Exhibit 10.27a
UIL HOLDINGS CORPORATION
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EXECUTIVE INCENTIVE COMPENSATION PROGRAM
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I. Purpose
The purpose of the UIL Holdings Corporation Executive Incentive
Compensation Program, as amended and restated effective January 1, 2002
in the form of this document (the "Program"), is to promote the
interests of UIL Holdings Corporation ("UIL"), its customers, and its
shareholders by (i) helping to attract and retain executives and key
managers of high ability, (ii) heightening the motivation of those
executives and key managers to attain goals that are in the interests
of shareholders and customers, and (iii) encouraging effective
management teamwork among the executives and key managers.
II. Definitions
When used herein, each of the following terms shall have the
corresponding meaning set forth below unless a different meaning is
plainly required by the context in which a term is used:
A. "Board" shall mean the Board of Directors of the Company.
B. "Chief Executive Officer" shall mean the chief executive
officer of the Company.
C. "Committee" shall mean the Compensation and Executive
Development Committee of the Board, or such other committee of
the Board comprised exclusively of "outside directors" as such
term is defined in Section 162(m) of the Internal Revenue Code
of 1986, as amended, as the Board may designate to administer
the Program.
D. "Company" shall mean UIL Holdings Corporation.
E. "Compensation" shall mean the annual base salary of a Participant as
of April 1 of the applicable Year.
F. "Incentive Award" shall mean an award earned by a Participant
pursuant to Section VII hereof.
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G. "Maximum Incentive Award" shall mean 150% (one hundred and
fifty percent) of the Participant's Target Incentive Award
which is determined by the Committee pursuant to Section V.A
hereof.
H. "Participant" shall mean a person who is selected by the
Committee for participation in the Program for a particular Year.
I. "Participant's Target Incentive Award" shall mean the
potential amount awarded to each Participant pursuant to
Section V.A hereof for achievement of the Target Level of
Performance.
J. "Subsidiary" shall mean one or more corporations, a majority
of the outstanding shares of voting stock of which is owned
directly or indirectly by the Company. An employee of a
Subsidiary shall only be eligible to participate in the
Program if selected for participation by the Committee in
accordance with Section IV hereof.
K. "Year" shall mean a calendar year January 1 through December 31.
III. Administration of the Program
A. The Program shall be administered by the Committee, as it may be
constituted from time to time. The Committee may adopt rules and
practices for carrying out the Program and may take such action in
the administration of the Program not inconsistent with the terms
hereof as it shall deem appropriate. Such rules and practices shall
be considered as incorporated into this Program by reference. All
questions of interpretation and construction of the Program, of any
rights arising by reason of the Program, or of the provisions of any
instrument or document used in connection with the Program shall be
determined by the Committee. The Committee may delegate authority
with respect to such aspects of the administration of the Program to
such individuals,,who may be employees of the Company or its
Subsidiaries, as the Committee may determine. Decisions of the
Committee on all matters relating to the Plan shall be conclusive
and binding upon all persons.
B. The Committee, in its sole discretion, may determine not to put the
Program into effect for the ensuing Year.
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IV. Selection of Participants
Prior to, or within the first 90 days of, each Year, after having
received the recommendations of the Chief Executive Officer, the
Committee may, in its sole discretion, select persons to be
Participants in the Program for the ensuing Year. Participants shall
generally be selected from the group of Company officers and key
managers, Subsidiary presidents, other Subsidiary officers, and other
key managers who report directly to a Company officer or Subsidiary
president. No person shall at any time have a right to be selected as a
Participant for any Year nor, having been selected as a Participant for
one Year, shall have a right to be selected as a Participant for any
other Year. The fact that a person is selected as a Participant for any
Year shall not mean that such person will necessarily receive an
Incentive Award for that Year.
V. Determination of Participant's Target Incentive Award
A. Prior to, or within the first 90 days of, each Year the Program is to
be put into effect, the Committee shall determine the amount of the
Target Incentive Award for each Participant for the ensuing Year.
The Participants' Target Incentive Awards are determined according to
the Target Incentive Award Percentages indicated in Exhibit I
attached hereto, provided however that the Committee may, prior to or
within the first 90 days of any Year, approve Target Incentive Award
Percentages with respect to the ensuing Year that are different than
those indicated in Exhibit I. The appropriate percentage based on
the Participant's Salary Grade shall be applied to the Compensation
of the Participant for the applicable Year. The product of this
process shall be the Participant's Target Incentive Award.
B. The maximum amount which shall be awarded to each Participant
with respect to any Year shall be limited to the Maximum Incentive
Award.
C. The amount of the Participant's Target Incentive Award for any
Year the Program is not put into effect by the Committee shall be
zero.
D. If the Company reduces or omits a dividend on its common stock
during any Year, the Board, at its sole discretion, may reduce
the Participant's Target Incentive Award for the Year.
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VI. Establishment of Goals
A. Prior to, or within the first 90 days of, each Year the Program is to
be put into effect, and after having received the recommendations of
the Chief Executive Officer, the Committee shall, in its sole
discretion, set specific goals ("Goals") for each person or group of
persons selected to be Participants in the Program for the ensuing
Year. The Goals applicable to any Year for any person or group of
persons shall be those Goals, based on the financial results or other
performance of the Company, its Subsidiaries or specific business
units thereof, or of individual persons or groups or teams of
persons, or such other factors, as the Committee shall approve with
respect to such Year.
B. At the time each Goal is set, the Goal will be given a percentage
weight by the Committee relative to the other Goals, with such
percentage varying by Participant in the sole discretion of the
Committee. This percentage weight shall be known as the Goal
Percentage. The sum of the Goal Percentages for any Participant shall
be 100%. For illustrative purposes only, the Goals and Goal
Percentages for the 2002 Year are summarized in Exhibit II attached
hereto; the actual Goals and Goal Percentages for any Year shall be
those established by the Committee.
C. Each Goal will have associated with it a range of performance as
shall be approved by the Committee. The range of performance will
be used to determine the percent of the Participant's Target
Incentive Award earned for each Goal, known as the Percent of the
Participant's Target Incentive Award Earned.
A Threshold, Target and Maximum Level of Performance for each
Goal shall be established by the Committee. For performance
below the Threshold or minimum level, the Incentive Award
shall be zero unless, in the sole discretion of the Committee,
extenuating factors exist which would dictate otherwise.
The Percent of the Participant's Target Incentive Award Earned
for each Goal shall be established based on the Level of
Performance achieved for that Goal. The relationship of the
range of performance to the percent of the Target Incentive
Award Earned is as follows:
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Percent of Target
Range of Performance Incentive Award Earned
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Less than Threshold None
Threshold 50%
Target 100%
Maximum or higher 150%
D. The Committee, under extenuating circumstances, may adopt in
its sole discretion adjustments to any of the Goals or Goal
Percentages, if it determines that an extraordinary event or
events have occurred which significantly alters the basis upon
which a Goal or Goal Percentage was established. Events
warranting adjustment of Goals or Goal Percentages include,
but are not limited to, events such as changes in accounting
practices; adoption of or changes in tax or regulatory laws,
regulations, or orders; extraordinary economic changes; or
compliance with judicial decrees or other legal authorities.
VII. Determination of Incentive Awards
A. In January following each Year the Program is in effect, and
after audited financial results for the Year are available to
the Committee, the Committee, after having received the
recommendations of the Chief Executive Officer, shall
determine the size of the Incentive Award for each Participant
for such Year.
Each Incentive Award shall be based on the achievement of the
Goals for the Year applicable to the Participant.
B. The Committee, under extenuating circumstances, may determine
to reduce or eliminate the Incentive Awards determined based
on the achievement of Goals for such Year. In making such
determination, the Committee shall consider the Company's
performance during such Year, taking into account the relative
success of the Company and such other significant factors as
the Committee deems relevant.
C. The Participant's Incentive Award shall be determined
according to the following steps:
1. Determination of Target Incentive Award Applicable to Each Goal.
The Target Incentive Award for each Participant shall
be allocated among the various Goals
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applicable to the Participant, based on the Goal
Percentages approved by the Committee. The appropriate
Goal Percentage shall be applied to the Participant's
Target Incentive Award to determine the amount of the
Target Incentive Award allocated for the Year to each
Goal for each Participant.
2. Determination of Incentive Awards.
The Incentive Award for each Participant will be
awarded based on the achievement of Goals for the
Year applicable to the Participant. The amount of the
Incentive Award will be determined separately with
respect to each Goal, unless otherwise determined by
the Committee.
For performance between the Threshold and Target
Levels of Performance, or between the Target and the
Maximum Levels of Performance, the percent of the
Participant's Target Incentive Award allocated to a
Goal that is earned shall be calculated by straight
line interpolation. An Incentive Award with respect
to each Goal may range from 50% to 150% of the
Participant's Target Incentive Award allocated for
the Year to that Goal.
A Participant's total Incentive Award for a Year
shall be equal to the sum of the Incentive Awards
calculated separately for each Goal applicable to the
Participant for the Year. The total Incentive Award
will be rounded to the nearest whole percent of the
Participant's Target Incentive Award. However, with
respect to Participants who are in a Subsidiary
business unit, the total amounts of the Incentive
Awards calculated for all Subsidiary business unit
Participants (other than for the Subsidiary business
unit presidents) shall be pooled, and the president
of such Subsidiary business unit shall have
discretion, unless the Committee determines
otherwise, as to how to such pooled Incentive Awards
are to be allocated among the Participants (other
than the Subsidiary business unit president) in such
business unit (subject to the approval of the Chief
Executive Officer if the amount of the Incentive
Award received by a Participant in a Subsidiary
business unit as a result of such pooling and
allocation would differ significantly from the amount
that would otherwise be payable to such Participant
if such pooling did not occur).
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Exhibit III provides an Illustration of an Incentive Award
Determination.
D. The Committee in its sole discretion, may grant an adjusted
Incentive Award to a Participant to reflect his or her shorter
period of participation during the Year due to accession,
termination by reason of death, permanent disability, retirement,
or for other good cause, or due to promotion during the year. In the
event a Participant's employment with the Company or its
Subsidiaries terminates during the Year for reasons other than
death, permanent disability or retirement, no Incentive Award shall
be payable with respect to such Participant unless the Committee
determines otherwise.
E. The Committee in its sole discretion, may grant an adjusted
Incentive Award to a Participant to reflect his or her adjusted
Compensation during the Year.
VIII. Payment of Incentive Awards
Promptly following action by the Committee with respect thereto in
conformity with Section III hereof, Incentive Awards shall be paid by
the Company to Participants in cash. The Company may deduct from any
Incentive Award the amount of taxes, if any, which the Company is
required to withhold with respect to the Award. A Participant may elect
to defer receipt of any portion of his or her Incentive Award into the
Company's Executive Deferred Compensation Program.
IX. Miscellaneous
A. Assignments and Transfers
The rights and interests of a Participant under the Program
may not be assigned, encumbered, or transferred; provided
however, that in the event of the Participant's death, any
award payable hereunder shall be paid to the executor or
administrator of the Participant's estate.
B. Program Creates No Employment Rights
Neither the establishment of the Program nor any action taken
thereunder shall be construed as creating a contract of
employment, or as a term or provision of any such contract, or
as giving any employee any right to be retained in the employ
of the Company or a Subsidiary.
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C. Nature of Participant's Interest
Any amounts payable to a Participant under the Program shall
constitute solely a general, unsecured liability of the
Company, payable exclusively out of the Company's general
assets and in no event shall the Company or any Subsidiary be
obligated to segregate any funds or assets to secure the
payment of any such amount. No action pursuant to the Program
shall confer upon any Participant any right, title, or
interest in any assets of the Company or a Subsidiary.
D. Amendment, Suspension, or Termination of Program
The Board may amend, suspend, or terminate the Program at any time.
E. Applicable Law
The interpretation of the provisions hereof and the
administration of the Program shall be governed by the laws of
Connecticut.
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Exhibit I
UIL HOLDINGS CORPORATION
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EXECUTIVE INCENTIVE COMPENSATION PROGRAM
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Target Incentive Awards Percentages,
By Officer Payroll Salary Grades
Target Incentive Award
Officer Payroll Percentages (Percent of
Salary Grade Compensation)
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8 70%
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7 60%
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6 50%
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5 40%
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4 33%
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3 27%
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2 23%
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1 20%
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Exhibit II
UIL HOLDINGS CORPORATION
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EXECUTIVE INCENTIVE COMPENSATION PROGRAM
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2002 Year Goals and Goal Percentages
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For illustrative purposes only, the Goals and the Goal Percentages for the 2002
Year are summarized below; the actual Goals and Goal Percentages for any Year
shall be those established by the Committee. Each Goal shall be as further
defined by the Committee. The Committee shall further indicate threshold,
target and maximum levels of performance for each Goal.
Goals and Goal Percentage
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Total Total
Total Total Business Business Strategic
Participant UIL UIL Unit(BU) Unit(BU) Opportunities or
Groups EPS Cash Flow EPS Cash Flow Scorecards
- ----------- ----- --------- --------- --------- -----------------
UIL CEO, CFO,
Corporate
Development 50% 20% 30%
All Other UIL
Officers and
Employees 20% 10% 30% (A) 10% (A) 30%
BU Presidents (B) 20% 40% 20% 20%
All Other BU
Officers (B) 15% 35% 20% 30%
Other BU Direct
Reports (B) 10% 35% 15% 40%
(A) 1/3 each for UI, APS and Xcelecom
(B) Some BU EPS and cash flow goals are also contained in their balanced scoreboards
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Exhibit III
UIL HOLDINGS CORPORATION
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EXECUTIVE INCENTIVE COMPENSATION PROGRAM
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Illustration of an Incentive Award Determination
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I. Prior to, or during the first 90 days of, each Year the Program is in
effect, establish Goals and Goal Percentages applicable to
Participants:
A. Determine appropriate weights for each Goal, for each Participant or
group of Participants:
Example: Participant A
Goal Goal Percentage
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Goal #1 20%
Goal #2 40%
Goal #3 20%
Goal #4 20%
----
Total 100%
The number of Goals and the Goal Percentages used for each
Goal may vary; the above is for illustrative purposes only and
is not predetermined by the Program.
B. Establish range of performance for each Goal including
threshold, target and maximum levels of performance.
Example: Range of performance for Goal #1 - UIL EPS
Threshold: $3.90
Target: $4.32
Maximum: $4.38
II. In January following each year the Program is in effect, determine
Incentive Award.
Example: Calculation of Incentive Award (the total Incentive Award
amount is rounded to the nearest 1% of the Target Award)
Assumptions: 1. Participant in Salary Grade 4.
o Compensation = $150,000
o Target Incentive Award Percentage = 33%
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2. Goal Percentages as indicated in Part I above.
3. Percent of Target Goal Incentive Awards Earned:
o Goal #1: 125%
o Goal #2: 150%
o Goal #3: 55%
o Goal #4: 0%
A. Participant's Total Target Incentive Award:
Compensation X Target Incentive = Target
Award Percentage Incentive Award
$150,000 X .33 = $49,500
B. Calculation of Target Goal Incentive Awards
Target X Goal = Target
Incentive Percentage Goal Incentive
Award Award
Target Goal
Goal Incentive Award
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Goal #1: $49,500 X .20 = $ 9,900
Goal #2: $49,500 X .40 = $ 19,800
Goal #3: $49,500 X .20 = $ 9,900
Goal #4: $49,500 X .20 = $ 9,900
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Total = $ 49,500
C. Calculation of Incentive Awards Applicable to Each Goal
Target Goal X Percent of Target Goal = Goal Incentive
Incentive Award Incentive Award Award Earned
Goal #1: $ 9,900 x 120% = $ 11,880
Goal #2: $19,800 x 150% = $ 29,700
Goal #3: $ 9,900 X 60% = $ 5,940
Goal #4: $ 9,900 X 0% = $ 0
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D. Total Incentive Award = $ 47,520 (96% of Total
Target Incentive Award)
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