation to the Executive under
      any
      other Section of this Agreement. Nothing in this Agreement shall require the
      Company to maintain a particular benefit plan or program, or preclude the
      Company from amending or terminating any such plans, programs or arrangements,
      including its participation therein, or eliminating, reducing or otherwise
      changing any benefit provided thereunder, so long as such change similarly
      affects all similarly situated employees of the Company and is in compliance
      with applicable law.

    

    (f)
Vacations
      and Holidays.  The Executive shall be entitled to that number
      of weeks of paid vacation in each calendar year determined by the Company Board
      from time to time to be available to similarly situated Company officers, and
      shall also be entitled to all paid holidays afforded by the Company to its
      management employees.

    

    (g)  Supplemental
      Executive Retirement Benefit. Upon termination of the Executive's
      employment with the Company and all affiliates other than for Cause (as defined
      in Section 5(b) of this Agreement), a supplemental retirement benefit shall
      be
      payable in accordance with the provisions of this Section (4)(g).  The
      annual supplemental retirement benefit, expressed in the form of a single life
      annuity beginning at the Executive's Normal Retirement Date as defined in The
      United Illuminating Company Pension Plan (the “Company's Pension Plan”), shall
      be the excess, if any, of (A) less (B), where (A) is 2.0% (.020) of the
      Executive's highest three-year average Total Compensation times his number
      of
      years of service as an employee of the Company (including any deemed service
      credited under this Agreement or the CIC Plan II) at termination (not to exceed
      thirty), and (B) is the benefit payable under the Company's Pension Plan
      expressed as a single life annuity commencing as of the Executive’s Normal
      Retirement Date.  For purposes of this Section, Total Compensation
      shall mean the Executive’s Base Salary, and any amount payable to the Executive
      as short-term incentive compensation pursuant to the Company’s annual executive
      incentive compensation plan.  Subject to the requirements of Section
      6(f), distribution of the supplemental retirement benefit shall be made in
      the
      month of January following the Executive’s termination of service with the
      Company and its affiliates, and shall be made in an actuarially equivalent
      lump
      sum, unless the Executive shall have elected at least 12 months in advance
      of
      such distribution date to commence distributions in one of the other actuarially
      equivalent forms of benefits permitted under the

    
      
         

      

      
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    Company’s
      Pension Plan, in which case the supplemental executive retirement benefit
      provided under this Section 4(g) shall be deferred, except in the case of
      termination due to death or disability, for a period of at least five years
      from
      the date on which such distribution otherwise would have been made. The
      provisions of this subsection are intended to comply with all laws applicable
      to
      the taxation of non-qualified deferred compensation, and the Company and
      Executive agree to revise this subsection as necessary or advisable from time
      to
      time in order to comply with changes in such laws. The benefits payable under
      this Section 4(g) shall be calculated using the same definitions of actuarial
      equivalence, and the same early retirement reduction factors that are specified
      in the Pension Plan in the event that the Executive becomes entitled to payment
      of the supplemental retirement benefit prior to what would have been his Normal
      Retirement Date, except that, in the event that the Executive is credited with
      deemed years of service, the reductions shall be based on the Executive's
      service deemed as an employee of the Company.  If the form of payment
      provides for a death benefit, such benefit shall be payable to the Executive's
      estate, unless another beneficiary has been designated by the
      Executive.  If the Executive dies prior to the commencement of benefit
      payments, then the pre-retirement death benefit provisions of the Pension Plan
      shall apply to the supplemental retirement benefit payable pursuant to this
      Section (4)(g).

    

    (5)           
      TERMINATION

    

    (a)
Death
      or
      Disability. The Executive's employment hereunder shall terminate upon the
      Executive's death or termination due to disability (as described in Section
      6(a)
      of this Agreement).

     

    (b)
Termination
      by Company for Cause. The Company may at any time by written notice to
      the Executive terminate the Executive’s employment for Cause in accordance with
      the following provisions:

     

     

    (i)
Termination
      for Cause Prior to a Change in Control. Prior to the date of a Change in
      Control, the Company shall be deemed to have “Cause” to terminate the
      Executive’s employment hereunder only upon the Executive’s:

     

    (1)
      failure to comply with any material term of this Agreement, or to perform and
      discharge the duties or obligations of the Executive’s office, or such other
      duties as may from time to time be assigned to the Executive by, or at the
      direction of, the UIL Board, faithfully, diligently, and competently, in the
      opinion of a majority of the members of the UIL Board, unless any such failure
      is cured in all material respects to the reasonable satisfaction of the UIL
      Board within sixty (60) days after the Executive receives written notice of
      such
      failure; or

    

    (2)
      failure to devote substantially all of his working time and efforts to the
      business and affairs of the Company unless any such failure is cured in all
      material respects to the reasonable satisfaction of the UIL Board within sixty
      (60) days after the Executive receives written notice of such failure; or

    
      
         

      

      
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    (3)
      misconduct that is demonstrably injurious to the interests of the Company or
      its
      Affiliates (as that term is defined in Section 10) unless such misconduct is
      rectified in all material respects to the reasonable satisfaction of the UIL
      Board within thirty (30) days after the Executive receives written notice of
      such misconduct; or

     

     

    (4)
      commission of a serious crime, such as an act of fraud, misappropriation of
      funds, embezzlement, or a crime involving personal dishonesty or moral
      turpitude.

     

     

    (ii)
      Termination
      for Cause After a Change in Control.  During
      the period that commences on a Change in Control and for twenty-four (24) months
      thereafter (the “Change in Control Protective Period”), and subject to the same
      notice and cure provisions specified above, the Company (or its successor or
      other entity employing the Executive following such Change in Control) shall
      be
      deemed to have Cause to terminate the Executive’s employment hereunder only upon
      the Executive’s:

     

     

    (1)
      commission of a serious crime, such as an act of fraud, misappropriation of
      funds, embezzlement, or a crime involving personal dishonesty or moral
      turpitude; or

     

    (2)  misconduct
      that is demonstrably injurious to the interests of the Company or its
      Affiliates; or

    

    (3)
      willful failure of the Executive to substantially perform his or her duties
      (other than by reason of incapacity due to physical or mental illness or
      injury).

    

     

    (c) Termination
      by Company without Cause.   The Company may terminate the
      Executive’s employment at any time, without cause, upon ninety (90) days prior
      written notice to the Executive.

     

     

    (d) Termination
      by Executive.

     

     

    (i) If
      the
      Executive is not in default of any of the Executive’s obligations under Sections
      (2), (10), (11) or (12) hereof, the Executive may terminate employment hereunder
      upon at least thirty (30) days’ prior notice, for failure of the Company to
      observe and perform one or more of its obligations under Sections (2), (3)
      and/or (4) hereof, which failure the Company fails to remedy within such notice
      period (a “Breach by the Company”).

     

     

    (ii) If
      the
      Executive is not in default of any of the Executive’s obligations under Sections
      (2), (10), (11) or (12) hereof, the Executive may terminate employment hereunder
      in the absence of a Breach by the Company, effective upon at least ninety (90)
      days prior written notice.

     

    
      
         

      

      
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    (e) Date
      of Termination.
      For purposes of this Agreement, the “Date of Termination” is defined as (i) the
      Executive’s date of death, in the event of his death; or the date of his
      termination due to disability, in the case of disability, or (ii) the date
      specified in the notice of termination, in the case of the Executive’s
      termination pursuant to Sections (5)(b), (5)(c), 5(d) hereof.

     

     

     (6)           
      CONSEQUENCES OF TERMINATION OR NON-RENEWAL.

     

     

    (a)
Termination
      on Death or Disability; or by the Executive in the Absence of a Breach by the
      Company.  If
      the Executive’s employment terminates by reason of the Executive’s death, or in
      the event that the Executive’s employment is terminated due to total or partial
      physical or mental disability such that the Executive becomes entitled to
      long-term disability benefits under the Company’s long-term disability plan, or
      if the Executive terminates employment hereunder in the absence of a Breach
      by
      the Company upon ninety (90) days prior written notice, the Company shall pay
      to
      the Executive or, in the event of death or disability, the Executive’s personal
      representative and/or spouse:

     

     

    (i)
      the Executive’s Base Salary and
      Accrued Incentive Compensation (as defined in Section 4(b));

     

     

    (ii)
      Stub-Period Incentive Compensation
      (as defined in Section 4(b)) earned, but unpaid, as of the Date of Termination,
      but only in the case of the Executive’s death or termination due to disability,
      and not in case of his voluntary termination; plus

     

     

    (iii)
      any amounts payable pursuant to
      (4)(d) (unreimbursed business expenses), (4)(e) (employee benefits due and
      owing), 4(f) (accrued, but unpaid vacation or holidays), and (4)(g)
      (supplemental executive retirement benefits), plus

     

     

    (iv)
      any benefits or amounts payable,
      on account of the Executive’s (A) exercise of his then exercisable rights under
      any long-term incentive compensation plan or arrangement, and (B) participation
      in any deferred compensation plan in which he was a participant as of his
      termination of service.

     

     

    Pending
      a
      determination that the Executive is entitled to long-term disability benefits,
      the Executive’s short-term disability benefits shall be extended, as necessary
      at 50% of Base Salary, if his length of employment with the Company is of such
      short duration that his short term disability benefits would otherwise expire
      before his entitlement to long-term disability benefits is determined.

     

     

    Upon
      payment of these amounts, the Company shall have no further obligation to the
      Executive, the Executive’s personal representative and/or spouse under this
      Agreement or on account of, or arising out of, the termination of the
      Executive’s employment.

     

     

    (b)
Upon
      Termination for Cause; or by the Executive on fewer than 90 days
      notice.  If the Company terminates the Executive’s employment
      for Cause, or the Executive terminates employment hereunder in the absence
      of a
      Breach by the Company and upon fewer than ninety (90) days prior written notice,
      the Company shall pay to the Executive:

     

    
      
         

      

      
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    (i)
      the Executive’s Base Salary earned,
      but unpaid, as of the Date of Termination; plus

     

     

    (ii)
      any amounts payable pursuant to
      Sections (4)(d), (4)(e), and 4(f) hereof, and

     

     

    (iii)
      any benefits payable under any
      elective non-qualified deferred compensation plan in which the Executive had
      been a participant, other than any SERP benefit under Section 4(g) or any
      supplemental executive retirement plan of the Company or an Affiliate,

     

     

    whereupon
      the Company shall have no further obligation to the Executive under this
      Agreement or on account of, or arising out of, the termination of the
      Executive’s employment.

     

     

    (c)
Upon
      Termination Without Cause, or Upon Breach by the Company, not on account of
      a
      Change in Control.  If
      the
      Company terminates the Executive's employment hereunder without Cause (including
      by non-renewal of
      this Agreement at the election of the Company at the end of a Term), or
      if the Executive terminates the Executive's employment hereunder on account
      of a
      Breach by the Company, and in either case the termination is not upon a Change
      in Control or within the Change in Control Protective Period, the Company shall
      pay or provide (as applicable) to the Executive, the following:

     

    

    (i)
      the Executive’s Base Salary,
      Accrued Incentive Compensation and Stub-Period Incentive Compensation earned,
      but unpaid, as of the Date of Termination; plus

    

    (ii)
      any amounts payable pursuant to
      Sections 4(d), 4(e), 4(f) and 4(g) hereof; plus

    

    (iii)
      any benefits or amounts payable,
      on account of the Executive’s (A) exercise of his then exercisable rights under
      any long-term incentive compensation plan or arrangement, and (B) participation
      in any deferred compensation plan in which he was a participant as of his
      termination of service; plus

    

    (iv)
      lump sum severance equal to two
      (2) times the sum
      of:

    

    (1)  the
      Executive’s annual Base Salary rate in effect immediately prior to the
      Executive’s Date of Termination, as determined by the UIL Board’s most recent
      review of salary rates pursuant to Section 4(a); and

    

    (2)  the
      short-term annual incentive compensation payment to which the Executive would
      be
      entitled, calculated as if he had been employed by the Company on the last
      day
      of the year of his Termination, as if the Executive had achieved personal goals
      ‘at target’, and based on actual performance with respect to the achievement of
      Company goals, without pro-ration for the fact that the Executive was employed
      only a portion of such year. In the event that the ‘gate’, if any, is not
      reached with respect to Company goals, then no short-term incentive compensation
      will be included in the calculation of severance. Personal and Company goals
      shall be defined and determined as set forth in Section 4(b) of this
      Agreement.

    
      
         

      

      
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    (v)
      for the period ending on the
      second anniversary
      of the date of the Executive’s Date of Termination, continued participation in
      the medical and dental plan(s) in which he was a participant as of his Date
      of
      Termination on the same basis as if he remained an active employee, provided
      that such participation is possible under the terms and provisions of such
      plans
      and programs and applicable law. Such period of continued participation shall
      run concurrently with, and reduce day- for-day, any obligation that the Company
      or any Affiliate would have to provide “COBRA” continuation coverage with
      respect to the Executive’s termination of employment. If the Executive’s
      participation in any such plan or program is barred as a result of the
      Executive’s termination, the Company shall arrange to provide the Executive with
      benefits substantially similar on an after-tax basis to those that the Executive
      would have been entitled to receive under such plan or program, provided that
      with respect to any benefit to be provided on an insured basis, the value of
      such coverage shall be based on the present value of the premiums expected
      to be
      paid for such coverage, and with respect to other benefits, such value shall
      be
      the present value of the expected cost to the Company of providing such
      benefits.

    

     

    (d)
Upon
      Non-renewal of Agreement at end of Term.  If the Executive’s
      employment hereunder is terminated due to non-renewal of this Agreement, the
      Company shall pay or provide (as applicable) to the Executive the same payments
      and benefits to which the Executive would have been entitled had he been
      terminated without cause in accordance with Section 6(c) of this
      Agreement.

     

    

    (e)  Timing
      of
      Payment.  Any cash amount
      that is due and owing to the Executive upon his termination of service pursuant
      to Section 6 will be paid as soon as administratively feasible following the
      effective date (including any revocation period) of the Release provided for
      in
      Section 6(f); provided, however, that (i) any Stub-Period Incentive
      Compensation, and (ii) that portion of any severance payment that is based
      on
      annual short-term incentive compensation shall be paid following the close
      of
      the year in which the Date of Termination occurs, at the same time that
      incentive compensation generally would be payable upon authorization of the
      UIL
      Board to all other employees.

     

    (f)
Release.  All
      payments and
      obligations of the Company under Section (6) and (7) shall be conditioned upon
      the execution and delivery by Executive to the Company of a full and effective
      release by Executive of any liability by the Company to Executive in form and
      substance reasonably satisfactory to the Company.

     

     

    

     

    (7)           
      CHANGE IN CONTROL

    

    (a)
      If on, or within twenty-four (24)
      months following a Change in Control, the Company (or its successor or other
      entity employing the Executive following such Change in Control) either
      terminates the Executive's employment hereunder without Cause or fails to renew
      this Agreement on substantially identical terms, or if the Executive terminates
      the Executive's employment on account of a Constructive Termination (as defined
      in the UIL CIC Plan II), then the Executive shall be entitled to the
      following:

    
      
         

      

      
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    (i)
      the Executive’s Base Salary,
      Accrued Incentive Compensation and Stub-Period Incentive Compensation earned
      prior to the Date of Termination; plus

    

    (ii)
      any amounts payable pursuant to
      Sections 4(d), 4(e), 4(f) and 4(g) hereof; plus

    

    (iii)
      any benefits or amounts payable,
      on account of the Executive’s (A) exercise of his then exercisable rights under
      any long-term incentive compensation plan or arrangement, and (B) participation
      in any deferred compensation plan in which he was a participant as of his
      termination of service; plus

    

    (iv)
      those payments, and benefits, if
      any, to which the Executive is entitled by reason of having been designated
      a
      Participant in the UIL CIC Plan II. The severance payments, pension supplements
      and other benefit provisions under such Plan (the “Total UIL CIC Plan Package”)
      shall be controlling and shall supplant the payments and benefits to which
      the
      Executive would be entitled on account of a termination of employment without
      Cause pursuant to the terms of this Agreement, including without limitation
      any
      severance benefits, supplemental retirement benefits, short-term incentive
      compensation and other compensation and benefits (other than long term incentive
      compensation) under this Agreement (the “Employment Agreement Termination
      Package”); expressly provided, however, that in the event that the Employment
      Agreement Termination Package exceeds the value of the Total UIL CIC Plan
      Package, then the Executive shall be entitled to select one or the other
      Package, but shall not be entitled to both, and shall not be entitled to select
      among compensation elements in each Package.

    

    (b)
      For purposes of this Agreement,
      Change in Control shall mean “Change in Control”  as defined with
      respect to the Company employing the Executive in the UIL CIC Plan II, as
      amended from time to time.

    

    (c)
      Payment of benefits under this
      Section 7 shall be subject to, and conditioned upon, the provisions of Section
      6(e) and (f) hereof.

    

    (8)
      ADDITIONAL CONSEQUENCES OF A CHANGE
      IN CONTROL.

    

     

    (a)
Payments
      to Executive.  In the event that a Change in Control has been
      approved by all necessary shareholder, creditor and regulatory actions, then,
      the Company will pay to the Trustee of the UIL Holdings Corporation Supplemental
      Retirement Benefit Rabbi Trust, as the same may be amended or superseded, for
      the benefit of the Executive, cash equal to that amount, calculated by the
      Company’s independent certified public accountants, to be reasonably sufficient
      to pay and discharge the Company’s future obligations, if any, to the Executive
      and/or his personal representative and/or spouse, under Section 7 hereof, but
      only if (i) the Executive’s employment has been terminated or will be terminated
      prior to the date of the Change in Control and (ii) the Company does not make
      such payment directly to the Executive.

     

     

    In
      the event that the Executive’s
      employment has not been terminated prior to the date of the Change in Control,
      but subsequently is terminated other than for Cause during the Change in Control
      Protective Period, then as of the date that notice of Date of Termination
      is

     

    
      
         

      

      
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          10
          -

        
          

        

      

      
         

      

    

     

    given
      to
      the Executive (or that it is finally determined that there is a Constructive
      Termination, in the case of termination by the Executive), the Company’s
      Successor (as defined in the UIL CIC Plan) shall deposit a sum, calculated
      by
      such Successor’s independent certified public accountants, reasonably sufficient
      to pay and discharge such Successor’s obligations to the Executive under Section
      7 hereof.

     

     

    (b)           
      Reduction
      of Salary.  During the Change in Control Protective Period, the
      Executive’s Base Salary may not be reduced to an annual rate less than the Base
      Salary rate fixed by the UIL Board as a result of its most recent review of
      salary rates, unless such reduction is part of, and consistent with, a general
      reduction of the compensation rates of all employees of the Company, its
      successor, or purchaser of assets, as the case may be.

     

     

    

     

    (9)
      TAX SAVINGS PROVISION

    

    If
      any portion of the payments which
      the Executive has the right to receive from the Company, or any affiliated
      entity, hereunder would constitute "excess parachute payments" (as defined
      in
      Section 280G of the Internal Revenue Code, and not governed by the terms defined
      in this Agreement) subject to the excise tax imposed by Section 4999 of the
      Internal Revenue Code, such excess parachute payments shall be reduced to the
      largest amount that will result in no portion of such excess parachute payments
      being subject to the excise tax imposed by Section 4999 of the Internal Revenue
      Code.

    

    

    (10)
      CONFIDENTIAL INFORMATION

    

    The
      Executive recognizes that the
      Executive’s employment by the Company is one of highest trust and confidence by
      reason of his access to certain trade secrets, confidential business practices,
      and proprietary information concerning the Company or any person or entity
      that
      directly, or indirectly through one or more intermediaries, controls or is
      controlled by, or is under common control with, the Company (an “Affiliate”),
      including, without limitation, the Company’s methods of doing business,
      marketing and strategic business plans, employees’ compensation and contract
      terms, customer lists and customer characteristics (collectively referred to
      as
“Proprietary Information”).  The Executive agrees and covenants to
      exercise utmost diligence to protect and safeguard the trade secrets,
      confidential business practices and Proprietary Information concerning the
      Company and any Affiliate.  The Executive further agrees and covenants
      that, except with the prior written consent of the Company, he will not, either
      during the Term hereof or thereafter, directly or indirectly, use for his own
      benefit or for the benefit of any other person or organization, or disclose,
      disseminate or distribute to any other person or organization, any of the
      Proprietary Information (whether or not acquired, learned, obtained or developed
      by the Executive alone or in conjunction with another), unless and until such
      Proprietary Information has become a matter of public knowledge through no
      action or fault of the Executive or unless otherwise required by court order
      to
      comply with legal process.  All memoranda, notes, records, drawings,
      documents or other writings whatsoever made, compiled, acquired or received
      by
      the Executive during the Term hereof arising out of, in connection with,

    
      
         

      

      
        -
          11
          -

        
          

        

      

      
         

      

    

    or
      related to any activity or business of the Company are and shall continue to
      be
      the sole and exclusive property of the Company, and shall, together with all
      copies thereof, be returned and delivered to the Company by the Executive
      immediately, when he ceases to be employed by the Company, or at any other
      time
      upon the Company’s demand.

    

    

    (11)  NON–COMPETITION

    

    The
      Executive agrees and covenants that, during the Term of this Agreement and
      for a
      period of twelve (12) months following the month during which the Executive
      ceases to be employed by the Company, the Executive will not, in any capacity,
      directly or indirectly, whether as a
      consultant,
      employee, officer, director, partner, member, principal, shareholder, or
      otherwise: 

    

    (a)
      compete with the Company in the
      regional marketing of energy services related to the delivery or use, at retail,
      of electricity in Connecticut; or

    

    (b)
      directly or indirectly divert or
      attempt to divert from the Company or any Affiliate any business in which such
      entity has been actively engaged during the Term hereof, or in any way interfere
      with the relationships that the Company or any Affiliate has with its sources
      of
      supply or customers; or

    

    (c)
      directly or indirectly interfere or
      attempt to interfere with the relationship between the Company or any Affiliate
      and any of such entity’s employees,

    

    unless
      the Company has granted prior written approval which may be withheld for any
      reason.

    

    For
      purposes of this Section “Affiliate” means any entity that directly or
      indirectly controls, is controlled by, or is under common control with the
      Company.

    

     

    
      	
               

            	
              (12)
                DISCLOSURE AND ASSIGNMENT OF INVENTIONS AND DISCOVERIES.
                

            

    

     

     

    (a)
Disclosure
      of Inventions. The Executive agrees to make prompt and complete
      disclosure to the Company of all inventions and discoveries made or conceived
      by
      him, alone or with others, while this Agreement is in effect, or within a
      reasonable time thereafter, which arise out of or relate to the services
      rendered pursuant to this Agreement. The Executive also agrees to keep necessary
      records, including notes, sketches, drawings, models and data supporting
      all such inventions
      and discoveries made by him, alone or with others, during the course of
      performing the services pursuant to this Agreement, and the Executive agrees
      to
      furnish the Company, upon request, all such records.

     

     

    (b)  Assignment
      of Inventions and Discoveries.  The Executive also agrees that
      he will assign to the Company all inventions and discoveries made by him which
      arise out of and pertain to the services rendered pursuant to this Agreement,
      together with all domestic and foreign patents as may be obtained on these
      inventions and discoveries. The Executive further agrees that, upon request
      of
      the Company, he will execute all necessary papers and cooperate in the fullest
      degree with the Company in securing, maintaining and enforcing any such
      patents

     

    
      
         

      

      
        -
          12
          -

        
          

        

      

      
         

      

    

     

    which
      arise out of his services under this Agreement. It is understood, however,
      that
      these obligations undertaken by Executive will be at no expense to him.

     

     

    

     

     

    (13)
      MISCELLANEOUS.

     

     

    (a)
Equitable
      Remedies.  The Executive
      acknowledges
      that the restrictions provided for in Sections (10) through (12) are reasonable
      and necessary in order to protect the legitimate interests of the Company and
      its Affiliates, and that any violation thereof would result in serious damage
      and irreparable injury to the Company and its Affiliates. Further, the
      Executive acknowledges that the services to be rendered by him are of such
      unique and extraordinary nature, and the resulting injury to the Company from
      a
      breach of Sections (10) through (12), inclusive, by the Executive would be
      of
      such a nature, that an action at law for the collection of damages would not
      provide adequate relief to the Company for the enforcement of its rights in
      the
      event of an actual or threatened violation by the Executive of his commitments
      and obligations under Sections (10) through (12). The Executive agrees that
      upon
      the actual or threatened breach or violation
      of
      any of the commitments under Section (10) through (12), the Company shall be
      entitled to both preliminary and permanent injunctive relief, in any action
      or
      proceeding brought in an appropriate court having jurisdiction over the
      Executive, to restrain him from committing any violation of any such commitments
      and obligations.

     

     

    (b)
Effect
      Of
      Breach.  All payments and other benefits payable but not yet
      distributed to Executive under Sections (6), (7) or (8) shall be forfeited
      and
      discontinued in the event that the Executive violates Sections (10) through
      (12)
      of this Agreement, or willfully engages in conduct which is materially injurious
      to the Company, monetarily or otherwise, all as determined in the sole
      discretion of the Company.

     

     

    (c)
Successors;
      Binding Agreement; Assignment.

     

    (i)
      The Company will require the
      acquirer of all or substantially all of the business or assets of the Company
      (whether directly or indirectly, by purchase of stock or assets, merger,
      consolidation or otherwise), by agreement in form and substance reasonably
      satisfactory to the Executive, to expressly assume and agree to perform this
      Agreement in the same manner and to the same extent that the Company would
      be
      required to perform it if no such succession had taken place. If the Company
      fails to obtain such agreement prior to the effective date of any such
      succession, the Executive may terminate his or her employment with in thirty
      (30) days of such succession and treat such termination as a Breach by the
      Company and termination without cause on account of a Change in Control
      entitling the Executive to payments and benefits under Section 7 of this
      Agreement. For purposes of implementing the foregoing, the date on which any
      such succession becomes effective shall be deemed the Date of
      Termination.

     

    (ii) This
      Agreement, and the
      Executive’s rights and obligations hereunder, may not be assigned by the
      Executive.  Any attempted assignment of this Agreement by the
      Executive shall be void and of no force or effect.  This Agreement and
      all rights of the Executive hereunder shall inure to the benefit of and be
      enforceable by the Executive’s personal or legal representatives, executors,
      administrators, successors, heirs, distributees, devisees and legatees.

     

    
      
         

      

      
        -
          13
          -

        
          

        

      

      
         

      

    

     

    As
      used
      in this Section, the term the “Company” shall include The United Illuminating
      Company, UIL Holdings Corporation, and any successor to, or acquirer of, the
      business or assets of the Company that executes and delivers the agreement
      provided for in this Section (13)(c) or which otherwise becomes bound by all
      the
      terms and provisions of this Agreement by operation of law.

     

    (d)           
      Notices.  For
      the purpose of this Agreement, notices and all other communications to either
      party hereunder provided for in the Agreement shall be in writing and shall
      be
      deemed to have been duly given when delivered or mailed by United States
      certified or registered mail, return receipt requested, postage prepaid,
      addressed, in the case of the Company, to the Secretary of the Company at 157
      Church Street, New Haven, Connecticut 06506, or, in the case of the Executive,
      to the Executive at his residence, or to such other address as either party
      shall designate by giving written notice of such change to the other
      party.

    

     

    (e)           
Waiver;
      Amendment.  No provision of this Agreement may be modified,
      waived or discharged unless such waiver, modification or discharge is approved
      by the UIL Board and agreed to in a writing signed by the Executive and the
      Company.  No waiver by either party hereto at any time of any breach
      by the other party hereto of, or compliance with, any condition or provision
      of
      this Agreement to be performed by such other party shall be deemed a waiver
      of
      any similar or dissimilar provisions or conditions at the same or at any prior
      or subsequent time.  No agreements or representations, oral or
      otherwise, express or implied, with respect to the subject matter hereof have
      been made by either party that are not set forth expressly in this
      Agreement.

     

     

    (f)           
Governing
      Law; Severability.  The validity, interpretation, construction
      and performance of this Agreement shall be governed by the laws of the State
      of
      Connecticut.  The validity or unenforceability of any provision or
      provisions of this Agreement shall not affect the validity or enforceability
      of
      any other provision of this Agreement, which shall remain in full force and
      effect. In the event one or more of the provisions of this Agreement should,
      for
      any reason, be held to be invalid, illegal or unenforceable in any respect,
      the
      parties agree that such provisions shall be legally enforceable to the extent
      permitted by applicable law, and that any court of competent jurisdiction shall
      so enforce such provision, or shall have the authority hereunder to modify
      it to
      make it enforceable to the greatest extent permitted by law.

     

     

    (g)           
No
      Conflict.  The Executive hereby represents and warrants to the
      Company that neither the execution nor the delivery of this Agreement, nor
      the
      employment of the Executive by the Company will result in the breach of any
      agreement to which the Executive is a party.

     

     

    (h)           
Survival.  The
      provisions of this Agreement shall not survive the termination of this Agreement
      or of the Executive’s employment hereunder, except that the provisions of
      Sections (6) through (13) hereof shall survive such termination and shall be
      binding upon the Executive, the Executive’s personal representative and/or
      spouse, the Company, and the Company’s successors and assigns.

     

     

    (i)           
Counterparts;
      Facsimile Execution.  This Agreement may be executed in two or
      more counterparts, each of which shall be deemed an original but all of which
      together shall

     

    
      
         

      

      
        -
          14
          -

        
          

        

      

      
         

      

    

     

    constitute
      one and the same instrument.  Facsimile execution and delivery of this
      Agreement is legal, valid and binding execution and delivery for all
      purposes.

     

    

    IN
      WITNESS WHEREOF, the parties hereto
      have executed this Agreement as of the day and year first above written.

    

    

    

                                        THE
      UNITED ILLUMINATING COMPANY

    

    Attest:

    

    

    
      	
              /s/
                Susan E. Allen

            	 	
              By:

            	
              /s/
                Nathanial D. Woodson

            
	 	 	 	
              Its

            
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	
              /s/
                Anthony J.
                Vallillo                                                
                1/26/04

            
	 	 	 	
              Anthony
                J. Vallillo

            

    

     

    -
      15 -uil_exh10-37a.htm

    EXHIBIT
      10.37a

    

    FIRST
      AMENDMENT

    TO

    EMPLOYMENT
      AGREEMENT

    

    THIS
      AMENDMENT ( the “First
      Amendment”) is made as of the 18 day
      of November,
      2004, between The United Illuminating Company, a Connecticut Corporation (the
      “Company”) and Anthony J. Vallillo (the “Executive”),

    

    

    WITNESSETH
      THAT

    

    WHEREAS,
      the Company previously entered
      into an amended and restated employment Agreement with the Executive dated
      as of
      January 26, 2004 (the “Employment Agreement”); and

    

    WHEREAS,
      the Company and the Executive
      desire to further amend the Employment Agreement by this First Amendment to
      reflect certain revisions to the supplemental executive retirement benefit
      provisions, tax savings provisions, and non-competition provisions of such
      Employment Agreement, and to make other minor clarifying revisions to the
      Employment Agreement;

    

    NOW
      THEREFORE, the following Sections
      of the Agreement are hereby amended as follows:

    

    1.           
      The first sentence of Section 1(b) of the Agreement is revised to read as
      follows:

    

    The
      term
      of this Agreement shall be for a period commencing on the date hereof and ending
      on the second anniversary of the date hereof, unless this Agreement is earlier
      terminated as provided in Section 5 (the “Initial Term”).

    

    2.           
      Section 4(g) of the Employment Agreement is hereby amended in its entirety
      to
      read as follows in recognition of Mr. Vallillo’s entitlement to certain early
      retirement subsidies in the calculation of his supplemental executive retirement
      benefit in the event he terminates and receives a lump sum distribution of
      his
      SERP prior to what would be his Normal Retirement Date:

    

    (g)  Supplemental
      Executive Retirement Benefit. Upon termination of the Executive's
      employment with the Company and all affiliates other than for Cause (as defined
      in Section 5(b) of this Agreement), a supplemental retirement benefit shall
      be
      payable in accordance with the provisions of this Section (4)(g).  The
      annual supplemental retirement benefit, expressed in the form of a single life
      annuity beginning at the Executive's Normal Retirement Date as defined in The
      United Illuminating Company Pension Plan (the “Company's Pension Plan”), shall
      be the excess, if any, of (A) less (B), where (A) is 2.0% (.020) of the
      Executive's highest three-year average Total Compensation times his number
      of
      years of service as an employee of the Company (including any deemed service
      credited under this Agreement or

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    the
      CIC
      Plan II) at termination (not to exceed thirty), and (B) is the benefit payable
      under the Company's Pension Plan expressed as a single life annuity commencing
      as of the Executive’s Normal Retirement Date.  For purposes of this
      Section, Total Compensation shall mean the Executive’s Base Salary, and any
      amount payable to the Executive as short-term incentive compensation pursuant
      to
      the Company’s annual executive incentive compensation plan.  Subject
      to the requirements of Section 6(f), distribution of the supplemental retirement
      benefit shall be made in the month of January following the Executive’s
      termination of service with the Company and its affiliates, but in no event
      earlier than six months following the Executive’s termination of service. The
      benefit provided in this Section 4(g) shall be paid in an actuarially equivalent
      lump sum equal to the present value of the immediate life annuity payable as
      of
      such distribution date, unless the Executive shall have elected at least 12
      months in advance of such distribution date to commence distributions in one
      of
      the other actuarially equivalent forms of benefits permitted under the Company’s
      Pension Plan, in which case the commencement of the supplemental executive
      retirement benefit provided under this Section 4(g) shall be deferred, except
      in
      the case of termination due to death or disability, for a period of at least
      five years from the date on which such distribution otherwise would have been
      made. The provisions of this subsection are intended to comply with all laws
      applicable to the taxation of non-qualified deferred compensation, and the
      Company and Executive agree to revise this subsection as necessary or advisable
      from time to time in order to comply with changes in such laws. With the
      exception of the lump sum methodology noted above (i.e., the present value
      of an
      immediate annuity), the benefits payable under this Section 4(g) shall be
      calculated using the same definitions of actuarial equivalence, and the same
      early retirement reduction factors that are specified in the Pension Plan in
      the
      event that the Executive becomes entitled to payment of the supplemental
      retirement benefit prior to what would have been his Normal Retirement Date,
      except that, in the event that the Executive is credited with deemed years
      of
      service, the reductions shall be based on the Executive's service deemed as
      an
      employee of the Company.  If the form of payment provides for a death
      benefit, such benefit shall be payable to the Executive's estate, unless another
      beneficiary has been designated by the Executive.  If the Executive
      dies prior to the commencement of benefit payments, then the pre-retirement
      death benefit provisions of the Pension Plan shall apply to the supplemental
      retirement benefit payable pursuant to this Section (4)(g).

    

    

    3.           
      Section 6(a) is hereby revised in its entirety to provide reference to
‘retirement’ as a condition upon which certain benefits will be paid:

    

     

    (6)           
      CONSEQUENCES OF TERMINATION OR NON-RENEWAL.

     

     

    (a)
Termination
      on Death, Disability or Retirement; or by the Executive in the Absence of a
      Breach by the Company upon Adequate Notice.  If the Executive’s
      employment terminates by reason of the Executive’s death, or his total or
      partial physical or mental disability such that the Executive becomes entitled
      to long-term disability benefits under the Company’s long-term disability plan,
      or if the Executive retires on or after becoming eligible to retire under the
      terms of the Company’s Pension Plan, or terminates employment hereunder in the
      absence of a Breach by the Company upon ninety (90) days prior written notice,
      the

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    Company
      shall pay to the Executive or, in the event of death or disability, the
      Executive’s personal representative and/or spouse:

     

     

    (i)
      the Executive’s Base Salary earned,
      but unpaid, as of the Date of Termination and Accrued Incentive Compensation
      (as
      defined in Section 4(b);

     

     

    (ii)
      Stub-Period Incentive Compensation
      (as defined in Section 4(b)) earned, but unpaid, as of the Date of Termination,
      but only in the case of the Executive’s death, termination due to disability or
      retirement (as hereinbefore defined), and not in case of his voluntary
      termination other than on account of such retirement; plus

     

     

    (iii)
      any amounts payable pursuant to
      (4)(d) (unreimbursed business expenses), (4)(e) (employee benefits due and
      owing), (4)(f) (accrued, but unpaid vacation or holidays) hereof, and (4)(g)
      (supplemental executive retirement benefits), plus

     

     

    (iv)
      any benefits or amounts payable on
      account of the Executive’s (A) participation in any long-term incentive
      compensation plan and equity compensation plan or arrangement, and (B)
      participation in any deferred compensation plan in which he was a participant
      as
      of his termination of service, all as determined in accordance with the terms
      and conditions of such plans and arrangements.

     

     

    Pending
      a
      determination that the Executive is entitled to long-term disability benefits,
      the Executive’s short-term disability benefits shall be extended, as necessary
      at 50% of Base Salary, if his length of employment with the Company is of such
      short duration that his short term disability benefits would otherwise expire
      before his entitlement to long-term disability benefits is determined.

     

     

    Upon
      payment of these amounts, the Company shall have no further obligation to the
      Executive, the Executive’s personal representative and/or spouse under this
      Agreement or on account of, or arising out of, the termination of the
      Executive’s employment.

     

    

    

    4.           
      Sections 6(c)(iii) and 7(a)(iii) are hereby revised to read as follows:

    

    (iii)
      any benefits or amounts payable
      on account of the Executive’s (A) participation in any long-term incentive
      compensation plan and equity compensation plan or arrangement, and (B)
      participation in any deferred compensation plan in which he was a participant
      as
      of his termination of service, all as determined in accordance with the terms
      and conditions of such plans and arrangements; plus

    

    5.           
      Section 6(c)(iv) is hereby revised to read as follows:

    

    (iv)
      lump sum severance equal to two
      (2) times the sum
      of:

    

    (1)  the
      Executive’s annual Base Salary rate in effect immediately prior to the
      Executive’s Date of Termination, as determined by the UIL Board’s most recent
      review of salary rates pursuant to Section 4(a); and

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    (2)   the
      short-term annual incentive compensation payment to which the Executive would
      be
      entitled, calculated as if he had been employed by the Company on the last
      day
      of the year of his Termination, and as if both personal goals and Company goals
      had been achieved ‘at target’ without pro-ration for the fact that the Executive
      was employed only a portion of such year. Except for the assumption that such
      goals shall have been achieved at target, personal and Company goals shall
      be
      defined and determined as set forth in Section 4(b) of this Agreement.

    

    6.           
      Section 6(f) is revised to read as follow:

    

     

    (f)
Release.  All
      payments and
      obligations of the Company under Section (6), (7), (8) and (9) shall be
      conditioned upon the execution and delivery by Executive to the Company of
      a
      full and effective release by Executive of any liability of the Company and
      its
      Affiliates to Executive in form and substance reasonably satisfactory to the
      Company.

     

    

    7.           
      Section 9 of the Employment Agreement is hereby revised to read in its entirety
      as follows:

    

    (9)  GROSS
      UP FOR EXCISE
      TAX.

    

    (a)           
      Anything in this Agreement to the contrary notwithstanding, in the event that
      it
      shall be determined that any payment made and benefits provided by the Company
      to or for the Executive, whether paid or payable or distributed or distributable
      pursuant to the terms of this Agreement or otherwise, would constitute an
“excess parachute payment” within the meaning of Section 280G of the Internal
      Revenue Code of 1986 subject to an excise tax under Section 4999 of the Internal
      Revenue Code of 1986 as amended (the “Code”) or any successor provision (the
“Excise Tax”), the Executive shall be paid an additional amount (the “Gross-Up
      Payment”) such that the net amount retained by Executive after deduction of any
      Excise Tax, and any federal, state and local income and employment tax
      (including any Excise Tax imposed upon the Gross-Up Payment itself) shall be
      equal to the total amount of all payments and benefits to which the Executive
      would be entitled pursuant to this Agreement absent the Excise Tax, but net
      of
      all applicable federal, state and local taxes.  For purposes of
      determining the amount of the Gross-Up Payment, Executive shall be deemed to
      pay
      federal income tax and employment taxes at the highest marginal rate of federal
      income and employment taxation in the calendar year in which the Gross-Up
      Payment is to be made and state and local income taxes at the highest marginal
      rate of taxation in the state and locality of Executive’s residence in the
      calendar year in which the Gross-Up Payment is to be made, net of the maximum
      reduction in federal income taxes that may be obtained from the deduction of
      state and local taxes.

    

    (b)           
      The Gross-Up Payment, if any, shall be paid to the Executive or, at the
      discretion of the Company, directly to governmental authorities through tax
      withholding on the Executive’s behalf, as soon as practicable following the
      payment of the excess parachute payment, but in any event not later than 30
      business days immediately following such payment; provided that any Gross-up
      Payment under this Section 9, including Section 9(d) shall be

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    conditioned
      upon the Executive providing the release called for in Section 6(f) and
      complying with the confidentiality and non-compete provisions of this
      Agreement.

    

    (c)           
      Subject to the provisions of Section 9(d), all determinations required to be
      made under this Section 9, including whether and when a Gross-Up Payment is
      required and the amount of such Gross-Up Payment and the assumptions to be
      utilized in arriving at such determination, shall be made by tax counsel
      appointed by UIL Holdings Corporation (the "Tax Counsel"), which shall provide
      its determinations and any supporting calculations both to the Company and
      Executive within 10 business days of having made such determination. The Tax
      Counsel shall consult with the benefit consultants and counsel to UIL Holdings
      Corporation in determining which payments to, or for the benefit of, the
      Executive are to be deemed to be ‘parachute payments’ within the meaning of
      Section 280G(b)(2) of the Code. Any such determination
      by
      the Tax Counsel shall be final and binding upon the Company and Executive.
      All
      fees and expenses of the Tax Counsel (and, if applicable benefits consultants
      or
      other counsel) shall be borne solely by UIL Holdings Corporation.  As
      a result of the uncertainty in the application of Section 4999 of the Code
      at
      the time of the initial determination by the Tax Counsel hereunder, it is
      possible that Gross-Up Payments, which will not have been made by the Company,
      should have been made ("Underpayment"). In the event that it is ultimately
      determined in accordance with the procedures set forth in Section 9(d) that
      the
      Executive is required to make a payment of Excise Tax, the Tax Counsel shall
      determine the amount of the Underpayment that has occurred, and any such
      Underpayment shall be promptly paid by the Company to or for the benefit of
      the
      Executive.

    

    (d)           
      The Executive shall notify the Company and UIL Holdings Corporation in writing
      of any claims by the Internal Revenue Service that, if successful, would require
      the payment by the Company of any, or any additional, Gross-Up Payment. Such
      notification shall be given as soon as practicable but no later than 30 days
      after the Executive actually receives notice in writing of such claim and shall
      apprise the Company and UIL Holdings Corporation of the nature of such claim
      and
      the date on which such claim is requested to be paid. The Executive shall not
      pay such claim prior to the expiration of the 30-day period following the date
      on which he gives such notice to the Company and UIL Holdings Corporation (or
      such shorter period ending on the date that any payment of taxes with respect
      to
      such claim is due). If the Company notifies the Executive in writing prior
      to
      the expiration of such period that it desires to contest such claim, the
      Executive shall:

    

    (1)
      give the Company any information
      reasonably requested by the Company relating to such claim;

    

    (2)
      take such action in connection
      with contesting such claim as the Company shall reasonably request in writing
      from time to time, including, without limitation, accepting legal representation
      with respect to such claim by an attorney selected by the Company and reasonably
      acceptable to the Executive;

    

    (3)
      cooperate with the Company in
      good faith in order to contest such claim effectively; and

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    (4)
      if the Company elects not to
      assume and control the defense of such claim, permit the Company to participate
      in any proceedings relating to such claim;

    

    provided,
      however, that the Company shall bear and pay directly all costs and expenses
      (including additional interest and penalties) incurred in connection with such
      contest and shall indemnify and hold the Executive harmless, on an after-tax
      basis, for any Excise Tax (including interest and penalties with respect
      thereto) imposed as a result of such representation and payment of costs and
      expenses.  Without limitation on the foregoing provisions of this
      Section 9(d), the Company shall have the right, with the consent of UIL Holdings
      Corporation, to assume the defense of and control all proceedings in connection
      with such contest, in which case it may pursue or forego any and all
      administrative appeals, proceedings, hearings and conferences with the taxing
      authority in respect of such claim and may either direct the Executive to pay
      the tax claimed and sue for a refund or contest the claim in any permissible
      manner, and the Executive agrees to prosecute such contest to a determination
      before any administrative tribunal, in a court of initial jurisdiction and
      in
      one or more appellate courts, as the Company shall determine; provided, however,
      that if the Company directs the Executive to pay such claim and sue for a
      refund, the Company shall advance the amount of such payment to the Executive,
      on an interest-free basis, and shall indemnify and hold the Executive harmless,
      on an after-tax basis, from any Excise Tax (including interest or penalties
      with
      respect thereto) imposed with respect to such advance or with respect to any
      imputed income with respect to such advance; and further provided, that any
      extension of the statute of limitations relating to payment of taxes for the
      taxable year of the Executive with respect to which such contested amount is
      claimed to be due is limited solely to such contested
      amount.  Furthermore, the Company's right to assume the defense of and
      control the contest shall be limited to issues with respect to which a Gross-Up
      Payment would be payable hereunder, and the Executive shall be entitled to
      settle or contest, as the case may be, any other issue raised by the Internal
      Revenue Service or any other taxing authority.

    

    (e)              
      If, after the receipt by the Executive of an amount advanced by the Company
      pursuant to Section 9(d), the Executive becomes entitled to receive any refund
      with respect to such claim, the Executive shall (subject to the Company's
      complying with the requirements of Section 9(d)) promptly pay to the Company
      the
      amount of such refund (together with any interest paid or credited thereon
      after
      taxes applicable thereto). If, after the receipt by the Executive of an amount
      advanced by the Company pursuant to Section 9(d), a determination is made that
      the Executive shall not be entitled to any refund with respect to such claim,
      and the Company does not notify the Executive in writing of its intent to
      contest such denial of refund prior to the expiration of 30 days after such
      determination, then such advance shall be forgiven and shall not be required
      to
      be repaid, and the amount of such advance shall offset, to the extent thereof,
      the amount of Gross-Up Payment required to be paid.

    

    8.           
      Section 11 of the Employment Agreement is hereby revised in its entirety to
      read
      as follows:

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    (11)  NON–COMPETITION

    

    (a)
      The Executive agrees and covenants
      that, during the Term of this Agreement and for a period of twelve (12) months
      following the month during which the Executive ceases to be employed by the
      Company, the Executive will not, in any capacity, directly or indirectly, whether as a
      consultant,
      employee, officer, director, partner, member, principal, shareholder, or
      otherwise: 

    

    (i)
      compete with the Company in the
      regional marketing of energy services related to the delivery or use, at retail,
      of electricity in Connecticut; or

    

    (ii)
      directly or indirectly divert or
      attempt to divert from the Company or any Affiliate any business in which such
      entity has been actively engaged during the Term hereof, or in any way interfere
      with the relationships that the Company or any Affiliate has with its sources
      of
      supply or customers; or

    

    (iii)
      directly or indirectly interfere
      or attempt to interfere with the relationship between the Company or any
      Affiliate and any of such entity’s employees,

    

    unless
      the Company has granted prior written approval which may be withheld for any
      reason.

    

    For
      purposes of this Section “Affiliate” means any entity that directly or
      indirectly controls, is controlled by, or is under common control with the
      Company.

    

    Nothing
      in this Section shall be construed to prohibit the ownership by the Executive
      of
      less than five percent (5%) of any class of securities of any entity that is
      engaged in any of the foregoing businesses having a class of securities
      registered pursuant to the Securities Exchange Act of 1934 (the “Exchange Act”),
      provided that such ownership represents a passive investment and that neither
      the Executive, nor any group of persons including the Executive, in any way,
      directly or indirectly, manages or exercises control of such entity, guarantees
      any of its financial obligations, or otherwise takes any part in its business,
      other than through exercising the Executive’s rights as a shareholder.

    

    As
      used
      in Sections 10-12, the term the “Company” shall mean The United Illuminating
      Company and any successor to, or acquirer of, the business or assets of the
      Company.

    

    (b)
      The Executive acknowledges and
      agrees that, of the total payments and benefits to which he would be entitled
      under Sections 6(c) (termination of the Executive without cause), Section 6(d)
      (non-renewal) or 7 (termination in connection with a Change in Control) of
      this
      Agreement, as applicable, an amount equal to one (1) times his ‘Target
      Total  Remuneration’, as hereinafter defined, shall be deemed to be on
      account of, and paid as consideration for, the covenant not to compete provided
      in this Section. Executive acknowledges and agrees that 1/12 of the amount
      attributable to this covenant shall be paid out on a monthly basis during the
      12
      month period that this covenant is in force following his termination of service
      from the Company and its Affiliates, and that such amount shall be deducted
      from, and not be in addition to, the amounts otherwise payable under Section
      6(c), 6(d) or 7 of this

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Agreement,
      as applicable.  Target Total Remuneration shall be defined as the sum
      of the following components of the Executive’s remuneration as most recently
      approved by the Compensation and Executive Development Committee of the Board
      prior to the date of the Executive’s termination: (1) Base Salary, (2) target
      annual short-term incentive award, and (3) target annual long-term incentive
      award (but in no event more than the amount owed under Section 6(c), 6(d) or
      7).  In the event that the Company determines that this covenant has
      been violated, no further payments shall be made under this Section, the
      Executive shall be obligated immediately to repay any amounts paid hereunder,
      and the Company shall have all of the rights and remedies provided under Section
      13 of this Agreement.  Payments hereunder shall be subject to the
      rabbi trust deposit requirements of Section 8.

    

    In
      the
      event that payments under the Change in Control Plan II would exceed those
      otherwise payable under this Agreement under Section 7 on account of a Change
      in
      Control, then such payments are expressly conditioned upon compliance with
      Section 11(a) and (b) of this Agreement and, of such Change in Control payments,
      an amount equal to one (1) times the Executive’s Target Total Remuneration shall
      be deemed to be on account of, and paid as consideration for, the covenant
      not
      to compete provided in this Section, and shall be paid ratably over the 12
      month
      period hereinbefore provided.

    

    9.           
      Section 13(b) is revised to read as follows:

    

     

    (b)
Effect
      Of
      Breach.  All payments and other benefits payable but not yet
      distributed to Executive under Sections (6), (7) (8) and (9) shall be forfeited
      and discontinued in the event that the Executive violates Sections (10) through
      (12) of this Agreement, or willfully engages in conduct which is materially
      injurious to the Company, monetarily or otherwise, all as determined in the
      sole
      discretion of the Company.

     

    

    

    All
      of
      the other terms and conditions of the Employment Agreement shall remain in
      full
      force and effect.

    

    

                                                THE
      UNITED
      ILLUMINATING COMPANY

    

    Attest:

    

    

    
      	
              /s/
                Susan E. Allen

            	 	
              By

            	
              /s/
                Nathanial D. Woodson

            
	
              Susan
                E. Allen

            	 	 	
              Nathanial
                D. Woodson

            
	
              UIL
                Vice President Investor Relations

            	 	 	
              Its
                Chief Executive
                Officer

            
	
              Corporate
                Secretary & Assistant Treasurer

            	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	
              /s/
                Anthony J. Vallillo

            
	 	 	 	
              Anthony
                J. Vallillo

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