SCHEDULE 14A INFORMATION
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ITT CORPORATION
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1994
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Notice of
Annual Meeting
and
Proxy Statement
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Letter from
RAND V. ARASKOG
Chairman, President
and Chief Executive
March 28, 1994
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders to be
held at 10:30 A.M. on Tuesday, May 17, 1994 in the Sheraton Ballroom of the
Sheraton Chicago Hotel & Towers, Chicago, Illinois.
We urge you to participate in the business of the Annual Meeting by completing
and returning the enclosed proxy as promptly as possible. Your vote is
important.
The accompanying Notice of Annual Meeting and Proxy Statement provide
information about the matters to be acted upon by the Corporation's
shareholders. The Proxy Statement also contains information about the role and
responsibility of the Board of Directors and the Committees of the Board and
provides important information about each nominee for election as director.
A report reflecting the highlights of the Annual Meeting will be sent to you in
the weeks following the meeting.
We are pleased to continue a communications service which affords shareholders
the opportunity to discuss ITT directly with senior financial staff. The service
is available as follows: on May 2, August 1 and November 7, 1994, following the
release of quarterly earnings, senior staff will be available from 10:00 A.M. to
12:00 Noon Eastern Time to discuss your questions about ITT's financial results.
The toll free number to call at those times is 1-800-DIAL-ITT (1-800-342-5488).
Sincerely yours,
Rand V. Araskog
[ITT LOGO]
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NOTICE OF ANNUAL MEETING
March 28, 1994
The Seventy-Fourth Annual Meeting of the Shareholders of ITT Corporation will be
held in the Sheraton Ballroom of the Sheraton Chicago Hotel & Towers, 301 East
North Water Street, Chicago, Illinois on Tuesday, May 17, 1994, at 10:30 A.M.,
local time, for the following purposes:
1. to elect directors;
2. to ratify the reappointment of Arthur Andersen & Co. as independent auditors
of the Corporation for 1994;
3. to approve the 1994 incentive stock plan;
4. to approve the annual performance-based incentive plan;
5. to act upon the shareholder proposals set forth in the Proxy Statement; and
6. to act upon such other matters as may properly come before the meeting.
Shareholders of record at the close of business on March 21, 1994 will be
entitled to vote at the meeting.
Gwenn L. Carr
Vice President and Secretary
[ITT LOGO]
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ITT Corporation
1330 Avenue of the Americas
New York, NY 10019-5490
PROXY STATEMENT
[ITT LOGO]
This Proxy Statement and accompanying proxy are being mailed to shareholders
commencing March 28, 1994 in connection with the solicitation of proxies by the
Board of Directors of ITT Corporation for the 1994 Annual Meeting.
When your proxy is returned properly executed, the shares it represents will be
voted in accordance with your specifications. You have three choices as to your
vote on each of the items described in this Proxy Statement that are to be voted
upon at the Annual Meeting. As to the election of directors, by marking the
appropriate box you may (a) vote for all of the director nominees as a group;
(b) vote for all director nominees except those nominees whose names you
indicate; or (c) withhold your vote from all nominees as a group. As to the
other items, you may vote "for" or "against" each item or "abstain" from voting
by marking the appropriate box.
Your vote is important and the Board of Directors urges you to exercise your
right to vote.
If you sign and return your proxy but do not specify any choices you will
thereby confer discretionary authority for your shares to be voted as
recommended by the Board of Directors. The proxy also confers discretionary
authority on the individuals named therein to vote the shares on any matter that
was not known by the Board of Directors on the date of this Proxy Statement but
is presented at the Annual Meeting and to vote on any shareholder proposals that
have been omitted from this Proxy Statement pursuant to the proxy regulations of
the Securities and Exchange Commission.
Whether or not you plan to attend the meeting, you can assure that your shares
are voted by
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completing, signing, dating and returning the enclosed proxy. You may revoke
your proxy at any time before it is exercised by giving written notice to Gwenn
L. Carr, vice president and secretary of ITT, by submitting a subsequently dated
proxy, by attending the meeting and withdrawing the proxy, or by voting in
person at the meeting.
If you hold shares of both Common and Preferred Stock of ITT, the accompanying
proxy represents all of the shares you are entitled to vote at the meeting. If
you are a participant in ITT's Dividend Reinvestment and Common Stock Purchase
Plan, the proxy indicates the number of shares registered in your name and the
number of full shares credited to your account in the Plan. If you participate
in the ITT Investment and Savings Plan for Salaried Employees or a savings plan
for hourly employees, the trustee under the plan will provide you with a proxy
representing the shares you are entitled to vote under the plan.
Each of the 117,516,488 shares of Common Stock and each of the 571,004
shares of Cumulative Preferred Stock, $2.25 Convertible Series N, outstanding at
the close of business on March 21, 1994 are entitled to one vote at the Annual
Meeting. The shares of Cumulative Preferred Stock, ESOP Convertible Series, will
be treated for voting purposes as though they were converted into 10,019,081
shares of Common Stock. All such shares entitled to vote at the Annual Meeting
are referred to herein as "Record Shares." The presence in person or by proxy of
shareholders holding a majority of the Record Shares will constitute a quorum
for the transaction of business at the Annual Meeting.
The By-laws of the Corporation provide that shareholders shall be accorded
privacy in voting and that the integrity of the balloting process shall be
assured. The Board of Directors has appointed one current and one former officer
of Chemical Banking Corporation to act as inspectors of election at the Annual
Meeting.
BOARD OF DIRECTORS
The Board of Directors is responsible for establishing broad corporate policies
and for overseeing the overall performance of ITT. The Board reviews significant
developments affecting ITT and acts on matters requiring Board approval. During
1993, there were ten meetings of the Board of Directors.
The standing committees of the Board are the Audit, Capital, Compensation and
Personnel, Executive and Policy, Legal Affairs, Nominating, and Public Affairs
Committees.
THE AUDIT COMMITTEE recommends the selection of independent auditors for the
Corporation, confirms the scope of audits to be performed by such auditors,
reviews audit results and internal accounting procedures and policies, and
reviews the fees paid to the Corporation's independent auditors. The Committee
reviews and recommends approval of the audited financial statements of the
Corporation and the annual reports to shareholders. It also reviews the expense
accounts of senior executives. The Committee held six meetings during 1993. The
members of the Audit Committee are: Bette B. Anderson, Robert A. Burnett, S.
Parker Gilbert, Paul G. Kirk, Jr., Edward C. Meyer, and Benjamin F. Payton.
THE CAPITAL COMMITTEE is responsible for maximizing the effective use of the
assets of ITT and its subsidiaries and for reviewing capital
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expenditures and appropriations. The Committee held nine meetings during 1993.
The members of the Committee are: Bette B. Anderson, Rand V. Araskog, Nolan D.
Archibald, Robert A. Burnett, S. Parker Gilbert, Paul G. Kirk, Jr., Edward C.
Meyer, Benjamin F. Payton, and Margita E. White.
THE COMPENSATION AND PERSONNEL COMMITTEE, which is comprised entirely of
non-employee directors, oversees the compensation and benefits of employees,
evaluates management performance and establishes executive compensation. In the
performance of its functions, the Committee has access to independent
compensation counsel. The Committee held nine meetings during 1993. Bette B.
Anderson, Nolan D. Archibald, Robert A. Burnett, Paul G. Kirk, Jr., Edward C.
Meyer and Margita E. White are the members of the Committee.
THE EXECUTIVE AND POLICY COMMITTEE exercises the powers of the Board in the
management of the business and affairs of the Corporation in the intervals
between meetings of the Board. The Committee reviews the long-range corporate
strategies formulated by senior management and the non-employee directors meet
in executive session to review the overall performance of the chief executive,
particularly with respect to the Corporation's long-range strategies. Eleven
Committee meetings were held during 1993. The members of the Executive and
Policy Committee are: Bette B. Anderson, Rand V. Araskog, Nolan D. Archibald,
Robert A. Burnett, Michel David-Weill, S. Parker Gilbert, Paul G. Kirk, Jr.,
Edward C. Meyer, Benjamin F. Payton, and Margita E. White.
THE LEGAL AFFAIRS COMMITTEE reviews and considers major claims and litigation,
and legal, regulatory, patent and related governmental policy matters affecting
ITT and its subsidiaries. The Committee reviews and approves management policies
and programs relating to compliance with legal and regulatory requirements,
business ethics and environmental matters. The Committee held four meetings
during 1993. The members of the Committee are: Bette B. Anderson, Robert A.
Burnett, S. Parker Gilbert, Edward C. Meyer, and Margita E. White.
THE NOMINATING COMMITTEE makes recommendations concerning the organization,
size, and composition of the Board and its Committees, proposes nominees for
election to the Board and its Committees and considers the qualifications,
compensation, and retirement of directors. The Committee held seven meetings
during 1993 and its members are:
Bette B. Anderson, Nolan D. Archibald, Edward C. Meyer, Benjamin F. Payton, and
Margita E. White.
The Nominating Committee will consider recommendations for director nominees
that are submitted by shareholders in writing to the vice president and
secretary of ITT in accordance with the requirements set forth in the By-laws of
the Corporation. A copy of the relevant provisions of the By-laws may be
obtained from the vice president and secretary.
THE PUBLIC AFFAIRS COMMITTEE reviews and defines the Corporation's social
responsibilities, including issues of significance to the Corporation and to its
shareholders and employees. The Committee held five meetings during 1993. The
members of the Committee are: Robert A. Burnett, S. Parker Gilbert, Paul G.
Kirk, Jr., Benjamin F. Payton, and Margita E. White.
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During 1993, there were ten meetings of the Board of Directors and 51 meetings
of the Board Committees. All of the incumbent directors attended at least 80% of
the meetings of the Board of Directors and the Committees on which they served.
There are currently ten directors serving on the Board, all of whom are nominees
for election. If all ten nominees for director are elected at the Annual
Meeting, the Board will consist of nine directors who are not officers or
employees of the Corporation or its subsidiaries and one director who is an
officer of ITT.
The Board of Directors has adopted a retirement policy which provides (i) that
no person may be nominated for election or reelection as a non-employee director
after reaching age 72, and (ii) that no employee of ITT or of any of its
subsidiaries (other than an employee who has served as chief executive of ITT)
may be nominated for election or reelection as a director after reaching age 65,
unless there has been a specific waiver by the Board of Directors of these age
requirements.
DIRECTORS' COMPENSATION
Members of the Board who are employees of ITT are not compensated for service on
the Board or its Committees. Non-employee directors receive a fee of $1,000 for
attendance at each meeting of the Board and at each meeting of the Committees on
which such directors serve. Members of the Executive and Policy Committee,
except Mr. Araskog, receive an annual retainer of $42,000. The non-employee
directors of ITT who serve on the Board of Directors of Hartford Fire Insurance
Company, ITT Financial Corporation or ITT Sheraton Corporation receive annual
retainers of $27,000 for such service and $1,000 for attendance at each meeting
of the board on which any such director serves.
ITT has an unfunded retirement benefit plan for non-employee directors who
retire from the Board at or after age 65 after completing at least five years of
service on the Board. The plan provides for an annual pension based on the ITT
Board annual retainer fee payable at retirement. Pensions range from 50% of such
fee after five years of service to 100% after ten years, with an additional 5%
for each year of service in excess of ten, to a maximum of 200% of the annual
retainer fee after 30 or more years of service. A director may indicate a
preference, subject to certain conditions, to receive any accrued benefit under
the plan in the form of a single (discounted) lump sum payment immediately
payable upon such director's retirement. During 1993, $672,000 was accrued for
this unfunded retirement benefit plan. Non-employee directors may participate in
a group life insurance plan that has been established for their benefit. The
plan provides $100,000 of non-contributory group life insurance to participating
non-employee directors during their service on the Board.
The non-employee directors also are covered under a non-contributory group
accidental death and dismemberment program which provides each of them $750,000
of coverage during their service on the Board. Additional benefits also may be
purchased.
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Item No. 1
ELECTION OF DIRECTORS
At the 1994 Annual Meeting, ten directors are to be elected to hold office until
the next Annual Meeting of Shareholders and until their successors are elected
and qualified. Unless there is a contrary indication, the shares represented by
valid proxies will be voted for the election of all ten nominees.
The Board has no reason to believe that any nominee will be unable to serve as a
director. If for any reason a nominee should become unable to serve, the shares
represented by valid proxies will be voted for the election of such other person
as the Board may recommend or the Board may reduce the number of directors to
eliminate the vacancy.
A brief summary of each nominee's principal occupation, business affiliations
and other information follows.
BETTE B. ANDERSON
Principal occupation --
President of Kelly,
Anderson & Associates, Inc.,
Consultants
Director since 1981
Mrs. Anderson, 65, was elected president of Kelly, Anderson & Associates, Inc.,
a Washington-based management firm, in 1990. She had previously been executive
vice president of the firm. Mrs. Anderson was formerly a partner in the public
affairs company of Anderson, Benjamin, Read & Haney. She was Undersecretary of
the Treasury from 1977 to 1981. Mrs. Anderson was affiliated for twenty-seven
years with the Citizens and Southern National Bank of Savannah, having served as
a vice president until she assumed the Treasury post. Mrs. Anderson is a
director of Riverwood International Corporation; ITT Financial Corporation, a
subsidiary of ITT; and Manville Corporation. Mrs. Anderson has also served as
president of the National Association of Bank Women, and as chairman of the U.S.
Department of Treasury Historical Association. She is a Director of the Miller
Foundation, the University of Virginia and a member of the Advisory Council of
Girl Scouts of America. She attended Georgia Southern and Armstrong State
Colleges and is a graduate of the Stonier Graduate School of Banking at Rutgers
University.
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RAND V. ARASKOG
Principal occupation --
Chairman, President and
Chief Executive of ITT
Director since 1977
Mr. Araskog, 62, joined ITT in 1966. He has been chief executive since 1979 and
chairman since 1980. In March 1991, he assumed the title of president. Mr.
Araskog is a director of Hartford Fire Insurance Company and ITT Sheraton
Corporation, subsidiaries of ITT. He is a director of Alcatel Alsthom of France,
in which ITT holds a seven percent interest. He is a director of Dow Jones &
Company, Inc.; Dayton-Hudson Corporation; Rayonier Inc.; Shell Oil Company; and
the New York Stock Exchange. He is a member of The Business Council, The
Business Roundtable, the Council on Foreign Relations, and the Trilateral
Commission. He is a trustee of the New York Zoological Society and the Salk
Institute. In 1988 Mr. Araskog was named Officier de la Legion d 'Honneur by the
President of France. In May 1991, he was awarded the Order of Merit of the
Republic of Italy in the level of Grand Officer. In 1994, he was awarded the
Medal of the Order of General Bernardo O'Higgins by the Chilean Government at
the level of Comendador. Mr. Araskog is a graduate of the U.S. Military Academy
at West Point and attended the Harvard Graduate School of Arts and Sciences.
NOLAN D. ARCHIBALD
Principal occupation --
Chairman, President and
Chief Executive Officer of
The Black & Decker
Corporation,
Consumer and Commercial
Products Company
Director since 1991
Mr. Archibald, 50, joined Black & Decker in 1985 as president and chief
operating officer, and since that time has been elected chief executive officer
and chairman. Prior to joining Black & Decker, he was senior vice president and
president of the Consumer and Commercial Products Group of the Beatrice
Companies, Inc. and held various executive and marketing positions with Beatrice
Companies, Inc. during the period 1977 to 1985. Mr. Archibald previously served
as a director of ITT from September 1986 to March 1988. Mr. Archibald serves as
a member of the Board of Trustees for The Johns Hopkins University and is a
member of The Business Roundtable. Mr. Archibald received a BS degree from Weber
State University and an MBA degree from The Harvard Business School.
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ROBERT A. BURNETT
Principal occupation --
Chairman and CEO (Retired)
of Meredith Corporation,
Diversified Media Company
Director since 1985
Mr. Burnett, 66, served as chairman of Meredith Corporation from 1988 until his
retirement in 1992. He served as president and chief executive officer from 1977
and relinquished the latter office in 1989. He is a director of Hartford Fire
Insurance Company, a subsidiary of ITT. Mr. Burnett is a director of
Dayton-Hudson Corporation, Meredith Corporation, Whirlpool Corporation, and
Midwest Resources Inc. He is a member of the Board of Trustees of Grinnell
College, Grinnell, Iowa. He also is a director of the Greater Des Moines
Committee and the Des Moines Art Center. Mr. Burnett has a BA degree in
economics from the University of Missouri.
MICHEL DAVID-WEILL
Principal occupation --
Senior Partner of
Lazard Freres & Co.,
Investment Bankers
Director since 1981
Mr. David-Weill, 61, is Senior Partner of Lazard Freres & Co., a position he has
held since 1977. He became a partner in Lazard Freres & Co., New York, in 1961,
where he served until 1965. In 1965 he became a partner of Lazard Freres & Cie.,
Paris, and a director of Lazard Brothers & Co. Limited, London. Mr. David-Weill
is a director of a number of corporations, including BSN Gervais Danone in
France, Fiat S.p.A. in Italy, Pearson plc in England, and The Dannon Company,
Inc. in the United States, as well as other companies of which Lazard Freres &
Cie., Paris, or one of its affiliates, is the principal shareholder. He
graduated from the Institut des Sciences Politiques, Paris, France.
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S. PARKER GILBERT
Principal occupation --
Chairman, Morgan Stanley
Advisory Board,
International Consultants
Director since 1991
Mr. Gilbert, 60, retired in 1990 from Morgan Stanley Group Inc., where he served
as chairman from 1984 until he retired. He joined Morgan Stanley in 1960, was
elected a partner in 1969, a managing director in 1970, and president in 1983.
Mr. Gilbert is a director of Morgan Stanley Group Inc., Burlington Resources
Inc., and Taubman Centers, Inc. He is vice chairman of the St. Luke's/ Roosevelt
Hospital Center Board of Trustees; president, Board of Trustees, the Pierpont
Morgan Library; member, Board of Trustees, the Metropolitan Museum of Art, the
Alfred P. Sloan Foundation and the John Simon Guggenheim Memorial Foundation;
and director, Josiah H. Macy Foundation. Mr. Gilbert is a graduate of Yale
University.
PAUL G. KIRK, JR.
Principal occupation --
of Counsel to
Sullivan & Worcester,
Law Firm
Director since 1989
Mr. Kirk, 56, became a partner in the law firm of Sullivan & Worcester in 1977
and is presently of Counsel to the firm. He served as chairman of the Democratic
National Committee from 1985 to 1989 and as treasurer from 1983 to 1985.
Following his graduation from law school, Mr. Kirk became an assistant district
attorney in Massachusetts. In 1969 he went to Washington to serve as assistant
counsel to the Senate Judiciary Committee's Subcommittee on Administrative
Practices and Procedures. In 1971, he left the Subcommittee staff to join
Senator Edward M. Kennedy's U.S. Senate staff as special assistant. Following
his resignation in 1989 as chairman of the Democratic National Committee, he
returned to Sullivan & Worcester as a partner in general corporate practice at
the firm's Boston and Washington offices. Mr. Kirk is a director of
Kirk-Sheppard & Co., Inc., of which he also is chairman and treasurer. He is a
trustee of the Bradley Real Estate Trust, and a director of Hartford Fire
Insurance Company, a subsidiary of ITT, and Rayonier Inc. He is co-chairman of
the Commission on Presidential Debates, chairman of the John F. Kennedy Library
Foundation Board of Directors, and a trustee of Stonehill College. He is a
graduate of Harvard College and Harvard Law School.
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EDWARD C. MEYER
Principal occupation --
Managing Partner of
Cilluffo Associates,
Investment Group
Director since 1986
General Meyer, 65, retired in 1983 as chief of staff of the United States Army.
He was executive vice president of a start-up aerospace company from 1983 to
1985 and has since been an international consultant. He is a member of the
supervisory board of Compagnie Financiere Alcatel. He is a director of FMC
Corporation and its joint venture company in Turkey, Savunma Sanayii A.S.; the
Brown Group; and GRC International. General Meyer also serves as a director of
ITT Financial Corporation, a subsidiary of ITT. He is a trustee of The Mitre
Corporation and the George C. Marshall Foundation. He is president of the Army
Emergency Relief Association, a director of the Scientists Institute for Public
Information, the Board of Overseers of the Hoover Institution, and the Board of
Advisors of the Center for Strategic and International Studies, and a board
member of the Smith Richardson Foundation. General Meyer received a BS degree in
engineering from the U.S. Military Academy at West Point and an MS degree in
international affairs from George Washington University. He was a Federal
Executive Fellow at the Brookings Institution. He has received honorary
doctorate degrees from Boston University, Susquehanna University, and Norwich
University, and a distinguished graduate award from the George Washington
University.
BENJAMIN F. PAYTON
Principal occupation --
President of Tuskegee
University
Director since 1987
Dr. Payton, 61, has been president of Tuskegee University in Alabama since 1981.
He served as president of Benedict College and with the Ford Foundation as
program officer, education and public policy. Dr. Payton is a director of ITT
Sheraton Corporation, a subsidiary of ITT. He is a director of Amsouth
Bancorporation, Amsouth Bank, the Liberty Corporation, Praxair Corporation,
Sonat Inc., Morrisons, Inc., the Southern Regional Council and the Alabama
Shakespeare Festival. He is a member of the Business-Higher Education Forum and
of the Visiting Committee of the Board of Overseers of Harvard College. He has
been awarded honorary degrees from Eastern Michigan University, Lehigh
University, Morris Brown College, Morgan State University, Benedict College, and
the University of Maryland. He is a graduate of South Carolina State College and
received a Bachelor of Divinity degree from Harvard University, an MA degree
from Columbia University, and a PhD from Yale University.
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MARGITA E. WHITE
Principal occupation --
President of the Association
for Maximum Service
Television, Inc.,
Television Trade
Association
Director since 1980
Mrs. White, 56, joined the Association for Maximum Service Television, Inc. as
president in 1987 after serving as an independent consultant and coordinator of
the Television Operators Caucus, Inc. She was a member of the Federal
Communications Commission between 1976 and 1979. Previously she served in the
federal government as director of the White House office of communications,
assistant press secretary to President Ford, and assistant director of the U.S.
Information Agency. She is a director of ITT Sheraton Corporation, a subsidiary
of ITT; The Growth Fund of Washington; and Washington Mutual Investors Fund.
Mrs. White received BA and LLD degrees from the University of Redlands and an MA
degree from Rutgers University.
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Item No. 2
RATIFICATION OF THE REAPPOINTMENT
OF INDEPENDENT AUDITORS
In accordance with the recommendation of the Audit Committee, the Board of
Directors has reappointed Arthur Andersen & Co. as independent auditors of the
Corporation for 1994, subject to ratification by the shareholders. If the
shareholders do not ratify the reappointment of Arthur Andersen & Co., the
selection of other independent auditors will be considered by the Audit
Committee and the Board of Directors.
Arthur Andersen & Co. has served as independent auditors of ITT and most of its
subsidiaries for many years, and its long-term knowledge of ITT has enabled it
to carry out its audits with effectiveness and efficiency. In keeping with the
established policy of Arthur Andersen & Co., partners and employees of the firm
engaged in auditing ITT are periodically rotated, thus giving ITT the benefit of
new expertise and experience. Arthur Andersen & Co. personnel regularly attend
meetings of the Audit Committee. Arthur Andersen & Co.'s fees for the 1993 audit
of ITT totalled approximately $8.2 million.
Representatives of Arthur Andersen & Co. will attend the Annual Meeting, will
have the opportunity to make a statement if they desire to do so, and will be
available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR RATIFICATION OF THE
REAPPOINTMENT OF ARTHUR ANDERSEN & CO. AS INDEPENDENT AUDITORS OF THE
CORPORATION.
Item No. 3
APPROVAL OF THE ITT CORPORATION 1994 INCENTIVE STOCK PLAN
Based on the recommendation of the Compensation and Personnel Committee,
effective March 8, 1994, the Board of Directors adopted the ITT Corporation 1994
Incentive Stock Plan (the "1994 Plan"), which is set forth as Appendix A hereto.
The Board believes the 1994 Plan, which will be administered by the Board's
Compensation and Personnel Committee (the "Committee"), will enable the
Corporation to attract and retain key employees and to directly link their
incentives to the performance of ITT Common Stock. The 1986 Incentive Stock Plan
(the "1986 Plan") currently has approximately 200,000 authorized shares
remaining. The proposed 1994 Plan, by permitting grants in the form of stock
options, stock appreciation rights, performance shares or restricted stock,
allows the Committee flexibility in using ITT stock as an incentive to
management performance. The effective date of the 1994 Plan is January 1, 1994,
subject to the approval of the Corporation's shareholders at the Annual Meeting.
ITT currently has two shareholder-approved plans which were designed to provide
long-term incentives for key employees. The first such plan is the ITT Long-Term
Performance Plan (the "LTPP"), which was first approved by the shareholders in
1970. It provides for the granting of Performance Units to ITT employees, with
ultimate cash payments, if any, based on the Corporation's (or a business
segment's) achievement of specified
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financial performance goals over a multi-year performance period. LTPP awards
were last made under the 1992 class covering the period 1992 through 1995 with
award values dependent upon the achievement of return on equity goals. The LTPP
permits a maximum of 3,000,000 units to be outstanding at any one time and
1,832,317 units were available for grants as of December 31, 1993. The 1986 Plan
is the second such long-term incentive plan. This plan permits the granting of
stock options, stock appreciation rights, performance shares or restricted stock
with respect to a maximum of 6,000,000 shares of Common Stock of the
Corporation. The 1986 Plan has a termination date of December 31, 1995.
The proposed 1994 Plan, which is substantially similar to the 1986 Plan,
provides for the grant of incentive stock options (qualifying under Section 422
of the Internal Revenue Code of 1986), non-qualified stock options, stock
appreciation rights ("Rights"), performance shares and restricted stock, or any
combination of the foregoing, as the Committee may determine (collectively,
"Awards"). The proposed 1994 Plan will expire on December 31, 2003.
Unlike the 1986 Plan which provided for a fixed aggregate amount of shares for
various awards during the term of the plan, the proposed 1994 Plan contains a
formula for establishing an annual limit on the number of shares which may be
awarded in any given calendar year (the "Annual Limit"). The Annual Limit
formula is expressed as a percentage of ITT's total issued Common Stock as of
the year end immediately preceding the year of awards ("Plan Year"). Under the
Annual Limit formula, the maximum number of shares of stock for which Awards may
be granted under the Plan in each Plan Year shall be 1.5 percent (1.5%) of the
total of the issued and outstanding shares of Common Stock and Treasury shares
as reported in the Annual Report on Form 10-K of the Corporation for the fiscal
year ending immediately prior to any Plan Year. Any unused portion of the Annual
Limit for any Plan Year shall be carried forward and be made available for
awards in succeeding Plan Years.
Notwithstanding the foregoing, (i) in no event shall more than five million
(5,000,000) shares of Stock be cumulatively available for Awards of Incentive
Stock Options under the 1994 Plan, and (ii) no more than twenty percent (20%) of
the total number of shares available on a cumulative basis shall be available
for Restricted Stock and Performance Share Awards. For any Plan Year, no
individual employee may receive stock options for more than ten percent (10%) of
the Annual Limit applicable to that Plan Year.
Subject to the above limitations, shares of Common Stock to be issued under the
1994 Plan may be made available from the authorized but unissued Common Stock,
from shares of Common Stock held in the Treasury, or from shares purchased on
the open market. In the event of a stock split or stock dividend,
reorganization, recapitalization, or other similar event affecting the price of
Common Stock, the number of shares subject to the 1994 Plan, the number of
shares then subject to Awards and the price per share payable on exercise of
options may be appropriately adjusted by the Committee. Whereas the 1994 Plan
does not contain any provision
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prohibiting the cancellation and reissuance of stock options at a lower option
price, ITT has a long-standing agreement with the New York Stock Exchange that
it will not take any such action without the approval of the ITT shareholders.
For the purpose of computing the total number of shares of stock available for
Awards under the 1994 Plan, there shall be counted against the foregoing
limitations the number of shares of stock subject to issuance upon exercise or
settlement of Awards and the number of shares of Stock which equal the value of
Performance Share Awards in each case determined as at the dates on which such
Awards are granted. If any Awards under the 1994 Plan are forfeited, terminated,
expire unexercised, settled in cash in lieu of Stock or exchanged for other
Awards, the shares of stock which were theretofore subject to such Awards shall
again be available for Awards under the 1994 Plan to the extent of such
forfeiture or expiration of such Awards. Further, any shares that are exchanged
(either actually or constructively) by optionees as full or partial payment to
the Corporation of the purchase price of shares being acquired through the
exercise of a stock option granted under the 1994 Plan may be available for
subsequent Awards, provided, however, that such shares may be awarded only to
those participants who are not directors or executive officers (as that term is
defined in the rules and regulations under Section 16 of the Securities Exchange
Act of 1934).
At December 31, 1993, 117,560,877 shares were issued and outstanding and
27,587,131 shares were held in Treasury for a total of 145,148,008 issued common
shares. The Annual Limit applicable to 1994 for Awards under the 1994 Plan is
1.5% thereof or 2,177,220 shares. During 1993, a total of 2,070,900 stock
options were awarded to 677 employees. Of these options, 1,763,600 were granted
under the 1986 Plan to 316 executives (including 310,000 options which were
granted to Messrs. Araskog, Bowman, Comey and Engen), and 307,300 options were
granted to 361 executives under the 1994 Plan and such grants are contingent
upon shareholder approval of the 1994 Plan. Accordingly, the number of shares
available for Awards during 1994 under the 1994 Plan, if approved, would be
reduced to 1,869,920. In addition, as a result of the cancellation of stock
option's held by executives of the Corporation's former subsidiary, Rayonier
Inc., upon completion of its spin-off on February 28, 1994, the 1986 Plan has
approximately 200,000 shares available for future grants.
The number and type of awards that may be granted under the 1994 Plan, the
number of eligible participants who may be granted such awards and the
allocation of such awards among such employees have not as yet been determined.
However, the Committee expects that it will award approximately 2 million stock
options in 1994 to about the same number of participants who were granted
options during 1993. Reference is made to the table showing individual stock
option grants to purchase ITT common stock on page 33 for details on options
awarded to the named executive officers during 1993.
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The closing price of a share of ITT Common Stock on the New York Stock Exchange
composite transactions on March 21, 1994 was $85.62.
If the 1994 Plan is approved by the shareholders, the Committee, made up
entirely of outside directors, none of whose members may receive any Award under
the 1994 Plan, will administer the 1994 Plan, including, but not limited to,
making determinations with respect to the designation of those employees who
shall receive Awards, the number of shares to be covered by options, Rights and
restricted stock awards, the exercise price of options (which may not be less
than 100% of the fair market value of ITT Common Stock on the date of grant),
other option terms and conditions, and the number of performance shares to be
granted and the applicable performance objectives. The Committee may impose such
additional terms and conditions on an Award as it deems advisable. The
Committee's decisions in the administration of the 1994 Plan shall be binding on
all persons for all purposes.
The Committee may in its sole discretion delegate such administrative powers as
it may deem appropriate to the chief executive officer or other members of
senior management, provided that Awards to executive officers shall be made
solely by the Committee and subject to compliance with Rule 16b-3 under the
Securities Exchange Act of 1934, as amended.
Awards will be made, in the discretion of the Committee, to employees of the
Corporation and any of its subsidiaries (including officers and members of the
Board of Directors who are also employees) whose responsibilities and decisions
directly affect the performance of the Corporation and its subsidiaries.
Incentive stock options and related Rights under the 1994 Plan must expire
within ten years after grant; non-qualified stock options and related Rights
will expire not more than ten years and two days after grant. No Right may be
exercisable until at least six months after it is granted. The exercise price
for options and Rights must at least equal the fair market value of the Common
Stock on the date of grant. The exercise price for options must be paid to the
Corporation at the time of exercise and, in the discretion of the Committee, may
be paid in the form of cash or already-owned shares of Common Stock or a
combination thereof. During the lifetime of an employee, an option must be
exercised only by the individual but no later than three months after his or her
termination of employment (or for longer periods as determined by the Committee
if termination is caused by retirement, disability or death, but in no event
later than the expiration of the original term of the option). If an optionee
voluntarily resigns or is terminated for cause, the options and Rights are
cancelled immediately.
Performance shares under the 1994 Plan are contingent rights to receive future
payments based on the achievement of individual or company performance
objectives as prescribed by the Committee. The amounts paid, which may be
subject to a prescribed maximum, will be based on actual performance over a
period from two to five years, as determined by the Committee, using such
criteria as it deems appropriate including, but not
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limited to, earnings per share and return on equity of the Corporation or the
Awardee's respective business unit. Payments may be made in the form of shares
of Common Stock, cash or a combination of Common Stock and cash. The ultimate
payments are determined by the number of shares earned and the price of Common
Stock at the end of the performance period. In the event an employee terminates
employment during such a performance period, the employee will forfeit any right
to payment. However, in the case of retirement, permanent total disability,
death or cases of special circumstances, the employee may, in the discretion of
the Committee, be entitled to an Award prorated for the portion of the
performance period during which he was employed by the Corporation. No awards of
performance shares were made during 1993.
Restricted shares of Common Stock awarded under the 1994 Plan shall be issued
subject to a restriction period set by the Committee during which time the
shares may not be sold, transferred, assigned or pledged. In the event an
employee terminates employment during a restriction period, all such shares
still subject to restrictions will be forfeited by the employee and reacquired
by the Corporation. The Committee may provide for the lapse of restrictions in
installments where deemed appropriate and it may also require the achievement of
predetermined performance objectives in order for such shares to vest. The
recipient, as owner of the awarded shares, shall have all other rights of a
shareholder, including the right to vote the shares and receive dividends and
other distributions during the restriction period. The restrictions may be
waived, in the discretion of the Committee, in the event of the awardee's
retirement, permanent total disability, death or in cases of special
circumstances. No awards of restricted stock were made during 1993.
The 1994 Plan provides for the automatic protection of intended economic
benefits by key employees in the event of a change in control of the Corporation
(i.e., upon the occurrence of an Acceleration Event as defined in the 1994
Plan). Such economic benefits would otherwise be jeopardized due to extended
vesting requirements, volatility of the stock price and uncertainty as to
continuing employment resulting from a change in control. Notwithstanding any
other provisions of the 1994 Plan, upon the occurrence of an Acceleration Event,
(a) all options and Rights will generally become immediately exercisable for a
period of 60 calendar days; (b) options and Rights will continue to be
exercisable for a period of seven months in the case of an employee whose
employment is terminated other than for just cause or who voluntarily terminates
employment because of a good faith belief that such employee will not be able to
discharge his or her duties; (c) Rights exercised during the 60-day period will
be settled fully in cash based on a formula price generally reflecting the
highest price paid for a Common Share during the 60-day period preceding the
date such Right is exercised; (d) "Limited Stock Appreciation Rights" shall
automatically be granted on all outstanding options not otherwise covered by a
Right, which shall generally be immediately exercisable in full and which shall
entitle the holders to the same exercise period and formula price referred to in
(a), (b) and (c)
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above; (e) outstanding performance share awards shall automatically vest, with
the valuation of such performance shares based on the formula price and (f)
restrictions applicable to awards of restricted stock shall be automatically
waived.
The following is a brief summary of the current Federal income tax rules
generally applicable to Awards.
NON-QUALIFIED OPTIONS.
An optionee is not subject to Federal income tax upon grant of a non-qualified
option. At the time of exercise, the optionee will realize compensation income
(subject to withholding) to the extent that the then fair market value of the
stock exceeds the option price. The amount of such income will constitute an
addition to the optionee's tax basis in the optioned stock. Sale of the shares
will result in capital gain or loss (long-term or short-term depending on the
optionee's holding period). ITT is entitled to a Federal tax deduction at the
same time and to the same extent that the optionee realizes compensation income.
INCENTIVE STOCK OPTIONS ("ISOS").
Options under the 1994 Plan denominated as ISOs are intended to constitute
incentive stock options under Section 422 of the Internal Revenue Code of 1986,
as amended. An optionee is not subject to Federal income tax upon either the
grant or exercise of an ISO. If the optionee holds the shares acquired upon
exercise for at least one year after issuance of the optioned shares and until
at least two years after grant of the option, then the difference between the
amount realized on a subsequent sale or other disposition of the shares and the
option price will constitute long-term capital gain or loss. ITT will not be
entitled to a Federal tax deduction with respect to the grant or exercise of the
ISO.
If the optionee sells the shares acquired under an ISO before the requisite
holding period, he will be deemed to have made a "disqualifying disposition" of
the shares and will realize compensation income in the year of disposition equal
to the lesser of the fair market value of the shares at exercise or the amount
realized on their disposition over the option price of the shares. Any gain
recognized upon a disqualifying disposition in excess of the ordinary income
portion will constitute either short-term or long-term capital gain. In the
event of a disqualifying disposition, ITT will be entitled to a Federal tax
deduction in the amount of the compensation income realized by the optionee.
The option spread on the exercise of an ISO is an adjustment in computing
alternative minimum taxable income. No adjustment is required, however, if the
optionee made a disqualifying disposition of the shares in the same year as he
is taxed on the exercise.
STOCK APPRECIATION RIGHTS ("SARS").
An optionee is not taxed upon the grant of SARs. An optionee exercising SARs for
cash will realize compensation income (subject to withholding) in the amount of
the cash or the fair market value of the shares received. ITT is entitled to a
tax deduction at the same time and to the same extent that the optionee realizes
compensation income.
PERFORMANCE SHARES.
An awardee of performance shares will generally realize compensation income
(subject to
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withholding) when and to the extent that payment is made, whether in the form of
cash or shares of ITT Common Stock. To the extent that payment is made in the
form of stock, income shall be measured by the then fair market value of the
shares, which shall constitute an addition to the awardee's tax basis in such
shares. ITT will be entitled to a Federal tax deduction for the value of payment
at the time of payment.
RESTRICTED STOCK.
An awardee of restricted stock will generally realize compensation income
(subject to withholding) when and to the extent that the restrictions on the
shares lapse, as measured by the value of the shares at the time of lapse. The
awardee's holding period for the shares will not commence until the date of
lapse, and dividends paid during the restriction period will be treated as
compensation. The income realized on lapse of the restrictions will constitute
an addition to the awardee's tax basis in the shares.
In lieu of deferred recognition of income, the awardee may formally elect,
within 30 days of award, to realize compensation income at the time of award, as
measured by the fair market value of the stock on the date of award determined
without regard to the restrictions. The income realized will constitute an
addition to the tax basis of the shares. In the case of such election, any
appreciation (or depreciation) on the shares during the restriction period will
give rise to capital gain (or capital loss). In the event that the awardee
terminates employment during the restriction period and forfeits his shares, no
deduction may be claimed and the taxes paid on award of the shares shall be
forfeited.
ITT will be entitled to a Federal tax deduction at the same time and to the same
extent that the awardee realizes compensation income.
EXCESS PARACHUTE PAYMENTS.
Options, SARs, performance shares or restricted stock which are granted,
accelerated or enhanced upon the occurrence of a takeover (i.e., an Acceleration
Event as defined in the 1994 Plan) may give rise, in whole or in part, to
"excess parachute payments" within the meaning of Section 280G of the Internal
Revenue Code and, to such extent, will be nondeductible by ITT and subject to a
20% excise tax to the awardee.
If the 1994 Plan is approved by the shareholders, the Board may amend or
discontinue it at any time. However, shareholder approval is required for any
amendment which may (i) increase the number of shares reserved for awards
(except as provided in Section 13 of the 1994 Plan with respect to stock splits
or other similar changes), (ii) materially change the group of employees
eligible for Awards, (iii) materially increase the benefits accruing to
participants under the 1994 Plan, or (iv) permit Awards after December 31, 2003.
The above summary of the proposed 1994 Plan is qualified in its entirety by
reference to the full plan text which is set forth as Appendix A hereto.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR APPROVAL OF THE PROPOSED ITT
CORPORATION 1994 INCENTIVE STOCK PLAN.
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Item No. 4
APPROVAL OF THE ITT CORPORATION ANNUAL PERFORMANCE-BASED INCENTIVE PLAN FOR
EXECUTIVE OFFICERS
The ITT Board of Directors endorses the recommendation of the Compensation and
Personnel Committee that the shareholders approve the ITT Annual
Performance-Based Incentive Plan for Executive Officers (the "Performance Plan")
to provide an opportunity for ITT's senior executive officers to earn annual
cash bonus awards based solely on account of the attainment of preestablished
performance goals. The Performance Plan is intended to preserve the
Corporation's tax deduction for payments thereunder for fiscal 1994 and
thereafter by meeting the requirements for performance-based compensation under
section 162(m) of the Internal Revenue Code of 1986, as amended. The material
terms of the performance goals and the compensation payable to covered employees
are discussed below.
ELIGIBILITY. Participation in the Performance Plan is limited to those executive
officers who are among the named executives in ITT's annual proxy statement
("Covered Employees"). Specifically, a covered employee is any individual who,
on the last day of the taxable year is (a) the chief executive officer of the
Corporation or is acting in such capacity or, (b) is among the four highest
compensated officers (other than the chief executive).
GENERAL DESCRIPTION OF THE PERFORMANCE GOALS. Performance goals will be based on
two business criteria: ITT Corporation's consolidated earnings per share
(calculated on a fully diluted basis) and its return on equity. Specific annual
targets for the performance measures will be established in writing by the
Compensation and Personnel Committee of the ITT Board of Directors prior to the
commencement of the year to which the performance goals relate.
THE FORMULA FOR COMPUTING THE BONUS PAYMENTS. Payments under the Performance
Plan, if any, will be based on an objective formula. There are three parts to
the formula: (1) the participant's target bonus award for the year; (2) the
weighted average performance factor which measures the degree of performance
goal attainment for the year; and (3) a leveraged target bonus award adjustment
factor based upon the weighted average performance factor achieved for the year.
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1. The annual target bonus awards for participants will be fixed at the
beginning of the year based upon the individual's annual rate of salary as of
January 1 of the performance year as disclosed in that year's proxy statement.
The target bonus award amount for applicable positions will be based on the
following percentages:
TARGET BONUS AWARD AMOUNT
POSITION AS % OF JANUARY 1 SALARY
------------------------------------------------ -------------------------
Chief Executive Officer 100%
Vice Chairman 80%
President & Chief Operating Officer 80%
Executive Vice President 75%
Senior Vice President 55%
2. The weighted average performance factor measurement will be calculated as
follows:
PERFORMANCE MEASURE WEIGHTING
------------------------------------------------ -------------------------
Actual EPS divided by EPS Goal 40%
Actual EPS divided by Prior Year EPS 40%
Actual ROE divided by ROE Goal 20%
-----
Total Weighted Average Performance Factor: 100%
3. The amount of each participant's target bonus award payable for a given year
will be determined with reference to the following table (subject to
interpolation between indices):
TOTAL WEIGHTED AVERAGE TARGET BONUS AWARD TOTAL WEIGHTED AVERAGE TARGET BONUS AWARD
PERFORMANCE FACTOR ADJUSTMENT FACTOR PERFORMANCE FACTOR ADJUSTMENT FACTOR
- ---------------------- ------------------ ---------------------- ------------------
Less than 67% 0% 110% 130%
70% 10% 120% 160%
80% 40% 130% 190%
90% 70% 133% or more 200%
100% 100%
Accordingly, the amount of bonus payable will be the product of the target bonus
award multiplied by the target bonus award adjustment factor.
For performance year 1994, the potential bonus awards payable under the
Performance Plan for the named officers in this proxy statement are as follows:
WEIGHTED AVERAGE PERFORMANCE FACTOR
---------------------------------------------------------------
@ 133%
OFFICER @ 60% @ 80% @ 100% @ 120% OR MORE
- ------------------------- ----- -------- ---------- ---------- ----------
R. V. Araskog -0- $650,000 $1,625,000 $2,600,000 $3,250,000
R. A. Bowman -0- 127,500 318,750 510,000 637,500
D. R. Comey -0- 172,500 431,250 690,000 862,500
D. T. Engen -0- 172,500 431,250 690,000 862,500
Mr. Howard J. Aibel, Executive Vice President and Chief Legal Officer, will not
participate in the Performance Plan for 1994 since he will be retiring on April
1, 1994.
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PLAN ADMINISTRATION. The Performance Plan will be administered by the
Compensation and Personnel Committee of the ITT Board of Directors comprised
solely of two or more outside directors (the "Committee"). The Committee is
empowered to set preestablished performance targets, measure the results and
determine the amounts payable according to the Performance Plan formula. The
Committee must certify in writing prior to payment of the bonus awards that the
performance goals and any other material terms were in fact satisfied. While the
Committee may not increase the amounts payable under the formula, it retains
discretionary authority to reduce the amount of compensation that would
otherwise be payable to the covered employees if the goals are attained. The
Committee may also provide for compensation to be payable upon death, disability
or change of ownership or control of the Corporation. The Committee is empowered
to modify the terms of the Performance Plan from time to time to ensure that it
complies with the requirements of Code section 162(m) and any regulations issued
thereunder.
OTHER COMPENSATION. The Board of Directors strongly believes that purely numeric
formula incentive plans are inadequate to drive the superior results that the
Corporation is seeking. Removing Board discretion from incentive compensation
severely limits the Board's ability to carry out its corporate governance
responsibility. Good judgment and discretion is the essence of what the
shareholders expect from Board members. The Board believes the discretion it has
been able to exercise under the existing incentive plan for management employees
at all levels has played a critical role in driving the Corporation's superior
performance in recent years.
Accordingly, the Board has authorized the Committee to establish a separate
discretionary bonus plan to measure the qualitative performance of the covered
employees with respect to such issues as strategic planning, development of an
orderly management succession plan, providing training programs and performance
against specific personal goals. Such discretionary bonus payments, if any, are
independent of any amounts payable under the Performance Plan and will be
separately determined. It is contemplated that not more than 25% of a covered
employee's base salary may be authorized under the discretionary bonus plan for
any performance year.
DISCUSSION OF TAX CONSEQUENCES. Tax legislation known as the Omnibus Budget
Reconciliation Act of 1993 ("OBRA") was passed by Congress and signed into law
by the President in August 1993. Under OBRA, which created a new Code subsection
162(m), the allowable deduction for compensation paid or accrued with respect to
the chief executive officer and each of the four most highly compensated
executive officers of a publicly held corporation will be limited to no more
than $1 million per year for taxable years beginning on or after January 1,
1994. Certain types of compensation are exempted from this deduction limitation,
including payments: (a) subject to the attainment of preestablished objective
performance goals, (b) administration by outside directors and (c) approval by
the shareholders.
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The Board of Directors has been advised by counsel that payments under the
Performance Plan will qualify for exemption from the operation of Section 162(m)
and will be fully deductible by the Corporation. Payments made under the
separate discretionary bonus plan will not qualify for an exemption and may not
be fully deductible by the Corporation.
The Board of Directors does not believe the loss of deductibility of payments
under the discretionary bonus plan will have any material effect upon the
earnings or financial condition of the Corporation.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR APPROVAL OF THE ANNUAL
PERFORMANCE-BASED INCENTIVE PLAN FOR EXECUTIVE OFFICERS.
Item No. 5
SHAREHOLDER PROPOSAL
Mrs. Evelyn Y. Davis of 2600 Virginia Avenue, N.W., Suite 215, Washington, D.C.,
the owner of 50 shares of Common Stock, plans to introduce the following
resolution at the forthcoming Annual Meeting:
"RESOLVED: That the shareholders recommend that the Board take the necessary
step that ITT specifically identify by name and corporate title in all future
proxy statements those executive officers, not otherwise so identified, who are
contractually entitled to receive in excess of $100,000 annually as a base
salary, together with whatever other additional compensation bonuses and other
cash payments were due them.
"REASONS: In support of such proposed Resolution it is clear that the
shareholders have a right to comprehensively evaluate the management in the
manner in which the Corporation is being operated and its resources utilized. At
present only a few of the most senior executive officers are so identified, and
not the many other senior executive officers who should contribute to the
ultimate success of the Corporation. Through such additional identification the
shareholders will then be provided an opportunity to better evaluate the
soundness and efficacy of the overall management.
"Last year the owners of 10,086,533 shares, representing approximately 10% of
shares voting, voted FOR this proposal."
"If you AGREE, please mark your proxy FOR this proposal."
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THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE AGAINST THIS PROPOSAL FOR THE
FOLLOWING REASONS:
Currently, the chairman, president and chief executive is the only officer who
has an employment contract with the Corporation. All of the details of his
compensation and the terms of his contract are set forth in this Proxy
Statement. Detailed information about the compensation of the four other highest
paid executive officers of the Corporation also is set forth herein. Listing the
names, corporate titles and compensation of other ITT executive officers would
not provide additional relevant information to shareholders and would be
inconsistent with the letter and spirit of the recently revised regulations of
the Securities and Exchange Commission, which limit required compensation
disclosures to the chief executive officer and the four other highest paid
executive officers.
THEREFORE, THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE AGAINST THIS
PROPOSAL.
Item No. 6
SHAREHOLDER PROPOSAL
The Evangelical Lutheran Church in America submits the following proposal, which
is co-sponsored by the Missionary Oblates of Mary Immaculate, The Dominican
Convent of Our Lady of the Rosary, The Diocese of San Angelo, and Augsburg
College.
"ENDORSEMENT OF THE CERES PRINCIPLES FOR PUBLIC ENVIRONMENTAL ACCOUNTABILITY
"WHEREAS WE BELIEVE:
"The responsible implementation of sound environmental policy increases
long-term shareholder value by increasing efficiency, decreasing clean-up costs,
reducing litigation, and enhancing public image and product attractiveness;
"Adherence to public standards for environmental performance gives a company
greater public credibility than is achieved by following standards created by
industry alone. In order to maximize public credibility and usefulness, such
standards also need to reflect what investors and other stakeholders want to
know about the environmental records of their companies;
"Standardized environmental reports will provide shareholders with useful
information which allows comparisons of performance against uniform standards
and comparisons of progress over time. Companies can also attract new capital
from investors seeking investments that are environmentally responsible,
responsive, progressive, and which minimize the risk of environmental liability.
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"AND WHEREAS:
"The Coalition for Environmentally Responsible Economies (CERES) -- which
comprises large institutional investors with $150 billion in stockholdings
(including shareholders of this Company), public interest representatives, and
environmental experts -- consulted with dozens of corporations and produced
comprehensive public standards for both environmental performance and reporting.
Over 50 companies have endorsed the CERES Principles -- including the Sun
Company, a Fortune 500 company -- to demonstrate their commitment to public
environmental accountability.
"In endorsing the CERES Principles, a company commits to work toward:
1. Protection of the biosphere
2. Sustainable use of natural resources
3. Waste reduction & disposal
4. Energy conservation
5. Risk reduction
6. Safe products and services
7. Environmental restoration
8. Informing the public
9. Management commitment
10. Audits and reports
The full text of the CERES Principles and the accompanying CERES Report Form are
available from CERES, 711 Atlantic Avenue, Boston MA 02110, tel: 617/451-0927.
"Concerned investors are asking the Company to be publicly accountable for its
environmental impact, including collaboration with this corporate,
environmental, investor and community coalition to develop (a) standards for
environmental performance and disclosure; (b) appropriate goals relative to
these standards; (c) evaluation methods and tools for measurement of progress
toward these goals; and (d) a format for public reporting of this progress.
"We believe this request is consistent with regulation adopted by the European
Community for companies' voluntary participation in verified and
publicly-reported eco-management and auditing.
"RESOLVED: Shareholders request the Company to endorse the CERES Principles as a
commitment to be publicly accountable for its environmental impact.
"SUPPORTING STATEMENT
"We invite the Company to endorse the CERES Principles by (1) stating its
endorsement in a letter signed by a senior officer; (2) committing to implement
the Principles; and (3) annually completing the CERES Report. Endorsing these
Principles complements rather than supplants internal corporate environmental
policies and procedures.
"We believe that without this public scrutiny, corporate environmental policies
and reports lack the critical component of adherence to standards set not only
by management but also by other stakeholders. Shareholders are asked to support
this resolution to encourage our Company to demonstrate environmental leadership
and accountability for its environmental impact."
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE AGAINST THIS PROPOSAL FOR THE
FOLLOWING REASONS:
The Board of Directors does not believe that adopting the CERES Principles will
make a meaningful contribution to the Corporation's efforts to fulfill its
obligations to protect the
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environment. ITT Corporation already has committed to work toward the objectives
of protecting the environment which are espoused by this proposal.
The Board of Directors understands that many shareholders may be concerned about
the environment and are interested in information about the Corporation's
commitment to the environment. The Board, however, is not persuaded that CERES'
effort to create a standardized environmental report is useful or even
meaningful. Each industry and each company is different, with its own
environmental concerns. Therefore it is difficult to reduce relevant
environmental disclosure or evaluation to a "standardized" format. The
Corporation already is subject to extensive federal, state, local and
international laws and regulations concerning the environment. To meet the
requirements of these laws and regulations, the Corporation and its subsidiaries
must file detailed environmental reports and disclosures with governmental
agencies.
The Board also believes that it is not appropriate to pay the annual fees which
the CERES organization requires as a condition to endorsing its principles. Such
fees would be based upon the Corporation's worldwide gross revenues --
regardless of the value to the Corporation or its shareholders of an endorsement
of the principles or the preparation of the CERES Report.
THEREFORE, THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE AGAINST THIS
PROPOSAL.
VOTE REQUIRED TO APPROVE MATTERS
SUBMITTED TO SHAREHOLDERS
Approval of each of the items which are submitted to a vote of the shareholders
at the Annual Meeting will require the affirmative vote of the holders of a
majority of the Record Shares present in person or represented by proxy, voting
together as a single group and without regard to class or series.
Abstentions and broker non-votes will be included in the computation of the
number of Record Shares that are present for purposes of determining the
presence of a quorum but will not be counted as votes cast for or against items
submitted for a vote of shareholders. Accordingly abstentions and broker non-
votes will have the same effect as a vote against such items.
SHAREHOLDER PROPOSALS FOR
1995 ANNUAL MEETING
Proposals submitted by shareholders for inclusion in next year's Proxy Statement
must be received by ITT no later than the close of business on November 29,
1994. Address your proposals to Gwenn L. Carr, vice president and secretary, ITT
Corporation, 1330 Avenue of the Americas, New York, NY 10019-5490. Proposals
must comply with all of the requirements of Rule 14a-8 under the Securities
Exchange Act of 1934 as well as the requirements set forth in ITT's By-laws. A
copy of the By-laws may be obtained from the vice president and secretary of
ITT.
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REPORT OF THE ITT COMPENSATION AND PERSONNEL COMMITTEE
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This report sets forth the executive compensation policies of the Compensation
and Personnel Committee of the ITT Board of Directors with respect to ITT's
executive officers in general and the rationale for the specific decisions
affecting the compensation as reported for 1993 of Rand V. Araskog, ITT's chief
executive officer. This report also discusses the relationship between the named
officers' compensation and the performance of the Corporation. Immediately
following this report are performance graphs which compare the cumulative total
return of ITT's Common Stock to the cumulative total returns of the S&P 500
Index and the S&P Conglomerate Index (assuming the investment of $100 in (a) ITT
Common Stock, (b) the S&P 500 Index, and (c) the S&P Conglomerate Index on
December 31 of the first year of the measurement period).
The amounts of all compensation awarded to, earned by, or paid to the chief
executive officer and the other four most highly compensated executive officers
who were serving as executive officers at the end of the 1993 fiscal year are
set forth on the Summary Compensation Table following the performance graphs.
ITT, a diverse, multi-national company with assets in excess of $70 billion,
must compete for skilled executives in a highly competitive marketplace. In
setting and administering ITT's compensation policies and programs, the
Committee considers compensation provided to executives of corporations similar
to ITT in terms of assets, sales and revenues, and earnings. The companies
against which ITT compares compensation are not limited to the other four
companies which make up the S&P Conglomerate Index used in the performance
graphs. Rather, ITT compares its compensation practices against a panel of 50
leading companies with sales greater than $10 billion in a cross section of
industries. The ITT executive compensation program is designed to attract,
reward and retain skilled executives and to provide incentives which vary
depending upon the attainment of short-term operating performance objectives and
strategic long-term performance goals. The major objective of the long-term
incentive program, which has been substantially modified in recent years, is to
provide ITT executives with incentives directly linked to the creation of
shareholder value. The program overall is intended to be highly leveraged so
that when performance goals are attained, executives can earn better than
average compensation and, conversely, when such goals are not achieved,
compensation will be below competitive levels.
THE COMMITTEE'S ROLE.
The Committee is responsible for the administration of the executive
compensation program, and it reviews all proposed new or amended employee
benefit plans. The Committee is currently composed of the six non-employee
directors named below, none of whom is eligible to participate in any of the
plans which make up ITT's executive compensation program. It is the policy of
the ITT Board of Directors to rotate the members and the post of chairman of the
Committee periodically to assure that new points of view are part of the
Committee's deliberations.
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The Committee may select consultants from nationally recognized independent
compensation and benefits consulting firms to provide expert advice on any
aspect of the ITT executive compensation program. The Committee may request
written reports or hold private meetings with such consultants in order to get
independent opinions on compensation proposals. The Committee often meets in
executive sessions which are not attended by any ITT executives or managers. The
Committee regularly reports its activities to the Executive and Policy Committee
of the ITT Board, on which all the non-employee directors serve.
PERFORMANCE EVALUATION.
The ITT Executive and Policy Committee met in executive session in February 1994
to review the overall performance of the chief executive, particularly with
respect to ITT's long range strategies and the achievement of both financial and
non-financial objectives. Paramount consideration was given to the chief
executive's role in building value and improving the return on the shareholders'
investment.
THE COMPENSATION PROGRAM.
The compensation program for ITT executives presently consists of base salary,
annual incentive bonus, long-term incentives and employee benefits. It is the
intent of the Committee that incentives based upon long-term performance should
be the major component in the pay package for senior executives. Discussed below
is each element of the compensation program.
BASE SALARY. Salaries are set and administered to reflect the value of the job
in the market-
place and individual contribution and performance. Based on a major survey of
competitive practice, ITT executive salaries are approximately 9% above the
average going rate of competitor companies. Salaries provide a necessary element
of stability in the total pay program and, as such, are not subject to
significant variability. Salary increases are based primarily on merit. During
1993, ITT executive salaries were evaluated in relation to a competitive
annualized merit increase guideline of 4% for expected levels of individual
performance. Actual increases can vary from the guideline depending primarily on
individual performance. The normal interval between salary reviews for senior
executives is 18 months.
The Committee authorized a salary increase for Mr. Araskog effective January 1,
1994 of $100,000, bringing his current annual salary to $1,625,000. This merit
increase, which followed an 18-month interval since his last salary review, was
equivalent to 4.3% on an annualized basis and was based on the Committee's
evaluation of his performance during the measurement period.
Among the other named officers, Mr. Aibel's annual salary of $710,000 has not
changed since July 1, 1992. Mr. Comey's annual salary was increased effective
March 1, 1994 to $610,000, an increase of $35,000 after 18 months or 3.9% on an
annualized basis. Mr. Engen's annual salary was increased effective September 1,
1993 to $575,000, an increase of $50,000 after 18 months or 6.1% on an
annualized basis. Mr. Bowman's annual salary was increased to $425,000 effective
February
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1, 1993, an increase of $100,000 in recognition of his promotion to the position
of chief financial officer.
ANNUAL INCENTIVE BONUS. Under the ITT Annual Incentive Bonus Plan, the amounts
of annual bonus awards are based upon corporate financial performance for the
year compared to annual performance goals established by the Committee at the
beginning of the year. For 1993, such performance goals were earnings per share
compared to budget, earnings per share compared to the prior year and return on
equity compared to budget. These measures were weighted 40%, 40% and 20%,
respectively. The weighted average performance factor under the formula was
calculated at 123.15%. Under a leveraged performance/payout schedule, the
performance factor generated a standard bonus adjustment factor of 169.5%. The
calculated bonus amounts for 1993 performance are shown in the Summary
Compensation Table following this report and reflect the significant improvement
in profitability over 1992 results.
The Committee awarded a bonus of $2,584,900 to Mr. Araskog for 1993. This
amount, as well as the awards for the other named officers, was determined
strictly in accordance with the above described formula and standard bonus
adjustment factor.
LONG-TERM PERFORMANCE PLAN AWARDS. The Board of Directors amended the ITT Long-
Term Performance Plan in October 1991 to enable the Committee to establish new
performance objectives upon which cash payments, if any, would be based. The
value of awards initially made in December 1991 (the "1992 Class Awards") is
based on the achievement of significant improvements in the Corporation's return
on equity, or, in the case of operating company participants, the achievement of
operating company targets. The 1992 Class Awards which at December 31, 1993
consisted of 1,167,683 performance units, were awarded to approximately 500
employees, including 58,333 to Mr. Araskog, 13,750 to Mr. Aibel, 25,000 each to
Messrs. Comey and Engen and 20,000 to Mr. Bowman. The 1992 Class Awards were
intended to cover the performance cycle 1992 through 1995 (a four-year period).
A performance unit has a target value of $60 corresponding to the achievement of
100% of the return on equity goals. The final value of a unit may be more or
less than the target value to the extent that actual returns overachieve or
underachieve such goals. A performance unit will not have any value unless at
least 90% of the return on equity goals is achieved. The maximum value of a
performance unit is $120 payable if the actual results are 130% or more of the
goals. The payment, if any, for the 1992 Class Awards will be made wholly in
cash during the first quarter of 1996.
The adoption of new accounting standards and significant restructuring actions
during 1992 resulted in a reduction in shareholders' equity and negative rates
of return on equity for 1992 for ITT and for several of its operating companies.
The Plan provides that the Committee may make adjustments as it deems
appropriate in performance objectives in the event of material changes in
accounting practices or for other circumstances specified by the Committee in
order to limit or avoid distortion in the operation of the Plan. After due
consideration, the Committee has increased the return on equity goals in light
27
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of the reduction in shareholders' equity and has redefined the performance
measurement period from four years (1992 through 1995) to three years (1993
through 1995). The ITT return on equity goal for the final year of the period
was increased from 15.5% to 16.4%. The circumstances considered by the Committee
included the restructuring charges taken in connection with a subsidiary's
reinsurance operations and another subsidiary's unsecured small loan portfolio,
and the gain realized on the sale of ITT's equity interest in Alcatel N.V.
The Committee believes that these changes are appropriate in order to continue
to provide challenging performance standards while preserving financial
incentive for management to achieve the goals.
STOCK OPTION AWARDS. Stock option awards provide long-term incentives which are
directly related to the performance of ITT Common Stock. Options generally have
10-year terms and closely align the executive's interests with those of other
shareholders. On October 14, 1993, 300,000 stock options were granted to Messrs.
Araskog, Bowman, Comey and Engen under the 1986 Plan at the exercise price of
$92 per share (the closing price of an ITT share on the New York Stock Exchange
on the October 14, 1993 grant date). Such options would become exercisable as to
two-thirds of the shares on the date that the closing prices of ITT Common Stock
have remained at or above $115 per share for ten consecutive trading days and
that such options will become fully exercisable upon the earlier of (i) October
14, 2002 or (ii) on the date that the closing prices of ITT Common Stock have
remained at or above $128.80 per share for ten consecutive trading days. The
Committee believes that by establishing threshold price requirements for the
exercisability of stock options, senior management will be motivated to maximize
the creation of shareholder value. Further details on the option grants for
Messrs. Araskog, Bowman, Comey and Engen during 1993 are included in the table
of Option Grants in Last Fiscal year on page 33 herein. Mr. Aibel was not
granted any stock options during 1993 because he will retire as of April 1,
1994.
The Committee awarded Mr. Araskog 150,000 stock options during 1993. This award
(and the option awards for the other named officers) was above the 90th
percentile of competitive practice based on a Towers Perrin survey of long-term
incentives among large public companies which measures grant size in terms of
the aggregate exercise price of the options (number of shares multiplied by the
option exercise price) expressed as a multiple of base salary. The Committee
elected to make the awards at this level of competitive practice in light of
ITT's stock price performance since the last option grant in December 1991 and
to provide significant incentive for management to continue its strategy for
building shareholder value.
EMPLOYEE BENEFITS. Executives also participate in ITT's broad-based employee
benefits program which includes a pension program, an investment and savings
plan, group medical and dental coverage, group life insurance and other benefit
plans. Further details on the ITT pension plan are provided on pages 37 and 38.
DISCUSSION OF THE COMMITTEE'S POLICY REGARDING QUALIFYING COMPENSATION FOR
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DEDUCTIBILITY UNDER SECTION 162(M) OF THE INTERNAL REVENUE CODE.
Tax legislation known as the Omnibus Budget Reconciliation Act of 1993 ("OBRA")
was passed by Congress and signed into law by the President in August 1993.
Under OBRA, which created a new Code subsection 162(m), the allowable deduction
for compensation paid or accrued with respect to the chief executive officer and
each of the four most highly compensated executive officers of a publicly held
corporation will be limited to no more than $1 million per year for taxable
years beginning on or after January 1, 1994. Certain types of compensation are
exempted from this deduction limitation, including payments subject to: a) the
attainment of an objective performance goal or goals; b) an outside director
requirement; and c) a shareholder approval requirement. Proposed regulations
were issued by the IRS in December 1993 which provided broad guidance to
companies, but which were not intended to be comprehensive.
It is the policy of the Committee to establish a competitive executive
compensation program and to design and administer incentive plans which relate
rewards directly to the overall performance of the Corporation and the
individual executive's specific contribution. Given the diversity of ITT and the
special demands caused by a complex multi-national business environment, the
Committee needs flexibility to determine the appropriate compensation package
for its senior executives. However, to qualify pay for exemption from section
162(m) as "performance-based compensation," the requirements of OBRA and the
proposed regulations generally preclude the use of discretion in determining
specific amounts of compensation. Accordingly, base salaries are subject to the
$1 million limit on deductible compensation as are annual bonus amounts where
discretion is used to increase an executive's payment above an amount determined
strictly by an objective formula.
In light of the new tax law, it is the policy of the Committee to modify where
practicable the executive incentive plans so as to maximize the tax
deductibility of compensation paid to its top executive officers. Accordingly,
the proposed ITT 1994 Incentive Stock Plan, which is submitted for shareholder
approval, includes a fixed limit on the number of options which may be granted
to any individual in any given year. Upon approval by the shareholders, any
future gains realized upon the exercise of stock options granted under such Plan
will qualify as "performance-based compensation" and will be fully deductible by
the Corporation. Also, ITT is submitting for shareholder approval a new bonus
plan (the "Performance Plan") applicable to the five highest paid executive
officers which is intended to meet the strict non-discretionary requirements of
OBRA.
Notwithstanding the above, the Committee believes that the overall performance
of its most senior executives cannot in all cases be reduced to a fixed formula
and that the prudent use of discretion in determining pay levels is in the best
interest of the Corporation and its shareholders. While attaining preestablished
goals is fundamental to earning incentive payments, neither the Committee nor
management can anticipate unusual events which may have a material effect on the
achievement of the desired results, but
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which may be entirely beyond the control of management (e.g., natural disasters,
wars, currency fluctuations, etc.). Under these circumstances, the Committee's
use of discretion in determining appropriate amounts of compensation may be
essential. In those limited situations where discretion is used by the
Committee, compensation may not be fully deductible on the Corporation's tax
return. However, the Committee does not believe that such loss of deductibility
will have any material impact on the financial condition of the Corporation.
This report is furnished by the members of the ITT Compensation and Personnel
Committee:
BETTE B. ANDERSON
NOLAN D. ARCHIBALD
PAUL G. KIRK, JR.
EDWARD C. MEYER
MARGITA E. WHITE
ROBERT A. BURNETT, Chairman of the Committee.
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COMPARISON OF ONE YEAR TOTAL RETURN
AMONG ITT CORPORATION, S&P 500, AND S&P CONGLOMERATES INDEX
CUMULATIVE TOTAL RETURN
BASED ON REINVESTMENT OF $100 BEGINNING DECEMBER 31, 1992
[CHART]
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DEC-92 MAR-93 JUN-93 SEP-93 DEC-93
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ITT Corp. $100 $111 $120 $132 $130
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S&P 500Registered $100 $104 $105 $108 $110
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S&PRegistered Conglomerates
Index $100 $112 $125 $132 $133
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COMPARISON OF FIVE YEAR TOTAL RETURN
AMONG ITT CORPORATION, S&P 500, AND S&P CONGLOMERATES INDEX
CUMULATIVE TOTAL RETURN
BASED ON REINVESTMENT OF $100 BEGINNING DECEMBER 31, 1988
[CHART]
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DEC-88 DEC-89 DEC-90 DEC-91 DEC-92 DEC-93
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ITT Corp. $100 $120 $101 $125 $161 $208
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S&P 500Registered $100 $132 $128 $166 $179 $197
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S&PRegistered Conglomerates
Index $100 $125 $104 $113 $140 $185
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SUMMARY COMPENSATION TABLE
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LONG-TERM
ANNUAL COMPENSATION COMPENSATION
-------------------------------------------- --------------------------
PAYOUTS
OTHER --------- ALL
ANNUAL SECURITIES LONG-TERM OTHER
COMPEN- UNDERLYING INCENTIVE COMPEN-
NAME AND PRINCIPAL SALARY BONUS SATION(1) OPTIONS(2) PLAN SATION(3)
POSITION YEAR ($) ($) ($) (#) ($) ($)
- ------------------------ ---- --------- --------- ------- ------------ --------- -------
Rand V. Araskog 1993 1,525,000 2,584,900 185,793 150,000 -0- 54,346
Chairman, 1992 1,462,500 -0- 210,459 -0- -0- 51,188
President and 1991 1,400,000 1,400,000 200,501 170,000 1,080,000 49,000
Chief Executive
Howard J. Aibel(4) 1993 710,000 589,700 71,574 -0- -0- 26,378
Executive 1992 692,500 -0- 22,209 -0- -0- 24,237
Vice President and 1991 675,000 315,000 17,657 30,900 270,000 23,625
Chief Legal Officer
Robert A. Bowman 1993 416,667 540,300 368,537 60,000 -0- 11,388
Executive 1992 289,166 -0- 587 5,000 -0- 6,544
Vice President and
Chief Financial Officer
Dale R. Comey 1993 575,000 731,000 18,890 50,000 -0- 21,096
Executive 1992 541,667 -0- 11,445 -0- -0- 18,958
Vice President 1991 514,167 300,000 11,990 56,300 189,000 17,996
D. Travis Engen 1993 541,667 731,000 13,043 50,000 -0- 19,930
Executive 1992 504,167 -0- 9,645 -0- -0- 17,646
Vice President 1991 380,000 300,000 2,994 56,300 162,000 13,300
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(1) All amounts shown in this column are tax reimbursement allowances, which are
intended to offset the inclusion in taxable income of the value of certain
benefits, except that: (a) the amounts shown for Mr. Araskog also include
$99,929, $132,052 and $121,043 in 1993, 1992, and 1991, respectively, for
personal benefits including tax and financial counseling and transportation
services, (b) the amount shown for Mr. Aibel in 1993 also includes $31,883
in personal benefits including tax and financial counseling and
transportation services, (c) the amount shown for Mr. Bowman in 1993 also
includes $205,373 in relocation allowance.
(2) The named executives do not hold any stock appreciation rights in connection
with the options shown.
(3) All amounts shown in this column are company contributions under the ITT
Investment and Savings Plan and the ITT Excess Savings Plan, which are
defined contribution plans. The Corporation makes a matching contribution in
an amount equal to 50% of an employee's contribution, such matching
contribution not to exceed three percent (3%) of such employee's salary.
Under these plans, the Corporation also makes a non-matching contribution
equal to one-half of one percent ( 1/2 of 1%) of an employee's salary.
(4) The Corporation has entered into a consulting arrangement with Mr. Aibel
effective upon his retirement on April 1, 1994. The one year arrangement
provides that Mr. Aibel will be paid a minimum of $100,000 and will be
reimbursed for his reasonable travel and other expenses. Any other future
services provided by Mr. Aibel would be on terms and conditions that he
and the Corporation would find mutually acceptable.
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OPTION GRANTS IN LAST FISCAL YEAR
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POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE
------------------------------------------------------------ AT ASSUMED ANNUAL RATES
NUMBER OF OF STOCK PRICE
SECURITIES APPRECIATION
UNDERLYING % OF TOTAL FOR OPTION TERM(4)
OPTIONS OPTIONS GRANTED EXERCISE ------------------------
GRANTED(1) TO EMPLOYEES PRICE (3) EXPIRATION 5% 10%
NAME (#) IN 1993 (2) ($/SHR) DATE ($) ($)
- -------------------------- ----------- --------------- --------- ---------- --------- ----------
Rand V. Araskog 150,000 7.2 92.00 10/16/2003 8,679,000 21,993,000
Robert A. Bowman 50,000 2.4 92.00 10/16/2003 2,893,000 7,331,000
10,000 0.5 72.63 02/03/2003 456,800 1,157,500
Dale R. Comey 50,000 2.4 92.00 10/16/2003 2,893,000 7,331,000
D. Travis Engen 50,000 2.4 92.00 10/16/2003 2,893,000 7,331,000
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(1) The numbers in this column represent the options to purchase ITT Common
Stock.
(2) Percentages indicated are based on a total of 2,070,900 options granted to
677 employees during 1993. This figure includes 307,300 options granted to
361 employees which are contingent upon the shareholders' approval of the
1994 Incentive Stock Plan.
(3) The exercise price per share is 100% of the fair market value of a share of
ITT Common Stock on the date of grant. The exercise price may be paid in
cash or in shares of ITT Common Stock valued at their fair market value on
the date of exercise.
Options granted on October 14, 1993 at the exercise price of $92 per share
are not exercisable until the trading price of ITT Common Stock equals or
exceeds $115 per share for 10 consecutive trading days at which time
two-thirds of the options will be exercisable; when the trading price equals
or exceeds $128.80 per share for 10 consecutive trading days, the options
will be fully exercisable. Notwithstanding the above, the options will be
fully exercisable on October 14, 2002.
Mr. Bowman's stock options for 10,000 shares at the exercise price of $72.63
per share were granted on February 1, 1993 and will be exercisable as to
one-third on the first anniversary date of grant; two-thirds on the second
anniversary date of the grant and in full on the third anniversary of the
grant date. This grant was made in recognition of his election as chief
financial officer.
The number and exercise prices of all options outstanding at the time of the
spin-off to shareholders of Rayonier, Inc., a former subsidiary of the
Corporation, will be adjusted for decreases in the economic value of the
options as a result of the distribution to shareholders. This adjustment
will increase the number of options by 9.3% and decrease the exercise prices
of the options outstanding by approximately 8.5%. The exercise thresholds
will be adjusted proportionately.
(4) At the end of the term of the options granted October 14, 1993, the
projected price per share of ITT Common Stock would be $149.86 and $238.62
at an assumed annual appreciation rate of 5% and 10%, respectively. The
projected price per share of ITT Common Stock for Mr. Bowman's February 1,
1993 grant will be $118.31 and $188.38 at an assumed appreciation rate of 5%
and 10%, respectively. Gains to all Common shareholders at those assumed
annual appreciation rates would exceed $6.8 billion and $17.4 billion,
respectively, over the term of the options.
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AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
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NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED,
SHARES OPTIONS AT IN-THE-MONEY OPTIONS HELD
ACQUIRED ON VALUE FISCAL YEAR-END (#) AT FISCAL YEAR-END ($)
NAME EXERCISE (#) REALIZED ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE(1)
- -------------------------- ------------- ------------- --------------------------- ---------------------------
Rand V. Araskog 170,000 5,827,820 -0-/ -0-/
150,000 -0-
Howard J. Aibel 16,666 483,231 39,234/ 1,598,920/
-0- -0-
Robert A. Bowman -0- -0- 23,332/ 859,295/
66,668 378,705
Dale R. Comey 10,000 395,250 163,300/ 6,508,875/
50,000 -0-
D. Travis Engen -0- -0- 129,800/ 5,241,865/
50,000 -0-
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(1) Based on the New York Stock Exchange consolidated trading closing price of
ITT Common Stock on that date of $91.25.
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SEVERANCE PAY PLAN
The Compensation and Personnel Committee of the ITT Board of Directors has
adopted a policy that it will not authorize the execution of any executive
employment contracts which would provide for severance payments constituting
"parachute payments" as defined in the Internal Revenue Code, unless the
shareholders of the Corporation are afforded the opportunity to approve such
contracts.
A severance pay plan applies to ITT senior executives who are U.S. citizens or
who are employed in the U.S., including all executive officers of ITT other than
Mr. Araskog. Under the plan, if a participant's employment is terminated by ITT,
other than for cause or as a result of other occurrences specified in the plan,
the participant is entitled to severance pay in an amount up to 24 months of
base salary depending upon his or her length of service. In no event shall such
severance pay exceed the amount of base salary for the number of months
remaining between the termination of employment and the participant's normal
retirement date or two times the participant's total annual compensation during
the year immediately preceding such termination. The plan includes offset
provisions for other compensation from ITT and requirements on the part of
executives with respect to non-competition and compliance with the ITT Code of
Corporate Conduct. Under the plan, severance payments would ordinarily be made
monthly over the scheduled term of such payments; however, ITT has the option to
make such payments in the form of a single lump sum payment discounted to
present value.
The annual salaries of Messrs. Aibel, Bowman, Comey and Engen as of March 1,
1994 were $710,000, $425,000, $610,000 and $575,000, respectively.
EMPLOYMENT CONTRACT
ITT has an employment contract with Mr. Araskog which provides for: (i) in
addition to salary, participation in ITT's benefit plans, and contractual
disability and death benefits, his employment as chairman and chief executive of
ITT until October 31, 1996 (when he will have reached age 65); (ii) his service
as consultant to his successor as chief executive of ITT from November 1, 1996
through October 31, 2001 for a fee of not less than $400,000 per year; (iii) his
nomination as a director of ITT at each annual meeting of ITT shareholders
commencing with the annual meeting for 1997 to and including the annual meeting
to be held in 2003 and, upon election, payment to him of the usual director's
fees for service in such capacity; (iv) the provision of office space and
certain staff and transportation assistance in connection with his service as a
director and consultant subsequent to October 31, 1996; (v) certain payments in
the event that (A) at any time prior to October 31, 1996, Mr. Araskog is not re-
elected as chairman and chief executive, which payments would be made (I) in
monthly installments over the term of the contract remaining through October 31,
1996 in amounts equal per annum to the salary received by Mr. Araskog for the
calendar year immediately preceding such event plus a percentage of the average
bonus received by Mr. Araskog with respect to the three calendar years
immediately preceding such event, and (II) in the form of a discounted lump sum
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payment on or about October 31, 1996 equal to the then present value of the
consulting fee and the director's fees referred to above, or (B) after
completion of services through October 31, 1996 in accordance with the terms of
the contract, Mr. Araskog at any time prior to October 31, 2003 is not nominated
as a director of ITT, which payment would be in the form of a discounted lump
sum payment equal to the then present value of the balance remaining of the
consulting fee and the director's fees referred to above; and (vi) covenants by
Mr. Araskog against competition with any business actively conducted by ITT or
any of its subsidiaries and for compliance with the ITT Code of Corporate
Conduct. Mr. Araskog's annual salary as of March 1, 1994 was $1,625,000.
CHANGE-IN-CONTROL ARRANGEMENTS
Acceleration of the exercisability, payment or vesting of awards or benefits is
provided for under the ITT Stock Option Incentive Plan (1977), the ITT 1986
Incentive Stock Plan, the ITT Long-Term Performance Plan the proposed 1994
Incentive Stock Plan and the retirement excess benefit plan upon the occurrence
of a change in corporate control, which is generally defined in such plans as
the occurrence of any of the following events: (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 ITT or a
subsidiary of ITT or any employee benefit plan sponsored by ITT or a subsidiary
of ITT, is the beneficial owner directly or indirectly of twenty percent or more
of the outstanding Common Stock of ITT; (ii) any person (within the meaning of
Section 13(d) of the Act), other than ITT or a subsidiary of ITT or any employee
benefit plan sponsored by ITT or a subsidiary of ITT, shall purchase shares
pursuant to a tender offer or exchange offer to acquire any Common Stock of ITT
(or securities convertible into such Common 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
Common Stock of ITT (calculated as provided in paragraph (d) of Rule 13d-3 under
the Act in the case of rights to acquire Common Stock); (iii) the stockholders
of ITT shall approve (A) any consolidation or merger of ITT in which ITT is not
the continuing or surviving corporation or pursuant to which shares of Common
Stock of ITT would be converted into cash, securities or other property, other
than a merger of ITT in which holders of Common Stock of ITT 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 ITT; or (iv)
there shall have been a change in a majority of the members of the Board of
Directors of ITT within a 12-month period unless the election or nomination for
election by ITT's shareholders of each new director during such 12-month period
was approved by the vote of two-thirds of the directors then still in
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office who were directors at the beginning of such 12-month period.
PENSION PLAN
Pensions for regularly employed salaried personnel are provided through a
defined benefit pension plan. The annual pension amounts to 2% of a member's
average final compensation for each of the first 25 years of benefit service
plus 1 1/2% of a member's average final compensation for each of the next 15
years of benefit service, reduced by 1 1/4% of the member's primary Social
Security benefit for each year of benefit service to a maximum of 40 years;
provided that no more than one-half of the member's primary Social Security
benefit is used for such reduction. A member's average final compensation
(including salary plus approved bonus payments) is defined under the plan as the
total of (i) a member's average annual base salary for the five calendar years
of the last 120 consecutive calendar months of eligibility service affording the
highest such average plus (ii) a member's average annual compensation not
including base salary for the five calendar years of the member's last 120
consecutive calendar months of eligibility service affording the highest such
average. The plan also provides for undiscounted early retirement pensions for
members who retire at or after age 60 following completion of 15 years of
eligibility service.
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Annual amounts of normal retirement pension commencing at age 65 based upon
average final compensation and benefit service, but before Social Security
reductions, are illustrated in the following table.
PENSION PLAN TABLE
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YEARS OF SERVICE
AVERAGE FINAL ---------------------------------------------------------------------------------
COMPENSATION 20 25 30 35 40
- -------------------- ------------- ------------- ------------- ------------- -------------
$ 50,000 $ 20,000 $ 25,000 $ 28,750 $ 32,500 $ 36,250
100,000 40,000 50,000 57,500 65,000 72,500
300,000 120,000 150,000 172,500 195,000 217,500
500,000 200,000 250,000 287,500 325,000 362,500
750,000 300,000 375,000 431,250 487,500 543,750
1,000,000 400,000 500,000 575,000 650,000 725,000
1,500,000 600,000 750,000 862,500 975,000 1,087,500
2,000,000 800,000 1,000,000 1,150,000 1,300,000 1,450,000
2,500,000 1,000,000 1,250,000 1,437,500 1,625,000 1,812,500
3,000,000 1,200,000 1,500,000 1,725,000 1,950,000 2,175,000
3,500,000 1,400,000 1,750,000 2,012,500 2,275,000 2,537,500
4,000,000 1,600,000 2,000,000 2,300,000 2,600,000 2,900,000
5,000,000 2,000,000 2,500,000 2,875,000 3,250,000 3,625,000
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The amounts shown under "Salary" and "Bonus" opposite the names of the
individuals in the Summary Compensation Table comprise their compensation which
is used for purposes of determining "average final compensation" under the plan.
Their respective covered years of benefit service under
the plan, through December 31, 1993, are
as follows: Mr. Araskog, 27.09 years;
Mr. Aibel, 29.47 years; Mr. Bowman, 1.33 years; Mr. Comey, 3.58 years; and Mr.
Engen, 8.73 years. In addition to the service indicated above under the ITT
pension plan, Mr. Comey also participated in the pension plan of Hartford Fire
Insurance Company for 24.58 years and Mr. Bowman participated in the pension
plan of ITT Sheraton Corporation for 1.40 years. Upon retirement, Mr. Comey and
Mr. Bowman will be entitled to combined benefits from such plans which will be
approximately equal to the benefit they would have earned had all of their
service been under the ITT plan.
Applicable federal legislation limits the annual benefits which may be paid and
the compensation which may be recognized under a tax-qualified retirement plan.
As permitted by such legislation, the portion of any benefit which is in excess
of the limit payable from a tax-qualified retirement plan is payable out of
general funds of ITT. Officers of ITT at the level of vice president or higher
may indicate a preference, subject to certain conditions, to receive any
"excess" benefit in the form of a single discounted lump sum payment. Any
"excess" benefit accrued to any such officer will be immediately payable in the
form of a single discounted lump sum payment upon the occurrence of a change in
corporate control (as defined in the excess benefit plan).
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The following table shows as of January 31, 1994 the beneficial ownership of
persons known to the Corporation to be the beneficial owners of more than five
percent of any class of ITT's voting securities.
NAME AND AMOUNT AND
ADDRESS OF NATURE OF
BENEFICIAL BENEFICIAL PERCENT OF
OWNER TITLE OF CLASS OWNERSHIP CLASS
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Bankers Trust Company 8,983,789 100% (7% of
280 Park Avenue shares, as ITT's voting
New York, NY 10017 ESOP Preferred Stock Trustee securities)
- ----------------------------------------------------------------------------------------------
The following table shows as of January 31, 1994 the beneficial ownership of
each class of ITT equity securities by each director and nominee, by each of the
executive officers named in the Summary Compensation Table, and by the directors
and executive officers as a group.
AMOUNT AND
NAME OF NATURE OF
BENEFICIAL BENEFICIAL PERCENT OF
OWNER TITLE OF CLASS OWNERSHIP (1) CLASS(2)
- ----------------------------------------------------------------------------------------------
Bette B. Anderson Common 2,000
Rand V. Araskog Common 422,841
ESOP Preferred 400
Nolan D. Archibald Common 1,000
Robert A. Burnett Common 1,133
Michel David-Weill Common 1,000
S. Parker Gilbert Common 5,000
Paul G. Kirk, Jr. Common 1,010
Edward C. Meyer Common 1,500
Benjamin F. Payton Common 476
Margita E. White Common 2,000
Howard J. Aibel Common 96,617
ESOP Preferred 486
Robert A. Bowman Common 26,895
ESOP Preferred 175
Dale R. Comey Common 180,193
ESOP Preferred 367
D. Travis Engen Common 139,916
ESOP Preferred 372
All directors and executive Common 1,082,449
officers as a group (25) ESOP Preferred 4,750
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NOTES:
(1) All shares are owned directly except as hereinafter otherwise indicated.
Pursuant to regulations of the Securities and Exchange Commission, shares (i)
receivable by directors and executive officers upon exercise of employee stock
options exercisable within 60 days after December 31, 1993, (ii) allocated to
the accounts of certain directors and executive officers under ITT's Investment
and Savings Plan at January 31, 1994, and (iii) acquired by directors and
executive officers under ITT's Dividend Reinvestment and Common Stock Purchase
Plan through January 31, 1994, are deemed to be beneficially owned by such
directors and executive officers at said date. Of the number of shares shown
above, (i) the following represent shares that may be acquired upon exercise of
employee stock options for the accounts of: Mr. Aibel, 39,234 common shares; Mr.
Bowman, 26,665 common shares; Mr. Comey, 163,300 common shares; and Mr. Engen,
129,800 common shares; and all present directors and executive officers as a
group, 503,555 common shares; (ii) the following amounts were allocated under
the ITT Investment and Savings Plan to the accounts of: Mr. Araskog, 17,033
common shares and 400 ESOP preferred shares; Mr. Aibel, 10,076 common shares and
486 ESOP preferred shares; Mr. Bowman, 230 common shares and 175 ESOP preferred
shares; Mr. Comey, 2,627 common shares and 367 ESOP preferred shares; and Mr.
Engen, 456 common shares and 372 ESOP preferred shares; and all present
directors and executive officers as a group, 37,485 common shares and 4,750 ESOP
preferred shares; and (iii) the following amounts were acquired under ITT's
Dividend Reinvestment and Common Stock Purchase Plan for the accounts of: Mr.
Burnett, 133 common shares; Dr. Payton, 76 common shares; and all present
directors and executive officers as a group, 1,904 common shares.
(2) Share ownership does not exceed one percent of the class so owned.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Lazard Freres & Co., of which Mr. David-Weill is Senior Partner, performed
various investment banking services for ITT and its subsidiaries in 1993. It is
anticipated that such firm will perform similar services for ITT and its
subsidiaries during 1994. In 1988, the ITT Master Retirement Trust, Hartford
Accident and Indemnity Company and Hartford Life Insurance Company (the "ITT
Investment Vehicles") committed to invest an aggregate of $35 million in, and
became limited partners of, Corporate Partners, L.P., a fund organized by Lazard
Freres & Co. With certain exceptions, such commitment expires in 1994. Under the
terms of the limited partnership agreement, the ITT Investment Vehicles have
agreed to pay Corporate Advisors, L.P., the general partner of Corporate
Partners, L.P., certain amounts in connection with their investment. During
1993, the ITT Investment Vehicles paid Corporate Advisors, L.P. fees aggregating
$208,898.
A By-law of ITT provides for mandatory indemnification of ITT directors and
officers (including payment of legal fees) to the fullest extent permitted by
applicable law. The By-law also provides that ITT may maintain insurance to
indemnify its directors and officers against liabilities whether or not ITT
40
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would be permitted to indemnify them. This type of insurance, as well as
policies under which ITT may be reimbursed for amounts paid in indemnification
of its directors and officers, are in force. The annual premiums thereon, which
aggregate $1,527,900 are paid by ITT. As authorized by such By-law, ITT has
entered into indemnification agreements with its directors pursuant to which ITT
agrees to indemnify them against all expenses, liabilities or losses incurred by
the directors in their capacity as such: (i) to the fullest extent permitted by
applicable law; (ii) as provided in the By-laws of ITT as in effect on the date
of such agreement; and (iii) in the event ITT does not maintain the
aforementioned insurance or comparable coverage, to the full extent provided in
the applicable policies as in effect on the date of such agreement (ITT's
obligations described in (ii) and (iii) being subject to certain exceptions).
Contractual rights under such indemnification agreements are believed to provide
the directors more protection than the indemnification By-law which is subject
to change.
GENERAL
In addition to the matters described above, there will be an address by the
chairman, president and chief executive at the Annual Meeting of Shareholders
and a general discussion period during which shareholders will have an
opportunity to ask questions about the business and operations of ITT.
As of the date of this proxy statement, the Board of Directors has no knowledge
of any business which will be presented for consideration at the meeting other
than that described above or shareholder proposals that have been omitted from
this proxy statement pursuant to the proxy regulations of the Securities and
Exchange Commission. As to such omitted proposals and other business, if any,
that may properly come before the meeting, the proxies will vote in accordance
with their judgment.
Present and former officers, directors and other employees of ITT may solicit
proxies by telephone, telegram or mail, or by meetings with shareholders or
their representatives. ITT will reimburse brokers, banks or other custodians,
nominees and fiduciaries for their charges and expenses in forwarding proxy
material to beneficial owners. All expenses of solicitation of proxies will be
borne by ITT.
By Order of the Board of Directors.
Gwenn L. Carr
Vice President and Secretary
Dated: March 28, 1994
SHAREHOLDERS ARE URGED TO COMPLETE, SIGN, DATE, AND RETURN THE ENCLOSED PROXY
PROMPTLY IN THE SELF-ADDRESSED ENVELOPE (WHICH IS POSTAGE-PAID FOR SHAREHOLDERS
IN THE UNITED STATES, CANADA, AND UNITED KINGDOM) WHETHER OR NOT THEY EXPECT TO
ATTEND THE MEETING. A SHARE-
HOLDER MAY NEVERTHELESS VOTE IN PERSON IF HE OR SHE DOES ATTEND.
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APPENDIX A
1994 ITT CORPORATION INCENTIVE
STOCK PLAN
The following is the text of the 1994 ITT Corporation Incentive Stock Plan:
1. PURPOSE
The purpose of the 1994 ITT Corporation Incentive Stock Plan is to motivate and
reward superior performance on the part of employees of ITT and its subsidiaries
and to thereby attract and retain employees of superior ability. In addition,
the Plan is intended to further opportunities for stock ownership by such
employees in order to increase their proprietary interest in ITT and, as a
result, their interest in the success of the Company. Awards will be made, in
the discretion of the Committee, to Key Employees (including officers and
directors who are also employees) whose responsibilities and decisions directly
affect the performance of any Participating Company and its subsidiaries. Such
incentive awards may consist of stock options, stock appreciation rights payable
in stock or cash, performance shares, restricted stock or any combination of the
foregoing, as the Committee may determine.
2. DEFINITIONS
When used herein, the following terms shall have the following meanings:
"Acceleration Event" means the occurrence of an event defined in Section 9 of
the Plan.
"Act" means the Securities Exchange Act of 1934.
"Award" means an award granted to any Key Employee in accordance with the
provisions of the Plan in the form of Options, Rights, Performance Shares or
Restricted Stock, or any combination of the foregoing.
"Award Agreement" means the written agreement evidencing each Award granted to a
Key Employee under the Plan.
"Beneficiary" means the beneficiary or beneficiaries designated pursuant to
Section 10 to receive the amount, if any, payable under the Plan upon the death
of a Key Employee.
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as now in effect or as hereafter
amended. (All citations to sections of the Code are to such sections as they may
from time to time be amended or renumbered.)
"Committee" means the Compensation and Personnel Committee of the Board or such
other committee as may be designated by the Board to administer the Plan.
"Company" means ITT Corporation and its successors and assigns.
"Fair Market Value", unless otherwise indicated in the provisions of this Plan,
means, as of any date, the composite closing price for one share of Stock on the
New York Stock Exchange or, if no sales of Stock have taken place on such date,
the composite closing price on the most recent date on which selling prices were
quoted, the determination to be made in the discretion of the Committee.
"Incentive Stock Option" means a stock option qualified under Section 422 of the
Code.
"Key Employee" means an employee (including any officer or director who is also
an
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employee) of any Participating Company whose responsibilities and decisions, in
the judgment of the Committee, directly affect the performance of the Company
and its subsidiaries.
"Limited Stock Appreciation Right" means a stock appreciation right which shall
become exercisable automatically upon the occurrence of an Acceleration Event as
described in Section 9 of the Plan.
"Option" means an option awarded under Section 5 of the Plan to purchase Stock
of the Company, which option may be an Incentive Stock Option or a non-qualified
stock option.
"Participating Company" means the Company or any subsidiary or other affiliate
of the Company; provided, however, for Incentive Stock Options only,
"Participating Company" means the Company or any corporation which at the time
such Option is granted qualifies as a "subsidiary" of the Company under Section
425(f) of the Code.
"Performance Share" means a performance share awarded under Section 6 of the
Plan.
"Plan" means the 1994 ITT Corporation Incentive Stock Plan, as the same may be
amended, administered or interpreted from time to time.
"Plan Year" means the calendar year.
"Retirement" means eligibility to receive immediate retirement benefits under a
Participating Company pension plan.
"Restricted Stock" means Stock awarded under Section 7 of the Plan subject to
such restrictions as the Committee deems appropriate or desirable.
"Right" means a stock appreciation right awarded in connection with an Option
under Section 5 of the Plan.
"Stock" means the common stock ($1 par value) of the Company.
"Total Disability" means the complete and permanent inability of a Key Employee
to perform all of his or her duties under the terms of his or her employment
with any Participating Company, as determined by the Committee upon the basis of
such evidence, including independent medical reports and data, as the Committee
deems appropriate or necessary.
3. SHARES SUBJECT TO THE PLAN
The aggregate number of shares of Stock which may be awarded under the Plan in
any Plan Year shall be subject to an annual limit. The maximum number of shares
of Stock for which Awards may be granted under the Plan in each Plan Year shall
be 1.5 percent (1.5%) of the total of the issued and outstanding shares of Stock
and Treasury Stock as reported in the Annual Report on Form 10-K of the Company
for the fiscal year ending immediately prior to any Plan Year. Any unused
portion of the annual limit for any Plan Year shall be carried forward and be
made available for awards in succeeding Plan Years.
In addition to the foregoing, in no event shall more than five million
(5,000,000) shares of Stock be cumulatively available for Awards of incentive
stock options under the Plan, and provided further, that no more than twenty
percent (20%) of the total number of shares on a cumulative basis shall be
available for restricted stock and performance shares
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Awards. For any Plan Year, no individual employee may receive an Award of stock
options for more than ten percent (10%) of the annual limit on available shares
applicable to that Plan Year.
Subject to the above limitations, shares of Stock to be issued under the Plan
may be made available from the authorized but unissued shares, or shares held by
the Company in treasury or from shares purchased in the open market. For the
purpose of computing the total number of shares of Stock available for Awards
under the Plan, there shall be counted against the foregoing limitations the
number of shares of Stock which equal the value of performance share Awards, in
each case determined as at the dates on which such Awards are granted. If any
Awards under the Plan are forfeited, terminated, expire unexercised, are settled
in cash in lieu of Stock or are exchanged for other Awards, the shares of Stock
which were theretofore subject to such Awards shall again be available for
Awards under the Plan to the extent of such forfeiture or expiration of such
Awards. Further, any shares that are exchanged (either actually or
constructively) by optionees as full or partial payment to the Company of the
purchase price of shares being acquired through the exercise of a stock option
granted under the Plan may be available for subsequent Awards, provided however,
that such shares may be awarded only to those participants who are not directors
or executive officers (as that term is defined in the rules and regulations
under Section 16 of the Exchange Act).
4. GRANT OF AWARDS AND AWARD AGREEMENTS
(a) Subject to the provisions of the Plan, the Committee shall (i) determine and
designate from time to time those Key Employees or groups of Key Employees to
whom Awards are to be granted; (ii) determine the form or forms of Award to be
granted to any Key Employee; (iii) determine the amount or number of shares of
Stock subject to each Award; and (iv) determine the terms and conditions of each
Award.
(b) Each Award granted under the Plan shall be evidenced by a written Award
Agreement. Such agreement shall be subject to and incorporate the express terms
and conditions, if any, required under the Plan or required by the Committee.
5. STOCK OPTIONS AND RIGHTS
(a) With respect to Options and Rights, the Committee shall (i) authorize the
granting of Incentive Stock Options, non-qualified stock options, or a
combination of Incentive Stock Options and non-qualified stock options; (ii)
authorize the granting of Rights which may be granted in connection with all or
part of any Option granted under this Plan, either concurrently with the grant
of the Option or at any time thereafter during the term of the Option; (iii)
determine the number of shares of Stock subject to each Option or the number of
shares of Stock that shall be used to determine the value of a Right; and (iv)
determine the time or times when and the manner in which each Option or Right
shall be exercisable and the duration of the exercise period.
(b) Any option issued hereunder which is intended to qualify as an Incentive
Stock
44
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Option shall be subject to such limitations or requirements as may be necessary
for the purposes of Section 422 of the Code or any regulations and rulings
thereunder to the extent and in such form as determined by the Committee in its
discretion.
(c) Rights may be granted only to Key Employees who may be considered directors
or officers of the Company for purposes of Section 16 of the Act.
(d) The exercise period for a non-qualified stock option and any related Right
shall not exceed ten years and two days from the date of grant, and the exercise
period for an Incentive Stock Option and any related Right shall not exceed ten
years from the date of grant.
(e) The Option price per share shall be determined by the Committee at the time
any Option is granted and shall be not less than the Fair Market Value of one
share of Stock on the date the Option is granted.
(f) No part of any Option or Right may be exercised until the Key Employee who
has been granted the Award shall have remained in the employ of a Participating
Company for such period after the date of grant as the Committee may specify, if
any, and the Committee may further require exercisability in installments;
provided, however, the period during which a Right is exercisable shall commence
no earlier than six months following the date the Option or Right is granted.
(g) The purchase price of the shares as to which an Option shall be exercised
shall be paid to the Company at the time of exercise either in cash or Stock
already owned by the optionee having a total Fair Market Value equal to the
purchase price, or a combination of cash and Stock having a total fair market
value, as so determined, equal to the purchase price. The Committee shall
determine acceptable methods for tendering Stock as payment upon exercise of an
Option and may impose such limitations and prohibitions on the use of Stock to
exercise an Option as it deems appropriate.
(h) Unless Section 9 shall provide otherwise, Rights granted to a director or
officer shall terminate when such person ceases to be considered a director or
officer of the Company subject to Section 16 of the Act.
(i) In case of termination of employment, the following provisions shall apply:
(A) If a Key Employee who has been granted an Option shall die before such
Option has expired, his or her Option may be exercised in full by the person
or persons to whom the Key Employee's rights under the Option pass by will,
or if no such person has such right, by his or her executors or
administrators, at any time, or from time to time, within five years after
the date of the Key Employee's death or within such other period, and subject
to such terms and conditions as the Committee may specify, but not later than
the expiration date specified in Section 5(d) above.
(B) If the Key Employee's employment by any Participating Company terminates
because of his or her Retirement or Total Disability, he or she may exercise
his or her Options in full at any time, or from time to time, within five
years after the date of the termination of his or her employment or within
such other period, and subject to such terms and conditions
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as the Committee may specify, but not later than the expiration date
specified in Section 5(d) above. Any such Options not fully exercisable
immediately prior to such optionee's retirement shall become fully
exercisable upon such retirement unless the Committee, in its sole
discretion, shall otherwise determine.
(C) Except as provided in Section 9, if the Key Employee shall voluntarily
resign before eligibility for Retirement or he or she is terminated for cause
as determined by the Committee, the Options or Rights shall be cancelled
coincident with the effective date of the termination of employment.
(D) If the Key Employee's employment terminates for any other reason, he or
she may exercise his or her Options, to the extent that he or she shall have
been entitled to do so at the date of the termination of his or her
employment, at any time, or from time to time, within three months after the
date of the termination of his or her employment or within such other period,
and subject to such terms and conditions as the Committee may specify, but
not later than the expiration date specified in Section 5(d) above.
(j) No Option or Right granted under the Plan shall be transferable other than
by will or by the laws of descent and distribution. During the lifetime of the
optionee, an Option or Right shall be exercisable only by the Key Employee to
whom the Option or Right is granted.
(k) With respect to an Incentive Stock Option, the Committee shall specify such
terms and provisions as the Committee may determine to be necessary or desirable
in order to qualify such Option as an "incentive stock option" within the
meaning of Section 422 of the Code.
(1) With respect to the exercisability and settlement of Rights:
(i) Upon exercise of a Right, the Key Employee shall be entitled, subject to
such terms and conditions the Committee may specify, to receive upon exercise
thereof all or a portion of the excess of (A) the Fair Market Value of a
specified number of shares of Stock at the time of exercise, as determined by
the Committee, over (B) a specified amount which shall not, subject to
Section 5(e), be less than the Fair Market Value of such specified number of
shares of Stock at the time the Right is granted. Upon exercise of a Right,
payment of such excess shall be made as the Committee shall specify in cash,
the issuance or transfer to the Key Employee of whole shares of Stock with a
Fair Market Value at such time equal to any excess, or a combination of cash
and shares of Stock with a combined Fair Market Value at such time equal to
any such excess, all as determined by the Committee. The Company will not
issue a fractional share of Stock and, if a fractional share would otherwise
be issuable, the Company shall pay cash equal to the Fair Market Value of the
fractional share of Stock at such time.
(ii) For the purposes of Subsection (i) of this Section 5(l), in the case of
any such Right or portion thereof, other than a Right related to an Incentive
Stock Option, exercised for cash during a "window period"
46
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specified by Rule 16b-3 under the Act, the Fair Market Value of the Stock at
the time of such exercise shall be the highest composite daily closing price
of the Stock during such window period.
(iii) In the event of the exercise of such Right, the Company's obligation in
respect of any related Option or such portion thereof will be discharged by
payment of the Right so exercised.
6. PERFORMANCE SHARES
(a) Subject to the provisions of the Plan, the Committee shall (i) determine and
designate from time to time those Key Employees or groups of Key Employees to
whom Awards of Performance Shares are to be made, (ii) determine the Performance
Period (the "Performance Period") and Performance Objectives (the "Performance
Objectives") applicable to such Awards, (iii) determine the form of settlement
of a Performance Share and (iv) generally determine the terms and conditions of
each such Award. At any date, each Performance Share shall have a value equal to
the Fair Market Value of a share of Stock at such date; provided that the
Committee may limit the aggregate amount payable upon the settlement of any
Award.
(b) The Committee shall determine a Performance Period of not less than two nor
more than five years. Performance Periods may overlap and Key Employees may
participate simultaneously with respect to Performance Shares for which
different Performance Periods are prescribed.
(c) The Committee shall determine the Performance Objectives of Awards of
Performance Shares. Performance Objectives may vary from Key Employee to Key
Employee and between groups of Key Employees and shall be based upon such
performance criteria or combination of factors as the Committee may deem
appropriate, including, but not limited to, minimum earnings per share or return
on equity. If during the course of a Performance Period there shall occur
significant events which the Committee expects to have a substantial effect on
the applicable Performance Objectives during such period, the Committee may
revise such Performance Objectives.
(d) At the beginning of a Performance Period, the Committee shall determine for
each Key Employee or group of Key Employees the number of Performance Shares or
the percentage of Performance Shares which shall be paid to the Key Employee or
member of the group of Key Employees if the applicable Performance Objectives
are met in whole or in part.
(e) If a Key Employee terminates service with all Participating Companies during
a Performance Period because of death, Total Disability, Retirement, or under
other circumstances where the Committee in its sole discretion finds that a
waiver would be in the best interests of the Company, that Key Employee may, as
determined by the Committee, be entitled to an Award of Performance Shares at
the end of the Performance Period based upon the extent to which the Performance
Objectives were satisfied at the end of such period and prorated for the portion
of the Performance Period during which the Key Employee was employed by any
Participating Company; provided, however, the Committee may provide for an
earlier payment in settlement of such
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Performance Shares in such amount and under such terms and conditions as the
Committee deems appropriate or desirable. If a Key Employee terminates service
with all Participating Companies during a Performance Period for any other
reason, then such Key Employee shall not be entitled to any Award with respect
to that Performance Period unless the Committee shall otherwise determine.
(f) Each Award of a Performance Share shall be paid in whole shares of Stock, or
cash, or a combination of Stock and cash either as a lump sum payment or in
annual installments, all as the Committee shall determine, with payment to
commence as soon as practicable after the end of the relevant Performance
Period.
7. RESTRICTED STOCK
(a) Restricted Stock shall be subject to a restriction period (after which
restrictions will lapse) which shall mean a period commencing on the date the
Award is granted and ending on such date as the Committee shall determine (the
"Restriction Period"). The Committee may provide for the lapse of restrictions
in installments where deemed appropriate.
(b) Except when the Committee determines otherwise pursuant to Section 7(d), if
a Key Employee terminates employment with all Participating Companies for any
reason before the expiration of the Restriction Period, all shares of Restricted
Stock still subject to restriction shall be forfeited by the Key Employee and
shall be reacquired by the Company.
(c) Except as otherwise provided in this Section 7, no shares of Restricted
Stock received by a Key Employee shall be sold, exchanged, transferred, pledged,
hypothecated or otherwise disposed of during the Restriction Period.
(d) In cases of death, Total Disability or Retirement or in cases of special
circumstances, the Committee may, in its sole discretion when it finds that a
waiver would be in the best interests of the Company, elect to waive any or all
remaining restrictions with respect to such Key Employee's Restricted Stock.
(e) The Committee may require, under such terms and conditions as it deems
appropriate or desirable, that the certificates for Stock delivered under the
Plan may be held in custody by a bank or other institution, or that the Company
may itself hold such shares in custody until the Restriction Period expires or
until restrictions thereon otherwise lapse, and may require, as a condition of
any Award of Restricted Stock that the Key Employee shall have delivered a stock
power endorsed in blank relating to the Restricted Stock.
(f) Nothing in this Section 7 shall preclude a Key Employee from exchanging any
shares of Restricted Stock subject to the restrictions contained herein for any
other shares of Stock that are similarly restricted.
(g) Subject to Section 7(e) and Section 8, each Key Employee entitled to receive
Restricted Stock under the Plan shall be issued a certificate for the shares of
Stock. Such certificate shall be registered in the name of the Key Employee, and
shall bear an
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appropriate legend reciting the terms, conditions and restrictions, if any,
applicable to such Award and shall be subject to appropriate stop-transfer
orders.
8. CERTIFICATES FOR AWARDS OF STOCK
(a) The Company shall not be required to issue or deliver any certificates for
shares of Stock prior to (i) the listing of such shares on any stock exchange on
which the Stock may then be listed and (ii) the completion of any registration
or qualification of such shares under any federal or state law, or any ruling or
regulation of any government body which the Company shall, in its sole
discretion, determine to be necessary or advisable.
(b) All certificates for shares of Stock delivered under the Plan shall also be
subject to such stop-transfer orders and other restrictions as the Committee may
deem advisable under the rules, regulations, and other requirements of the
Securities and Exchange Commission, any stock exchange upon which the Stock is
then listed and any applicable federal or state securities laws, and the
Committee may cause a legend or legends to be placed on any such certificates to
make appropriate reference to such restrictions. The foregoing provisions of
this Section 8(b) shall not be effective if and to the extent that the shares of
Stock delivered under the Plan are covered by an effective and current
registration statement under the Securities Act of 1933, or if and so long as
the Committee determines that application of such provisions is no longer
required or desirable. In making such determination, the Committee may rely upon
an opinion of counsel for the Company.
(c) Except for the restrictions on Restricted Stock under Section 7, each Key
Employee who receives Stock in settlement of an Award of Stock, shall have all
of the rights of a shareholder with respect to such shares, including the right
to vote the shares and receive dividends and other distributions. No Key
Employee awarded an Option, a Right or Performance Share shall have any right as
a shareholder with respect to any shares covered by his or her Option, Right or
Performance Share prior to the date of issuance to him or her of a certificate
or certificates for such shares.
9. ACCELERATION EVENTS
(a) For the purposes of this Plan, 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 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 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
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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's 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.
(b) Notwithstanding any provisions in this Plan to the contrary:
(i) Each outstanding Option granted under the Plan shall become immediately
exercisable in full for the aggregate number of shares covered thereby and
all related Rights shall also become exercisable upon the occurrence of an
Acceleration Event described in this Section 9 and shall continue to be
exercisable in full for cash for a period of 60 calendar days beginning on
the date that such Acceleration Event occurs and ending on the 60th calendar
day following that date; provided, however, that (A) no Right shall become
exercisable earlier than six months following the date the Right is granted,
and (B) no Option or Right shall be exercisable beyond the expiration date of
its original term.
(ii) Options and Rights shall not terminate and shall continue to be fully
exercisable for a period of seven months following the occurrence of an
Acceleration Event in the case of an employee who is terminated other than
for just cause or who voluntarily terminates his employment because he in
good faith believes that as a result of such Acceleration Event he is unable
effectively to discharge his present duties or the duties of the position he
occupied just prior to the occurrence of such Acceleration Event. For
purposes of Section 9 only, termination shall be for "just cause" only if
such termination is based on fraud, misappropriation or embezzlement on the
part of the employee which results in a final conviction of a felony. Under
no circumstances, however, shall any Option or Right be exercised beyond the
expiration date of its original term.
(iii) Any Right or portion thereof may be exercised for cash within the
60-calendar-day period following the occurrence of an Acceleration Event with
settlement, except in the case of a Right related to an Incentive Stock
Option, based on the "Formula Price" which shall be the highest of (A) the
50
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highest composite daily closing price of the Stock during the period
beginning on the 60th calendar day prior to the date on which the Right is
exercised and ending on the date such Right is exercised, (B) the highest
gross price paid for the Stock during the same period of time, as reported in
a report on Schedule 13D filed with the Securities and Exchange Commission or
(C) the highest gross price paid or to be paid for a share of Stock (whether
by way of exchange, conversion, distribution upon merger, liquidation or
otherwise) in any of the transactions set forth in this Section 9 as
constituting an Acceleration Event.
(iv) Upon the occurrence of an Acceleration Event, Limited Stock Appreciation
Rights shall automatically be granted as to any Option with respect to which
Rights are not then outstanding; provided, however, that Limited Stock
Appreciation Rights shall be provided at the time of grant of any Incentive
Stock Option subject to exercisability upon the occurrence of an Acceleration
Event. Limited Stock Appreciation Rights shall entitle the holder thereof,
upon exercise of such rights and surrender of the related Option or any
portion thereof, to receive, without payment to the Company (except for
applicable withholding taxes), an amount in cash equal to the excess, if any,
of the Formula Price as that term is defined in Section 9 over the option
price of the Stock as provided in such Option; provided that in the case of
the exercise of any such Limited Stock Appreciation Right or portion thereof
related to an Incentive Stock Option, the Fair Market Value of the Stock at
the time of such exercise shall be substituted for the Formula Price. Each
such Limited Stock Appreciation Right shall be exercisable only during the
period beginning on the first business day following the occurrence of such
Acceleration Event and ending on the 60th day following such date and only to
the same extent the related Option is exercisable. In the case of persons who
are considered directors or officers of the Company for purposes of Section
16 of the Act, Limited Stock Appreciation Rights shall not be so exercisable
until they have been outstanding for at least six months. Upon exercise of a
Limited Stock Appreciation Right and surrender of the related Option, or
portion thereof, such Option, to the extent surrendered, shall not thereafter
be exercisable.
(v) The restrictions applicable to Awards of Restricted Stock issued pursuant
to Section 7 shall lapse upon the occurrence of an Acceleration Event and the
Company shall issue stock certificates without a restrictive legend. Key
Employees holding Restricted Stock on the date of an Acceleration Event may
tender such Restricted Stock to the Company which shall pay the Formula Price
as that term is defined in Section 9; provided, such Restricted Stock must be
tendered to the Company within 60 calendar days of the Acceleration Event.
(vi) If an Acceleration Event occurs during the course of a Performance
Period applicable to an Award of Performance Shares pursuant to Section 6,
then the Key Employee shall be deemed to have satisfied
51
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the Performance Objectives and settlement of such Performance Shares shall be
based on the Formula Price, as defined in this Section 9.
10. BENEFICIARY
(a) Each Key Employee shall file with the Company a written designation of one
or more persons as the Beneficiary who shall be entitled to receive the Award,
if any, payable under the Plan upon his or her death. A Key Employee may from
time to time revoke or change his or her Beneficiary designation without the
consent of any prior Beneficiary by filing a new designation with the Company.
The last such designation received by the Company shall be controlling;
provided, however, that no designation, or change or revocation thereof, shall
be effective unless received by the Company prior to the Key Employee's death,
and in no event shall it be effective as of a date prior to such receipt.
(b) If no such Beneficiary designation is in effect at the time of a Key
Employee's death, or if no designated Beneficiary survives the Key Employee or
if such designation conflicts with law, the Key Employee's estate shall be
entitled to receive the Award, if any, payable under the Plan upon his or her
death. If the Committee is in doubt as to the right of any person to receive
such Award, the Company may retain such Award, without liability for any
interest thereon, until the Committee determines the rights thereto, or the
Company may pay such Award into any court of appropriate jurisdiction and such
payment shall be a complete discharge of the liability of the Company therefor.
11. ADMINISTRATION OF THE PLAN
(a) Each member of the Committee shall be both a member of the Board and a
"disinterested person" within the meaning of Rule 16b-3 under the Act or
successor rule or regulation. No member of the Committee shall be, or shall have
been, eligible to receive an Award under the Plan or any other plan maintained
by any Participating Company to acquire stock, stock options, stock appreciation
rights, performance shares or restricted stock of a Participating Company at any
time within the one year immediately preceding the member's appointment to the
Committee.
(b) All decisions, determinations or actions of the Committee made or taken
pursuant to grants of authority under the Plan shall be made or taken in the
sole discretion of the Committee and shall be final, conclusive and binding on
all persons for all purposes.
(c) The Committee shall have full power, discretion and authority to interpret,
construe and administer the Plan and any part thereof, and its interpretations
and constructions thereof and actions taken thereunder shall be, except as
otherwise determined by the Board, final, conclusive and binding on all persons
for all purposes.
(d) The Committee's decisions and determinations under the Plan need not be
uniform and may be made selectively among Key Employees, whether or not such Key
Employees are similarly situated.
(e) The Committee may, in its sole discretion, delegate such of its powers as it
deems appropriate.
(f) If an Acceleration Event has not occurred and if the Committee determines
that a Key
52
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Employee has taken action inimical to the best interests of any Participating
Company, the Committee may, in its sole discretion, terminate in whole or in
part such portion of any Option (including any related Right) as has not yet
become exercisable at the time of termination, terminate any Performance Share
Award for which the Performance Period has not been completed or terminate any
Award of Restricted Stock for which the Restriction Period has not lapsed.
12. AMENDMENT, EXTENSION OR TERMINATION
The Board may, at any time, amend or terminate the Plan and, specifically, may
make such modifications to the Plan as it deems necessary to avoid the
application of Section 162(m) of the Code and the Treasury regulations issued
thereunder. However, no amendment shall, without approval by a majority of the
Company's stockholders, (a) alter the group of persons eligible to participate
in the Plan, (b) except as provided in Section 13 increase the maximum number of
shares of Stock which are available for Awards under the Plan or (c) extend the
period during which awards may be granted beyond December 31, 2003. If an
Acceleration Event has occurred, no amendment or termination shall impair the
rights of any person with respect to a prior Award.
13. ADJUSTMENTS IN EVENT OF CHANGE IN COMMON STOCK
In the event of any recapitalization, reclassification, split-up or
consolidation of shares of Stock or, stock dividend, merger or consolidation of
the Company or sale by the Company of all or a portion of its assets, the
Committee may make such adjustments in the Stock subject to Awards, including
Stock subject to purchase by an Option, or the terms, conditions or restrictions
on Stock or Awards, including the price payable upon the exercise of such
Option, as the Committee deems equitable.
14. MISCELLANEOUS
(a) Except as provided in Section 9, nothing in this Plan or any Award granted
hereunder shall confer upon any employee any right to continue in the employ of
any Participating Company or interfere in any way with the right of any
Participating Company to terminate his or her employment at any time. No Award
payable under the Plan shall be deemed salary or compensation for the purpose of
computing benefits under any employee benefit plan or other arrangement of any
Participating Company for the benefit of its employees unless the Company shall
determine otherwise. No Key Employee shall have any claim to an Award until it
is actually granted under the Plan. To the extent that any person acquires a
right to receive payments from the Company under this Plan, such right shall be
no greater than the right of an unsecured general creditor of the Company. All
payments to be made hereunder shall be paid from the general funds of the
Company and no special or separate fund shall be established and no segregation
of assets shall be made to assure payment of such amounts except as provided in
Section 7(e) with respect to Restricted Stock.
(b) The Committee may cause to be made, as a condition precedent to the payment
of any Award, or otherwise, appropriate arrangements with the Key Employee or
his or her Beneficiary, for the withholding of any federal, state, local or
foreign taxes.
53
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(c) The Plan and the grant of Awards shall be subject to all applicable federal
and state laws, rules, and regulations and to such approvals by any government
or regulatory agency as may be required.
(d) The terms of the Plan shall be binding upon the Company and its successors
and assigns.
(e) Captions preceding the sections hereof are inserted solely as a matter of
convenience and in no way define or limit the scope or intent of any provision
hereof.
15. EFFECTIVE DATE, TERM OF PLAN AND SHAREHOLDER APPROVAL
The effective date of the Plan shall be January 1, 1994. No Award shall be
granted under this Plan after the Plan's termination date. The Plan's
termination date shall be December 31, 2003. The Plan will continue in effect
for existing Awards as long as any such Award is outstanding.
54
[ITT LOGO]
1330 Avenue of the Americas
New York, NY 10019-5490
[RECYCLE LOGO]
Printed on recycled paper with Soybean Oil Inks
ITT ITT
ITT CORPORATION
1330 AVENUE OF THE AMERICAS
NEW YORK, NY 10019-5490
PROXY SOLICITED BY BOARD OF DIRECTORS FOR ANNUAL MEETING OF SHAREHOLDERS
THE UNDERSIGNED HEREBY APPOINTS GWENN L. CARR OR WALTER F. DIEHL, JR., OR
RICHARD S. WARD, AS PROXY, EACH WITH POWER TO APPOINT HIS OR HER SUBSTITUTE AND
HEREBY AUTHORIZES EACH OF THEM AT THE ANNUAL MEETING OF SHAREHOLDERS OF ITT
CORPORATION TO BE HELD AT 10:30 A.M. ON MAY 17, 1994 IN THE SHERATON BALLROOM
OF THE SHERATON CHICAGO HOTEL & TOWERS, CHICAGO, ILLINOIS AND AT ANY
ADJOURNMENTS THEREOF TO VOTE ALL SHARES OF ITT COMMON AND PREFERRED STOCK,
INCLUDING FULL SHARES HELD IN THE ITT DIVIDEND REINVESTMENT AND COMMON STOCK
PURCHASE PLAN, WHICH THE UNDERSIGNED COULD VOTE IF PERSONALLY PRESENT AS
DESIGNATED ON THE REVERSE SIDE OF THIS PROXY AND CONFERS DISCRETIONARY
AUTHORITY UPON EACH SUCH PROXY TO VOTE UPON ANY OTHER MATTER PROPERLY BROUGHT
BEFORE THE MEETING.
THE NOMINEES FOR ELECTION AS DIRECTORS ARE:
(B.B. ANDERSON, R.V ARASKOG, N.D. ARCHIBALD, R.A. BURNETT, M. DAVID-WEILL,
S.P. GILBERT, P.G. KIRK, JR., E.C. MEYER, B.F. PAYTON, AND M.E. WHITE)
PLEASE SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES ON THE REVERSE
SIDE OF THIS PROXY. THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS
DESIGNATED BY YOU ON THE REVERSE SIDE, OR IF NO DESIGNATION IS MADE WILL BE
VOTED FOR ITEMS 1, 2, 3, AND 4, AND AGAINST ITEMS 5, AND 6. THE PROXY
COMMITTEE CANNOT VOTE YOUR SHARES UNLESS YOU SIGN AND RETURN THIS PROXY.
PROXY
------------
SEE REVERSE
SIDE
------------
PLEASE MARK YOUR CHOICE LIKE THIS / /
IN DARK INK AND SIGN AND DATE BELOW.
DIRECTORS RECOMMEND A VOTE FOR ITEMS 1-2-3-4.
- -----------------------------------------------------------------------------
FOR ALL EXCEPT* WITHHELD
1. ELECTION OF DIRECTORS. / / / / / /
(NOMINEES ARE LISTED ON THE
REVERSE SIDE OF THIS PROXY)
*LIST OF EXCEPTIONS. ---------------------------------------
FOR AGAINST ABSTAIN
2. RATIFICATION OF AUDITORS. / / / / / /
3. TO APPROVE THE 1994 INCENTIVE / / / / / /
STOCK PLAN
4. TO APPROVE THE ANNUAL
PERFORMANCE-BASED INCENTIVE PLAN. / / / / / /
- ---------------------------------------------------------------------------
DIRECTORS RECOMMEND A VOTE
AGAINST ITEMS 5-6.
- ---------------------------------------------------------------------------
FOR AGAINST ABSTAIN
5. SHAREHOLDER PROPOSAL TO / / / / / /
LIST EXECUTIVES EARNING MORE
THAN $100,000.
6. SHAREHOLDER PROPOSAL TO ENDORSE / / / / / /
CERES PRINCIPLES
- ---------------------------------------------------------------------------
/ / MARK THIS BOX IF YOU WANT TO RECEIVE AN ADMISSION CARD.
,1994.
- --------------------------------------------- ---------------------
SIGNATURE DATE
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED
ENVELOPE.
NOTE PLEASE ADD YOUR TITLE IF YOU ARE SIGNING AS ATTORNEY, ADMINISTRATOR,
EXECUTOR, GUARDIAN, TRUSTEE OR IN ANY OTHER REPRESENTATIVE CAPACITY.
..............................................................................
DETACH HERE AND RETURN UPPER PORTION IN SELF-ADDRESSED ENVELOPE.
ITT
ANNUAL MEETING INFORMATION:
---------------------------
YOUR VOTE IS IMPORTANT RECORD DATE: MARCH 21, 1994
- ---------------------- MEETING DATE: MAY 17, 1994
TO ITT CORPORATION. 10:30 AM
- -------------------
MEETING SITE: SHERATON CHICAGO
PLEASE VOTE YOUR PROXY. HOTEL & TOWERS
SHERATON BALLROOM,
CHICAGO, ILLINOIS.
