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EXHIBIT 10.15
SECOND 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
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 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 or 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
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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 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, 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.
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(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 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 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 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
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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 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 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
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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.
/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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