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Sometimes tough decisions must be made, so before resigning (possibly out of frustration/disappointment) get the facts and the actual reason - and base your decision on that instead.
(of course, if senior management actually didn't inform about the reason - that might be reason itself to leave anyway...)
Get a new job first. Then quit. Downside: You're in a sucky environment for 1-6 months longer. Upside: You have a LOT more negotiating leverage for your next job.
Management might throw some short-term things your way if you smile politely and play along until you have the next position lined up. The trick is to NOT LET THEM KNOW you're looking. Don't take recruiter/interview calls during work hours. Don't use company computers to scrub job boards and handle applications.
Your impulse is to walk away, and that's a hard impulse to fight, but believe me it will look better during interviews when you don't have a gap on your resume.
How will you answer questions about that? "Oh, I walked away in a huff when I didn't get a raise" signals that you could be a potential problem if/when problems arise at your new employer as well.
Every company has financial hiccups. Even if you aced your work every single quarter there are going to be cashflow problems somewhere else. Dig in, put your ear to the ground, and find out what is really happening in your company.
Put the bare minimum, and do not say anything about compensation, etc. As a3n says, just say you are leaving, and when your last day will be. When it comes to the exit interview, DO NOT SAY ANYTHING EITHER. It all goes into your employment record. You don't owe them any honesty, so just leave quietly and don't burn any bridges.
Think of it this way, what do you have to gain by being honest? What do you have to lose? I think you'll see being anything other than polite and positive in your resignation letter offers nothing but downside.
No one is happy with such news, as others said - start searching for a new job and once you find, then quit.
Ask yourself what purpose you wish to achieve? Do you want them to change their decision? Are you concerned that they might want to accuse you of leaving for some other reason, and you want to document it? Keep it short unless you want to achieve something specific, and then include only the verbiage relevant to that purpose.
I have a better offer for a job I'm looking forward to starting, so there's nothing I can do that will help me personally. It feels more honest to me to be upfront and, who knows, it might help my colleagues.
I don't think being frank will affect my ability to get references from the people here. Aside from that, are there any other risks?
Please accept this letter as formal notification that I am leaving my position with [company name] on [full date of departure]. After much consideration I have decided to accept another job offer. My new position will enhance my career growth and will expose me to challenges and opportunities that I believe are in my best interest.
I value the professional relationships I have made with my coworkers, as well as yourself. Because of this, if there is anything I can do in my last days of employment to help transition my work, please let me know.
I am resigning my position with $EMPLOYER. My last day will be date(today + 14) % weekend.
I tried telling the truth in my first exit interview and all it did was burn bridges and make people mad. I wasn't even pulling skeletons out, I just stated the facts for why I was leaving and when they tried to counter (Another thing, NEVER accept a counter offer) and I refused they got all mad because they thought they were addressing all my reasons for leaving but I was still leaving. Don't give them that chance, you already know you want to leave, don't waste yours or their time trying to convince you otherwise.
$TODAY
To Whom it May Concern:
I would like to inform you that I am resigning
from my position here at $EMPLOYER, effective $DATE.
Sincerely,
$ME