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EXHIBIT 10.14
FIRST AMENDMENT TO
EMPLOYMENT AND CONSULTING AGREEMENT
DATED AS OF DECEMBER 19, 1995
BETWEEN ITT DESTINATIONS, INC. AND
XXXX X. XXXXXXX
WHEREAS, ITT CORPORATION, a Nevada corporation (formerly known as ITT
Destinations, Inc.) (the "Company"), entered into an employment and consulting
agreement with Xxxx X. Xxxxxxx (the "Executive") dated as of December 19, 1995
(the "Agreement"); and
WHEREAS, the Company and Executive 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 12 of the Agreement shall be 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 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 responsibilities, 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.
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
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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 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 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) Section 280 Cutback. Except as provided in paragraph (b) and
paragraph (c) hereof, notwithstanding any other provision of this
Agreement to the contrary, in the event that any payment or benefit
received or to be received by Executive in connection with a Change of
Control of the Company or the termination of Executive's employment
(whether pursuant to the terms of this Agreement or any other plan,
arrangement or agreement) with the Company, any "person" (as defined in
Section 13(d) of the Act) whose actions result in a Change of Control or
any person affiliated with the Company or such person) (all such
payments and benefits, being hereinafter called "Total Payments") would
not be deductible (in whole or part) by the Company, an affiliate or
person making such payment or providing such benefit as a result of
section 280G of the Internal Revenue Code of 1986, as amended ("the
Code"), then, to the extent necessary to make such otherwise
non-deductible portion of the Total Payments deductible (and after
taking into account any reduction in the Total Payments provided by
reason of section 280G of the Code in such other plan, arrangement or
agreement), (A) the cash portion of the Total Payments provided in this
Agreement shall first be reduced (if necessary, to zero), and (B) all
other non-cash Total Payments
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under this Agreement shall next be reduced (if necessary, to zero). For
purposes of this limitation, (i) no portion of the Total Payments the
receipt or enjoyment of which the Executive shall have effectively
waived in writing prior to the Date of Termination shall be taken into
account, (ii) no portion of the Total Payments shall be taken into
account which in the opinion of a nationally recognized tax counsel
selected by the Executive does not constitute a "parachute payment"
within the meaning of section 280G(b)(2) of the Code, including by
reason of section 280G(b)(4)(A) of the Code, (iii) the Total Payments
shall be reduced only to the extent necessary so that the Total Payments
(other than those referred to in clauses (i) or (ii)) in their entirety
constitute reasonable compensation for services actually rendered within
the meaning of section 280G(b)(4)(B) of the Code or are otherwise
deductible after application of the non-deductibility rules of Section
280G of the Code, in the opinion of the tax counsel referred to in
clause (ii); and (iv) the value of any non-cash benefit or any deferred
payment or benefit included in the Total Payments shall be determined by
the Company's independent auditors in accordance with the principles of
sections 280G(d)(3) and (4) of the Code. Solely for purposes of this
paragraph 14(a) and without limiting the generality of clause (ii) of
the preceding sentence, it is expressly acknowledged by the Company that
the Executive's accrued benefit under the Company's Excess Pension Plan
and the Executive's account balance under the Company's Excess Savings
Plan, both of which are already fully vested under the terms of the
respective plans, as well as any non-qualified stock options which are
fully exercisable as of the date of the Executive's termination of
employment, do not constitute "parachute payments" within the meaning of
Section 280G(b)(2) of the Code.
(b) Certain Additional Payments by the Company. (i) Anything in
this Agreement to the contrary notwithstanding, in the event that it
shall be determined that any payment or distribution by the Company 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, but determined without regard to any additional payments
required under this paragraph 14(b)) (a "Payment") would give rise to
liability of the Executive for the excise tax imposed by section 4999 of
the Code, or that any interest or penalties are incurred by the
Executive 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 the Executive shall be entitled
to receive an additional payment (the "Gross-Up Payment") in an amount
such that after payment by the Executive 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, the Executive retains an
amount of the Gross-Up Payment equal to the Excise Tax imposed upon the
Payments. Notwithstanding the foregoing provisions of this paragraph
14(b)(i), if it shall be determined that the Executive is entitled to
the Gross-Up Payment, but that the Executive, after taking into account
the Payments and the Gross-Up Payment, would not receive a net after-tax
benefit of at least $50,000 (taking into account both income taxes and
any Excise Tax) as compared to the net after-tax proceeds to the
Executive resulting from an elimination of the Gross-Up Payment and a
reduction of the Payments, in the aggregate, to an amount (the "Reduced
Amount") such that the receipt of Payments would not give rise to any
Excise Tax, then no Gross-Up Payment shall be made to the Executive and
the Payments, in the aggregate, shall be reduced to the Reduced Amount.
(ii) Subject to the provisions of paragraph 14(b)(iii), all
determinations required to be made under this paragraph 14(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 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
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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(b)(ii) (the
"Underpayment"). In the event that the Company exhausts its remedies
pursuant to paragraph 14(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 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;
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(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 xxx 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 xxx 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; 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
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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(b)(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(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 paragraph
14(b)(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.
(c) Notwithstanding anything herein to the contrary, paragraph 14(a)
shall not become effective if the closing price per share of Company common
stock, no par value, as reported on the New York Stock Exchange Composite
Tape, remains, for five consecutive trading days following February 11,
1997 (provided one of the consecutive days occurs on or prior to the
Executive's date of termination of employment), at or above the price at
which two-thirds of the award of performance-based options granted by the
Company on February 4, 1997 to senior executives of the Company will vest
by their terms (the "Target Price"), such Target Price to be adjusted for
any stock split, stock dividend, merger, reorganization, recapitalization
or other business combination effectuated after the date of execution of
this First Amendment to the Agreement.
(d) 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. Except as hereinabove provided, this First Amendment is hereby ratified
and confirmed and the Agreement shall continue in full force and effect.
IN WITNESS WHEREOF, the parties have executed this First Amendment to the
Agreement as of the 11th day of February, 1997.
/s/ XXXX X. XXXXXXX
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Xxxx X. Xxxxxxx
ITT CORPORATION
By: /s/ XXXXX X. XXXXXX
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Xxxxx X. Xxxxxx
Senior Vice President
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