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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
(Amendment No. 29)
SOLICITATION/RECOMMENDATION STATEMENT
Pursuant to Section 14(d)(4)
of the Securities Exchange Act of 1934
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ITT CORPORATION
(Name of Subject Company)
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ITT CORPORATION
(Name of Person(s) Filing Statement)
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Common Stock, no par value
(including the associated Series A Participating Cumulative
Preferred Stock Purchase Rights)
(Title of Class of Securities)
450912 10 0
(CUSIP Number of Class of Securities)
RICHARD S. WARD, Esq.
Executive Vice President,
General Counsel and Corporate Secretary
ITT Corporation
1330 Avenue of the Americas
New York, NY 10019-5490
(212) 258-1000
(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications on Behalf of the Person(s) Filing Statement)
With a copy to:
PHILIP A. GELSTON, Esq.
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019-7475
(212) 474-1000
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<PAGE>
INTRODUCTION
The Solicitation/Recommendation Statement on Schedule
14D-9 (the "Schedule 14D-9") originally filed on February 12, 1997,
by ITT Corporation, a Nevada corporation (the "Company"), relates to
an offer by HLT Corporation, a Delaware corporation ("HLT") and a
wholly owned subsidiary of Hilton Hotels Corporation, a Delaware
corporation ("Hilton"), to purchase 61,145,475 shares of the common
stock, no par value (including the associated Series A Participating
Cumulative Preferred Stock Purchase Rights), of the Company. All
capitalized terms used herein without definition have the respective
meanings set forth in the Schedule 14D-9.
Item 3. Identity and Background.
The response to Item 3 is hereby amended by adding the
following after the final paragraph of Item 3(b):
In view of the need to minimize employee distraction and
to retain employee loyalty and dedication to the Company and to
assure their attention to the Company's performance pending
resolution of the Hilton Tender Offer, on August 14, 1997, the
Compensation and Personnel Committee of the Board of Directors of
the Company, after consultation with its independent compensation
consultant, Towers Perrin, unanimously voted, with the unanimous
concurrence of the entire Board (with management members of the
Board abstaining), to provide or modify existing severance
arrangements for certain officers and employees in the event of a
change in control as follows: (1) the amendment of the ITT Excess
Pension Plans to permit lump-sum distributions to participants whose
employment is terminated within two years of a change in control of
the Company; (2) the amendment of the ITT Corporation Salaried
Retirement Plan and the ITT Excess Pension Plans to provide enhanced
retirement benefits (which are equivalent to the enhanced benefits
provided to employees whose employment recently was severed) in the
event of a change in control of the Company to certain active
employees, including certain executive officers of the Company; (3)
the modification of each of ITT's Senior Executive Severance Pay
Plan (the "SPP"), the nine individual employment agreements (the
"Individual Agreements") entered into as of February 11, 1997, and
the Employment and Consulting Agreement (the "Araskog
<PAGE>
Agreement") with the Company's Chairman and Chief Executive, Rand V.
Araskog, entered into as of December 19, 1995, to provide that the
excise tax gross-up payment contained in such arrangements be
applicable in all events following a change in control of the
Company that would give rise to such excise taxes; and (4) to fund
existing obligations of the Company under the ITT Corporation
Salaried Retirement Plan, the ITT Excess Pension Plans, the ITT
Corporation Excess Savings Plan, the ITT Corporation Deferred
Compensation Plan, the Company's Executive Death Benefit Program
(which ceased to be offered in 1985 and covers nine executives,
including four current executive officers, Juan C. Cappello, Ralph
W. Pausig, Daniel P. Weadock and Richard S. Ward) and under a split
dollar insurance arrangement with Mr. Araskog. The Company has a
severance plan for salaried employees who are not covered by the SPP
or by the Individual Agreements and has established other
arrangements to protect (including vesting and/or funding) or
enhance certain benefit arrangements for such employees in the event
of a change in control of the Company. Copies of the SPP, the form
of the Individual Agreements and the Araskog Agreement are filed as
Exhibits 86, 87 and 88 hereto, respectively, and are incorporated
herein by reference.
Item 4. The Solicitation or Recommendation.
The response to Item 4 is hereby amended by adding the
following:
(a) Recommendation of the Board of Directors.
At a meeting held on August 14, 1997, the Board of
Directors of the Company reassessed the Hilton Transaction in light
of developments since July 15, including the Comprehensive Plan, and
unanimously reaffirmed its conclusion that the Hilton Transaction,
including the Hilton Tender Offer, is inadequate and not in the best
interests of the Company. Accordingly, the Board continues to
unanimously recommend that the stockholders of the Company reject
the Hilton Transaction and not tender their Shares pursuant to the
Hilton Tender Offer or take any other action to facilitate the
Hilton Tender Offer.
The Board's determination was based on the Board's review
and consideration of the interests of the Company's stockholders and
all other factors permitted by applicable law, including the
interests of the Company's employees, suppliers, creditors and
customers; the economy of Nevada
<PAGE>
and the nation; the interests of the communities in which the
Company operates and of society; and the long and short- term
interests of the Company and its stockholders, including the
possibility that these interests may be best served by the continued
independence of the Company. The Board also reaffirmed its
determination that, in light of the prospects of each of the
Company's businesses, the attractiveness of the Distributions and
the other elements of the Comprehensive Plan and other factors
described below, the Company's and its stockholders' interests would
be best served if the Company (and particularly the core business of
the Company) were to remain independent and pursue the Comprehensive
Plan.
(b) Reasons for Recommendation. In reaffirming its
recommendation that stockholders of the Company should reject the
Hilton Transaction, the Board considered a number of factors,
including, without limitation, the following:
(i) the Board's belief, based on the factors further
described in this amendment and factors previously disclosed,
that the Hilton Transaction, including the Hilton Tender Offer,
does not reflect the inherent value of the Company;
(ii) a presentation by Goldman, Sachs & Co. ("Goldman
Sachs") and Lazard Freres & Co. LLC ("Lazard Freres"),
financial advisors to the Company, concerning the Company,
Hilton and the financial aspects of the Hilton Transaction, and
the opinions of Goldman Sachs and Lazard Freres to the effect
that, as of August 14, 1997, the consideration to be received
by stockholders of the Company pursuant to the Hilton
Transaction, including the Hilton Tender Offer, is inadequate;
such opinions were expressed after review of many of the
factors referred to herein and various financial criteria used
in assessing an offer, and were based on various assumptions
and subject to various limitations, which were reviewed for the
Board as part of the presentation of Goldman Sachs and Lazard
Freres;
(iii) the Board's continued belief that, in light of the
prospects of each of the Company's businesses, pursuit of the
Comprehensive Plan and the successful implementation by the
three companies of their long-term strategic plans will produce
greater value for the stockholders of the Company and greater
benefits for the Company's
<PAGE>
employees, creditors, customers, and the economies and
communities in which the Company operates than the Hilton
Transaction, including the Hilton Tender Offer; in that regard,
the Board noted that the $70 per Share offered by the Company
in the Equity Tender Offer and offered by Hilton in the Hilton
Tender Offer are not comparable as the Equity Tender Offer does
not involve a change in control of the Company; and
(iv) the remaining factors discussed in Amendment No. 20
to the Schedule 14D-9, which the Board believes, after review
of the recently announced modifications to the Hilton
Transaction, continue to support the Board's recommendation.
A copy of a press release announcing the Board's
determination is filed as Exhibit 89 hereto and is incorporated
herein by reference.
Item 9. Exhibits.
The response to Item 9 is hereby amended by adding the
following new exhibits:
86. ITT Corporation Senior Executive Severance Pay Plan.
87. Form of Individual Employment Agreement.
88. Second Amendment to Employment and Consulting Agreement
dated as of December 19, 1995 between ITT Destinations,
Inc. and Rand V. Araskog.
89. Text of Press Release issued by the Company dated August
14, 1997.
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this Statement
is true, complete and correct.
ITT CORPORATION
By /s/ RICHARD S. WARD
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Name: Richard S. Ward
Title: Executive Vice President,
General Counsel and
Corporate Secretary
Dated as of August 15, 1997
<PAGE>
EXHIBIT INDEX
Exhibit Description Page No.
(86) ITT Corporation Senior Executive Severance Pay Plan....
(87) Form of Individual Employment Agreement................
(88) Second Amendment to Employment and Consulting Agreement
dated as of December 19, 1995 between ITT Destinations,
Inc. and Rand V. Araskog...............................
(89) Text of Press Release issued by the Company dated
August 14, 1997........................................
[Exhibit 86]
ITT Corporation
Senior Executive Severance Pay Plan
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1. Purpose
The purpose of this ITT Senior Executive Severance Pay Plan
("Plan") is to assist in occupational transition by, providing
severance pay, for employees covered by this Plan whose employment is
terminated under conditions set forth in this Plan.
2. Covered Employees
Covered employees under this Plan ("Executives") are full-time,
regular salaried employees of ITT Corporation ("ITT" or the "Company")
and of any ITT subsidiary company ("ITT Subsidiary") (collectively or
individually as the context requires "Company") who are United States
citizens, or who are employed in the United States, in salary, grade
26 and above at any time within the two year period immediately
preceding the date the Company selects as the Executive's last day of
active employment ("Effective Date") and such other employees of the
Company or any ITT Subsidiary who shall be designated as covered
employees hereunder by the Compensation and Personnel Committee (the
"Compensation Committee") of the Company's Board of Directors (the
"Board").
Change in Control Rule. Following a "change in control of the
Company", (which, for purposes of this Plan, shall have the same
meaning as an "Acceleration Event" under Section 9 of the Company's
1995 Incentive Stock Plan as in effect on February 11, 1997) (as used
herein, the occurrence of an Acceleration Event shall be referred to
as a "Change in Control"), special rules provided herein shall apply
to those Executives designated by the Compensation Committee whose
names are designated on Schedule A or B hereto ("Special Severance
Executives"). Notwithstanding the preceding sentence, any spin-off of
all or a portion of the assets or operations of the Company or any
subsidiary which has been approved by a majority of the directors
serving on the Board as of the date hereof, or by directors approved
by the vote of two-thirds of the directors then still in office who
were directors as of the date hereof, shall not be deemed a "Change in
Control".
<PAGE>
3. Severance Pay Upon Termination of Employment
If the Company terminates an Executive's employment, the
Executive shall be provided severance pay in accordance with the terms
of this Plan except where the Executive:
o is terminated for cause,
o accepts employment or refuses comparable employment with a
purchaser as provided in Section 8, "Divestiture",
o is terminated with an Effective Date on or after the
Executive's Normal Retirement Date as defined herein, or
o terminates employment with the Company prior to the Effective
Date.
No severance pay will be provided under this Plan where the Executive
terminates employment by:
o voluntarily resigning,
o voluntarily retiring, or
o failing to return from an approved leave of absence (including
a medical leave of absence).
No severance pay will be provided under this Plan upon any
termination of employment as a result of the Executive's
death or disability.
"Normal Retirement Date" shall mean the first of the month which
coincides with or follows the Executive's 65th birthday
Change in Control Rule. The foregoing provisions of this Section 3
shall not apply to Special Severance Executives following a Change in
Control. In lieu thereof, if, within two years following the
occurrence of a Change in Control, a Special Severance Executive is
terminated by the Company other than for Cause, death or Incapacity or
the Special Severance Executive terminates for Good Reason, he shall
receive the benefits set forth in Schedule A or B, as applicable.
Following a Change in Control, "Cause", "Disability" and "Good Reason"
shall have the respective meanings set forth on Schedule D hereto.
<PAGE>
4. Schedule of Severance Pay
Severance pay will be provided in accordance with the following
Schedule of Severance Pay which sets forth the months of Base Pay
which is provided to an Executive based upon the Executive's Years of
Service as of the Effective Date.
Years of Service Months of Base Pay
---------------- ------------------
Less than 4...................... 12
4...................... 13
5...................... 14
6...................... 15
7...................... 16
8...................... 17
9...................... 18
10...................... 19
11...................... 20
12...................... 21
13...................... 22
14...................... 23
15 or more.............. 24
"Base Pay" shall mean the annual base salary rate payable to the
Executive at the Effective Date divided by twelve (12) months. Such
annual base salary rate shall in no event be less than the highest
annual base salary rate paid to the Executive at any time during the
twenty-four month (24) period immediately preceding the Effective
Date.
"Years of Service" shall mean the total number of completed years of
employment since the Executive's ITT system service date to the
Effective Date, rounded to the nearest whole year. The ITT system
service date is the date from which employment in the ITT system is
recognized for purposes of determining eligibility for vesting under
the applicable Company retirement plan covering the Executive on the
Effective Date.
Notwithstanding the above Schedule of Severance Pay, (i) in no event
shall months of Base Pay provided to an Executive exceed the number of
months remaining between the Effective Date and the Executive's Normal
Retirement Date or (ii) shall severance pay exceed the equivalent of
twice the Executive's total annual compensation during the year
immediately preceding the Effective Date.
Change in Control Rule. The foregoing provisions of this Section 4
shall not apply to Special Severance Executives following a Change in
Control. In lieu thereof, severance pay will be provided in accordance
with Schedule A or B, as applicable.
<PAGE>
5. Form of Payment of Severance Pay
Severance pay shall be paid in the form of periodic payments
according to the regular payroll schedule ("Salary Continuation"),
provided that ITT reserves the right at any time to pay the remaining
severance pay in the form of a discounted lump sum.
Any discounted lump sum paid under this Plan shall be equal to the
present value of the remaining periodic payments of severance pay as
determined by ITT using an interest rate equal to the prime rate at
Citibank in effect on the date ITT notifies the Executive that it is
exercising its right to pay severance in the discounted lump sum.
Salary Continuation will commence or the discounted lump sum will be
paid on the next day following the Effective Date except that where
ITT exercises its right to pay the discounted lump sum after the
commencement of Salary Continuation, it will be paid promptly after
ITT exercises such right.
In the event of an Executive's death during the period the Executive
is receiving Salary Continuation, the amount of severance pay
remaining shall be paid in a discounted lump sum to the Executive's
spouse or to such other beneficiary, or beneficiaries designated by
the Executive in writing, or, if the Executive is not married and
failing such designation, to the estate of the Executive.
If an Executive is receiving Salary Continuation, the Executive must
continue to be available to render to the Company reasonable
assistance, consistent with the level of the Executive's prior
position with the Company, at times and locations that are mutually
acceptable. In requesting such services, the Company will take into
account any other commitments which the Executive may have. After the
Effective Date and normal wind up of the Executive's former duties,
the Executive will not be required to perform any regular services for
the Company. In the event the Executive secures other employment
during the period the Executive is receiving Salary Continuation, the
Executive must promptly notify the Company.
Salary Continuation will cease if an Executive is rehired by the
Company.
Change in Control Rule. The foregoing provisions of this Section 5
shall not apply to Special Severance Executives following a Change in
Control. In lieu thereof, severance pay will be provided in accordance
with Schedule A or B, as applicable.
<PAGE>
6. Benefits During Severance Pay
As long as an Executive is receiving Salary Continuation, except
as provided in this Section, the Executive will continue to be
eligible for participation in Company employee benefit plans,
including without limitation, any non-qualified excess or supplemental
benefit plans, in accordance with the provisions of such plans as in
effect on the Effective date. An Executive will not be eligible to
participate in any Company short-term or long- term disability plans,
the Company business travel accident plan or any new employee benefit
plan or any improvement to any existing employee benefit plan adopted
by the Company after the Effective Date.
Change in Control Rule. Except as provided in the last sentence of
this paragraph, the foregoing provisions of this Section 6 shall not
apply to Special Severance Executives following a Change in Control.
In lieu thereof, benefits will be provided in accordance with Schedule
A or B, as applicable. Notwithstanding the foregoing, any rights that
a Special Severance Executive has under any Company employee benefit
plan to receive health or life insurance coverage following
termination of employment shall continue in effect and not be affected
hereby.
7. Excluded Executive Compensation Plans, Programs, Arrangements, and
Perquisites
During the period an Executive is receiving Salary Continuation,
the Executive will not be eligible to accrue any vacation or
participate in any (i) bonus program, (ii) special termination
programs, (iii) tax or financial advisory services, (iv) new awards
under any stock option or stock related plans for executives (provided
that the Executive will be eligible to exercise any outstanding stock
options in accordance with the terms of any applicable stock option
plan), (v) new or revised executive compensation programs that may be
introduced after the Effective Date and (vi) any other executive
compensation program, plan,
<PAGE>
arrangement, practice, policy or perquisites unless specifically
authorized by ITT in writing. The period during which an Executive is
receiving Salary Continuation does not count as service for the
purpose of any ITT long term incentive award program including, but
not limited to, the ITT Restricted Stock Award Plan (1984) and any
similar plan, and the ITT Long-Term Performance Plan and any similar
plan.
Change in Control Rule. The foregoing provisions of this Section 7
shall not apply to Special Severance Executives following a Change in
Control. In lieu thereof, executive compensation plans, programs,
arrangements and perquisites shall be provided in accordance with
Schedule A or B, as applicable.
8. Divestiture
If an ITT Subsidiary or division of ITT or a portion thereof at
which an Executive is employed is sold or divested and if (i) the
Executive accepts employment or continued employment with the
purchaser or (ii) refuses employment or continued employment with the
purchaser on terms and conditions substantially comparable to those in
effect immediately preceding the sale or divestiture, the Executive
shall not be provided severance pay under this Plan. The provisions of
this Section 8 apply to divestitures accomplished through sales of
assets or through sales of corporate entities.
Change in Control Rule. The foregoing provisions of this Section 8
shall not apply to Special Severance Executives following a Change in
Control.
9. Disqualifying Conduct
If during the period an Executive is receiving Salary
Continuation, the Executive, (i) engages in any activity which is
inimical to the best interests of the Company; (ii) disparages the
Company; (iii) fails to comply with any Company Covenant Against
Disclosure and Assignment of Rights to Intellectual Property; (iv)
without ITT's prior consent, induces any employees of the Company to
leave their Company employment; (v) without ITT's prior consent,
engages in, becomes affiliated with, or becomes employed by any
business competitive with the Company; or (vi) fails to comply with
applicable provisions of the ITT Code of Conduct or applicable ITT
Corporate Policies or any applicable ITT Subsidiary Code or policies,
then the Company will have no further obligation to provide severance
pay.
Change in Control Rule. The foregoing provisions of this Section 9
shall not apply to Special Severance Executives following a Change in
Control. The only basis upon which the compensation and benefits shall
not be provided to a Special Severance Executive involuntarily
terminated by the Company following a Change in Control of the Company
is upon an involuntary termination of employment for Cause as defined
in Schedule C hereto.
10. Release
No severance pay will be provided under this Plan unless the
Executive executes and delivers to ITT a release, satisfactory to ITT,
in which the Executive discharges and releases the Company and the
Company's directors, officers, employees and employee benefit plans
from all claims (other than for benefits to which Executive is
entitled under any Company employee benefit plan) arising out of
Executive's employment or termination of employment.
Change in Control Rule. The foregoing provisions of this Section 10
shall not apply to Special Severance Executives following a Change in
Control.
<PAGE>
11. Administration of Plan
This Plan shall be administered by ITT, who shall have the
exclusive right to interpret this Plan, adopt any rules and
regulations for carrying out this Plan as may be appropriate and
decide any and all matters arising under this Plan, including but not
limited to the right to determine appeals. Subject to applicable
Federal and state law, all interpretations and decisions by ITT shall
be final, conclusive and binding on all parties affected thereby.
Change in Control Rule. Following a Change in Control, if there is any
dispute between a Special Severance Executive and the Company as to
the validity, enforceability and/or interpretation of any right or
benefit afforded by this Plan, at the Special Severance Executive's
option, any other agreement or policy notwithstanding, such dispute
shall be resolved by binding arbitration proceedings in accordance
with the rules of the American Arbitration Association. The
arbitrators shall presume that the rights and/or benefits afforded by
this Plan which are in dispute are valid and enforceable and that the
Special Severance Executive is entitled to such rights and/or
benefits. The Company shall be precluded from asserting that such
rights and/or benefits are not valid, binding and enforceable and
shall stipulate before such arbitrators that the Company is bound by
all the provisions of this Plan. The burden of overcoming by clear and
convincing evidence the presumption that the Special Severance
Executive is entitled to such rights and/or benefits shall be on the
Company. The results of any arbitration shall be conclusive on both
parties and shall not be subject to judicial interference or review on
any ground whatsoever, including without limitation any claim that the
Company was wrongfully induced to enter into this Plan to arbitrate
such a dispute.
The Company shall pay the cost of any arbitration proceedings
under this Plan. The Special Severance Executive shall be entitled
(within two business days of requesting such advance) to an advance of
the actual legal fees and expenses incurred by the Special Severance
Executive in connection with such proceedings and the Special
Severance Executive shall be obligated to reimburse the Company for
such fees and expenses in connection with such arbitration proceedings
only if it is finally and specifically determined by the arbitrators
that the Special Severance Executive's position in initiating the
arbitration was frivolous and completely without merit. The
arbitrators shall have discretion to award punitive damages to the
Special Severance Executive if it is found that the Company's actions
or failures to act which led to the Special Severance Executive
submitting a dispute to arbitration and/or the Company's actions or
failures to act during the pendency of the arbitration proceeding make
such an award appropriate in the circumstances.
In the event the Special Severance Executive is required to
defend in any legal action or other proceeding the validity or
enforceability of any right or benefit afforded by this Plan, the
Company will pay any and all actual legal fees
<PAGE>
and expenses incurred by the Special Severance Executive regardless of
the outcome of such action and, if requested by the Special Severance
Executive, shall (within two business days of such request) advance
such fees and expenses to the Special Severance Executive. The Company
shall be precluded from asserting in any judicial or other proceeding
commenced with respect to any right or benefit afforded by this Plan
that such rights and benefits are not valid, binding and enforceable
and shall stipulate in any such proceeding that the Company is bound
by all the provisions of this Plan.
12. Termination or Amendment
ITT may terminate or amend this Plan ("Plan Change") at any time
except that no such Plan Change may reduce or adversely affect
severance pay for any Executive whose employment terminates within two
years of the effective date of such Plan Change provided that the
Executive was a covered employee under this Plan on the date of such
Plan Change.
Change in Control Rule. Following a Change in Control, no Plan Change
that would adversely affect any Special Severance Executive may be
made without the prior written consent of such Special Severance
Executive affected thereby.
13. Offset
Any severance pay provided to an Executive under this Plan shall
be offset by reducing such severance pay by any severance pay, salary
continuation, termination pay or similar pay or allowance which
Executive receives or is entitled to receive (i) under any other
Company plan, policy, practice, program, arrangement; (ii) pursuant to
any employment agreement or other agreement with the Company; (iii) by
virtue of any law, custom or practice. Any severance pay provided to
Executive under this Plan shall also be offset by reducing such
severance pay by any severance pay, salary continuation pay,
termination pay or similar pay or allowance received by the Executive
as a result of any prior termination of employment with the Company.
Coordination of severance pay with any pay, or benefits provided by
any applicable ITT short-term or long-term disability plan shall be in
accordance with the provisions of those plans.
Change in Control Rule. Following a Change in Control, a Special
Severance Executive who becomes eligible for severance pay and
benefits under this Plan shall be entitled to receive the greater of
(x) the severance pay and benefits provided on Schedule A or B (as
applicable) or (y) the severance pay and benefits provided under any
plans or arrangements otherwise afforded by the Company or any ITT
Subsidiary to such Special Severance Executive. Accordingly, if the
amount under
<PAGE>
clause (x) is greater than the amount under clause (y), the amount
payable under this Plan shall be reduced by any amount of severance
pay and benefits provided under such other plans or arrangements.
14. Miscellaneous
Except as provided in this Plan, the Executive shall not be
entitled to any notice of termination or pay in lieu thereof.
In cases where severance pay is provided under this Plan, pay in lieu
of any unused current year vacation entitlement will be paid to the
Executive in a lump sum.
Benefits under this Plan are paid for entirely by the Company from its
general assets.
This Plan is not a contract of employment, does not guarantee the
Executive employment for any specified period and does not limit the
right of the Company to terminate the employment of the Executive at
any time.
The section headings contained in this Plan are included solely for
convenience of reference and shall not in any way affect the meaning
of any provision of this Plan.
15. Adoption Date and Amendments
This Plan was originally adopted by ITT's predecessor on December
12, 1989 ("Adoption Date") and became applicable to ITT on December
19, 1995. This Plan does not apply to any termination of employment
which occurred or which was communicated to the Executive prior to the
Adoption Date. The Plan was most recently amended effective as of
August 14, 1997.
<PAGE>
SCHEDULE A
I. Severance Pay and Benefits
If a Special Severance Executive whose name is set forth in
Section II of this Schedule A becomes eligible for severance under
Section 3 hereof, the Company shall pay or provide the Special
Severance Executive the following, subject to the provisions set forth
in Schedule C:
A. The Company shall pay a Special Severance Executive in a lump
sum in cash, within five business days after the date of termination
of employment, the following (in addition to any accrued but unpaid
salary, deferred compensation and vacation pay): two times the sum of
(x) the annual base salary of a Special Severance Executive in effect
immediately prior to a Special Severance Executive's termination of
employment (but in no event less than his or her annual base salary in
effect immediately prior to a Change in Control) and (y) the highest
bonus paid or awarded to the Special Severance Executive in respect of
the three years preceding a Change in Control.
B. The Company shall provide continued health and life insurance
benefits, perquisites and fringe benefits for the Special Severance
Executive and his or her eligible family members for a two-year period
(or such longer period as may be provided by the terms of the
appropriate Company plan or applicable law) following his or her
termination of employment on the same basis provided to the Special
Severance Executive immediately prior to his or her termina tion of
employment provided, however, that if the Special Severance Executive
becomes reemployed with another employer and becomes eligible to
receive health or life insurance benefits, perquisites and fringe
benefits under another employer-provided plan, the Company's
obligation to provide continued benefits, perquisites and fringe
benefits hereunder shall cease.
C. At the Company's sole expense, reasonable outplacement
services for a period of up to one year.
Dated: August 14, 1997
<PAGE>
SCHEDULE B
I. Severance Pay and Benefits
If a Special Severance Executive whose name is set forth in
Section II of this Schedule B becomes eligible for severance under
paragraph 3 hereof, the Company shall pay or provide the Special
Severance Executive the following, subject to the provisions set forth
in Schedule C:
A. The Company shall pay a Special Severance Executive in a lump
sum in cash, within five business days after the date of termination
of employment, the following (in addition to any accrued but unpaid
salary, deferred compensation and vacation pay): two times the annual
base salary of a Special Severance Executive in effect immedi ately
prior to a Special Severance Executive's termination of employment.
B. The Company shall provide continued health and life insurance
benefits, perquisites and fringe benefits for the Special Severance
Executive and his or her eligible family members for a two-year period
(or such longer period as may be provided by the terms of the
appropriate Company plan or applicable law) following his or her
termination of employment on the same basis provided to the Special
Severance Executive immediately prior to his or her termina tion of
employment provided, however, that if the Special Severance Executive
becomes reemployed with another employer and becomes eligible to
receive health or life insurance benefits, perquisites and fringe
benefits under another employer-provided plan, the Company's
obligation to provide continued benefits, perquisites and fringe
benefits hereunder shall cease.
C. At the Company's sole expense, reasonable outplacement
services for a period of up to one year.
Dated: August 14, 1997
<PAGE>
SCHEDULE C
I. Certain Additional Payments by the Company
(i) Anything in this Agreement to the contrary notwithstanding,
if it shall be determined that any payment or distribution
to or for the benefit of the Special Severance Executive
(whether paid or payable or distributed or distributable)
pursuant to the terms of this Agreement or otherwise (the
"Payment") would be subject to the excise tax imposed by
Section 4999 of the Internal Revenue Code of 1986, as
amended (the "Code", and such excise tax, the "Excise Tax"),
then the Special Severance Executive shall be entitled to
receive from the Company an additional payment (the "Gross-
Up Payment") in an amount such that the net amount of
Payment and Gross-Up Payment retained by the Special
Severance Executive, after the calculation and deduction of
all Excise Taxes (including any interest or penalties
imposed with respect to such taxes) on the Payment and all
federal, state and local income tax, employment tax and
Excise Tax (including any interest or penalties imposed with
respect to such taxes) on the Gross-Up Payment provided for
in this Section, shall be equal to the Payment.
(ii) Subject to the provisions of Section I(iii) of this Schedule
C, all determinations required to be made under this Section I,
including whether and when the Gross- Up Payment is required and the
amount of such Gross-Up Payment, and the assumptions to be utilized in
arriving at such determinations shall be made by the Accounting Firm
which shall provide detailed supporting calculations both to the
Company and the Special Severance Executive within 15 business days of
the receipt of notice from the Special Severance Executive that there
has been a Payment, or such earlier time as is requested by the
Company. All fees and expenses of the Accounting Firm shall be borne
solely by the Company. Any Gross-Up Payment shall be paid by the
Company to the Special Severance Executive within five days of the
receipt of the Accounting Firm's determination. Any determination by
the Accounting Firm shall be binding upon the Company and the Special
Severance Executive. As a result of uncertainty in the application of
section 4999 of the Code at the time of the initial determination by
the Accounting Firm hereunder, it is possible that the Gross-Up
Payment made will have been an amount less than the Company should
have paid pursuant to this Section I(ii) (the "Underpayment"). In the
event that the Company exhausts its remedies pursuant to Section
I(iii) below and the Special Severance Executive thereafter is
required to make a payment of any Excise Tax, the Accounting Firm
shall determine the amount of the Underpayment and any such
Underpayment shall be promptly paid by the Company to or for the
benefit of the Special Severance Executive.
<PAGE>
(iii) The Special Severance Executive shall notify the Company in
writing of any claim by the Internal Revenue Service that, if
successful, would require the payment by the Company of the Gross-Up
Payment. Such notification shall be given as soon as practicable after
the Special Severance Executive is informed in writing of such claim
and shall apprise the Company of the nature of such claim and the date
on which such claim is requested to be paid. The Special Severance
Executive shall not pay such claim prior to the expiration of the
30-day period following the date on which he or she gives such notice
to the Company (or such shorter period ending on the date that any
payment of taxes, interest and/or penalties with respect to such claim
is due). If the Company notifies the Special Severance Executive in
writing prior to the expiration of such period that it desires to
contest such claim, the Special Severance Executive shall:
(A) give the Company any information reasonably requested by the
Company relating to such claim,
(B) 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
reasonably selected by the Company,
(C) cooperate with the Company in good faith in order to
effectively contest such claim, and
(D) 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 the
Special Severance Executive for and hold the Special Severance
Executive harmless from, on an after-tax basis, any Excise Tax or
income tax (including interest and penalties with respect thereto)
imposed as a result of such representation and payment of all related
costs and expenses. Without limiting the foregoing provisions of this
Section I(iii), the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or
forgo any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim and
may, at its sole option, either direct the Special Severance Executive
to pay the tax claimed and sue for a refund or contest the claim in
any permissible manner, and the Special Severance 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 Special Severance Executive to pay
such claim and sue for a refund, the Company shall advance the amount
of such payment to the Special Severance Executive, on an
interest-free basis, and shall
<PAGE>
indemnify the Special Severance Executive for and hold the Special
Severance Executive harmless from, on an after- tax basis, any Excise
Tax or income 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 the payment of
taxes for the taxable year of the Special Severance Executive with
respect to which such contested amount is claimed to be due is limited
solely to such contested amount. Furthermore, the Company's control of
the contest shall be limited to issues with respect to which a
Gross-Up Payment would be payable hereunder and the Special Severance
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.
(iv) If, after the receipt by the Special Severance Executive of
an amount advanced by the Company pursuant to Section I(iii), the
Special Severance Executive becomes entitled to receive any refund
with respect to such claim, the Special Severance Executive shall
(subject to the Company's complying with the requirements of Section
I(iii)) 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 Special Severance
Executive of an amount advanced by the Company pursuant to Section
I(iii), a determination is made that the Special Severance Executive
shall not be entitled to any refund with respect to such claim and the
Company does not notify the Special Severance 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.
<PAGE>
SCHEDULE D
With respect to Special Severance Executives whose employment
terminates following a Change in Control of the Company, "Cause" and
"Good Reason" shall have the respective meanings set forth below:
I. Cause
"Cause" shall mean (i) the willful and continued failure of the
Special Severance Executive to perform substantially the Special
Severance Executive's duties owed to the Company or its affiliates
after a written demand for substantial performance is delivered by the
Company to the Special Severance Executive which specifically
identifies the nature of such nonperformance, or (ii) conviction of
the Special Severance Executive for a felony. No act or omission on
the part of the Executive shall be considered "willful" unless it is
done or omitted in bad faith or with out reasonable belief that the
action or omission was in the best interests of the Company.
II. Good Reason
"Good Reason" shall mean:
(i) without the Special Severance Executive's express
written consent and excluding for this purpose an isolated,
insubstantial and inadvertent action not taken in bad faith and
which is remedied by the Company or its affiliates promptly after
receipt of notice thereof given by the Special Severance
Executive, (A) a reduction in the Special Severance Executive's
annual base salary or annual bonus (as measured by the highest
bonus paid or awarded in respect of the three calendar years
preceding a Change in Control of the Company) or any reduction in
any material compensation or benefits arrangement, (B) the
assignment to the Special Severance Executive of any duties
inconsistent in any respect with the Special Severance
Executive's position (including status, offices, titles and
reporting requirements), authority, duties or responsibilities,
or (C) any other action by the Company or its affiliates which
results in a diminution in such position, authority, duties or
responsibilities;
(ii) without the Special Severance Executive's express
written consent, the Company's requiring the Special Severance
Executive's work location to be other than within twenty-five
(25) miles of the location where such Special Severance Executive
was principally working immediately prior to the Change in
Control of the Company; or
(iii) any failure by the Company to obtain the express
written assumption of this Plan from any successor to the
Company.
<PAGE>
For purposes hereof, a determination by a Special Severance
Executive that he or she has "Good Reason" hereunder shall be final
and binding on the parties hereto absent a showing of bad faith on the
Special Severance Executive's part.
III. Incapacity
"Incapacity" shall mean any physical or mental illness or
disability to the Special Severance Executive which continues for
a period of six consecutive months or more and which at any time
after such six-month period the Board shall reasonably determine
renders the Special Severance Executive incapable of performing
his or her duties.
[Exhibit 87]
[FORM OF AGREEMENT FOR NINE EXECUTIVES]
AMENDED AND RESTATED EXECUTIVE AGREEMENT dated as
of February 11, 1997, between ITT Corporation, a Nevada
corporation ("the Company"), and [name of executive]
(the "Executive").
WHEREAS the Company considers it essential to the best
interests of its shareholders to foster the continuous employment of
key management personnel; and
WHEREAS the Board of Directors of the Company (the "Board")
recognizes that, as is the case with many publicly- held corporations,
the possibility of a Change in Control (as defined in Section 1(d)
hereof) exists and that such possibility, and the uncertainty and
questions which it may raise among management, may result in the
departure or distraction of management personnel to the detriment of
the Company and its shareholders; and
WHEREAS the Board has determined that appropriate steps
should be taken to reinforce and encourage the continued attention and
dedication of members of the Company's management, including the
Executive, to their assigned duties without distraction in the face of
potential disturbing circumstances arising from the possibility of a
Change in Control;
NOW THEREFORE, in consideration of the premises and the
mutual covenants herein contained, the Company and the Executive agree
as follows:
SECTION 1. Definitions. As used in this Agreement:
(a) "Affiliate" has the meaning ascribed thereto in Rule
12b-2 pursuant to the Securities Exchange Act of 1934, as amended (the
"Act").
(b) "Board" means the Board of Directors of the Company.
(c) "Cause" means (i) the willful and continued failure of
the Executive to perform substantially the Executive's duties owed to
the Company or its Affiliates after a written demand for substantial
performance is delivered to the Executive which specifically
identifies the nature of such non-performance, or (ii) conviction of
the Executive for a felony.
<PAGE>
No act or omission on the part of the Executive shall be considered
"willful" unless it is done or omitted in bad faith or without
reasonable belief that the action or omis sion was in the best
interests of the Company.
(d) A "Change in Control" shall be deemed to have occurred
if:
(i) a report on Schedule 13D shall be filed with the
Securities and Exchange Commission pursuant to Section 13(d) of
the Securities Exchange Act of 1934 (the "Act") disclosing that
any person (within the meaning of Section 13(d) of the Act),
other than the Company or a subsidiary of the Company or any
employee benefit plan sponsored by the Company or a subsidiary of
the Company, is the beneficial owner directly or indirectly of
twenty percent of more of the outstanding common stock, no par
value ("Stock"), of the Company;
(ii) any person (within the meaning of Section 13(d) of the
Act), other than the Company or a subsidiary of the Company or
any employee benefit plan sponsored by the Company or a
subsidiary of the Company, shall purchase shares pursuant to a
tender offer or exchange offer to acquire any Stock of the
Company (or securities convertible into Stock) for cash,
securities or any other consideration, provided that after
consummation of the offer, the person in question is the
beneficial owner (as such term is defined in Rule 13d-3 under the
Act), directly or indirectly, of fifteen percent or more of the
outstanding Stock of the Company (calculated as provided in
paragraph (d) of Rule 13d-3 under the Act in the case of rights
to acquire Stock);
(iii) the stockholders of the Company shall approve (A) any
consolidation or merger of the Company in which the Company is
not the continuing or surviving corporation or pursuant to which
shares of Stock of the Company would be converted into cash,
securities or other property, other than a merger of the Company
in which holders of Stock of the Company immediately prior to the
merger have the same proportionate ownership of common stock of
the surviving corporation immediately after the merger as
immediately before, or (B) any sale, lease, exchange or other
transfer in one transaction or a series of related transactions
of all or substantially all the assets of the Company; or
(iv) there shall have been a change in a majority of the
members of the Board within a 12-month period
<PAGE>
unless the election or nomination for election by the
Company stockholders of each new director during such
12-month period was approved by the vote of two-thirds of
the directors then still in office who were directors at the
beginning of such 12-month period.
Notwithstanding the foregoing, any spin-off of all or a portion of the
assets or operations of the Company or any subsidiary which has been
approved by a majority of the directors serving on the Board as of the
date hereof or by directors approved by the vote of two-thirds of the
directors then still in office who were directors as of the date
hereof, shall not be deemed a "Change in Control".
(e) "Good Reason" means:
(i) without the Executive's express written con sent and
excluding for this purpose an isolated, insub stantial and
inadvertent action not taken in bad faith and which is remedied
by the Company or its Affiliates promptly after receipt of notice
thereof given by the Executive, (A) a reduction in the
Executive's Annual Base Salary and Annual Bonus (each as defined
herein) or any reduction in any material compensation or benefits
arrangement, (B) the assignment to the Executive of any duties
inconsistent in any respect with the Executive's position
(including status, offices, titles and reporting requirements),
authority, duties or responsibilities as contemplated by Section
3(a) hereof, (C) any other action by the Company or any of its
Affiliates which results in a diminution in the Executive's
position, authority, duties or responsibilities, or (D) any
failure by the Company to comply with any of the provisions of
Section 3(b) hereof;
(ii) without the Executive's express written con sent, the
Company's requiring the Executive's work location to be other
than within twenty-five (25) miles of the location set forth in
Section 3(a)(i);
(iii) any failure by the Company to comply with and satisfy
Section 8(a).
For purposes hereof, a determination by the Executive that he has
"Good Reason" hereunder shall be final and binding on the parties
hereto absent a showing of bad faith on the Executive's part.
(f) "Incapacity" means any physical or mental illness or
disability of the Executive which continues for a
<PAGE>
period of six consecutive months or more and which at any time after
such six-month period the Board shall reasonably determine renders the
Executive incapable of performing his or her duties during the
remainder of the Term.
(g) "Operative Date" means the date on which a Change in
Control shall have occurred.
SECTION 2. Term of Agreement. This Agreement shall become
operative on the Operative Date and shall remain in effect until the
second anniversary of the Operative Date (the "Term") unless further
extended or sooner terminated as hereinafter provided. Commencing on
the second anniversary of the Operative Date, and each anniversary
date thereafter (each, an "Anniversary Date"), the Term shall
automatically be extended for one additional year, unless, not later
than 30 days prior to such Anniversary Date, the Company shall have
given notice to the Executive that it does not wish to extend this
Agreement.
SECTION 3. Terms of Employment. (a) Position and Duties. (i)
During the Term: (A) the Executive's position (including status,
offices, titles and reporting requirements), authority, duties and
responsibilities shall be at least commensurate in all material
respects with the most significant of those held, exercised and
assigned immediately prior to the Operative Date, and (B) the
Executive's services shall be performed at the location at which the
Executive was based on the Operative Date and the Company shall not
require the Executive to travel on Company business to a substantially
greater extent than required immediately before the Operative Date,
except for travel and temporary assignments which are reasonably
required for the full discharge of the Executive's responsibilities
and which are consistent with the Executive's being so based.
(ii) During the Term, and excluding any periods of vacation
and sick leave to which the Executive is entitled in accordance with
Company policy, the Executive agrees to devote reasonable attention
and time during normal business hours to the business and affairs of
the Company and, to the extent necessary to discharge the
responsibilities assigned to the Executive hereunder, to use the
Executive's reason able best efforts to perform faithfully and
efficiently such responsibilities.
(b) Compensation. (i) Salary and Bonus. During the first
year of the Term, the Executive will receive compensation at an annual
rate equal to the sum of (A) an annual salary not less than the
Executive's annualized salary in effect immediately prior to the
Operative Date
<PAGE>
(such annualized salary, as may be increased on or after the Operative
Date, the "Annual Base Salary"), plus (B) a bonus not less than the
aggregate amount of the Executive's highest bonus award under the ITT
Annual Performance-Based Incentive Plan for Executive Officers or any
substitute or successor plan in respect of the last three calendar
years preceding the Operative Date ("Annual Bonus"). During the Term,
on each anniversary of the Operative Date, the Executive's
compensation in effect on such anniversary date shall be increased for
the following twelve-month period by not less than the higher of (A)
5% or (B) 80% of the per centage change in the Consumer Price Index
(All Urban Consumers) for the twelve month period ended immediately
prior to the month in which such anniversary date occurs.
(ii) Employee Benefit Plans. During the Term, the Executive
will be entitled to (A) continue to participate in all 401(k)/savings
and retirement plans, welfare plans, incentive plans, equity-based
plans and all other plans, programs, policies and arrangements
applicable to the Executive prior to the Operative Date (the "Company
Plans"), or (B) participate in employee benefit plans, programs,
policies and arrangements of any successor to the Company which have
benefits that are not less favorable to the Executive.
SECTION 4. Termination of Employment. (a) Death or
Incapacity. This Agreement shall terminate automatically upon the
Executive's death during the Term. This Agreement shall cease and
terminate on the date of determination by the Board that the
Incapacity of the Executive has occurred during the Term ("Incapacity
Effective Date").
(b) Cause. The Company may terminate the Executive's
employment for Cause, as defined herein. Termination of the Executive
for Cause shall not be effective unless the Board has passed a
resolution, duly adopted by the affirmative vote of not less than
three- quarters (3/4) of the entire membership of the Board at a
meeting of the Board which was called and held for the purpose of
considering such termination (after reasonable notice to the Executive
and an opportunity for the Executive, together with the Executive's
counsel, to be heard before the Board, finding that, in the good faith
opinion of the Board, the Executive was guilty of conduct set forth in
clause (i) or (ii) of the definition of Cause herein, and specifying
the particulars thereof in detail.
(c) Good Reason. The Executive may terminate his or her
employment for Good Reason, as defined herein.
<PAGE>
(d) Notice of Termination. Any termination by the Company
for Cause or Incapacity, or by the Executive for Good Reason, shall be
communicated by Notice of Termination to the other party hereto given
in accordance with Section 10 of this Agreement. For purposes of this
Agree ment, a "Notice of Termination" means a written notice which (i)
indicates the specific termination provision in this Agreement relied
upon, (ii) to the extent applicable, sets forth in reasonable detail
the facts and circumstances claimed to provide a basis for termination
of the Executive's employment under the provision so indicated, (iii)
in the case of termination by the Company for Cause or for Incapacity,
confirms that such termination is pursuant to a resolution of the
Board (which, in the case of Cause, is pursuant to Section 4(b)
hereof), and (iv) if the Date of Termination (as defined below) is
other than the date of receipt of such notice, specifies the
termination date (which date shall be not more than 30 days after the
giving of such notice). The failure by the Executive or the Company to
set forth in the Notice of Termination any fact or circumstance which
contributes to a showing of Good Reason, Incapacity or Cause shall not
serve to waive any right of the Executive or the Company,
respectively, here under or preclude the Executive or the Company,
respectively, from asserting such fact or circumstance in enforcing
the Executive's or the Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means (i) if
the Executive's employment is terminated by the Company for Cause or
by the Executive for Good Reason, the date of receipt of the Notice of
Termination or any later date specified therein, as the case may be,
(ii) if the Executive's employment is terminated by the Company other
than for Cause or Incapacity, the Date of Termination shall be the
date on which the Company notifies the Executive of such termination,
and (iii) if the Executive's employment is terminated by reason of
death or Incapacity, the Date of Termination shall be the date of
death of the Executive or the Incapacity Effective Date, as the case
may be.
SECTION 5. Obligations of the Company Upon Termination. (a)
Termination for Good Reason or for Reasons Other Than for Cause, Death
or Incapacity. If, during the Term, the Company shall terminate the
Executive's
<PAGE>
employment other than for Cause or Incapacity or the Executive shall
terminate his or her employment for Good Reason:
(i) the Company shall pay to the Executive in a lump sum in
cash, within five business days after the Date of Termination,
the aggregate of the following amounts:
(A) the sum of (1) the Executive's currently effective
Annual Base Salary through the Date of Termination to the
extent not theretofore paid, (2) any compensation previously
deferred by the Executive (together with any accrued
interest or earnings thereon) and any accrued vacation pay,
in each case to the extent not theretofore paid (the sum of
the amounts described in clauses (1) and (2) shall be
hereinafter referred to as the "Accrued Obligations"); and
(B) the amount equal to the product of (1) three1 and
(2) the sum of (x) the Executive's Annual Base Salary and
(y) his or her Annual Bonus;
(ii) for three years2 after the Executive's Date of
Termination, or such longer period as may be provided by the
terms of the appropriate Company Plan, the Company shall continue
health and life insurance benefits, perquisites and fringe
benefits to the Executive and the Executive's eligible family
members at least equal to those which would have been provided to
them in accordance with the Company Plans if the Executive's
employment had not been terminated or, if more favorable to the
Executive, as in effect generally at any time thereafter,
provided, however, that if the Executive becomes reemployed with
another employer and is eligible to receive health or life
insurance benefits, perquisites and fringe benefits under another
employer's plans, the Company's obligations under this Section
5(a)(ii) shall cease;
- -----------------
1 For three of the nine executives covered by individual
agreements, the multiplier will be two, rather than three. The
executives covered, respectively, by the 3x and 2x multipliers are set
forth on Schedule A hereto.
2 Two years for three of the nine executives.
<PAGE>
(iii) the Company shall, at its sole expense as incurred,
provide the Executive with reasonable out placement services for
a period of up to one year from the Date of Termination, the
provider of which shall be selected by the Executive in his or
her sole discre tion; and
(iv) to the extent not theretofore paid or pro vided, the
Company shall timely pay or provide to the Executive any other
amounts or benefits required to be paid or provided or which the
Executive is eligible to receive under any Company Plan,
including earned but unpaid stock and similar compensation (such
other amounts and benefits shall be hereinafter referred to as
the "Other Benefits").
(b) Certain Additional Payments by the Company. (i) Anything
in this Agreement to the contrary notwithstanding, if it shall be
determined that any payment or distribution to or for the benefit of
the Executive (whether paid or payable or distributed or
distributable) pursuant to the terms of this Agreement or otherwise
(the "Payment") would be subject to the excise tax imposed by Section
4999 of the Internal Revenue Code of 1986, as amended (the "Code", and
such excise tax, the "Excise Tax"), then the Executive shall be
entitled to receive from the Company an additional payment (the
"Gross-Up Payment") in an amount such that the net amount of Payment
and Gross-Up Payment retained by the Executive, after the calculation
and deduction of all Excise Taxes (including any interest or penalties
imposed with respect to such taxes) on the Payment and all federal,
state and local income tax, employment tax and Excise Tax (including
any interest or penalties imposed with respect to such taxes) on the
Gross-Up Payment provided for in this Section, shall be equal to the
Payment.
(ii) Subject to the provisions of Section 5(b)(iii), all
determinations required to be made under this Section 5(b), including
whether and when the Gross-Up Payment is required and the amount of
such Gross-Up Payment, and the assumptions to be utilized in arriving
at such determinations shall be made by a nationally recognized
certified public accounting firm as may be jointly designated by the
Executive and the Company (the "Accounting Firm") which shall provide
detailed supporting calculations both to the Company and the Executive
within 15 business days of the receipt of notice from the Executive
that there
<PAGE>
has been a Payment, or such earlier time as is requested by the
Company. All fees and expenses of the Accounting Firm shall be borne
solely by the Company. Any Gross-Up Payment shall be paid by the
Company to the Executive within five days of the receipt of the
Accounting Firm's determination. Any determination by the Accounting
Firm shall be binding upon the Company and the Executive. As a result
of uncertainty in the application of section 4999 of the Code at the
time of the initial determination by the Accounting Firm hereunder, it
is possible that the Gross-Up Payment made will have been an amount
less than the Company should have paid pursuant to this Section
5(b)(ii) (the "Underpayment"). In the event that the Company exhausts
its remedies pursuant to Section 5(b)(iii) and the Executive
thereafter is required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the Underpayment and any
such Underpayment shall be promptly paid by the Company to or for the
benefit of the Executive.
(iii) The Executive shall notify the Company in writing of
any claim by the Internal Revenue Service that, if successful, would
require the payment by the Company of the Gross-Up Payment. Such
notification shall be given as soon as practicable after the Executive
is informed in writing of such claim and shall apprise the Company 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 or she
gives such notice to the Company (or such shorter period ending on the
date that any payment of taxes, interest and/or penalties 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:
(A) give the Company any information reasonably requested by
the Company relating to such claim,
(B) 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
reasonably selected by the Company,
(C) cooperate with the Company in good faith in order to
effectively contest such claim, and
(D) permit the Company to participate in any proceedings
relating to such claim;
<PAGE>
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 the
Executive for and hold the Executive harmless from, on an after-tax
basis, any Excise Tax or income tax (including interest and penalties
with respect thereto) imposed as a result of such representation and
payment of all related costs and expenses. Without limiting the
foregoing provisions of this Section 5(b)(iii), the Company shall
control all proceedings taken in connection with such contest and, at
its sole option, may pursue or forgo any and all administrative
appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole option, 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 the
Executive for and hold the Executive harmless from, on an after-tax
basis, any Excise Tax or income 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 (including
as a result of any foregiveness by the Company of such advance); and
further provided that any extension of the statute of limitations
relating to the 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
control of 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.
(iv) If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 5(b)(iii), 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 5(b)(iii)) 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
5(b)(iii), a determination is made that the Executive shall not be
entitled to any refund
<PAGE>
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 or other indemnity payment required to be
paid.
(c) Death or Incapacity. If the Executive's employment is
terminated by reason of the Executive's death or Incapacity during the
Employment Period, this Agreement shall terminate without further
obligations to the Executive's legal representatives under this
Agreement, other than for (i) timely payment of Accrued Obligations
and Other Benefits, and (ii) provision by the Company of death
benefits or disability benefits for termination due to death or
Incapacity, respectively, in accordance with the Company Plans as in
effect immediately prior to the Operative Date or, if more favorable
to the Executive, at the Executive's Date of Termination.
(d) Cause; Other than for Good Reason. If the Executive's
employment shall be terminated for Cause during the Term, this
Agreement shall terminate without further obligations to the Executive
other than timely payment to the Executive of (x) the Executive's
currently effective Annual Base Salary through the Date of
Termination, (y) the amount of any compensation previously deferred by
the Executive, and (z) Other Benefits, in each case to the extent
theretofore unpaid. If the Executive voluntarily terminates employment
during the Term, excluding a termina tion for Good Reason, this
Agreement shall terminate without further obligations to the
Executive, other than for the timely payment of Accrued Obligations
and Other Benefits.
SECTION 6. Non-exclusivity of Rights. Nothing in this
Agreement shall prevent or limit the Executive's con tinuing or future
participation in any Company Plan and for which the Executive may
qualify, nor, subject to Section 14(c), shall anything herein limit or
otherwise affect such rights as the Executive may have under any
contract or agreement with the Company or any of its Affiliates.
Amounts which are vested benefits or which the Executive is otherwise
entitled to receive under any Company Plan at or subsequent to the
Date of Termination shall be payable in accordance with such plan,
policy, practice or program or contract or agreement except as
explicitly modified by this Agreement.
<PAGE>
SECTION 7. Full Settlement. The Company's obligation to make
the payments provided for in this Agreement and otherwise to perform
its obligations hereunder shall not be affected by any set-off,
counterclaim, recoupment, defense or other claim, right or action
which the Company may have against the Executive or others. In no
event shall the Executive be obligated to seek other employment or
take any other action by way of mitigation of the amounts payable to
the Executive under any of the provisions of this Agreement and such
amounts shall not be reduced, whether or not the Executive obtains
other employment. The Company agrees to pay as incurred, to the full
extent permitted by law, all legal fees and expenses which the
Executive may reasonably incur as a result of any contest (regardless
of the outcome thereof) by the Company, the Executive or others of the
validity or enforceability of, or liability under, any provision of
this Agreement or any guarantee of performance thereof.
SECTION 8. Successors; Binding Agreement. (a) The Company
will require any successor (whether direct or indirect, by purchase,
merger, consolidation or other wise) to all or substantially all of
the business or assets of the Company, by agreement, in form and
substance satis factory to the Executive, expressly to assume and
agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform if no such
succession had taken place. Failure of the Company to obtain such
assumption and agreement prior to the effective ness of any such
succession will be a breach of this Agree ment and entitle the
Executive to compensation from the Company in the same amount and on
the same terms as the Executive would be entitled to hereunder had the
Company terminated the Executive for any reason other than Cause or
Incapacity on the succession date (and assuming a Change in Control of
the company had occurred prior to such succession date). As used in
this Agreement, "the Company" means the Company as defined in the
preamble to this Agreement or any successor to its business or assets
which executes and delivers the agreement provided for in this Section
8 or which otherwise becomes bound by all the terms and provisions of
this Agreement by operation of law or other wise. Notwithstanding the
foregoing, it is expressly acknowledged by the Executive and the
Company that, if the distribution of the stock of ITT Destinations,
Inc., a Nevada corporation, to the Company's stockholders shall occur
prior to the occurrence of a Change in Control of the Company, ITT
Destinations, Inc. shall be required to automatically assume and agree
to perform this Agreement in the same manner and to the same extent
that the Company would be required to perform if no such succession
had taken
<PAGE>
place, 3 and following such distribution, all references herein to
"the Company" shall be deemed to refer to ITT Destinations, Inc.
(b) This Agreement shall be enforceable by the Executive's
personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees.
SECTION 9. Non-assignability. This Agreement is personal in
nature and neither of the parties hereto shall, without the consent of
the other, assign or transfer this Agreement or any rights or
obligations hereunder, except as provided in Section 8 hereof. Without
limiting the fore going, the Executive's right to receive payments
hereunder shall not be assignable or transferable, whether by pledge,
creation of a security interest or otherwise, other than a transfer by
his or her will or by the laws of descent or distribution, and, in the
event of any attempted assignment or transfer by the Executive
contrary to this Section, the Company shall have no liability to pay
any amount so attempted to be assigned or transferred.
SECTION 10. Notices. For the purpose of this Agreement,
notices and all other communications provided for herein shall be in
writing and shall be deemed to have been duly given when delivered or
mailed by United States regis tered or certified mail, return receipt
requested, postage prepaid, addressed as follows:
If to the Executive: [name]
[address]
If to the Company: ITT Corporation
1330 Avenue of the Americas
New York, NY 10019-5490
Attention: General Counsel
or to such other address as either party may have furnished to the
other in writing in accordance herewith, except that notices of change
of address shall be effective only upon receipt.
- --------
3 With respect to Gerald Crotty's agreement, his agreement
will reflect that ITT World Directories will retain all of the
Company's obligations under such agreement following the
distribution of ITT Destinations stock to ITT's stockholders.
<PAGE>
SECTION 11. Operation of Agreement. This Agreement shall be
effective immediately upon its execution and continue to be effective
until the Term expires so long as the Executive is employed by the
Company or any of its Affiliates as of the Operative Date. The
provisions of this Agreement do not take effect until the Operative
Date.
SECTION 12. Governing Law. The validity, inter pretation,
construction and performance of this Agreement shall be governed by
the laws of the State of New York without reference to principles of
conflict of laws.
SECTION 13. Settlement of Disputes; Arbitration. If there
has been a Change in Control and any dispute arises between the
Executive and the Company as to the validity, enforceability and/or
interpretation of any right or benefit afforded by this Agreement, at
the Executive's option, any other agreement or policy notwithstanding,
such dispute shall be resolved by binding arbitration proceedings in
accordance with the rules of the American Arbitration Association. The
arbitrators shall presume that the rights and/or benefits afforded by
this Agreement which are in dispute are valid and enforceable and that
the Executive is entitled to such rights and/or benefits. The Company
shall be precluded from asserting that such rights and/or benefits are
not valid, binding and enforceable and shall stipulate before such
arbitrators that the Company is bound by all the provisions of this
Agreement. The burden of overcoming by clear and convincing evidence
the presumption that the Executive is entitled to such rights and/or
benefits shall be on the Company. The results of any arbitration shall
be conclusive on both parties and shall not be subject to judicial
interference or review on any ground whatsoever, including without
limitation any claim that the Company was wrongfully induced to enter
into this Agreement to arbitrate such a dispute.
The Company shall pay the cost of any arbitration
proceedings under this Agreement. The Executive shall be entitled
(within two business days of requesting such advance) to an advance of
the actual legal fees and expenses incurred by the Executive in
connection with such proceedings and the Executive shall be obligated
to reimburse the Company for such fees and expenses in connection with
such arbitration proceedings only if it is finally and specifically
determined by the arbitrators that the Executive's position in
initiating the arbitration was frivolous and completely without
arguable merit. The arbitrators shall have discretion to award
punitive damages to the Executive if it is found that the Company's
actions or failures to act which led to the Executive submitting a
<PAGE>
dispute to arbitration and/or the Company's actions or failures to act
during the pendency of the arbitration proceeding make such an award
appropriate in the circumstances.
In the event the Executive is required to defend in any
legal action or other proceeding the validity or enforceability of any
right or benefit afforded by this Agreement, the Company will pay any
and all actual legal fees and expenses incurred by the Executive
regardless of the outcome of such action and, if requested by the
Executive, shall (within two business days of such request) advance
such fees and expenses to the Executive. The Company shall be
precluded from asserting in any judicial or other proceeding commenced
with respect to any right or benefit afforded by this Agreement that
such rights and benefits are not valid, binding and enforceable and
shall stipulate in any such proceeding that the Company is bound by
all the provisions of this Agreement.
SECTION 14. Miscellaneous. (a) This Agreement contains the
entire understanding with the Executive with respect to the subject
matter hereof and supersedes any and all prior agreements or
understandings, written or oral, relating to such subject matter. No
provisions of this Agreement may be modified, waived or discharged
unless such modification, waiver or discharge is agreed to in writing
signed by the Executive and the Company.
(b) The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any
other provision of this Agreement.
(c) Except as provided herein, this Agreement shall not be
construed to affect in any way any rights or obligations in relation
to the Executive's employment by the Company or any of its Affiliates
prior to the Operative Date or subsequent to the end of the Term.
(d) This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an origi nal but all
of which together will constitute one and the same Agreement.
(e) The Company may withhold from any benefits payable under
this Agreement all Federal, state, city or other taxes as shall be
required pursuant to any law or governmental regulation or ruling.
<PAGE>
(f) The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect.
IN WITNESS WHEREOF, the parties have caused this Agreement
to be executed and delivered as of the day and year first above set
forth.
ITT CORPORATION
by
----------------------
Name:
Title:
--------------------------
[Name of Executive]
<PAGE>
Schedule A
----------
A. Executives entitled to 3x multiplier under Section 5(a)(i)(B) of
the Agreement--
Bowman, Robert A.
Boynton, Peter G.
Crotty, Gerald C.
Reese, Ann N.
Ward, Richard S.
Weadock, Daniel P.
B. Executives entitled to 2x multiplier under Section
5(a)(i)(B) of the Agreement--
Danski, Jon F.
Juliano, Mark J.
Tuttle, Elizabeth A.
[Exhibit 88]
SECOND AMENDMENT TO
EMPLOYMENT AND CONSULTING AGREEMENT
DATED AS OF DECEMBER 19, 1995
BETWEEN ITT DESTINATIONS, INC. AND
RAND V. ARASKOG
WHEREAS, ITT CORPORATION, a Nevada corporation (formerly
known as ITT Destinations, Inc.) (the "Company"), entered into an
employment and consulting agreement with Rand V. Araskog (the
"Executive") dated as of December 19, 1995 and amended as of February
11, 1997 (the "Agreement"); and
WHEREAS, the Company and Executive desire to further amend
the Agreement in certain respects and to have this Second Amendment
replace the First Amendment in its entirety;
NOW, THEREFORE, in consideration of the premises and of the
mutual agreements herein set forth and for other consideration herein
described, the parties hereto agree as follows:
1. Paragraph 12 of the Agreement is hereby amended by adding the
following at the end thereof:
"Following a Change in Control of the Company (as defined
herein), Executive shall have the right
<PAGE>
to terminate for good reason (as defined herein). For purposes hereof,
(A) "Good Reason" shall mean:
(i) without the Executive's express written consent and
excluding for this purpose an isolated, insubstantial and
inadvertent action not taken in bad faith and which is
remedied by the Company or its affiliates promptly after
receipt of notice thereof given by the Executive, (A) a
failure to pay or a reduction in the Executive's annual base
salary as described in paragraph 3 hereof or any bonus or
incentive compensation opportunities or any reduction in any
material compensation or benefits arrangement provided to
the Executive or in which the Executive participates, (B)
the assignment to the Executive of any duties inconsistent
in any respect with the Executive's position (including
status, offices, titles and reporting requirements),
authority, duties or responsibilities as contemplated by
paragraphs 2, 6, and 8 hereof, (C) any other action by the
Company or any of its affiliates which results in a
diminution in Executive's position, authority, duties or
responsibili ties, or (D) any failure by the Company to
comply with any of the provisions of paragraph 5 hereof;
(ii) without the Executive's express written consent,
the Company's requiring the Executive's work location to be
other than within twenty-five (25) miles of New York City,
New York;
(iii) any failure by the Company to obtain an express
written assumption of the Agreement by any successor to the
Company.
For purposes hereof, a determination by the Executive that
he has "Good Reason" hereunder shall be final and binding on
the parties hereto absent a showing of bad faith on the
Executive's part.
<PAGE>
and (B) "Change in Control" of the Company shall mean the
occurrence of:
(i) a report on Schedule 13D shall be filed with the
Securities and Exchange Commission pursuant to Section 13(d)
of the Securities Exchange Act of 1934 (the "Act")
disclosing that any person (within the meaning of Section
13(d) of the Act), other than the Company or a subsidiary of
the Company or any employee benefit plan sponsored by the
Company or a subsidiary of the Company, is the beneficial
owner directly or indirectly of twenty percent of more of
the outstanding common stock, no par value of the Company
("Stock");
(ii) any person (within the meaning of Section 13(d) of
the Act), other than the Company or a subsidiary of the
Company or any employee benefit plan sponsored by the
Company or a subsidiary of the Company, shall purchase
shares pursuant to a tender offer or exchange offer to
acquire any Stock of the Company (or securities convertible
into Stock) for cash, securities or any other consideration,
provided that after consummation of the offer, the person in
question is the beneficial owner (as such term is defined in
Rule 13d-3 under the Act), directly or indirectly, of
fifteen percent or more of the outstanding Stock of the
Company (calculated as provided in paragraph (d) of Rule
13d-3 under the Act in the case of rights to acquire Stock);
(iii) the stockholders of the Company shall approve (A)
any consolidation or merger of the Company in which the
Company is not the continuing or surviving corporation or
pursuant to which shares of Stock of the Company would be
converted into cash, securities or other property, other
than a merger of the Company in which holders of Stock of
the Company immediately prior to the merger have the same
proportionate ownership of common stock of the surviving
corporation immediately after the merger as immediately
<PAGE>
before, or (B) any sale, lease, exchange or other transfer
in one transaction or a series of related transactions) of
all or substantially all the assets of the Company; or
(iv) there shall have been a change in a majority of
the members of the Board within a 12-month period unless the
election or nomination for election by the Company
stockholders of each new director during such 12-month
period was approved by the vote of two-thirds of the
directors then still in office who were directors at the
beginning of such 12-month period."
Notwithstanding the foregoing, any spin-off of all or a portion
of the assets or operations of the Company or any subsidiary
which has been approved by a majority of the directors serving on
the Board as of the date hereof, or by directors approved by the
vote of two-thirds of the directors then still in office who were
directors as of the date hereof, shall not be deemed a "Change in
Control"."
2. Paragraph 13 of the Agreement is hereby amended by adding
the following paragraph (c) at the end thereof:
"(c) Notwithstanding the foregoing, if, within two
years following a Change in Control, the Executive's
employment with the Company is involuntarily terminated
other than for cause or is terminated by the Executive for
Good Reason, then ITT will pay the Executive in a lump sum
within five days following Executive's date of termination
of employment, the following: (i) all amounts owing under
paragraph 13(a) hereof (as if the Board of Directors had
determined not to elect the Executive to the offices
described in paragraph 2 hereof), without reduction for
future payment, (ii) all amounts owing under paragraph 13(b)
hereof (as if the Executive served as Chairman and Chief
Executive until October 31, 2000 and was not nominated as a
non-management director), without reduction
<PAGE>
for future payment, and (iii) the value of the benefit
provided for in paragraph 7 hereof, computed without
reduction for future payment. For purposes of this paragraph
13(c), the amounts under clauses (i), (ii) and (iii) above
shall be determined as provided in paragraph 14(d) hereof.
The foregoing provisions of this paragraph 13(c) shall
be subject to paragraph 14 hereof."
3. A new paragraph 14 is added to the Agreement, to read as
follows: "14. Golden Parachute Tax Matters
(a) Certain Additional Payments by the Company. (i) Anything
in this Agreement to the contrary notwithstanding, if it shall be
determined that any payment or distribution to or for the benefit of
the Executive (whether paid or payable or distributed or
distributable) pursuant to the terms of this Agreement or otherwise
(the "Payment") would be subject to the excise tax imposed by Section
4999 of the Internal Revenue Code of 1986, as amended (the "Code", and
such excise tax, the "Excise Tax"), then the Executive shall be
entitled to receive from the Company an additional payment (the
"Gross-Up Payment") in an amount such that the net amount of Payment
and Gross-Up Payment retained by the Executive, after the calculation
and deduction of all Excise Taxes (including any interest or penalties
imposed with respect to such taxes) on the Payment and all federal,
state and local income tax, employment tax and Excise Tax (including
any interest or penalties imposed with respect to such taxes) on the
Gross-Up Payment provided for in this Section, shall be equal to the
Payment.
(ii) Subject to the provisions of paragraph 14(a)(iii),
all determinations required to be made under this paragraph
14(a), including whether and when the Gross-Up Payment is
required and the amount of
<PAGE>
such Gross-Up Payment, and the assumptions to be utilized in
arriving at such determinations shall be made by a
nationally recognized certified public accounting firm as
may be designated by the Executive (the "Accounting Firm")
which shall provide detailed supporting calculations both to
the Company and the Executive within 15 business days of the
receipt of notice from the Executive that there has been a
Payment, or such earlier time as is requested by the
Company. All fees and expenses of the Accounting Firm shall
be borne solely by the Company. Any Gross-Up Payment shall
be paid by the Company to the Executive within five days of
the receipt of the Accounting Firm's determination. Any
determination by the Accounting Firm shall be binding upon
the Company and the Executive. As a result of uncertainty in
the application of Section 4999 of the Code at the time of
the initial determination by the Accounting Firm hereunder,
it is possible that the Gross- Up Payment made will have
been an amount less than the Company should have paid
pursuant to this paragraph 14(a)(ii) (the "Underpayment").
In the event that the Company exhausts its remedies pursuant
to paragraph 14(a)(iii) and the Executive thereafter is
required to make a payment of any Excise Tax, the Accounting
Firm shall determine the amount of the Underpayment and any
such Underpayment shall be promptly paid by the Company to
or for the benefit of Executive.
(iii) The Executive shall notify the Company in writing
of any claim by the Internal Revenue Service that, if
successful, would require the payment by the Company of the
Gross-Up Payment. Such notification shall be given as soon
as practicable after the Executive is informed in writing of
such claim and shall apprise the Company 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 or she gives such notice to the Company (or such shorter
period ending on the date that any payment of taxes,
interest and/or penalties, with respect to such claim is
due). If the Company notifies the Executive in writing prior
to the
<PAGE>
expiration of such period that it desires to contest such
claim, the Executive shall:
(A) give the Company any information reasonably
requested by the Company relating to such claim,
(B) 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 reasonably selected by the
Company,
(C) cooperate with the Company in good faith in
order to effectively contest such claim, and
(D) 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 the Executive for and hold the
Executive harmless from, on an after-tax basis, any Excise
Tax or income tax (including interest and penalties with
respect thereto) imposed as a result of such representation
and payment of all related costs and expenses. Without
limiting the foregoing provisions of this paragraph
14(a)(iii), the Company shall control all proceedings taken
in connection with such contest and, at its sole option, may
pursue or forgo any and all administrative appeals,
proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole
option, 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 the Executive for and hold the Executive
harmless from, on an after-tax basis, any Excise Tax or
income tax
<PAGE>
(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 the 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 control of 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.
(iv) If, after the receipt by the Executive of an
amount advanced by the Company pursuant to paragraph
14(a)(iii), 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 paragraph
14(a)(iii)) 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 paragraph 14(a)(iii), 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.
(b) For purposes of the calculations required to be made
under paragraphs 13 and 14, the parties agree that, absent any
changes made following the date of execution of this First
Amendment to Executive's compensation arrangements or to the
Company's benefit plans, programs, policies or arrangements, the
determinations to be made hereunder by tax counsel and the
Accounting Firm shall be made on a basis consistent with the
calculations set forth in Exhibit A hereto which have been
prepared by the Company concurrently with the execution of this
First Amendment."
4. Paragraph 20 of the Agreement is hereby amended in
<PAGE>
its entirety, to read as follows:
"20. Settlement of Disputes; Arbitration. If any dispute
arises between the Executive and the Company as to the validity,
enforceability and/or interpretation of any right or benefit afforded
by this Agreement, at the Executive's option, any other agreement or
policy notwithstanding, such dispute shall be resolved by binding
arbitration proceedings in accordance with the rules of the American
Arbitration Association. The arbitrators shall presume that the rights
and/or benefits afforded by this Agreement which are in dispute are
valid and enforceable and that the Executive is entitled to such
rights and/or benefits. The Company shall be precluded from asserting
that such rights and/or benefits are not valid, binding and
enforceable and shall stipulate before such arbitrators that the
Company is bound by all the provisions of this Agreement. The burden
of overcoming by clear and convincing evidence the presumption that
the Executive is entitled to such rights and/or benefits shall be on
the Company. The results of any arbitration shall be conclusive on
both parties and shall not be subject to judicial interference or
review on any ground whatsoever, including without limitation any
claim that the Company was wrongfully induced to enter into this
Agreement to arbitrate such a dispute.
The Company shall pay the cost of any arbitration
proceedings under this Agreement. The Executive shall be entitled
(within two business days of requesting such advance) to an advance of
the actual legal fees and expenses incurred by the Executive in
connection with such proceedings and the Executive shall be obligated
to reimburse the Company for such fees and expenses in connection with
such arbitration proceedings only if it is finally and specifically
determined by the arbitrators that the Executive's position in
initiating the arbitration was frivolous and completely without merit.
The arbitrators shall have discretion to award punitive damages to the
Executive if it is found that the Company's actions or failures to act
which led to the Executive submitting a dispute to arbitration and/or
the Company's actions or failures to act during the pendency of the
arbitration proceeding make such an award appropriate in the
circumstances.
In the event the Executive is required to defend in any
legal action or other proceeding the validity or enforceability of any
right or benefit afforded by this Agreement, the Company will pay any
and all actual legal fees and expenses incurred by the Executive
regardless of the outcome of such action and, if
<PAGE>
requested by the Executive, shall (within two business days of such
request) advance such fees and expenses to the Executive. The Company
shall be precluded from asserting in any judicial or other proceeding
commenced with respect to any right or benefit afforded by this
Agreement that such rights and benefits are not valid, binding and
enforceable and shall stipulate in any such proceeding that the
Company is bound by all the provisions of this Agreement."
5. All references to "ITT" in the Agreement shall be
deemed to refer to the Company.
6. Except as hereinabove provided, the Agreement is hereby
ratified and confirmed and shall continue in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Second
Amendment to the Agreement as of the [14th] day of [August], 1997.
-------------------------
Rand V. Araskog
ITT CORPORATION
By:
--------------------
Ralph W. Pausig
Senior Vice President
[Exhibit 89]
[ITT Letterhead]
DATE: August 13, 1997
CONTACT: Jim Gallagher
TELEPHONE: 212-258-1261
OR
CONTACT: George Sard/David Reno
TELEPHONE: 212-687-8080
FOR IMMEDIATE RELEASE
ITT BOARD REJECTS HILTON'S OFFER AS INADEQUATE,
REAFFIRMS BELIEF THAT ITT'S COMPREHENSIVE PLAN IS IN BEST
INTERESTS OF ITT SHAREHOLDERS
Will Continue To Pursue Tax-Free Split Into
3 Public Companies,
$70 Per Share Self-Tender For 30 Million ITT Shares
---------------------------------------------------
NEW YORK, NY, August 14, 1997 -- ITT Corporation (NYSE: ITT)
announced that its Board of Directors today voted unanimously to
recommend that ITT shareholders reject Hilton's tender offer and
proposed second-step "squeeze out" merger as inadequate and not
in the best interests of ITT shareholders and other stakeholders.
The ITT Board stated that the interests of ITT shareholders,
as well as ITT's creditors, customers, employees and the
communities in which ITT operates, would best be served by the
Company remaining independent and pursuing its previously
announced comprehensive plan. ITT's plan, announced July 16, is
designed to further sharpen ITT's strategic focus and enhance
shareholder value through the creation of three independent
public companies and a self-tender for 30 million ITT shares at
$70 per share.
<PAGE>
ITT BOARD REJECTS HILTON'S REVISED OFFER...
In its recommendation to ITT shareholders, the Board cited
many factors, including:
o Its belief that Hilton's offer does not reflect the
inherent value of ITT.
o Its belief that, in light of the prospects of each of
ITT's businesses, continued pursuit of ITT's
comprehensive plan and the successful implementation by
the three companies of their long-term strategic plans
will produce greater value for ITT shareholders, as
well as greater benefits for ITT's other
constituencies, than the Hilton proposal.
o Continuing uncertainty as to the value of Hilton shares
to be received by ITT shareholders in the second-step
merger and the coercive nature of Hilton's two-tier,
front-end loaded offer, which is intended to compel ITT
shareholders to tender into the offer to avoid
receiving Hilton stock.
o The still undefined "collar" provisions in the second-
step merger.
o Its belief that an acquisition of ITT by Hilton could
have an adverse effect on the combined entity due to
Hilton management's lack of a track record in growing a
large chain of owned, managed or franchised full-
service, international hotels.
<PAGE>
ITT BOARD REJECTS HILTON'S REVISED OFFER...
o The potential for competition, cannibalization and
conflicts between Hilton properties, Hilton
International properties (which are owned by Ladbroke
Group plc) and Sheraton and Four Points properties,
each of which operate in many of the same locations in
the U.S. and overseas, following any combination of
Hilton and ITT.
o Its belief that the combination of ITT and Hilton would
result in undue economic concentration in the Atlantic
City gaming market. Hilton operates three casinos in
Atlantic City, including the recently opened Wild Wild
West casino, totaling 177,000 square feet of casino
space. ITT operates one casino in Atlantic City which,
after its expansion is completed, will have a total of
110,000 square feet of casino space.
o The opinions of its financial advisors, Goldman Sachs
and Lazard Freres, that the Hilton proposal, including
the Hilton offer, is inadequate.
As reported on July 16, under ITT's comprehensive plan ITT
will split into three separate publicly traded companies: ITT
Destinations, Inc., a worldwide leader in hotels and gaming
operating principally under the Sheraton and Caesars brands; ITT
Corporation, whose sole asset will be 100% of ITT World
Directories, Inc., one of the largest and most successful
<PAGE>
ITT BOARD REJECTS HILTON'S REVISED OFFER...
publishers of telephone directories and classified information
outside the United States; and ITT Educational Services, Inc.
(NYSE:ESI), a leading provider of post-secondary technical
education.
In addition, ITT has launched a self-tender for up to 30
million ITT shares at $70 per share and has also tendered for all
$2.0 billion of existing ITT Corporation public debt. The equity
and debt tender offers currently expire on September 9, 1997.
"Our Board of Directors has conducted a thorough review of
Hilton's revised offer and has unanimously concluded that the
prompt execution of ITT's comprehensive plan is in the best
interests of our shareholders and other constituents," said Rand
V. Araskog, Chairman and Chief Executive of ITT.
"The ITT Board is responsible, experienced and independent.
Our plan will allow ITT shareholders to realize near-term value
for their investment while preserving their full participation in
the potential long-term upside of owning three strong independent
companies. Our Board, which has a proven track record of
creating value through spin-offs, has an obligation to consider
both the short- and long-term interests of our shareholders and
other constituents in making its determination."
Since 1992 ITT has sold its entire stake in Alcatel
Alsthom and created four separate public companies through tax-free
spin-offs: Rayonier (NYSE:RYN), The Hartford Financial Services
Group, Inc. (NYSE:HIG), ITT Industries, Inc. (NYSE:IIN), and ITT
<PAGE>
ITT BOARD REJECTS HILTON'S REVISED OFFER...
Corporation (NYSE:ITT). Holders of ITT stock since January 1,
1992 have seen their investment outperform the S&P 500 Index by
more than 70% and increase in aggregate value by approximately
$15 billion.
Added Araskog: "The three independent companies that will
emerge from ITT's comprehensive plan will all be strong, focused
companies with powerful market positions and excellent management
teams, able to create superior value for their shareholders. ITT
Destinations, ITT World Directories -- which will have a powerful
partner in Clayton, Dubilier & Rice -- and ESI are all well
positioned to deliver excellent results. Among many other
problems with its hostile offer, Hilton could not effect a tax-
free spin-off of World Directories and ESI for five years, and it
could have to pay $500 million in taxes if it sold these assets."
"Being forced to deal with HFS -- which franchises economy
lodging brands such as Super 8 Motels, Days Inn and Knights Inn -
- - would devalue the premium Sheraton brand and antagonize many of
our property owners who have contracted with ITT to manage or
franchise their properties around the world," said Robert A.
Bowman, ITT President and Chief Operating Officer.
A recently conducted survey by an independent association
representing Sheraton franchisees found that over 90% of Sheraton
franchisees would consider reflagging their properties if HFS
became their franchisor as proposed in the Hilton transaction.
<PAGE>
ITT BOARD REJECTS HILTON'S REVISED OFFER...
Added Bowman: "ITT Destinations, which already has a global
presence, has the management depth and financial strength to
continue expanding while delivering strong double-digit growth in
earnings and cash flow. In 1997, we have signed 78 new contracts
for hotels to be added to our system. Shareholders can expect
continued strong performance from hotels and substantially
improved performance from gaming in 1998 and beyond as major
renovation projects are completed in Las Vegas and Atlantic City
and a large new riverboat casino/hotel complex in Indiana becomes
operational."
Concluded Araskog: "Our Board has directed management to
proceed expeditiously with our previously announced plan and
believes that the creation of the three new independent companies
is in the best interests of the future shareholders of each of
them, as well as their employees, customers and suppliers."
ITT Corporation consists of Sheraton, a premier hotel
company which owns, manages and franchises 424 hotels in 62
countries; Caesars, the leading brand name in the gaming
industry; and ITT World Directories. ITT also has ownership
positions in ITT Educational Services (83.3%) and Madison Square
Garden (10.2%). ITT has a definitive agreement to sell its 50%
interest in New York City television station WBIS+ to Paxson
Communications Corp. (ASE:PXN).
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