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EXHIBIT 10(E)
FIRST AMENDMENT TO
EMPLOYMENT AGREEMENT
DATED AS OF DECEMBER 5, 1995
BETWEEN ITT INDUSTRIES, INC. AND
D. XXXXXX XXXXX
WHEREAS, ITT Industries, Inc., an Indiana corporation ("Industries"),
entered into an employment agreement with D. Xxxxxx Xxxxx dated as of December
5, 1995 (the "Agreement"); and,
WHEREAS, Industries and you desire to amend the Agreement in certain
respects;
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 4 of the Agreement shall be amended by changing the paragraph
heading to "Termination" and by adding the following at the end thereof:
Following an Acceleration Event (as defined herein), no act or omission on
your part shall be considered "willful" for purposes of this Paragraph 4 unless
it is done or omitted in bad faith or without reasonable belief that the action
or omission was in the best interests of Industries.
Following an Acceleration Event, you shall have the right to terminate your
employment for Good Reason (as defined herein). For purposes hereof:
(A) "Good Reason" shall mean:
(i) without your express written consent and excluding for this
purpose an isolated, insubstantial and inadvertent action not taken in
bad faith and which is remedied by Industries or its affiliates promptly
after receipt of notice thereof given by you, (A) a failure to pay or
reduction in your annual base salary (as described in Paragraph 3(a)
hereof) or any bonus or incentive compensation opportunities or any
reduction in any material compensation or benefits arrangement provided
to you or in which you participate, (B) your assignment to any duties
inconsistent in any respect with your position (including status,
offices, titles and reporting requirements), authority, duties or
responsibilities as contemplated by paragraph (1) hereof, (C) any other
action by Industries or any of its affiliates which results in a
diminution in your position, authority, duties or responsibilities, or
(D) any failure by Industries to comply with any of the provisions of
paragraph 3(b) hereof;
(ii) without your express written consent, Industries requiring
your work location to be other than within twenty-five (25) miles of
White Plains, New York;
(iii) any failure by Industries to obtain an express written
assumption of this Agreement by any successor to Industries. For
purposes hereof, a determination by you that you have "Good Reason"
hereunder shall be final and binding on the parties hereto absent a
showing of bad faith on your part.
(B) An "Acceleration Event" shall occur 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 Industries or a subsidiary of Industries or any employee benefit plan
sponsored by Industries or a subsidiary of Industries, is the beneficial
owner directly or indirectly of twenty percent or more of the outstanding
Common Stock, $1 par value, of Industries (the "Stock"); (ii) any person
(within the meaning of Section 13(d) of the Act), other than Industries or
a subsidiary of Industries, or any employee benefit plan sponsored by
Industries or a subsidiary of Industries, shall purchase shares pursuant to
a tender offer or exchange offer to acquire any Stock of Industries (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 Industries (calculated as provided in paragraph (d) of
Rule 13d-3 under the Act in the case of
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rights to acquire Stock); (iii) the stockholders of Industries shall
approve (A) any consolidation or merger of Industries in which Industries
is not the continuing or surviving corporation or pursuant to which shares
of Stock of Industries would be converted into cash, securities or other
property, other than a merger of Industries in which holders of Stock of
Industries 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 Industries, or (iv) there shall have been a
change in a majority of the members of the Board of Directors of Industries
within a 12-month period unless the election or nomination for election by
Industries' 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.
(C) Following an Acceleration Event, the term "Industries" as used in
this Agreement shall also include any successor company to Industries, any
successor to any affiliate of Industries, and any affiliate of any such
successor company.
If you are terminated by Industries within two years after an Acceleration
Event, the only basis upon which the Severance Benefits shall not be provided to
you is upon a termination of employment for cause.
2. Paragraph 5 (f) is amended to provide as follows:
(f) Termination Allowance Under A Severance Plan or Policy. If you would
otherwise ordinarily receive a termination allowance under an Industries'
severance plan or termination allowance policy, including, without limitation,
the ITT Industries, Inc. Senior Executive Severance Pay Plan, a copy of which is
attached hereto as Exhibit I, were you deemed to be covered under and eligible
for such Plan, exceeding the amount of base salary remaining under this
Agreement at the time of notice by Industries of its intent to terminate your
full-time employment, Industries will pay you a termination allowance, in
accordance with the terms of the Industries' severance plan or termination
allowance policy, in lieu of salary continuation under this Agreement. In no
case will both termination allowance and amounts under this Agreement (whether
lump sum or salary continuation) be paid.
3. A new Paragraph 5A is added to the Agreement to read as follows:
5A. Termination After An Acceleration Event
Notwithstanding Paragraph 5 hereof, if within two years following an
Acceleration Event, your employment with Industries is involuntarily terminated
other than for cause or is terminated by you for Good Reason, then Industries
will pay you the following severance benefits ("Severance Benefits"):
Severance Pay -- The sum of (x) three times your highest annual base salary
rate (as provided in Paragraph 3(a) hereof) (whether or not deferred) at any
time during the three year period immediately preceding your termination of
employment, and (y) three times the highest bonus paid or awarded (whether or
not deferred) to you in respect of the three years preceding an Acceleration
Event.
Benefits and Perquisites
-- Continued health and life insurance benefits and perquisites (including,
without limitation, any Industries provided automobile and any tax or financial
advisory services) for a three year period following your termination of
employment at the same cost to you, and at the same coverage levels, provided to
you (and your eligible dependents) immediately prior to your termination of
employment.
-- Payment of a lump sum amount ("Pension Lump Sum Amount") equal to the
difference between (i) the total lump sum value of your pension benefit under
the ITT Industries Salaried Retirement Plan, Industries' Excess Pension Plan IA
and Industries' Excess Pension Plan IB ("Pension Plans") as of your termination
of employment and (ii) the total lump sum value of your pension benefit under
the Pension Plans after crediting you with an additional three years of age and
three years of eligibility and benefit service to you and applying the annual
base salary and highest bonus determined above under "Severance Pay" with
respect to each of the additional three years of service so credited for
purposes of determining Final Average Compensation under the Pension Plans. The
above total lump sum values shall
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be determined in the manner provided in such Excess Pension Plans of Industries
for determination of lump sum benefits upon the occurrence of an Acceleration
Event, as defined in said Plans.
-- Crediting of an additional three years of age and three years of
eligibility service for purposes of Industries' retiree health and retiree life
insurance benefits.
-- Payment of a lump sum amount ("Savings Plan Lump Sum Amount") equal to
three times the following amount: the annual base salary rate determined above
under "Severance Pay" times the highest rate of Company Contributions (not to
exceed 3 1/2%) with respect to you under the ITT Industries Investment and
Savings Plan for Salaried Employees and/or the ITT Industries Excess Savings
Plan (including matching contributions and floor contributions) at any time
during the three year period immediately preceding your termination of
employment.
With respect to the provision of benefits and perquisites during the above
described three year period, if, for any reason at any time Industries is unable
to treat you as being eligible for ongoing participation in any Industries
employee benefit plans or perquisites in existence immediately prior to your
termination of employment of and if, as a result thereof, you do not receive a
benefit or perquisite or receive a reduced benefit or perquisite, Industries
shall provide such benefits or perquisites by (i) direct payment to you of the
amounts you would have received from such benefit plan or perquisite you
continued to be eligible or (ii) at Industries' option, making available
equivalent benefits or perquisites from other sources.
Severance Pay shall be paid in cash, in a non-discounted lump sum within
five business days after the date your employment terminates. The Pension Lump
Sum Amount and the Savings Plan Lump Sum Amount shall be paid in cash within
thirty calendar days after the date your employment terminates.
In cases where Severance Benefits are provided under this Agreement, pay in
lieu of any unused current year vacation entitlement will be paid to you in a
lump sum, in cash within five business days after the date your employment
terminates.
If, upon the termination of your employment after an Acceleration Event,
you would otherwise ordinarily receive, under an Industries' severance plan or
termination allowance policy, including, without limitation, the ITT Industries,
Inc. Senior Executive Severance Pay Plan and the ITT Industries, Inc. Special
Senior Executive Severance Pay Plan, a copy of which is attached hereto as
Exhibit II, were you deemed to be covered under and eligible for either of such
Plans, (i) severance pay, salary continuation pay, termination pay or similar
pay or allowance ("Plan Severance Pay") exceeding the Severance Pay hereunder
and/or (ii) employee benefits, perquisites or outplacement services ("Plan
Severance Benefits") exceeding the corresponding other Severance Benefits,
Industries will pay you or provide to you the Plan Severance Pay and/or the Plan
Severance Benefits in lieu of, respectively, the Severance Pay hereunder or the
corresponding other Severance Benefits. In no case will both Plan Severance Pay
and the Severance Pay hereunder be paid or will both Plan Severance Benefits and
the corresponding other Severance Benefits be provided.
Upon the termination your employment after an Acceleration Event, you may
elect, in your sole discretion, to receive the base salary and incentive bonus
and other compensation and benefits pursuant to Paragraph 5 hereof ("Paragraph 5
Benefit") in lieu of the Severance Benefits and in lieu of any Plan Severance
Pay and/or Plan Severance Benefits, whichever is otherwise payable under the
preceding paragraph. In no case will both the Paragraph 5 Benefit and the
Severance Benefits or the Plan Severance Pay and/or Plan Severance Benefits,
whichever is otherwise payable under the preceding paragraph, be paid.
4. Paragraph 13 of the Agreement shall be amended by adding the following
at the end thereof:
Industries shall pay all legal fees, costs of litigation, prejudgment
interest, and other expenses which are incurred in good faith by you as a result
of Industries' refusal to provide any of the Severance Benefits to which you
become entitled under this Agreement, or as a result of Industries' (or any
third party's) contesting the validity, enforceability, or interpretation of
this Agreement, or as a result of any conflict
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between you and Industries pertaining to this Agreement. Industries shall pay
such fees and expenses from its general assets.
5. A new Paragraph 14 is added to the Agreement, to read as follows:
14. Excise Tax
In the event that it shall be determined that any payment or distribution
by Industries to you or for your benefit (whether paid or payable or distributed
or distributable pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required under this
paragraph 14, such payments or distributions being referred to herein as
"Payments") would give rise to your liability for the excise tax imposed by
Section 4999 of the Internal Revenue Code, as amended (the "Code"), or that any
interest or penalties are incurred by you with respect to such excise tax (such
excise tax, together with any such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), then you shall be entitled to
receive an additional payment (the "Gross-Up Payment") in an amount such that
after your payment of all Federal, state and local taxes (including any interest
or penalties imposed with respect to such taxes), including, without limitation,
any income and employment taxes (and any interest and penalties imposed with
respect to such taxes) and Excise Tax imposed upon the Gross-Up Payment, you
retain an amount of the Gross-Up Payment equal to the Excise Tax imposed upon
the Payments. For this purpose, you shall be deemed to be in the highest
marginal rate of Federal, state and local taxes. This payment shall be made as
soon as possible following the date of your termination of employment, but in no
event later than thirty calendar days of such date.
In the event the Gross-Up Payment shall fail to make you whole on an
after-tax basis, the Gross-Up Payment shall be recalculated ("Recalculated
Gross-Up Payment"), using your actual effective tax rate, once it is known for
the calendar year in which the Gross-Up Payment is made, and Industries shall
reimburse you for the full amount of any amount by which the Recalculated
Gross-Up Payment exceeds the Gross-Up Payment ("Additional Gross-Up Payment").
The Gross-Up Payment and any Additional Gross-Up Payment shall be paid out
of the general assets of Industries.
In the event the Internal Revenue Service subsequently adjusts the excise
tax computation herein described, Industries shall reimburse you for the full
amount necessary to make you whole on an after-tax basis (less any amounts
received by you that you would not have received had the computations initially
been computed as subsequently adjusted), including the value of any underpaid
excise tax, and any related interest and/or penalties due to the Internal
Revenue Service.
6. A new Paragraph 15 is added to the Agreement, to read as follows:
15. Miscellaneous
Severance Benefits under this Agreement are paid entirely by Industries
from its general assets.
In the event of your death while any amount is still payable to you
hereunder had you continued to live, all such amounts shall be paid in
accordance with this Agreement to your designated heirs or, in the absence of
such designation, to your estate.
7. Except as hereinabove amended by this First Amendment, the Agreement is
hereby ratified and confirmed and the Agreement shall continue in full force and
effect.
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IN WITNESS WHEREOF, the parties have executed this First Amendment to the
Agreement, and this First Amendment shall be effective, as of the 11th day of
March, 1997.
D. XXXXXX XXXXX
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D. Xxxxxx Xxxxx
ITT INDUSTRIES, INC.
By: XXXXX X. XXXXX
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Xxxxx X. Xxxxx
Senior Vice President -- Director,
Human Resources
