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EXHIBIT 10.19

                            UIL HOLDINGS CORPORATION

                     NON-EMPLOYEE DIRECTORS COMMON STOCK AND
                           DEFERRED COMPENSATION PLAN

SECTION 1.        ESTABLISHMENT OF THE PLAN
                  -------------------------

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").

1.02     APPLICABILITY  OF  THE  PLAN.  The  provisions  set  forth  herein  are
         applicable only to Directors  serving on the Board of the Company on or
         after the Effective Date. The benefits of Directors terminating Service
         prior to that date shall be governed by the terms of the Plan in effect
         on the date each of them terminated Service.

1.03     PURPOSE OF THE PLAN.  The purpose of the Plan is to provide for payment
         to each Eligible  Director of a portion of his or her  compensation for
         Service as a Director in shares of the  Company's  Stock,  and to allow
         each Eligible Director to defer the payment of part of the Fees payable
         to him or her for Service as a Director of the Company,  including Fees
         payable to an Eligible  Director  for Service as the  chairperson  or a
         member of one or more  committees of the Board.  It is also the purpose
         of the Plan to provide an incentive for Eligible  Directors to continue
         to  contribute  to the  growth  and  profitability  of the  Company  by
         enabling  them  to  share  in  the  appreciation  of the  value  of the
         Company's Stock.

SECTION 2.        DEFINITIONS
                  -----------

2.01     Whenever  used  in  the  Plan,  the  following  terms  shall  have  the
         respective   meanings  set  forth  below,  unless  otherwise  expressly
         provided in the Plan:

         (a)      "Beneficiary"  or  "Beneficiaries"  shall  mean the  person or
                  persons   designated  by  a  Participant  in  accordance  with
                  Subsection 6.02 hereof.

         (b)      "Board" shall mean the Board of Directors of the Company.

         (c)      "Cash Account" shall mean the unfunded memorandum  sub-account
                  maintained  by  the  Company  to  record  that  portion  of an
                  Eligible  Director's  Fees that he or she has  elected to have
                  deferred and credited  with  interest  pursuant to  Subsection
                  5.02(a) of the Plan,  together with the amount of the interest
                  credited from time to time to such sub-account.

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         (d)      "Change in Control" shall mean any of the following events:

                  (1)      any merger or  consolidation  of the Company with any
                           corporate  shareholder  holding  twenty-five  percent
                           (25%) or more of the Stock of the Company or with any
                           other  corporation  that is, or after such  merger or
                           consolidation  would be,  controlled by a shareholder
                           or group of shareholders  owning at least twenty-five
                           percent  (25%)  of  the  Stock  of  the  Company  (an
                           "affiliate"   of  such   shareholder   or   group  of
                           shareholders); or

                  (2)      any sale, lease, exchange, mortgage, pledge, transfer
                           or  disposition,  other than the payment of quarterly
                           cash  dividends,  to or with any shareholder or group
                           of shareholders holding twenty-five per cent (25%) or
                           more of the 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 $40 million or more; or

                  (3)      the issuance or sale by the Company of any securities
                           of  the  Company  to  any  shareholder  or  group  of
                           shareholders  holding  twenty-five  per cent (25%) or
                           more of the 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

                  (4)      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  per cent
                           (25%) of the Stock of the Company,  or any  affiliate
                           of such shareholder or group of shareholders; or

                  (5)      any  reclassification  of  securities   (including  a
                           reverse  stock  split)  or  recapitalization  of  the
                           Company,  or any  other  transaction,  which  has the
                           effect,  direct  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,  that is
                           directly  or  indirectly  owned by a  shareholder  or
                           group of  shareholders  owning  at least  twenty-five
                           percent  (25%) of the  Stock of the  Company,  or any
                           affiliate   of   such   shareholder   or   group   of
                           shareholders.

         (e)    "Committee" shall mean the Committee on Directors of the Board.

         (f)    "Company" shall mean UIL Holdings Corporation and any successor.

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         (g)      "Deferred   Compensation  Account"  shall  mean  the  unfunded
                  memorandum  account  maintained  by the Company to record that
                  portion  of an  Eligible  Director's  Stock  Awards  and  Fees
                  deferred  under the Plan,  their  hypothetical  investment  in
                  either a Cash Account,  Phantom  Stock Unit  Account,  or some
                  combination  thereof,  and the accretions to and payments from
                  each such Account.

         (h)      "Director"  shall mean  any  person who  is  duly  elected and
                  qualified  to  serve  on  the Board and renders Service to the
                  Company.

         (i)      "Eligible Director" shall mean a person who renders Service to
                  the Company or The United Illuminating Company on or after May
                  15,  1996 at a time when he or she is not an  employee  of the
                  Company or The United Illuminating Company.

         (j)      "Fair  Market  Value"  shall mean the average on a  particular
                  date of the high and low per  share  sale  prices of shares of
                  Stock on the New  York  Stock  Exchange,  as  reported  on the
                  composite  tape,  or, if there is no sale on such  date,  then
                  such average  price on the last  previous date on which a sale
                  is reported.

         (k)      "Fees"  shall mean  amounts  earned for Service as an Eligible
                  Director,  including quarterly  retainers,  Board meeting fees
                  and Board committee chairperson and meeting fees.

         (l)      "Grant  Date" shall mean a date,  on or about March 1, in each
                  of the years 1997 through  2010,  inclusive,  on which the New
                  York Stock Exchange  conducts  business;  and,  unless another
                  date is  designated  as the  Grant  Date for such  year by the
                  Secretary of the Company  (the  "Corporate  Secretary")  on or
                  before  February 1 of such year,  the Grant Date for such year
                  shall be the first  day in March on which  the New York  Stock
                  Exchange conducts business.

         (m)      "Participant"   shall  mean  a  person  for  whom  a  Deferred
                  Compensation   Account  has  been  established  and  is  being
                  maintained under the Plan.

         (n)      "Phantom   Stock  Unit"  shall  mean  a  unit  of  measurement
                  equivalent  to one share of Common Stock of the  Company,  but
                  excluding all of the attendant rights of a shareholder of such
                  Stock (for  example,  the right to own,  control and vote such
                  Stock)  other  than the right to be  credited  with  dividends
                  thereon.

         (o)      "Phantom  Stock  Account"  shall mean the unfunded  memorandum
                  sub-account  maintained by the Company  pursuant to Subsection
                  5.02(b)  of the Plan to record  the  number of  Phantom  Stock
                  Units  resulting  from  Stock  Awards  and an  election  by an
                  Eligible  Director  to have some  portion of all of his or her
                  deferred  Fees  invested  in Phantom  Stock  Units,  and shall
                  include  all Phantom  Stock Units  credited as a result of the
                  reinvestment of dividends on Phantom Stock Units.

                                      -3-
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         (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.

         (q)      "Stock" shall mean the Common Stock of the Company.

         (r)      "Stock  Award"  shall  mean a number of whole  and  fractional
                  Phantom Stock Units,  computed to three decimal places,  equal
                  to the sum of 200 plus the quotient  resulting  from  dividing
                  (a) the quarterly retainer Fee payable to an Eligible Director
                  for  Service  during the first  quarter of each fiscal year of
                  the Company during the period  commencing  January 1, 1997 and
                  ending  December 31, 2010, by (b) the Fair Market Value of the
                  Stock on the Grant Date of such year.

SECTION 3.        STOCK AWARDS
                  ------------

3.01     ANNUAL  AWARDS.  On each Grant Date, in lieu of the quarterly  retainer
         Fee  payable to each  Participant  who has served as a Director  for at
         least six (6) months  immediately  preceding  such Grant date,  a Stock
         Award  shall  be  credited  to  the  Phantom   Stock  Account  of  such
         Participant.

3.02     ELECTION TO RECEIVE  ANNUAL  AWARD IN SHARES OF STOCK.  With respect to
         each Grant Date, each Eligible Director who would receive a Stock Award
         pursuant to  Subsection  3.01 of the Plan may elect to waive such Stock
         Award  and  receive a whole  number  of shares of Stock,  issued by the
         Company  or  purchased  by the  Company  for  and in the  name  of such
         Eligible Director,  in lieu of such Stock Award. To the extent that the
         formula for such Stock Award, as set forth in Subsection 2.01(r) of the
         Plan does not result in a whole  number of shares of Stock,  the result
         shall be rounded  downwards to the next whole number,  and the value of
         the  fractional  share shall be  distributed  and paid to the  Eligible
         Director  promptly in cash. The stock  certificate  for shares of Stock
         issued  to or  purchased  for and in the name of an  Eligible  Director
         pursuant  to this  Subsection  3.02 shall be held by the  Company for a
         period  of six (6)  months  following  the  Grant  Date  and  shall  be
         distributed  to him  or  her  as  soon  as  practicable  following  the
         expiration of such period;  and during such period he or she shall have
         all the rights of a  shareholder  of the Company  with  respect to such
         shares  of  Stock,  except  that  such  shares  of Stock  shall  not be
         transferrable   other  than  by  will  or  the  laws  of  descent   and
         distribution.  An  election  to waive a Stock  Award  pursuant  to this
         Subsection  3.02 shall be irrevocable and must be made at least six (6)
         months in advance of the Grant Date.

3.03     RETIREMENT PROGRAM TERMINATION AWARDS. On and as of the Effective Date,
         each Eligible Director serving as such on the Effective Date who makes
         or has made an irrevocable election to waive participation in, and any
         and all benefits under, any prior retirement program maintained by the
         Company for Directors, shall have credited to the Phantom

                                      -4-
<PAGE>

         Stock Account of such Participant a number of Phantom Stock Units as
         follows: Ms. Albright 88; Mr. Breslawsky 127; Mr. Carson 717; Mr.
         Croweak 1,343; Mr. Devlin 672; Ms. Henley-Cohn 326; Mr. Lahey 183; Mr.
         McFadden 1,250; Mr. O'Keefe 2,059; Mr. Thomas 568.

SECTION 4.        DEFERRAL OF FEES
                  ----------------

4.01     GENERAL  PARTICIPATION  RULE.  An Eligible  Director may elect to defer
         payment  of all or a  specific  portion  of all  Fees  (other  than the
         quarterly  retainer  Fee payable  during the first  quarter of a fiscal
         year of the Company  during the period  commencing  January 1, 1997 and
         ending December 1, 2010) payable to the Eligible Director more than six
         (6) months after the date of such  election  until he or she (i) elects
         to revoke or alter such election with respect to such Fees payable more
         than six (6) months after the date of such election to revoke,  or (ii)
         terminates  Service,  or (iii)  is paid  upon a Change  in  Control  in
         accordance with Subsection 6.01(d) of the Plan. Elections shall be made
         by written notice delivered to the Corporate  Secretary.  Fees shall be
         considered  deferred  on the date on which  they  would  have been paid
         absent the election to defer (the "Deferral  Date").  Any Fees deferred
         pursuant  to the Plan  shall not be  affected  by any  revocation  of a
         Participant's  election  and  shall  be paid  only in  accordance  with
         Section 6 of the Plan,  together with increments  thereon determined in
         accordance with Subsection 5.02 of the Plan.

4.02     ELECTION  ALTERNATIVES.  The election made pursuant to Subsection  4.01
         shall designate some portion or all of such Fees treated as if invested
         in the Participant's (a) Cash Account, or (b) Phantom Stock Account, or
         some  combination  thereof.  Investment  elections  shall  be  made  in
         multiples of twenty-five per cent (.25) (for example,  seventy-five per
         cent (.75) of such  deferred  Fees treated as being  invested in a Cash
         Account and  twenty-five  per cent (.25) treated as being invested in a
         Phantom Stock Account).

4.03     PRE-EFFECTIVE DATE ELECTIONS.  Each election by a Participant under and
         pursuant to the Directors' Deferred Compensation Plan of the Company in
         effect prior to the Effective Date, shall be and remain in effect under
         the Plan until revoked in accordance  with Subsection 4.01 of the Plan;
         and each amount in such  Participant's Cash Account and number of whole
         and fractional Phantom Stock Units in such Participant's  Phantom Stock
         Account on the Effective date shall be and remain in such Participant's
         Cash Account and Phantom Stock Account,  respectively, on and as of the
         Effective Date.

                                      -5-
<PAGE>

SECTION 5.        ACCOUNTING FOR AWARDS AND DEFERRALS; HYPOTHETICAL
                  INVESTMENT OF DEFERRALS.
                  -----------------------

5.01     SEPARATE ACCOUNTS.  The Company shall maintain a Deferred  Compensation
         Account for each  Participant.  Such Account shall be  maintained  with
         enough  specificity  to enable the  Company to  determine  the  amounts
         credited,  at any particular point in time, to the  Participant's  Cash
         Account and/or Phantom Stock Account.

5.02     HYPOTHETICAL INVESTMENT OF DEFERRED COMPENSATION ACCOUNTS.

         (a)      Credits to Cash Account. A Participant's Cash Account shall be
                  credited  on each  Deferral  Date with the amount of Fees then
                  deferred and elected to be invested in a Cash Account.  On the
                  first day of each calendar quarter, interest shall be credited
                  to the Cash Account of each  Participant for each month of the
                  preceding  quarter,  calculated  on the basis of 30-day months
                  and a 360-day  year and the  balance  of such  Account  on the
                  first day of each month of the  preceding  quarter  (including
                  interest  for  the  preceding  month)  at the  prime  rate  of
                  Citibank,  N.A., its successor,  or any other bank approved by
                  the Committee for such purpose,  in effect on the first day of
                  each such month.

         (b)      Crediting of Phantom Stock Units; Reinvestment of Dividends in
                  Phantom Stock Account; Capital Adjustments.  The number of
                  whole and fractional Phantom Stock Units, computed to three
                  decimal places, to be credited to the Phantom Stock Account of
                  a Participant on each Deferral Date shall be equal to the
                  amount of Fees then deferred and elected to be invested in a
                  Phantom Stock Account, divided by Fair Market Value on the
                  Deferral Date.  On each dividend payment date with respect to
                  the Stock, the Phantom Stock Account of a Participant shall be
                  credited with an additional number of whole and fractional
                  Phantom Stock Units, computed to three decimal places, equal
                  to the product of the dividend per share then payable,
                  multiplied by the number of Phantom Stock Units then credited
                  to such account, divided by Fair Market Value on the dividend
                  payment date.

                  In the event that the number of  outstanding  shares of Common
                  Stock of the Company shall be increased or decreased by reason
                  of  a   stock   split,   stock   dividend,   recapitalization,
                  reclassification  or other  similar  change  in the  Company's
                  capital structure,  the number of Phantom Stock Units credited
                  to a  Participant's  Phantom  Stock  Account shall be adjusted
                  accordingly by and at the direction of the Board.

                  In the event of a Change of Control or of a termination of the
                  Plan  pursuant  to  Subsection  8.03 of the Plan,  the Phantom
                  Stock Units credited to a Participant's  Phantom Stock Account
                  shall be converted  immediately into a cash equivalent  amount
                  and  credited  to,  and shall  thereafter  be  treated  in all
                  respects as part of,

                                      -6-
<PAGE>

                  such Participant's Cash Account. The cash equivalent  amount
                  added to the Cash  Account  pursuant to the preceding sentence
                  shall be  determined by  multiplying  the number  of  Phantom
                  Stock units then standing to the Participant's  credit by the
                  highest Fair Market Value on any day within the sixty (60)
                  calendar days preceding the Change in Control or termination
                  of the Plan.

SECTION 6.        PAYMENT OF DEFERRED COMPENSATION ACCOUNT
                  ----------------------------------------

6.01     BENEFITS FOLLOWING TERMINATION OF SERVICE, TERMINATION OF THE PLAN, OR
         A CHANGE IN CONTROL.  Upon termination of a Participant's Service
         (other than by death) or termination of the Plan pursuant to Subsection
         8.03 of the Plan:

         (a)      The amount of a Participant's Cash Account, together with
                  interest accrued thereon, shall be calculated and shall be
                  distributed in substantially equal annual installments
                  (together with interest on the undistributed amount, credited
                  in accordance with Subsection 5.02(a) of the Plan and payable
                  annually, in arrears, with each annual installment) over a
                  period of five or ten years, as elected by the Participant in
                  accordance with Subsection 6.01(c) of the Plan.  The first
                  installment (or the lump sum payment) shall be distributed,
                  except in the event of a subsequent Change of Control,
                  promptly following the calendar year in which the
                  Participant's Service terminates or the Plan is terminated;
                  and subsequent installments shall, except in the event of a
                  subsequent Change of Control, be distributed promptly at the
                  beginning of each succeeding calendar year until the entire
                  amount credited to the Participant's Cash Account shall have
                  been distributed.  All amounts distributed shall be paid in
                  cash.

         (b)      The number of Phantom Stock Units in a Participant's Phantom
                  Stock Account, including Phantom Stock Units credited as a
                  result of reinvested dividends, shall be calculated, and Stock
                  shall be distributed to the Participant, either in a single
                  distribution promptly after the date of such termination of
                  Service or in substantially equal annual installments
                  (together with additional Phantom Stock Units credited as a
                  result of reinvested dividends) over a period of five or ten
                  years, as elected by the Participant in accordance with
                  Subsection 6.01(c) of the Plan.  In the event of a single
                  distribution of Stock, (i) the value of any fractional Phantom
                  Stock Unit, calculated by reference to the Fair Market Value
                  of a share of Stock on the date of termination of the
                  Participant's Service, shall be distributed and paid in cash
                  to the Participant, and (ii) the whole number of Phantom Stock
                  Units shall be and become payable in an equal number of shares
                  of Stock, issued by the Company or purchased by the Company
                  for and in the name of the Participant.  In the event of
                  payment of Stock in installments, the first installment shall,
                  except in the event of a subsequent Change in Control, be
                  distributed promptly following the calendar year in which the
                  Participant's Service terminates, and subsequent installments
                  shall, except in the event of a subsequent

                                      -7-
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                  Change in Control, be distributed promptly at the beginning of
                  each succeeding calendar year until the entire amount credited
                  to the Participant's Phantom Stock Account shall have been
                  distributed.  To the extent that an installment calculation
                  does not result in a whole number, the result shall be rounded
                  downwards to the next whole number and that number of shares
                  of Stock, issued by the Company or purchased by the Company
                  for and in the name of the Participant, shall be distributed
                  as and for that installment.  Any fractional Phantom Stock
                  Unit payable as part of the final installment shall be valued
                  by reference to the Fair Market Value of a share of Stock on
                  the first business day of the calendar year of payment of the
                  installment and shall be distributed and paid in cash to the
                  Participant promptly.  In the event of a single distribution
                  of Stock, or in connection with the first installment of a
                  distribution of Stock in installments, a stock certificate for
                  any shares of Stock distributable on account of Phantom Stock
                  Units credited to the Participant's Phantom Stock Account
                  pursuant to Section 3 or Section 4 of the Plan within six (6)
                  months prior to the date of such termination of Service shall
                  be held by the Company for a period of six (6) months
                  following such date and shall be distributed to the former
                  Director as soon as practicable following the expiration of
                  such period; and during such period the former Director shall
                  have all rights of a shareholder of the Company with respect
                  to such shares of Stock, except that such shares of Stock
                  shall not be transferrable by the former Director other than
                  by will or the laws of descent and distribution.

         (c)      An election pursuant to Subsection 6.01(a) or Subsection
                  6.01(b) of the Plan must be made by written notice delivered
                  to the Corporate Secretary on or before December 31 of the
                  calendar year prior to the date on which the Participant
                  terminates his or her Service or the date of the Plan's
                  termination.  Upon written request of the Committee, and in
                  its absolute discretion, a Participant may receive a single
                  lump-sum distribution of his or her Cash Account.  Such
                  request must be delivered to the Corporate Secretary prior to
                  the date on which the Participant's Service terminates or the
                  Plan is terminated.  In the event that no timely filed payment
                  election is on record with respect to a Participant, and
                  except in the event of a Change of Control, payment of his or
                  her cash Account and Phantom Stock Account shall be made in
                  installments over a five-year period.  Except in the event of
                  a Change of Control or the termination of the Plan, no portion
                  of a Deferred Compensation Account shall be distributed
                  to a Participant prior to his or her termination of Service.

         (d)      In the event of a Change of  Control,  whether the same occurs
                  before or after  termination of the  Participant's  Service or
                  after  termination of the Plan, all of the Phantom Stock Units
                  credited to a Participant's  Phantom Stock Account,  including
                  Phantom  Stock  Units  credited  as  a  result  of  reinvested
                  dividends,  shall be converted into a cash equivalent  amount,
                  in accordance  with  Subsection  5.02(b) of the Plan,  and all
                  amounts  credited  to a  Participant's  Deferred  Compensation
                  Account, including the amounts converted into cash equivalents

                                      -8-
<PAGE>

                  from  the  Participant's  Phantom  Stock  Account,   shall  be
                  distributed and paid in cash to the Participant immediately in
                  a single lump sum.

6.02     DESIGNATION  OF  BENEFICIARIES.  A  Participant's  spouse  shall be the
         Participant's   Beneficiary  under  the  Plan  unless  the  Participant
         designates  a  different   Beneficiary  and  the  Participant's  spouse
         consents to such  designation.  If a  Participant  leaves no  surviving
         spouse,  his  or  her  estate  shall  be  the  Beneficiary  unless  the
         Participant had designated a different  Beneficiary prior to his or her
         death. A Participant may designate, on a form provided for that purpose
         by the Corporate  Secretary,  a Beneficiary or Beneficiaries to receive
         the cash  distributions  and/or Stock  payments from the  Participant's
         Deferred Compensation Account in the event of his or her death, and the
         period  or  periods  of  payment  (not  to  exceed  ten  years);  and a
         Participant  may direct  that such  payments  be  divided  in  specific
         portions among two or more Beneficiaries; but no such designation shall
         be effective until it has been filed by the  Participant  during his or
         her lifetime with the Corporate  Secretary.  Each Participant may, from
         time to time  during  his or her  lifetime,  on a form  filed  with the
         Corporate  Secretary,  revoke or change such  designation in any or all
         respects;  and  the  death  of a  designated  Beneficiary  prior  to or
         simultaneously  with the  death of the  designating  Participant  shall
         automatically   revoke  such  designated   Beneficiary's  status  as  a
         Beneficiary.

6.03     PAYMENTS UPON DEATH.  Upon a  Participant's  death,  the  provisions of
         Subsections  6.01(a) and 6.01(b) of the Plan shall become applicable to
         the   Participant's   Deferred   Compensation   Account,   except  that
         distributions  and  payments  of cash  and  Stock  shall be made to the
         Beneficiary or  Beneficiaries,  at the time or times  designated by the
         Participant;  provided,  however,  that in the  event  of a  subsequent
         Change of Control,  or at the election of the executor or administrator
         of the  estate of such  Participant,  all of the  Phantom  Stock  Units
         remaining  credited to the decedent's  Phantom Stock Account,  shall be
         converted into a cash equivalent  amount, in accordance with Subsection
         5.02(b) of the Plan in the event of a Change in Control,  or determined
         by  multiplying  the  number of such  Phantom  Stock  Units by the Fair
         Market Value of the Stock on the date of the election of the decedent's
         executor or administrator,  and distributed and paid in cash,  together
         with any amount  remaining  credited to the decedent's  Cash Account on
         such date, in a lump sum, to such Beneficiary or Beneficiaries.

6.04     PAYMENTS  TO  INCOMPETENTS.   If  a  court  of  competent  jurisdiction
         determines  that a person  entitled to receive any cash amount or Stock
         to be distributed  or paid hereunder is under a legal  disability or is
         otherwise  incapacitated  so that he or she is unable to manage  his or
         her financial  affairs to his or her own best  interest and  advantage,
         the Company  shall  distribute  or pay such cash amount or Stock (a) to
         such person's spouse,  (b) or his or her legal guardian or conservator,
         or (c) to any person, to be held and/or used for such person's benefit,
         with no  responsibility  on the part of the Committee or the Company to
         monitor the application of the same. Distributions and/or payments made
         pursuant to this Subsection 6.04 shall operate as a complete  discharge
         of the  obligations  under the Plan of the Company and the Committee in
         respect of such Participant and all other persons.

                                      -9-
<PAGE>

6.05     PROCEDURE  FOR CLAIMING A PAYMENT.  Any person who believes  himself or
         herself to be entitled  to a  distribution  or payment  pursuant to the
         Plan may  request,  in  writing,  a  review  by the  Committee  of such
         person's entitlement under the Plan. Such a request must be sent to the
         Corporate Secretary within one year after the Director's termination of
         Service, or the termination of the Plan or a Change of Control,  or, in
         the case of a Beneficiary,  within on year after a Participant's death.
         After review, the Committee shall,  within a reasonable period of time,
         give, or cause to be given, to the requesting  person written notice of
         its  decision.  If  distribution  of any cash  amount or payment of any
         Stock  claimed is denied,  the  decision  shall set forth the  specific
         reason(s) for the denial.

6.06     UNCLAIMED BENEFITS.  Neither the Company nor the Committee shall be
         responsible for locating any person to whom cash amounts or Stock are
         distributable or payable pursuant to the Plan.

6.07     SUSPENSION  OF  DISTRIBUTIONS  UPON  RE-ELECTION  TO  THE  BOARD.  If a
         Participant receiving  distributions under the Plan returns to Service,
         distribution or payment of any  undistributed or unpaid cash amounts or
         Stock  under  the Plan  shall be  suspended  until  his or her  Service
         terminates  again,  or the Plan is  terminated  pursuant to  Subsection
         8.02, or a Change of Control occurs,  at which time his or her Deferred
         Compensation Account shall be recomputed and adjusted to give effect to
         any additional cash amounts or Stock distributable or payable to him or
         her and to the cash amounts or Stock previously distributed or paid.

SECTION 7.        ADMINISTRATION OF THE PLAN
                  --------------------------

7.01     ACCOUNTS AND RECORDS.  The accounts and all records  necessary  for the
         administration  of the  Plan  shall  be  maintained  by  the  Corporate
         Secretary and shall accurately  disclose the history and status of each
         Participant's Deferred Compensation Account and his or her Cash Account
         and/or Phantom Stock Account,  and all  distributions and payments made
         to each Participant or Beneficiary or other person under the Plan.

7.02     EXPENSES.  The expenses of administering the Plan shall be paid out of
         the general funds of the Company.

SECTION 8.        AMENDMENT OR TERMINATION OF THE PLAN
                  ------------------------------------

8.01     AMENDMENT.  The Plan may, at any time and from time to time, be amended
         or modified in whole or in part by action of the Board;
         provided, however, that:
         --------  -------

         (a)      no such amendment shall become effective  without the approval
                  of the  shareholders  of  the  Company,  if and to the  extent
                  shareholder  approval is required

                                      -10-
<PAGE>

                  in order to comply with Rule 16b-3  promulgated by the
                  Securities and Exchange  Commission under the Securities
                  Exchange Act of 1934; and

         (b)      the  provisions of the Plan that set forth the amounts and the
                  formula for  determining  the  amounts,  pricing and timing of
                  Stock  Awards may not be amended  more than once every six (6)
                  months,  other than to comport  with  changes in the  Internal
                  Revenue Code, the Employee  Retirement Income Security Act, or
                  rules promulgated by the Internal Revenue Service  thereunder;
                  and

         (c)      unless  required by law,  no such  amendment  or  modification
                  shall  deprive a  Participant  of any  portion of those  Stock
                  Awards  and  deferred  Fees  that have  been  credited  to the
                  Participant's  Deferred Compensation Account as of the date of
                  such amendment or modification; and

         (d)      notice of every such amendment shall be given to each Director
                  and Beneficiary of a deceased Director.

8.02     TERMINATION OF STOCK AWARDS.  Unless the Plan is sooner terminated, no
         Stock Award shall be made after March 5, 2010.

8.03     TERMINATION OF PLAN.  The Plan may be terminated prospectively at any
         time by action of the Board; provided, however, that:
                                      --------  -------

         (a)      the amounts then credited to the Deferred Compensation
                  Accounts of the Participants shall be distributed to the
                  Participants as provided in Section 6 of the Plan; and

         (b)      unless  required by law, no such  termination  shall deprive a
                  Participant  of any portion of those Stock Awards and deferred
                  Fees that have been  credited  to the  Participant's  Deferred
                  Compensation Account as of the date of such termination; and

         (c)      the Board shall not  terminate  the Plan solely to  accelerate
                  the   payment  of  any  amounts   previously   credited  to  a
                  Participant's Cash Account or Phantom Stock Account.

SECTION 9.        MISCELLANEOUS PROVISIONS
                  ------------------------

9.01     FUNDING.  The Company's  obligations  under the Plan shall be unfunded;
         and the Company is not, under any  circumstances,  required to fund its
         obligations  hereunder.  The  Company  may,  in  its  sole  discretion,
         purchase  shares of Stock  and/or set aside or invest funds to meet its
         obligations hereunder in whole or in part. If the Company

                                      -11-
<PAGE>

         determines to make such  provisions,  the manner of making it, and the
         continuance or discontinuance of such provision is solely within the
         discretion of the Company.

9.02     A PARTICIPANT'S RIGHT TO ASSETS; ASSIGNMENTS; ENCUMBRANCES. Except with
         respect  to Stock  purchased  by the  Company  for and in the name of a
         Participant  pursuant to Subsection  3.02 or Subsection  6.01(b) of the
         Plan,  the Plan confers on a  Participant  no right,  title or interest
         whatsoever  in or to any  shares of  Stock,  or any  specific  funds or
         assets of the  Company.  The  Participant  has the  rights  solely of a
         general,  unsecured  creditor  with respect to the  enforcement  of and
         payment  from the Plan.  Except  as  aforesaid,  if any Stock  funds or
         assets are acquired by the Company in connection  with its  obligations
         under  this  Plan,  they  shall  not be  deemed  to be held in trust or
         otherwise for the benefit of the Participant, and the Participant shall
         have no property  right or  security  interest in such funds or assets;
         and any Stock  funds or assets so acquired  shall be, and  remain,  the
         general,  unpledged and unrestricted  funds or assets of the Company. A
         Participant's  right to receive a Stock  Award,  a  Retirement  Program
         Termination  Award,  shares of Stock in lieu of a Stock  Award,  and/or
         payment  with  respect to Phantom  Stock  Units,  under the Plan is not
         assignable   or   transferrable   and  shall  not  be  subject  to  any
         encumbrances,  liens,  pledges or charges of the  Participant or his or
         her creditors.  Any attempt to assign, transfer or hypothecate any such
         Stock Award,  Retirement Program  Termination Award, shares of Stock or
         right  to  receive  payment  shall  be null and void and of no force or
         effect whatsoever.

9.03     STOCK.  The  aggregate  number of shares of Stock that may be issued by
         the Company under the Plan shall not exceed 200,000; provided, however,
                                                              --------  -------
         that in the event of a stock split,  stock dividend,  recapitalization,
         reclassification  or other  similar  change  in the  Company's  capital
         structure,  the  number of  shares  of Stock  that may be issued by the
         Company  under the Plan shall be  appropriately  adjusted by and at the
         direction of the Board.  The grant of Stock Awards and the crediting of
         Phantom Stock Units to Phantom Stock  Accounts under the Plan shall not
         affect in any way the right, power or authority of the Company to issue
         additional   Stocks   or  other   securities,   to  make   adjustments,
         reclassifications,  reorganizations  or other changes in its corporate,
         capital  or other  business  structure,  to  participate  in a  merger,
         consolidation or share exchange, or to transfer its assets, dissolve or
         liquidate.

9.04     GOVERNMENT REGULATIONS.
         ----------------------

         (a)      The  obligations  of the Company to issue,  or  purchase,  and
                  deliver  any shares of Stock  payable  under the Plan shall be
                  subject to all applicable laws, rules and regulations,  and to
                  the obtaining of all such approvals by  governmental  agencies
                  as may be deemed necessary or appropriate by the Board.

         (b)      Except as otherwise  provided in Subsection  8.01 of the Plan,
                  the  Board  may  make  such  changes  in  the  Plan  as may be
                  necessary  or   appropriate  to  comply  with  the  rules  and
                  regulations of any governmental authority.

                                      -12-
<PAGE>

9.05     EFFECT OF MISTAKE.  In the event of a mistake or misstatement as to the
         eligibility of any person,  or the amount or kind of  distributions  or
         payments  made or to be  made  to a  Participant  or  Beneficiary,  the
         Committee shall, to the extent it deems possible, make such adjustments
         as will in its judgment  accord to such  Participant or Beneficiary the
         distributions  and  payments  to which he or she is  properly  entitled
         under the Plan.  No member of the Board and no officer or  employee  of
         the  Company  shall be liable to any  person  for any  action  taken or
         omitted  in  connection  with the  administration  of the Plan,  unless
         attributable  to his or her own  fraud or  wilful  misconduct;  and the
         Company  shall not be liable to any person for any such action,  unless
         attributable  to fraud or wilful  misconduct on the part of a Director,
         officer or employee of the Company.

9.06     NON-EXPANSION OF RIGHTS. Nothing contained in the Plan shall afford any
         Director  the right to be  retained  on the Board of  Directors  of the
         Company.  Neither  the  provisions  of  this  Plan  nor  any act of the
         Committee or the Company  hereunder shall be construed as giving to any
         Director or other person any legal or equitable  right or claim against
         the  Company  for the  payment  of any  Stock  Award or  deferred  Fees
         hereunder, except as otherwise specifically provided in the Plan.

9.07     HEADINGS OF SECTIONS  AND  SUBSECTIONS.  The  headings of Sections  and
         Subsections are included  solely for  convenience of reference,  and if
         there is any conflict  between such headings and text of the Plan,  the
         text shall control.

9.08     ILLEGALITY OF PARTICULAR  PROVISION.  The  illegality of any particular
         provision  of the Plan shall not affect the other  provisions  thereof,
         but the Plan shall be  construed  in all  respects  as if such  invalid
         provision were omitted.

9.09     APPLICABLE LAW. The validity,  interpretation and administration of the
         Plan,  and the rights of any and all  persons  having or  claiming  any
         interest  in or under the  Plan,  shall be  governed  by the law of the
         State of Connecticut, except to the extent preempted by federal law.

                                      -13-<PAGE>   1

                                                                    EXHIBIT 10.8

[ALLERGAN LOGO]

March 5, 2001

William C. Shepherd
Chairman of the Board
Allergan Specialty Therapeutics, Inc.
2525 Dupont
Irvine, CA  92612

Dear Mr. Shepherd:

Pursuant to this letter agreement by and between Allergan, Inc. ("Allergan") and
Allergan Specialty Therapeutics, Inc. ("ASTI"), Exhibit A to the License Option
Agreement dated March 6, 1998, by and between Allergan and ASTI is amended as
follows:

Section 3.1(a) of the Exhibit A is amended to add the following provisions after
3.1(a)(ii):

         "(iii) Notwithstanding any other provision of this Agreement, including
Section 3.1(a)(I) and (ii), Allergan shall pay to ASTI a royalty of fifteen (15)
percent (15%) of Allergan's Net Sales of the following ASTI Products, if such
ASTI Product has become a Licensed Product:

<TABLE>
<S>                        <C>                 <C>
Brimo Timolol Combo        Eyecare             Ocular Hypertension/Primary Angle Glaucoma
Keto Reformulation         Eyecare             Post surgical Pain
Alpha 2 Pain               New Technologies    Chronic Pain
Photo Dynamic Therapy      Eyecare             Age Related Macular Degeneration
AGN 195795                 Eyecare             Glaucoma"
</TABLE>

Additionally, by this letter agreement, Allergan, on the one hand, and ASTI, on
the other, confirm that Exhibit A attached hereto accurately reflects the
current ASTI Products and Pre-Selection Work Projects of ASTI.

Please acknowledge your acceptance of the terms of this letter agreement by
signing below.

Very truly yours,

/s/ ERIC BRANDT
-----------------------
    Eric Brandt                            ACCEPTED AND AGREED:

                                           Allergan Specialty Therapeutics, Inc.

                                           By: /s/ WILLIAM C. SHEPHERD
                                               ---------------------------------
                                                   William C. Shepherd, Chairman

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