<PAGE> 1
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
FORM 10-K
ANNUAL REPORT
(MARK ONE)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1995
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the Transition period from
---------------------- to
-------------------
COMMISSION FILE NO. 1-13960
------------------
ITT CORPORATION
INCORPORATED IN THE STATE OF NEVADA
88-0340591
(I.R.S. EMPLOYER
IDENTIFICATION NO.)
1330 AVENUE OF THE AMERICAS, NEW YORK, NY 10019-5490
(PRINCIPAL EXECUTIVE OFFICES)
TELEPHONE NUMBER: (212) 258-1000
------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT, ALL OF WHICH ARE
REGISTERED ON THE NEW YORK STOCK EXCHANGE, INC.:
COMMON STOCK, NO PAR VALUE
SERIES A PARTICIPATING CUMULATIVE PREFERRED STOCK PURCHASE RIGHTS
6 1/4% NOTES DUE NOVEMBER 15, 2000
6 3/4% NOTES DUE NOVEMBER 15, 2005
7 3/8% DEBENTURES DUE NOVEMBER 15, 2015
7 3/4% DEBENTURES DUE NOVEMBER 15, 2025
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. /X/
The aggregate market value of the Common Stock of the registrant
held by non-affiliates of the registrant on January 31, 1996, was approximately
$6.5 billion.
As of February 29, 1996, there were outstanding 117,299,221 shares of
Common Stock, no par value, of the registrant.
DOCUMENTS INCORPORATED BY REFERENCE
The registrant's definitive proxy statement filed or to be filed with the
Securities and Exchange Commission pursuant to Regulation 14A involving the
election of directors at the annual meeting of the shareholders of the
registrant scheduled to be held on May 14, 1996, is incorporated by reference in
Part III of this Form 10-K.
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ITEM PAGE
<C> <C> <S> <C>
PART 1 Business of ITT...................................................... 1
I 2 Properties........................................................... 22
3 Legal Proceedings.................................................... 22
4 Submission of Matters to a Vote of Security Holders.................. 23
* Executive Officers of ITT............................................ 23
PART 5 Market for ITT's Common Stock and Related Stockholder Matters........ 24
II 6 Selected Financial Data.............................................. 24
7 Management's Discussion and Analysis of Financial Condition and
Results of Operations.............................................. 25
8 Financial Statements and Supplementary Data.......................... 32
9 Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure............................................... 32
PART 10 Directors and Executive Officers of ITT.............................. 32
III 11 Executive Compensation............................................... 32
12 Security Ownership of Certain Beneficial Owners and Management....... 32
13 Certain Relationships and Related Transactions....................... 32
PART 14 Exhibits, Financial Statement Schedules, and Reports on Form 8-K..... 32
IV
Signatures.................................................................. II-1
Exhibit Index............................................................... II-2
</TABLE>
- - ------------
* Included pursuant to Instruction 3 to Item 401(b) of Regulation S-K.
PART I
ITEM 1. BUSINESS OF ITT
ITT Corporation is a Nevada corporation, with World Headquarters at 1330
Avenue of the Americas, New York, NY 10019-5490. ITT Corporation was
incorporated in 1995. Unless the context otherwise indicates, references herein
to ITT Corporation ("ITT") include its subsidiaries.
On December 19, 1995 (the "Distribution Date"), ITT Corporation, a Delaware
corporation (which has been renamed ITT Industries, Inc. and reincorporated in
the State of Indiana, "Old ITT"), distributed to its shareholders of record at
the close of business on such date all of the outstanding shares of common stock
of ITT, then a wholly owned subsidiary of Old ITT (the "Distribution"). In such
Distribution, holders of common stock of Old ITT received one share of ITT's
common stock for every one share of Old ITT common stock held. In connection
with such Distribution, ITT, which was then named "ITT Destinations, Inc.",
changed its name to "ITT Corporation". References herein to ITT prior to
December 20, 1995 are references to Old ITT, the former parent corporation of
ITT.
ITT is engaged, through subsidiaries, in the hospitality, gaming and
entertainment business and the information services business. ITT conducts its
hospitality and entertainment business through ITT Sheraton Corporation ("ITT
Sheraton"), Ciga S.p.A. ("Ciga"), Caesars World, Inc. ("Caesars") and Madison
Square Garden, L.P. ("MSG") and conducts its information services business
through ITT World Directories, Inc. ("ITT World Directories") and ITT
Educational Services, Inc. ("ITT Educational"). In addition, ITT owns
approximately 6% of the outstanding capital shares of Alcatel Alsthom, a French
company which owns, among other things, Alcatel, N.V., one of the largest
telecommunications equipment manufacturers in the world.
Through the ITT Sheraton trade names and service marks, ITT is represented
in most major markets of the world. In 1995, over 45 million customers stayed at
ITT Sheraton properties in approximately 60 countries. ITT Sheraton is a
worldwide hospitality network of 412 owned, leased, managed and franchised
properties, including hotels, casinos and inns. Gaming operations are marketed
under either the Caesars World or ITT Sheraton trade names and service marks and
are represented in Las Vegas,
1
<PAGE> 3
Atlantic City, Halifax (Nova Scotia), Sydney (Nova Scotia), Lake Tahoe, Tunica
County (Mississippi), Lima (Peru), Cairo (Egypt), Windsor (Ontario) and
Townsville (Australia). The acquisition in 1994 of 70.3% of Ciga and the
acquisition of other key hotel properties(particularly, The Phoenician in
Scottsdale, Arizona, the Crescent in Phoenix, Arizona, and The Park Grande Hotel
in Sydney, Australia) enhanced ITT's geographic balance of hotels along with its
image and profile.
In January 1995, ITT completed the acquisition of Caesars, one of the
world's most recognized gaming companies. The acquisition of Caesars greatly
enhanced ITT's profile in the rapidly growing gaming business. Caesars' flagship
property is the renowned Caesars Palace in Las Vegas; Caesars also owns and
operates Caesars Atlantic City in Atlantic City, New Jersey, and Caesars Tahoe
in Stateline, Nevada. Caesars also owns one-third of a management company that
operates Casino Windsor, which was opened in May 1994 in Windsor, Ontario, and
Caesars owns and operates four non-gaming resorts in Pennsylvania's Pocono
Mountains.
In March 1995, ITT acquired, through its investment in MSG in partnership
with subsidiaries of Cablevision Systems Corporation, the New York
Knickerbockers basketball and New York Rangers hockey franchises and the Madison
Square Garden arena. The MSG investment also included a special events theater
and the MSG cable television entertainment network.
In August 1995, ITT, in partnership with Dow Jones & Co. ("Dow Jones"),
agreed to purchase television station WNYC-TV from New York City. The purchase,
subject to approval by the Federal Communications Commission and other customary
conditions, is expected to close in the first half of 1996. The purchase price
of $207 million will be split evenly by the two companies, and the partnership
will be managed on a 50/50 basis.
ITT World Directories, an 80%-owned subsidiary, engages in the publication
of telephone directories, including classified directory services for telephone
subscribers, in Europe, Asia, Africa, Puerto Rico and the United States Virgin
Islands. ITT Educational, which is owned 83.3% by ITT and 16.7% by the public,
operates technical colleges offering post-secondary career education.
ITT owns approximately 9.4 million shares, or approximately 6% of the
outstanding capital shares, of Alcatel Alsthom, a French company which owns,
among other things, Alcatel N.V., one of the largest telecommunications
equipment manufacturers in the world. The fair market value of such shares was
$826 million at December 31, 1995.
2
<PAGE> 4
BUSINESS SEGMENTS*
<TABLE>
<CAPTION>
REVENUES INCOME
------------------------------- -------------------------
1995 1994 1993 1995 1994 1993
------- ------- ------- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Hotels................................................... $ 4,120 $ 3,700 $ 3,160 $ 190 $ 152 $ 87
Gaming................................................... 1,370 227 24 209 9 (9)
Information Services..................................... 856 833 800 178 155 162
Dispositions and Other................................... -- -- 185 -- 1 8
------- ------- ------- ----- ----- -----
Total Segments........................................... 6,346 4,760 4,169 577 317 248
Other.................................................... -- -- -- (6) (25) (106)
------- ------- ------- ----- ----- -----
6,346 4,760 4,169 571 292 142
Interest expense, net.................................... (291) (131) (33)
Miscellaneous income (expense), net...................... 2 (17) 10
Income tax expense....................................... (114) (58) (63)
Minority equity.......................................... (21) (12) (17)
------- ------- ------- ----- ----- -----
$ 6,346 $ 4,760 $ 4,169 $ 147 $ 74 $ 39
====== ====== ====== ===== ===== =====
</TABLE>
- - ---------------
* Reference is made to Management's Discussion and Analysis of Financial
Condition and Results of Operations and the Business Segment Information,
included in the Notes to Financial Statements, which include descriptions of
Business Segments.
HOTEL OPERATIONS
ITT's revenues from hotel operations are derived worldwide from ITT
Sheraton's owned, leased and managed hotels and franchise fees. Revenues in the
hotel business are essentially a function of number of rooms, average daily rate
charged for rooms and number of rooms occupied. Six of the hotels in the ITT
Sheraton network have casino operations managed by Sheraton. The gaming
operations in the ITT Sheraton network and the gaming operations of Caesars are
discussed below under "Gaming Operations".
The following table illustrates in percentage terms the sources of revenues
of ITT's hotel operations. The percentages for the 1994 period assume that the
acquisition of the 70.3% interest in Ciga and certain other hotel properties had
been completed on January 1, 1994. Hotel/casinos owned by ITT Sheraton and
Caesars are not included in the table.
<TABLE>
<CAPTION>
PRO FORMA
YEAR ENDED YEAR ENDED
DEC. 31, 1995 DEC. 31, 1994
------------- -------------
<S> <C> <C>
Owned or Leased Hotels............................................................. 32% 30%
Managed and Joint Venture Hotels(1)................................................ 65 67
Franchised Hotels(2)............................................................... 1 1
Other(3)........................................................................... 2 2
--- ---
100% 100%
=== ===
</TABLE>
- - ---------------
(1) Includes 100% of the revenues of managed and joint venture hotels.
(2) Includes franchise fees to ITT Sheraton, not revenues of franchise hotels.
(3) Other revenues primarily include reservations fees and Sheraton Club
International fees.
3
<PAGE> 5
Owned and Leased Hotels
The following table illustrates for ITT Sheraton's owned and leased
properties, the number of properties, available room nights, average daily
occupancy rate and average daily room rate, in each case for the years ended
December 31, 1995 and December 31, 1994. For the year ended December 31, 1994,
the table assumes that the acquisition of the 70.3% interest in Ciga and certain
other hotel properties had been completed on January 1, 1994. Hotel/casinos
owned by ITT Sheraton and Caesars are not included in the table.
<TABLE>
<CAPTION>
PRO FORMA
YEAR ENDED YEAR ENDED
DEC. 31, 1995 DEC. 31, 1994
------------- -------------
<S> <C> <C>
Number of properties at period end................................................. 68 66
Available room nights(1)........................................................... 7,929,283 7,467,848
Average daily occupancy rate(2).................................................... 71.2% 70.1%
Average daily rate(3).............................................................. $135.65 $125.72
</TABLE>
- - ---------------
(1) Based on properties held at period end.
(2) Occupied rooms in the period divided by rooms available for sale in the same
period.
(3) Room revenues for the period divided by rooms occupied for the same period.
The owned and leased properties in the ITT Sheraton network are, in many
cases, subject to mortgage and lease indebtedness. As of December 31, 1995, the
aggregate mortgage and lease indebtedness in respect of such hotels was $334
million. In connection with the leased properties in the ITT Sheraton network,
an ITT Sheraton subsidiary generally leases the land upon which the hotel has
been built and the hotel building. Upon expiration of the lease, the buildings
and other leasehold improvements owned by such subsidiary revert to the
landlord. Usually, such ITT Sheraton subsidiary is responsible for repairs,
maintenance, operating expenses and lease rentals and retains managerial
discretion over operations. Generally, ITT Sheraton pays a percentage rental
based on total revenues (as defined) or gross operating profit (as defined) in
respect of the relevant facility but sometimes with a minimum fixed annual rent
or a preferential rent. During the year ended December 31, 1995 and the year
ended December 31, 1994, ITT Sheraton paid aggregate rentals, including rentals
attributable to the leased properties referenced above, of $22 million and $17
million, respectively.
Managed and Joint Venture Hotels
ITT Sheraton, through subsidiaries, manages, usually under long-term
agreements, a number of hotels throughout the world. The following table
illustrates the number of properties, available room nights, average daily
occupancy rate and average daily room rate, in each case for the years December
31, 1995 and December 31, 1994 for the hotels managed for third parties and
joint venture hotels in the ITT Sheraton network. For the year ended December
31, 1994, the table assumes that the acquisition of the 70.3% interest in Ciga
and certain other hotel properties had been completed on January 1, 1994.
<TABLE>
<CAPTION>
PRO FORMA
YEAR ENDED YEAR ENDED
DEC. 31, 1995 DEC. 31, 1994
------------- -------------
<S> <C> <C>
Number of properties at period end(1).............................................. 130 143
Available room nights(2)........................................................... 18,138,378 18,919,583
Average daily occupancy rate(3).................................................... 70.6% 70.4%
Average daily rate(4).............................................................. $121.28 $111.12
</TABLE>
- - ---------------
(1) The decrease resulted primarily from a reclassification of certain hotels
from the managed category to the franchised category.
(2) Based on properties held at period end.
(3) Occupied rooms in the period divided by rooms available for sale in the same
period.
(4) Room revenues for the period divided by rooms occupied for the same period.
4
<PAGE> 6
Under its standard management agreement, ITT Sheraton operates lodging
facilities under long-term arrangements with property owners. ITT Sheraton's
responsibilities include hiring, training and supervising the managers and
employees required to operate the facilities. For an additional fee ITT Sheraton
provides reservation services as well as national advertising, marketing and
promotional services. ITT Sheraton prepares and implements annual budgets for
lodging facilities under its management and is responsible for allocating
property-owner funds for periodic maintenance and repair of buildings and
furnishings. ITT Sheraton's management fee is generally based on a percentage of
the hotel's total revenues (as defined), plus, in certain instances, an
incentive fee based on the operating performance.
International Operations
The hotel operations of ITT Sheraton are conducted worldwide. As a general
matter, ITT Sheraton's presence outside of North America consists of contracts
to manage hotels and, to a far more limited extent, equity positions in hotels.
With the acquisition of 70.3% of Ciga, a deluxe hotel group in Europe with 33
hotels, and Sheraton on the Park in Sydney, Australia, ITT Sheraton has expanded
its role as an owner of hotels outside of North America. As of December 31,
1995, ITT Sheraton had an equity interest of 50% or more in 28 properties in
Europe, one property in the Asia/Pacific region, six properties in Latin America
and one property in the Africa/Middle East region.
The source of revenues in geographic terms of ITT's operations (excluding
revenues from gaming operations and reservations-based revenues) is set forth in
the following table for the years ended December 31, 1995 and December 31, 1994.
The data for the year ended December 31, 1994 assumes that the acquisition of
the 70.3% interest in Ciga and certain other hotel properties had been completed
on January 1, 1994. The pro forma financial information includes ITT
management's estimates of results which, among other things, assume revenue and
expense levels based on historical trends and ITT management's views of current
economic conditions. Such information may not be indicative of the results that
would have occurred if the acquisitions had been completed on January 1, 1994.
Hotel/ casinos owned by ITT Sheraton and Caesars are not included in the table.
<TABLE>
<CAPTION>
PRO FORMA
YEAR ENDED YEAR ENDED
DEC. 31, 1995 DEC. 31, 1994
------------- -------------
<S> <C> <C>
REVENUES
North America(1)................................................................. 44% 45%
Europe........................................................................... 21 18
Africa/Middle East............................................................... 9 10
Latin America.................................................................... 5 6
Asia/Pacific..................................................................... 19 19
Headquarters and Other........................................................... 2 2
--- ---
Total...................................................................... 100% 100%
============= =============
EBITDA(2)
North America(1)................................................................. 50% 60%
Europe........................................................................... 24 6
Africa/Middle East............................................................... 3 3
Latin America.................................................................... 15 21
Asia/Pacific..................................................................... 12 15
Headquarters and Other........................................................... (4) (5)
--- ---
Total...................................................................... 100% 100%
============= =============
</TABLE>
- - ---------------
(1) Includes franchise fees.
(2) EBITDA is presented here as an alternative measure of the ability of ITT to
generate cash flow and should not be construed as an alternative to
operating income (as determined in accordance with generally accepted
accounting principles) or to cash flow from operating activities (as
determined on the Consolidated Cash Flow Statements in ITT's Consolidated
Financial Statements contained herein). EBITDA was computed above as
earnings before interest, taxes, depreciation and amortization.
5
<PAGE> 7
Franchise Business
The franchise business of ITT Sheraton largely relates to properties based
in North America. Only 20 of the franchise hotels and inns are located outside
of North America. The following table illustrates for ITT Sheraton's franchise
business (which includes properties operated under the "Four Points Hotels"
trade name), the number of properties, available room nights, average daily
occupancy rate and average daily room rate, in each case for the years ended
December 31, 1995 and December 31, 1994.
<TABLE>
<CAPTION>
PRO FORMA
YEAR ENDED YEAR ENDED
DEC. 31, 1995 DEC. 31, 1994
------------- -------------
<S> <C> <C>
Number of properties at period end......................................... 214 214
Available room nights(1)................................................... 19,199,826 20,530,000
Average daily occupancy rate(2)............................................ 67.2% 67.4%
Average daily rate(3)...................................................... $76.51 $72.89
</TABLE>
- - ---------------
(1) Based on properties held at period end.
(2) Occupied rooms in the period divided by rooms available for sale in the same
period.
(3) Room revenues for the period divided by rooms occupied for the same period.
Sheraton franchise hotels are licensed to operate under the "Sheraton"
trade name and the stylized "S" and Wreath service mark. The franchise hotels
currently operated under the "Sheraton" trade name are generally smaller than
the hotels owned, leased or managed by ITT Sheraton. In each instance, ITT
Sheraton approves the plans for, and the location of, franchise hotels and
reviews their design.
In 1995, ITT Sheraton began offering owners the opportunity to convert
Sheraton franchise inns to the new "Four Points Hotels" trade name. ITT Sheraton
plans for nearly all of its franchise inns to convert to the "Four Points
Hotels" trade name. It is expected that the "Four Points Hotel" will be operated
and marketed by their respective owners with a view toward providing hospitality
services to the business-oriented traveler. Nearly all new franchise hotels are
also expected to be operated under the "Four Points Hotels" trade name.
At December 31, 1995, there were 214 franchise hotels operated by other
business entities under the "Sheraton" or "Four Points Hotels" trade name. In
general, each franchisee pays ITT Sheraton an initial minimum fee, plus an
additional fee for every room over 100. There is a continuing monthly license
fee based on a percentage of the facility's room revenues. Although ITT Sheraton
does not directly participate in the day-to-day management or operation of
franchise hotels, it periodically inspects those facilities to ensure that ITT
Sheraton's standards are maintained.
GAMING OPERATIONS
ITT's gaming operations consist primarily of Caesars Palace in Las Vegas,
Caesars Atlantic City in Atlantic City and Caesars Tahoe in Stateline, Nevada
(each acquired in January 1995), ITT Sheraton's Desert Inn Resort & Casino in
Las Vegas, the Sheraton Casino in Tunica County, Mississippi and various
hotel/casino operations of ITT Sheraton and Caesars outside of the United
States.
Caesars World
In January 1995, a subsidiary of Old ITT acquired through a cash tender
offer approximately 92.9% of the outstanding shares of Caesars. Upon the merger
of such subsidiary into Caesars, effective March 2, 1995, Caesars became a
direct, wholly owned subsidiary of Old ITT. The cost of the transaction to Old
ITT was approximately $1.7 billion. In connection with the Distribution, Caesars
became an indirect wholly owned subsidiary of ITT.
Caesars' wholly owned subsidiaries operate three destination gaming
resorts: Caesars Palace in Las Vegas, Nevada; Caesars Tahoe in Stateline,
Nevada; and Caesars Atlantic City in Atlantic City, New Jersey. A Caesars
subsidiary carries on operations of small casinos on two cruise ships in
conjunction with the operator of the ships. Caesars also owns one-third of a
management company which operates Casino Windsor, a casino opened on May 17,
1994 in Windsor, Canada, which is owned by the Government of the Province of
Ontario. Caesars' subsidiaries also own and operate four non-gaming resorts in
the Pocono Mountains of Pennsylvania.
6
<PAGE> 8
Nevada Properties. Caesars Palace, which opened in 1966 and was purchased
by Caesars in 1969, is a casino/hotel complex located on approximately 80 acres
on the "Strip" in Las Vegas, Nevada. At December 31, 1995, Caesars Palace had
1,486 hotel rooms and suites, 10 restaurants, a 1,126-seat showroom, a
convention complex with approximately 100,000 square feet of meeting and banquet
space, numerous bars and lounges, a shopping arcade, two swimming pools, tennis
facilities, a 4,500-seat sports pavilion, a 15,000-seat outdoor stadium, health
spas, and an "Omnimax" theater. Its casino is approximately 118,000 square feet,
and it offers wagering limits among the highest in Nevada.
For the year ended December 31, 1995, the average occupancy rate at Caesars
Palace of 88.3% included occupancy of approximately 41.7% of the available rooms
and suites by guests receiving complimentary rooms. The average occupancy rate
at Caesars Palace was 90.8% and 92.0% for the years ended December 31, 1994 and
1993, respectively, including occupancy of 42.7% and 37.1%, respectively, of the
available rooms and suites by guests receiving complimentary rooms.
Recent major capital projects at Caesars Palace include room and public
area refurbishments and completion of luxury suites. Scheduled or ongoing
capital projects include Caesars Magical Empire, a new state-of-the-art magical
and dining entertainment facility scheduled to open in the second quarter of
1996, a second parking garage and guest room and public area refurbishments.
Caesars Tahoe casino/hotel opened in 1979 and is located in Stateline,
Nevada, adjacent to Lake Tahoe. In 1979, Caesars entered into a long-term lease
of the 24-acre property on which the casino/hotel stands. At December 31, 1995,
Caesars Tahoe had 440 hotel rooms and suites, four restaurants, a 1,500-seat
showroom, 25,000 square feet of convention space, a Roman-themed nightclub, a
40,000-square foot casino including a race and sports book, bars, shops, four
outdoor tennis courts and an indoor health spa containing a swimming pool and a
racquetball court.
For the year ended December 31, 1995, the average occupancy rate at Caesars
Tahoe of 86.0% included occupancy of approximately 28.9% of the available rooms
and suites by guests receiving complimentary rooms. The average occupancy rate
at Caesars Tahoe was 88.8% and 90.4% for the years ended December 31, 1994 and
1993, respectively, including occupancy of 32.0% and 33.6%, respectively, of the
available rooms and suites by guests receiving complimentary rooms.
Recent major capital projects at Caesars Tahoe include a themed restaurant,
room renovations and remodeling/refurbishing of the casino floor. Scheduled
capital projects include room renovations and replacement of slot equipment.
Caesars Atlantic City. Caesars Atlantic City is a 638-room casino/hotel on
the Boardwalk in Atlantic City, New Jersey. At December 31, 1995, it had a
74,000-square foot casino, including table games, slots, keno, poker and race
simulcasting, 12 restaurants and bars, 10,000 square feet of meeting and banquet
space, an 1,100-seat showroom, a shopping arcade, a Roman-themed transportation
center which accommodates 2,500 cars and 11 buses, a health club and 2 tennis
courts. The property on which Caesars Atlantic City stands consists of
approximately 8.1 acres, including contiguous parcels totaling approximately 5.4
acres bounded on three sides by Missouri, Arkansas and Pacific Avenues, with an
entire block of Boardwalk frontage.
For the year ended December 31, 1995, the average occupancy rate at Caesars
Atlantic City of 93.7% included occupancy of approximately 84.4% of the
available rooms and suites by guests receiving complimentary rooms. The average
occupancy rate at Caesars Atlantic City was 92.7% and 90.8% for the years ended
December 31, 1994 and 1993, respectively, including occupancy of 77.0% and
62.6%, respectively, of the available rooms and suites by guests receiving
complimentary rooms.
Recent major capital projects at Caesars Atlantic City include completion
of a casino expansion (including additional slot machines, table games, poker
games, and a keno and simulcasting area), remodeling and refurbishing of guest
rooms and the baccarat casino area and purchase of slot equipment. Scheduled
capital projects include a casino renovation to add slot machines, computer
equipment, themed restaurants, replacement of slot machines and renovation of
guest rooms and suites.
7
<PAGE> 9
Sheraton Desert Inn Resort & Casino
The Sheraton Desert Inn Resort & Casino, which was purchased, through a
wholly owned subsidiary, by ITT Sheraton in November 1993, is a casino/hotel
complex located on approximately 200 acres on the "Strip" in Las Vegas, Nevada.
At December 31, 1995, the Sheraton Desert Inn had 821 hotel rooms and suites,
five restaurants, a 636-seat showroom, a convention complex with approximately
24,500 square feet of meeting and banquet space, numerous bars and lounges, a
shopping arcade, three swimming pools, tennis facilities, an 18 hole golf course
and other facilities. Its casino is approximately 20,000 square feet.
For the year ended December 31, 1995, the average occupancy rate at
Sheraton Desert Inn of 74.7% included occupancy of approximately 18.8% of the
available rooms and suites by guests receiving complimentary rooms. The average
hotel occupancy rate at Sheraton Desert Inn was 78.4% and 82.6% in 1994 and
1993, respectively, including occupancy of 18.3% and 18.9%, respectively, of the
available rooms and suites by guests receiving complimentary rooms.
Tunica Casino
The Sheraton Casino opened in Tunica County, Mississippi in August 1994.
The Sheraton Casino has three restaurants, three bars and lounges and other
facilities. Its casino has approximately 31,000 square feet. Casino games
include mini-baccarat, black jack, craps, roulette, slot machines, Caribbean
stud poker, big "6" and "let it ride."
Other
ITT Sheraton also operates a casino gaming operation in Lima, Peru in the
Sheraton Lima Hotel & Casino, which has 438 rooms and suites. In June 1995, ITT
Sheraton added to its foreign gaming operation with the opening of a casino in
Halifax, Nova Scotia in the Sheraton Halifax Hotel, now renamed the Sheraton
Halifax Hotel & Casino. In August 1995, ITT Sheraton expanded its Nova Scotia
gaming operations with the opening of a stand-alone casino in Sydney, Cape
Breton, Nova Scotia, named Sheraton Casino Sydney. ITT Sheraton also operates
casinos in Australia and Egypt. During late 1995, for operational purposes, all
of ITT Sheraton's gaming operations were consolidated under Caesars.
Both ITT Sheraton and Caesars are actively exploring various gaming
opportunities in the United States and internationally.
MADISON SQUARE GARDEN
In March 1995, ITT, in partnership with an indirect subsidiary of
Cablevision Systems Corporation, acquired MSG for approximately $1 billion.
MSG's activities include owning and operating (i) the Madison Square Garden
Arena, which seats approximately 20,000 people, (ii) a special events theater
which seats approximately 5,600 people, (iii) the New York Knicks of the
National Basketball Association (the "NBA") and (iv) the New York Rangers of the
National Hockey League (the "NHL"). MSG also supplies and distributes television
programming for cable systems principally in New York, New Jersey and
Connecticut through the MSG Network. MSG Network programming includes its own
sporting events and rights to the New York Yankees baseball games through the
year 2000. In addition, MSG produces, promotes and/or presents live
entertainment.
In addition to its principal assets, MSG currently owns the business which
produces the Miss Universe, Miss USA and Miss Teen USA pageants. On March 12,
1996 MSG sold SRO Motorsports, a division of MSG which produced auto thrill show
events. In connection with the sale of SRO Motorsports, MSG received
approximately $20.1 million in cash.
Ownership Structure
On March 10, 1995, Madison Square Garden, L.P. ("Holdings"), a partnership
among subsidiaries of Rainbow Programming Holdings, Inc. ("Rainbow
Programming"), a wholly owned subsidiary of
8
<PAGE> 10
Cablevision Systems Corporation, and wholly owned subsidiaries of ITT acquired
the business and assets of Madison Square Garden Corporation.
Holdings funded the purchase price of the acquisition through (i)
borrowings of $289.1 million under a bank credit agreement, (ii) an equity
contribution from Rainbow Programming of $110 million and (iii) an equity
contribution from ITT of $610 million. Pursuant to agreements among ITT, Rainbow
Programming and Cablevision Systems Corporation, Rainbow Programming has the
right to acquire interests in Holdings from ITT sufficient to equalize the
interests of ITT and Rainbow Programming in Holdings by making certain scheduled
payments totalling $250 million (plus interest on any unpaid portion thereof) on
specified dates up to and including March 17, 1997. Rainbow Programming may
acquire all or part of such interests in Holdings through (i) the payment of
cash to ITT, (ii) the delivery to ITT, at the option of Rainbow Programming, of
common or preferred stock of the Cablevision Systems Corporation (together with
the commitment of a nationally recognized underwriter to promptly purchase such
common or preferred stock for cash), or a combination of cash and such common or
preferred stock (with such a commitment) or (iii) subject to certain conditions
and in lieu of payment of a limited amount of the required cash or common or
preferred stock for the purchase of a portion of such interests, the delivery to
ITT, at the option of ITT, of certain designated programming interests of
Rainbow Programming. If any scheduled payment is not made on the applicable due
date, then Rainbow Programming will forfeit (a) its right to equalize the
interests in Holdings and (b) certain minority rights. If certain conditions are
met and Rainbow Programming has forfeited its right to equalize the interests in
Holdings, then Rainbow Programming will also have the right to require ITT to
purchase all of Rainbow Programming's interest in Holdings for an amount equal
to (i) the price paid by Rainbow Programming for such interest plus (ii) all
interest paid by Rainbow Programming on the unpaid portion of the $250 million
of scheduled payments (as described above).
Initially, Holdings will be managed on a 50/50 basis by Rainbow Programming
and ITT. If Rainbow Programming does not equalize its ownership interest in
Holdings as discussed above, its management role will effectively be eliminated.
MSG Network
The MSG Network is an advertiser-supported cable television entertainment
program service. The MSG Network's programming is distributed primarily via
satellite for distribution by cable television operators and other video
distributors principally in New York, New Jersey and Connecticut. The MSG
Network currently has over 5,000,000 homes that are subscribers in the New York,
New Jersey and Connecticut.
The MSG Network derives revenue from two principal sources: sale of
advertising time on the network and receipt of per-subscriber license fees paid
by cable operators and other distributors pursuant to negotiated carriage
arrangements. The sale of advertising time is affected by viewer demographics,
viewer ratings and market conditions.
The MSG Network programming generally consists of sporting events and
related programs, primarily focusing on New York Yankees baseball games, New
York Knicks basketball games, New York Rangers hockey games and various other
events held at the Madison Square Garden Arena.
The MSG Network has acquired programming rights from the New York Yankees
to broadcast its baseball games through the year 2000, for an aggregate fee of
$493.5 million. In addition to rights fees paid to the New York Yankees, the MSG
Network pays a fee to (i) the NBA for distribution of New York Knicks games to,
as a general matter, households located outside of a 75 mile radius of New York
City and (ii) the NHL for distribution of New York Rangers games to, as a
general matter, households located outside of a 50 mile radius of New York City.
New York Knicks
MSG owns the New York Knicks, a member of the NBA. The New York Knicks play
their home games in the Madison Square Garden Arena, which is owned and operated
by MSG.
The NBA, through its constitution, has established rules governing club
operations, including drafting of players and trading player contracts. The New
York Knicks are subject to payment of ongoing
9
<PAGE> 11
assessments and dues to the NBA and to compliance with the constitution and
by-laws of the NBA, as the same may be modified from time to time by the
membership, as well as with rules promulgated by the Commissioner of the NBA.
These rules include standards of conduct for players and front office personnel;
methods of operation; procedures for drafting new players and for purchasing,
selling and trading player contracts; rules for implementing disciplinary action
relative to players, coaches and front office personnel; and certain financial
requirements.
In addition to ticket revenues from home games (basketball clubs in the NBA
do not share in gate receipts from games away from home), a portion of the New
York Knicks' revenues is derived from a pro-rata share of the network broadcast
rights fees received by the NBA, pursuant to a broadcast rights fee agreement
through the 1997-1998 seasons awarded to NBC Sports, a division of the National
Broadcasting Company, and from a pro-rata share of the broadcast rights fees
received by the NBA, pursuant to the broadcast rights fee agreement through the
1997-1998 season awarded to TBS Superstation and Turner Network Television,
Inc., affiliates of Turner Broadcasting System, Inc. The New York Knicks also
receive revenue from local cable rights fees for games broadcast by the MSG
Network and from local radio rights fees for games broadcast by WFAN-AM.
Other sources of revenues for the New York Knicks' operations include
promotional and novelty revenues, including royalties from NBA Properties, Inc.,
and a pro rata share of expansion fees paid by new NBA franchises.
New York Rangers
MSG owns the New York Rangers, a member of the NHL. In addition to owning
the New York Rangers, MSG licenses the Rangers name in connection with the
operation of a minor league hockey team in Binghamton, New York. The New York
Rangers play their home games in the Madison Square Garden Arena.
The NHL, through its constitution, has established rules governing club
operations, including drafting of players and trading player contracts. The New
York Rangers are subject to payment of ongoing assessments and dues to the NHL
and to compliance with the constitution and by-laws of the NHL, as the same may
be modified from time to time by the membership, as well as with rules
promulgated by the Commissioner of the NHL. These rules include standards of
conduct for players and front office personnel; methods of operation; procedures
for drafting new players and for purchasing, selling and trading player
contracts; rules for implementing disciplinary action relative to players,
coaches and front office personnel; and certain financial requirements.
In addition to ticket revenues from home games, a portion of the New York
Rangers' revenues is derived from a pro-rata share of the revenues generated
through contracts negotiated by the NHL with television networks. The principal
broadcast agreements for the NHL are with the Entertainment and Sports
Programming Network ("ESPN"), the Fox Television Network and, in Canada, Molson
Companies, Ltd. Each of these agreements covers the 1994-1995 through 1998-1999
seasons. The New York Rangers also receive revenue from local cable rights fees
for games broadcast by the MSG Network and from local radio rights fees for
games broadcast by WFAN-AM.
Other sources of revenues for the New York Rangers' operations include
promotional and novelty revenues, including royalties from NHL Enterprises,
Inc., and a pro rata share of expansion fees paid by new NHL franchises.
Madison Square Garden Arena
The principal tenants of the Madison Square Garden Arena are the New York
Knicks and the New York Rangers. In addition to the New York Knicks basketball
games and New York Rangers hockey games, MSG derives revenues from various other
activities and events held at the Madison Square Garden Arena and the special
events theater at Madison Square Garden. These events include various other
sporting events, concerts, family shows, the circus, trade shows, conventions
and other special events. MSG generates revenue through luxury suite licensing,
concessions (fast food, restaurants and catering), ticket sales and merchandise
sales.
10
<PAGE> 12
WBIS+-TV
In August 1995, ITT, in a 50/50 partnership with Dow Jones, agreed to
purchase television station WNYC-TV from New York City. The purchase, subject to
approval by the Federal Communications Commission and other customary
conditions, is expected to close in the first half of 1996. The purchase price
of $207 million will be split evenly by the two companies and the partnership
will be managed on a 50/50 basis. ITT and Dow Jones plan to rename the station
WBIS+, and to replace the station's mix of public-service and ethnic programming
with a broad range of business news during the day and professional sports and
other events at night.
INFORMATION SERVICES
ITT World Directories
ITT, through an 80%-owned subsidiary, ITT World Directories, is engaged in
the publication of telephone directories, including classified directory
services for telephone subscribers in several countries outside the United
States, as well as in Puerto Rico and the United States Virgin Islands.
BellSouth Corporation owns the remaining 20% of ITT World Directories through a
subsidiary.
ITT World Directories publishes telephone directories -- alphabetical and
classified -- and also publishes specialized directories. ITT World Directories'
principal source of revenues in connection with its operations is advertising
revenue generated by advertisements published in its directories. Its principal
publications are in Belgium, The Netherlands, Portugal, The Republic of Ireland,
Puerto Rico and the United States Virgin Islands. ITT publishes directories in
these jurisdictions either pursuant to a contract with the existing national
telecommunications provider or as a proprietary directory in such jurisdiction
after expiration of such a contract. ITT World Directories is continuing a
program of product diversification and, where possible, geographic expansion, as
exemplified by its recent return to South Africa and its acquisition of a 60%
controlling interest in the directory sales agent for Telekom in South Africa,
Maister Directories 1981 (Pty) Limited, in late 1995.
Historically, the business of ITT World Directories had consisted of
contracts for the publication of telephone directories with monopoly providers
of telecommunications services. In many jurisdictions, the monopoly provider of
telecommunications services was obligated to publish white pages telephone
directories and the obligation or right (depending on the jurisdiction) to
publish yellow pages directories (and thus claim significant advertising
revenues) went along with the requirement to publish white pages. As a means of
satisfying its publication obligations, various monopoly providers contracted
with ITT World Directories to publish telephone directories. Some of the current
business of ITT World Directories remains consistent with this historical source
of business. However, one of the most important factors currently affecting the
business of ITT World Directories is the changing competitive environment in the
member states of the European Union in which it publishes telephone directories.
Specifically, in Belgium and The Netherlands, the historical contractual
relationship between ITT World Directories and the national telecommunications
entity, namely Belgacom and PTT Telecom, respectively, were not renewed or
extended when the last contract term expired. As contracts are scheduled for
renewal in other jurisdictions within the European Union, the contracts there
may also not be renewed or extended, thereby possibly adversely affecting ITT
World Directories.
A second important factor affecting the business of ITT World Directories
is the challenge presented by new interactive and other technologies (including
as the traditional yellow pages market moves to a paperless product). The
operating performance of ITT World Directories is not expected to be materially
adversely affected by the emergence of new technologies in the immediate future.
However, if ITT World Directories is not successful in implementing a strategy
to apply new technologies to its business, its long-term operating results may
be adversely affected. These new technologies are likely to include information
delivery methods such as CD ROMs and computer diskettes and operator-assisted
yellow pages. ITT World Directories has activities in this arena. Specifically,
in South Africa and Portugal, ITT World Directories has had operator-assisted
yellow pages in operation, in South Africa for nine years and in Portugal for
three years; in Belgium and The Netherlands, and it is publishing its classified
directories on CD ROM and it is publishing a fax directory in Portugal on CD
ROM.
11
<PAGE> 13
ITT Educational
Prior to its initial public offering, which was consummated on December 27,
1994, ITT Educational was a wholly owned subsidiary of Old ITT. ITT beneficially
owns 83.3% of the outstanding shares of common stock of ITT Educational. The
shares of common stock of ITT Educational are traded on the New York Stock
Exchange under the symbol "ESI". The term "ITT Technical Institutes" (in
singular or plural form) refers to educational institutions owned and operated
by ITT Educational.
Based on student enrollment, ITT Educational is a leading proprietary
provider of technical post-secondary degree programs in the United States. ITT
Educational offers degree programs and non-degree diploma programs to over
20,000 students through a system of 58 ITT Technical Institutes located in 26
states. These programs are designed, after consultation with employers, to
provide students with the knowledge and skills necessary for entry-level
employment in technical positions in a variety of industries.
ITT entered the education services business in 1966 through the acquisition
of a predecessor of ITT Educational which owned three technical institutes. In
1981, ITT Educational began a strategy of significant expansion, acquiring three
and establishing 45 new technical institutes since that date. Of the 58
institutes currently operating, 20 were established since January 1, 1991. As a
result of adding new institutes and increasing enrollment at existing
institutes, the number of students attending Technical Institutes rose from
16,192 students at December 31, 1990, to 20,618 students at December 31, 1995.
ITT Educational has recently accelerated its expansion program, opening five new
technical institutes in 1993, six institutes in 1994 and four institutes in
1995. Classes at two of the institutes opened in 1995 did not begin until March
1996.
ALCATEL ALSTHOM
In July 1992, Old ITT sold its 30% equity interest in Alcatel N.V., a
Netherlands company which is one of the largest telecommunications equipment
manufacturers in the world, to Alcatel Alsthom, a major French company which
owned the other 70% of Alcatel N.V. At the closing of the sale, Old ITT
received, among other things, 9.1 million capital shares of Alcatel Alsthom,
recorded at $806 million. During the 1995 third quarter, Old ITT received
approximately an additional 300,000 capital shares in the form of a stock
dividend. The total 9.4 million capital shares at December 31, 1995 represented
approximately 6% of the outstanding capital shares of Alcatel Alsthom. The
shares of Alcatel Alsthom were transferred to ITT in December 1995. ITT expects
to retain its equity interest in Alcatel Alsthom until at least July 1997,
unless Alcatel Alsthom and ITT agree otherwise. Mr. Rand V. Araskog, Chairman
and Chief Executive of ITT, is a member of the board of directors of Alcatel
Alsthom.
EMPLOYEES
As of December 31, 1995, ITT and its subsidiaries employed approximately
38,000 people.
OPERATIONS OUTSIDE THE UNITED STATES
In 1995, approximately 46.5% of the ITT's consolidated sales and revenues
were made outside the United States. Of these, Western Europe comprised 46.9%,
the Asia Pacific region 26.8%, Africa and Middle East region 14.3%, and the
balance made elsewhere.
COMPETITION
Substantially all of ITT's operations are in highly competitive businesses,
although the nature of the competition varies among the business segments.
INTELLECTUAL PROPERTY
ITT owns and controls a number of trademarks, trade names, service marks,
copyrights, patents, trade secrets, confidential information, and other
intellectual property rights which are used in the operation of ITT businesses.
These intellectual property rights include such well recognizable trademarks and
trade names as ITT, Sheraton, Caesars Palace, Madison Square Garden, the Knicks
and the
12
<PAGE> 14
Rangers. However, while these trademarks, trade names, and other intellectual
property rights in the aggregate, are of material importance to its business, it
is believed that ITT's business, as a whole, is not materially dependent upon
any one intellectual property or related group of such properties. ITT is
licensed to use certain trademarks, software, patents, technology and other
intellectual property rights owned and controlled by others, and similarly,
other companies are licensed to use certain trademarks, software, patents,
technology and other intellectual property rights owned and controlled by ITT.
SERVICE CONTRACTS
ITT has contracts with certain of its operating subsidiaries under which
ITT furnishes them with insurance, administrative, legal, intellectual property,
tax, personnel, financial, accounting, purchasing and operating advice and
assistance, as well as other services. In certain instances, specialized
employees are engaged for the account of the companies served. In return for
such services, these subsidiaries pay ITT a percentage of their gross operating
revenues. In addition, reimbursement is sometimes made for the actual salaries
and expenses of specialized employees furnished.
RELATIONSHIP BETWEEN ITT, ITT INDUSTRIES, INC. AND ITT HARTFORD GROUP, INC.
In connection with the Distribution, ITT, ITT Industries and ITT Hartford
Group, Inc. ("ITT Hartford") entered into certain agreements, described below,
governing their relationship following the Distribution and providing for the
allocation of tax and certain other liabilities and obligations arising from
periods prior to the Distribution Date.
Distribution Agreement. ITT, ITT Industries and ITT Hartford entered into
a Distribution Agreement which provided for, among other things, certain
corporate transactions required to effect the Distribution and other
arrangements between ITT, ITT Industries and ITT Hartford subsequent to the
Distribution Date.
The Distribution Agreement provides for, among other things, the assumption
of liabilities and cross-indemnities designed to allocate generally, effective
as of the Distribution Date, financial responsibility for the liabilities of Old
ITT arising out of or in connection with (i) the automotive, defense and
electronics, and fluid technology businesses to ITT Industries and its
subsidiaries, (ii) the hospitality, entertainment and information services
businesses to ITT and its subsidiaries and (iii) the insurance businesses to ITT
Hartford and its subsidiaries. The Distribution Agreement also provides for the
allocation generally of the financial responsibility for the liabilities arising
out of or in connection with former and present businesses not described in the
immediately preceding sentence to or among ITT, ITT Industries and ITT Hartford.
Pursuant to the Distribution Agreement each of ITT, ITT Industries and ITT
Hartford agreed not to take any action that would jeopardize the intended tax
consequences of the Distribution. Specifically, each of ITT, ITT Industries and
ITT Hartford agreed to maintain its status as a company engaged in the active
conduct of a trade or business, as defined in Section 355(b) of the Internal
Revenue Code, until the first anniversary of the Distribution Date.
Under the Distribution Agreement, each of ITT, ITT Industries and ITT
Hartford have also agreed to provide to the other parties, subject to certain
conditions, on an "as-needed" basis such services on such terms as may be agreed
upon between the applicable parties.
Intellectual Property Agreements. ITT, ITT Industries and ITT Hartford
have entered into certain Intellectual Property License Agreements
(collectively, "IP Agreements") which provide for licensing to or among the
companies of, rights under patents, copyrights, software, technology, trade
secrets and certain other intellectual property (collectively, "Intellectual
Property") owned by ITT, ITT Industries or ITT Hartford and their respective
subsidiaries and associated companies as of the Distribution Date. The purpose
of these IP Agreements was to provide ITT, ITT Industries and ITT Hartford and
their respective subsidiaries and associated companies with those continuing
rights and licenses under such Intellectual Property necessary for the continued
conduct of their respective businesses. Included within the IP Agreements is:
(i) a grant of rights and licenses to ITT Industries and ITT Hartford, with
rights to license their respective subsidiaries and associated companies, to
continue to use the "ITT" name, mark and logo in the operation of their
respective businesses, subject to the maintenance of certain quality standards
for their products and services and other conditions in accordance with the
terms of the IP Agreements, and (ii) a transfer from ITT Industries to ITT of
all the right, title and interest in the "ITT"
13
<PAGE> 15
name, mark, and logo and the applications, registrations, goodwill, and
contractual rights and obligations associated therewith.
Tax Allocation Agreement. ITT, ITT Industries and ITT Hartford have also
entered into a Tax Allocation Agreement which generally provides that ITT and
ITT Hartford will pay their respective shares of ITT Industries' consolidated
tax liability for the tax years that ITT and ITT Hartford, as applicable, were
included in ITT Industries' consolidated Federal income tax return. The Tax
Allocation Agreement also provides for sharing, where appropriate, of state,
local and foreign taxes attributable to periods prior to the Distribution Date,
as well as certain other matters.
Employee Benefits Agreement. ITT, ITT Industries and ITT Hartford have
also entered into an Employee Benefits Services and Liability Agreement
providing for the allocation of retirement, medical, disability and other
employee welfare benefit plans among ITT, ITT Industries and ITT Hartford. The
Agreement provides for the treatment of certain retirement plans for salaried
employees, investment and savings programs, excess benefit plans, retiree
medical and life insurance benefits and stock awards. In addition, the Agreement
provided that, as of the Distribution Date, each of ITT, ITT Industries and ITT
Hartford generally assume all liability for their respective active employees
under their respective employee welfare benefit plans and that each of ITT, ITT
Industries, and ITT Hartford shall be allocated a proportionate share of any
assets of ITT Industries held with respect thereto.
GOVERNMENTAL REGULATION AND RELATED MATTERS
General. In the event that ITT, in partnership with Dow Jones, consummates
the acquisition of WNYC-TV, ownership of ITT common stock by "aliens" (to the
United States) will be subject to limitation under the United States
Communications Act of 1934 due to the license of the United States Federal
Communications Commission held by the partnership. Sheraton hotels in the United
States are liquor retailers where permitted, licensed in each state where they
do such business, and in certain states are subject to statutes which prohibit
ITT Sheraton or its owner from being both a wholesaler and retailer of alcoholic
beverages. ITT Educational's technical colleges offering postsecondary career
education are extensively regulated by federal and state agencies.
Restrictions on Alien Ownership. If, as anticipated, ITT, in partnership
with Dow Jones, consummates the purchase of WNYC-TV from New York City, then the
Communications Act of 1934, as amended (the "Communications Act"), will restrict
the ownership of the common stock of ITT by "aliens." The Communications Act
generally defines "aliens" to include persons who are not citizens of the United
States, entities organized under laws other than those of the United States,
foreign governments, entities controlled directly or indirectly by foreign
nationals, and the representatives of foreign persons or foreign-controlled
entities.
Because ITT will have shared control of a broadcast licensee, the
limitations in Section 310(b)(4) of the Communications Act will govern the
permissible degree of alien ownership and control of the outstanding stock of
ITT. Under Section 310(b)(4), no more than 25 percent of the ownership nor more
than 25 percent of the voting rights in ITT may be held directly or indirectly
by aliens. In assessing compliance with the 25 percent ceiling, the FCC will
consider direct and indirect alien interests using a multiplier, so that, for
example, minority alien interests in U.S.-controlled corporations will count
proportionally against the 25 percent ceiling. Alien voting interests are not
treated proportionally, however, in any corporation that is alien controlled.
The alien interest in any partnership with an alien partner also is not treated
proportionally unless the alien partner is a limited partner that is insulated
from material involvement in the business of the partnership within the meaning
of the FCC's rules and policies.
The ITT By-Laws will provide that under no circumstances shall the amount
of ITT stock owned of record or voted by aliens within the meaning of the FCC's
rules and policies exceed 25 percent of the total outstanding stock of ITT. If
and so long as the stock records of ITT shall at any time disclose 25 percent
alien ownership (i) no transfers of shares of domestic record to aliens may be
made and (ii) if it shall be found that stock of domestic record is in fact held
by or for the account of an alien within the meaning of the FCC's rules and
policies, the holder of such stock shall not be entitled to vote, to receive
14
<PAGE> 16
dividends, or to have any other rights except the right to transfer the stock to
a citizen of the United States. At the close of business on January 31, 1996,
ITT believes that approximately 6 percent of the outstanding common stock of ITT
was owned of record by aliens.
Casino Gaming -- General. The Sheraton Desert Inn casino/hotel complex is
owned and operated by Sheraton Desert Inn Corporation ("SDI"), which is a
wholly-owned subsidiary of Sheraton Gaming Corporation ("SGC"), which is a
wholly-owned subsidiary of ITT Sheraton (Sheraton, SGC and SDI are hereinafter
collectively referred to as the "Sheraton Desert Inn Companies"). In August
1994, ITT expanded its domestic casino gaming operations with the opening of the
Sheraton Casino in Tunica County, Mississippi; that casino is owned and operated
by Sheraton Tunica Corporation ("STC"), which is a wholly-owned subsidiary of
SDI.
Caesars' casino gaming operations in Las Vegas, Nevada and Stateline,
Nevada are conducted by Desert Palace, Inc. ("DPI"), which is a wholly-owned
subsidiary of Caesars Palace Corporation ("CPC"), which is a wholly-owned
subsidiary of Caesars (Caesars, CPC and DPI are hereinafter collectively
referred to as the "Caesars Nevada Companies"). Caesars is a wholly-owned
subsidiary of ITT Sheraton. Caesars' casino gaming operations in Atlantic City,
New Jersey are conducted by Boardwalk Regency Corporation ("BRC"), which is a
wholly-owned subsidiary of Caesars New Jersey, Inc. ("CNJ"), which is a
wholly-owned subsidiary of Caesars (as required by the context, Caesars, CNJ and
BRC are hereinafter collectively referred to as the "Caesars New Jersey
Companies"). In addition, DPI owns all of the issued and outstanding capital
stock of Tele/Info, Inc. ("Tele/Info"), which is a Nevada licensed disseminator
of horse race simulcasts for the purpose of receiving and disseminating live
telecasts of horse racing information.
Casino Gaming Regulation -- General. The ownership and/or operation of
casino gaming facilities in the United States are subject to extensive federal,
state and local regulations. On the federal level, in addition to all other
relevant federal regulation, ITT's casino gaming operations are specifically
subject to the compliance with the Gambling Devices Act of 1962, as amended, and
the Bank Secrecy Act, as amended; these govern the ownership, possession,
manufacture, distribution and transportation in interstate commerce of gaming
devices and the recording and reporting of currency transactions, respectively.
Due to its casino gaming operations in Nevada, ITT's Nevada casino gaming
operations -- at the Sheraton Desert Inn in Las Vegas, Caesars Palace in Las
Vegas, and Caesars Tahoe in Stateline -- are subject to the Nevada Gaming
Control Act (the "Nevada Act") and the licensing and regulatory control of the
Nevada Gaming Commission (the "Nevada Commission") and the Nevada State Gaming
Control Board (the "Nevada Control Board"), as well as various local, county and
state regulatory agencies (hereinafter collectively referred to as the "Nevada
Gaming Authorities"). Due to its casino gaming operations in New Jersey, ITT's
New Jersey casino gaming operations -- at Caesars Atlantic City -- are subject
to the New Jersey Casino Control Act (the "New Jersey Act") and the licensing
and regulatory control of the New Jersey Casino Control Commission (the "New
Jersey Commission") and the New Jersey Department of Law & Public Safety,
Division of Gaming Enforcement (the "New Jersey DGE"), as well as various local,
county and state regulatory agencies (hereinafter collectively referred to as
the "New Jersey Gaming Authorities"). Due to its casino gaming operations in
Mississippi, ITT's Mississippi casino gaming operations -- at the Sheraton
Casino in Tunica County, Mississippi -- are subject to the Mississippi Gaming
Control Act (the "Mississippi Act") and the licensing and regulatory control of
the Mississippi Gaming Commission (the "Mississippi Commission"), as well as
various local, county and state regulatory agencies (hereinafter collectively
referred to as the "Mississippi Gaming Authorities"). Due to its casino gaming
operations in Ontario, Canada, ITT's Ontario casino gaming operations -- through
its one-third interest in the licensed operator of Casino Windsor,
Ontario -- are subject to the Ontario Gaming Control Act (the "Ontario Act") and
the licensing and regulatory control of the Ontario Gaming Control Commission
(the "Ontario Commission"), as well as various local, provincial and federal
regulatory agencies (hereinafter collectively referred to as the "Ontario Gaming
Authorities"). Due to its casino gaming operations in Nova Scotia, Canada, ITT's
Nova Scotia casino gaming operations -- at the Sheraton Halifax Hotel & Casino
and the Sheraton Casino/Sydney -- are subject to the Nova Scotia Gaming Control
Act (the "Nova Scotia Act") and the licensing and regulatory control of the Nova
Scotia Gaming Control Commission (the "Nova Scotia Commission"), as well as
various local, provincial and federal regulatory agencies (hereinafter
collectively referred to as the "Nova Scotia Gaming Authorities").
15
<PAGE> 17
The casino gaming laws, regulations and supervisory procedures of Nevada,
New Jersey, Mississippi, Ontario and Nova Scotia are extensive and reflect
certain public policy considerations as to (i) the integrity of casino gaming
operations and its participants, (ii) the need for strict governmental and
regulatory control of casino gaming operations, (iii) the creation of economic
development, taxes and employment, and (iv) foster and enhance the public
confidence and trust in casino gaming regulation and control. Changes to such
laws, regulations and supervisory procedures could have an adverse effect on
ITT's casino gaming operations.
Nevada Gaming Regulation. Nevada's casino gaming laws, regulations and
supervisory procedures are extensive and reflect certain broad declarations of
public policy. In general, Nevada's gaming laws, regulations and supervisory
procedures seek to (i) prevent unsavory or unsuitable persons from having any
direct or indirect involvement with gaming at any time or in any capacity, (ii)
establish and maintain responsible accounting practices and procedures, (iii)
maintain effective control over the financial practices of licensees, including
establishing minimum procedures for internal fiscal affairs and the safeguarding
of assets and revenues, providing reliable record-keeping, and making periodic
reports to the applicable casino gaming authority, (iv) prevent cheating and
fraudulent practices, and (v) provide a source of state and local revenues
through taxation and licensing fees.
SDI, as the operator of the Sheraton Desert Inn, and DPI, as the operator
of Caesars Palace and Caesars Tahoe, are required to be licensed by the Nevada
Gaming Authorities. The casino gaming licenses are not transferable and must be
renewed periodically by the payment of casino gaming license fees and taxes. The
Nevada Commission requires that (i) SGC and ITT Sheraton be registered as
intermediary companies of SDI and (ii) CPC be registered as an intermediary
company of DPI; the Nevada Commission also requires that ITT and Caesars be
registered as publicly traded corporations. No person may become a stockholder
of, or receive any percentage of profits from, SDI or DPI without first
obtaining certain required licenses and approvals from the Nevada Gaming
Authorities.
The Nevada Gaming Authorities may investigate any individual who has a
material relationship to, or material involvement with ITT, the Sheraton Desert
Inn Companies or the Caesars Nevada Companies in order to determine whether such
individual is suitable or should be licensed as a business associate of either
SDI or DPI. Officers, directors and key employees of each of SDI and DPI must be
individually licensed by, and changes in corporate positions must be reported
to, the Nevada Gaming Authorities; the Nevada Gaming Authorities may disapprove
a change in corporate position. Certain officers, directors and key employees of
ITT, ITT Sheraton and SGC who are actively and directly involved in the gaming
activities of SDI may be required to be licensed or found suitable by the Nevada
Gaming Authorities; similarly, certain officers, directors and key employees of
ITT, Caesars and CPC who are actively and directly involved in the gaming
activities of DPI may be required to be licensed or found suitable by the Nevada
Gaming Authorities. The Nevada Gaming Authorities may deny an application for
licensing for any cause which they deem reasonable. A finding of suitability is
comparable to licensing, and both require submission of detailed personal and
financial information followed by a thorough investigation. The applicant for
licensing or finding of suitability must pay all of the costs of the
investigation.
If the Nevada Gaming Authorities find an officer, director or key employee
unsuitable for licensing or unsuitable to continue having a relationship with
ITT, the Sheraton Desert Inn Companies or the Caesars Nevada Companies, the
companies involved would be required to sever all relationships with such
person. In addition, the Nevada Gaming Authorities may require a registered
company or licensee to terminate the employment of any person who refuses to
file appropriate disclosures.
ITT, the Sheraton Desert Inn Companies and the Caesars Nevada Companies are
required to submit detailed financial and operating reports to the Nevada
Commission. Substantially all loans, leases, sales of securities and similar
financing transactions by either SDI or DPI must be reported to or approved by
the Nevada Commission. Nevada law prohibits a corporation registered by the
Nevada Commission from making a public offering of its securities without the
prior approval of the Nevada Commission if any part of the proceeds of the
offering of the securities themselves are to be used either to (i) finance the
construction, acquisition or operation of gaming facilities in Nevada, or (ii)
retire or extend obligations incurred for one or more such purposes.
If it is determined that Nevada gaming laws were violated by SDI or DPI,
the gaming license each respectively holds could be limited, conditioned,
suspended or revoked. In addition, at the discretion of
16
<PAGE> 18
the Nevada Commission, ITT, the Sheraton Desert Inn Companies and the persons
involved could be subject to substantial fines for each separate violation of
the Nevada gaming laws by the Sheraton Desert Inn; similarly, and also at the
discretion of the Nevada Commission, ITT, the Caesars Nevada Companies and the
persons involved could be subject to substantial fines for each separate
violation of the Nevada gaming laws by either Caesars Palace or Caesars Tahoe.
Further, a supervisor could be appointed by the Nevada Commission to operate
either SDI's or DPI's respective gaming property and, under certain
circumstances, earnings generated during the supervisor's appointment (except
for the reasonable rental value of SDI's or DPI's respective gaming property)
could be forfeited to the State of Nevada. Any suspension or revocation of
either SDI's or DPI's license would have a materially adverse effect on SDI or
DPI, respectively.
The Nevada Gaming Authorities may investigate and require a finding of
suitability of any holder of any class of ITT's voting securities at any time.
Nevada law requires any person who acquires more than 5% of any class of ITT's
voting securities to report the acquisition to the Nevada Commission and such
person may be investigated and found suitable. Any person who becomes a
beneficial owner of more than 10% of any class of ITT's voting securities must
apply for a finding of suitability by the Nevada Commission within 30 days after
the Nevada Control Board Chairman mails a written notice requiring such filing,
and must pay the costs and fees incurred by the Nevada Control Board in
connection with the investigation. Under certain circumstances, an
"institutional investor," as such term is defined in the Nevada Act and
regulations, which acquires more than 10% but not more than 15% of ITT's voting
securities, may apply to the Nevada Commission for a waiver of such finding of
suitability requirements if such institutional investor holds the voting
securities for investment purposes only; an institutional investor shall not be
deemed to hold voting securities for investment purposes unless the voting
securities were acquired and are held in the ordinary course of business as an
institutional investor and not for the purpose of causing, directly or
indirectly, the election of a majority of the members of the Board of Directors
of ITT, any change in ITT's corporate charter, bylaws, management, policies or
operations or any of its casino gaming operations, or any other action which the
Nevada Commission finds to be inconsistent with holding ITT's voting securities
for investment purposes only. Notwithstanding the foregoing, activities which
are not deemed to be inconsistent with holding voting securities for investment
purposes only include (i) voting on all matters voted on by stockholders, (ii)
making financial and other inquiries of management of the type normally made by
securities analysts for informational purposes and not to cause a change in its
management, policies or operations, and (iii) such other activities as the
Nevada Commission may determine to be consistent with such investment intent. If
the stockholder who must be found suitable is a corporation, partnership or
trust, it must submit detailed business and financial information, including a
list of beneficial holders.
Any person who fails or refuses to apply for a finding of suitability or a
license within 30 days after being ordered to do so by the Nevada Commission or
by the Chairman of the Nevada Control Board may be found unsuitable. Any holder
of any equity or debt security found unsuitable and who holds, directly or
indirectly, any beneficial ownership of ITT's debt or equity voting securities
beyond such period or periods of time as may be prescribed by the Nevada
Commission may be guilty of a gross misdemeanor. ITT could be subject to
disciplinary action if, without the prior approval of the Nevada Commission and
after ITT receives notice that a person is unsuitable to be an equity or debt
security holder or to have any other relationship with ITT, the Sheraton Desert
Inn Companies or the Caesars Nevada Companies, ITT, the Sheraton Desert Inn
Companies, the Caesars Nevada Companies or any one of them either (i) pays to
the unsuitable person any dividend, interest or any distribution whatsoever,
(ii) recognizes any voting right by such unsuitable person in connection with
such securities, (iii) pays the unsuitable person remuneration in any form, (iv)
makes any payment to the unsuitable person by way of principal, redemption,
conversion, exchange, liquidation or similar transaction, or (v) fails to pursue
all lawful efforts to require such unsuitable person to relinquish his
securities including, if necessary, the immediate purchase of such securities
for cash at fair market value.
Regulations of the Nevada Commission provide that control of a registered
publicly traded corporation cannot be changed through merger, consolidation,
acquisition of assets, management or consulting agreements, or any form of
takeover without the prior approval of the Nevada Commission. Persons seeking
approval to control a registered publicly traded corporation must satisfy the
Nevada Commission as to a variety of stringent standards prior to assuming
control of such corporation. The
17
<PAGE> 19
failure of a person to obtain such approval prior to assuming control over the
registered publicly traded corporation may constitute grounds for finding such
person unsuitable.
Regulations of the Nevada Commission also prohibit certain repurchases of
securities by registered publicly traded corporations without the prior approval
of the Nevada Commission. Transactions covered by these regulations are
generally aimed at discouraging repurchases of securities at a premium over
market price from certain holders of more than 3% of the outstanding securities
of the registered publicly traded corporation. The regulations of the Nevada
Commission also require prior approval for a "plan of recapitalization," as such
term is defined in the Nevada regulations; generally, a plan of recapitalization
is a plan proposed by the management of a registered publicly traded corporation
that contains recommended action in response to a proposed corporate acquisition
opposed by management of the corporation which acquisition itself would require
the prior approval of the Nevada Commission.
Any person who is licensed, required to be licensed, registered, required
to be registered, or is under common control with such persons (collectively
"Licensees"), and who proposes to become involved in a gaming operation outside
the State of Nevada is required to deposit with the Nevada Control Board, and
thereafter maintain, a revolving fund in the amount of $10,000 to pay the
expenses of investigation by the Nevada Control Board of the Licensees'
participation in such foreign gaming; the revolving fund is subject to increase
or decrease in the discretion of the Nevada Commission. Once such revolving fund
is established, the Licensees may engage in gaming activities outside the State
of Nevada without seeking the approval of the Nevada Commission provided (i)
such activities are lawful in the jurisdiction where they are to be conducted
and (ii) the Licensees comply with certain reporting requirements imposed by the
Nevada Act. Licensees are subject to disciplinary action by the Nevada
Commission if they or any one of them (i) knowingly violates any laws of the
foreign jurisdiction pertaining to the foreign gaming operation, (ii) fails to
conduct the foreign gaming operation in accordance with the standards of honesty
and integrity required of Nevada gaming operations, (iii) engages in activities
that are harmful to the State of Nevada or its ability to collect gaming taxes
and fees, or (iv) employs a person in the foreign operation who has been denied
a license or finding of suitability in Nevada on the ground of personal
unsuitability.
New Jersey Casino Gaming Regulation. Casino gaming in New Jersey is
subject to strict compliance with the New Jersey Act, the strict supervision of
the New Jersey Commission and compliance with the regulations adopted by the New
Jersey Commission. The New Jersey gaming laws and regulations primarily concern
(a) the financial stability and character of casino operators, their employees,
their security holders and others financially interested in casino operations,
and (b) the operating methods -- including the rules of the games and credit
issuance procedures -- and the financial and accounting procedures used in
connection with casino operations. The New Jersey gaming laws and regulations
include detailed provisions concerning, among other things, (i) the type, manner
and number of applications and licenses required to conduct casino gaming and
ancillary activities, (ii) the licensing, regulation and curricula of gaming
schools, (iii) the establishment of minimum standards of accounting and internal
control, including the issuance and enforceability of casino credit, (iv) the
manufacture, sale, distribution and possession of gaming equipment, (v) the
rules of the games, (vi) the exclusion of undesirable persons, (vii) the use,
regulation and reporting of junket activities, (viii) the possession, sale and
distribution of alcoholic beverages, (ix) the regulation and licensing of
suppliers to licensed casino operators, (x) the conduct of entertainment within
licensed casino facilities, (xi) equal employment opportunity for employees of
licensed casino operators, contractors for casino facilities and the like, (xii)
the payment of gross revenue taxes and similar fees and expenses, (xiii) the
conduct of casino simulcasting, and (xiv) the imposition and discharge of casino
reinvestment development obligations. A number of these regulations require
practices which are different from those in many casinos elsewhere and some of
them result in casino operating costs greater than those in comparable
facilities elsewhere. As a prerequisite to being licensed, a New Jersey
casino/hotel facility must meet certain facilities requirements concerning,
among other things, the size and number of guest rooms.
In order to operate Caesars Atlantic City, BRC must be licensed by the New
Jersey Commission, which has broad discretion with regard to the issuance,
renewal, revocation or suspension of licenses. A New Jersey casino license is
not transferable and must be renewed at designated periods of up to four years;
renewal is not automatic and involves an extensive review by the New Jersey DGE,
a report by the New Jersey DGE to the New Jersey Commission, an independent
intensive review by the New Jersey
18
<PAGE> 20
Commission, and the affirmative vote of at least four of the five sitting
Commissioners of the New Jersey Commission sitting in a scheduled open public
meeting. BRC's plenary casino license to operate Caesars Atlantic City was
renewed on October 5, 1994 and expires on November 30, 1996; as a result of
recent legislative changes extending the terms of casino licenses, BRC will
become eligible for a four year license upon consideration of its renewal
application in November 30, 1996.
Except for certain banking and lending institutions exempted under the New
Jersey Act, all financial backers, investors, mortgagees, debt holders,
landlords under leases relating to New Jersey casino/hotel facilities, all
lenders to BRC, all officers and directors of BRC and all employees who work at
Caesars Atlantic City have to be qualified, licensed, approved or registered by
or with the New Jersey Commission. In addition, all contracts and leases entered
into by BRC are subject to approval by the New Jersey Commission.
As a prerequisite to BRC holding a license, ITT, Caesars and CNJ have to be
approved by the New Jersey Commission due to their corporate relationship to
BRC. Thus, any debt or equity security holder of ITT, Caesars or CNJ will have
to be found qualified; the qualification requirement of any debt or equity
security holder of ITT may be waived based on an express finding by the New
Jersey Commission, with the consent of the Director of the New Jersey DGE, that
the security holder either (a)(i) is not significantly involved in the
activities of BRC, (ii) does not have the ability to control ITT, Caesars, CNJ
or BRC, and (iii) does not have the ability to elect one or more members of the
respective boards of directors of ITT, Caesars, CNJ or BRC, or (b) is an
"institutional investor," as such term is defined in the New Jersey Act and
regulations; for purposes of the former, the New Jersey Act presumes that any
non-"institutional investor" security holder who owns or beneficially holds 5%
or more of the equity securities of ITT has the ability to control ITT, Caesars,
CNJ or BRC, unless such presumption is rebutted by clear and convincing
evidence.
The New Jersey Act and regulations define an "institutional investor" as
(i) any retirement fund administered by a public agency for the exclusive
benefit of federal, state or local public employees, (ii) an investment company
registered under the Investment Company Act of 1940, (iii) a collective
investment trust organized by banks under Part Nine of the Rules of the
Comptroller of the Currency, (iv) a closed end investment trust, (v) a chartered
or licensed life insurance company or property and casualty insurance company,
(vi) banking or other licensed or chartered lending institutions, (vii) an
investment advisor registered under the Investment Advisors Act of 1940, or
(viii) such other persons as the New Jersey Commission may determine for reasons
consistent with the policies of the New Jersey Act. In the absence of a prima
facie showing by the Director of the DGE that there is any cause to believe that
such institutional investor may be found unqualified, upon application and for
good cause shown, an institutional investor holding either (a) less than 10% of
the equity securities of ITT or (b) ITT debt securities constituting less than
20% of the outstanding debt of ITT and less than 50% of the issue involved may
be granted a waiver of qualification as to such holdings if (i) such securities
are those of a publicly traded corporation, (ii) the institutional investor's
holdings of such securities were purchased for investment purposes only, and
(iii) upon request by the New Jersey Commission, the institutional investor
files with the New Jersey Commission a certified statement to the effect that
the institutional investor has no intention of influencing or affecting the
affairs of ITT, Caesars, CNJ or BRC; notwithstanding the foregoing, the
institutional investor is permitted to vote on matters put to the vote of the
outstanding security holders of ITT.
If an institutional investor who has been granted a waiver subsequently
determines to influence or affect the affairs of ITT, the institutional investor
must provide to the New Jersey Commission not less than 30 days prior notice of
such intent and the institutional investor must file with the New Jersey
Commission an application for qualification before taking any action that may
influence or affect the affairs of ITT; notwithstanding the foregoing, the
institutional investor is permitted to vote on matters put to the vote of the
outstanding security holders of ITT. If an institutional investor changes its
investment intent, or if the New Jersey Commission finds reasonable cause to
believe that the institutional investor may be found unqualified, no action
other than divestiture shall be taken by such institutional investor with
respect to its security holdings until there has been compliance with the
interim casino authorization provisions of the New Jersey Act, including the
execution of a trust agreement. ITT, Caesars, CNJ and BRC are required to
immediately notify the New Jersey Commission and the New Jersey DGE of any
information about, or action of, an institutional investor holding its equity or
debt securities where such
19
<PAGE> 21
information or action may impact on the eligibility of such institutional
investor for a waiver. If the New Jersey Commission finds an institutional
investor unqualified or if the New Jersey Commission finds that, by reason of
the extent or nature of its holdings, an institutional investor is in the
position to exercise a substantial impact on the controlling interests of BRC so
that qualification of the institutional investor is necessary to protect the
public interest, the New Jersey Act vests in the New Jersey Commission the power
to take all necessary action to protect the public interest, including the power
to require that the institutional investor submit to qualification and become
qualified under the New Jersey Act.
An equity or debt security holder -- including institutional
investors -- of ITT, Caesars, CNJ or BRC who is required to be found qualified
by the New Jersey Commission must submit an application for qualification within
30 days after being ordered to do so or divest all security holdings within 120
days after the New Jersey Commission determines such qualification is required.
The application for qualification must include a trust agreement by which the
security holder places its interest in ITT in trust with a trustee qualified by
the New Jersey Commission. If the security holder is ultimately found qualified,
the trust agreement is terminated. If the security holder is not found qualified
or withdraws its application for qualification prior to a determination on
qualification being made, the trustee will be empowered with all rights of
ownership pertaining to such security holder's ITT securities, including all
voting rights and the power to sell the securities; in any event, the
unqualified security holder will not be entitled to receive in exchange for its
ITT securities an amount in excess of the lower of (i) the actual cost the
security holder incurred in acquiring the securities or (ii) the value of such
securities calculated as if the investment had been made on the date the trust
became operative. By the same token, if the security holder is not found
qualified, it is unlawful for the security holder to (i) receive any dividends
or interest on such securities, (ii) exercise, directly or through any trustee
or nominee, any right conferred by such securities, or (iii) receive any
remuneration in any form from ITT, Caesars, CNJ or BRC for services rendered or
otherwise.
Each officer, director, lender and certain other persons of ITT, Caesars
and CNJ must be found qualified unless the New Jersey Commission, with the
consent of the Director of the New Jersey DGE, finds that such officer,
director, lender or other person of ITT, Caesars or CNJ is not significantly
involved in the affairs of BRC and is thus waived from qualification. New Jersey
law requires that an officer or director of ITT, Caesars or CNJ must apply for
temporary qualification at least 30 days before assuming any duties; such
temporary qualification, if granted by the New Jersey Commission, will be valid
for a period not to exceed the earlier of (i) nine consecutive calendar months
or (ii) the effective date of BRC's next casino license renewal.
The New Jersey Act requires that each of ITT, Caesars, CNJ and BRC maintain
financial stability and capability. For purposes of these requirements, the New
Jersey Commission has adopted regulations defining "financial stability" as the
same applies to the licensed casino operation and has set forth certain
standards for determining compliance with the financial stability regulations.
Under the regulations of the New Jersey Commission, "financial stability" has
been defined as (i) the ability to assure the financial integrity of casino
operations by the maintenance of a casino bankroll or equivalent provisions
adequate to pay winning wagers to casino patrons when due, (ii) the ability to
meet ongoing operating expenses which are essential to the maintenance of
continuous and stable casino operations, (iii) the ability to pay, as and when
due, all local, state and federal taxes and any and all fees imposed by the New
Jersey Act, (iv) the ability to make necessary capital and maintenance
expenditures in a timely manner which are adequate to insure maintenance of a
superior first class facility of exceptional quality as required by the New
Jersey Act, and (v) the ability to pay, exchange, refinance or extend debts,
including long-term and short-term principal and interest and capital lease
obligations, which will mature or otherwise come due and payable during either
the license term or within 12 months after the end of the license term or to
otherwise manage such debts and any default with respect to the debts. The New
Jersey Commission regulations provide that the financial stability standards
concerning casino bankroll, operating expenses and capital and maintenance
expenditures are met if the following is shown by clear and convincing evidence:
(i) casino bankroll -- the maintenance, on a daily basis, of a casino bankroll
at least equal to the average daily casino bankroll, calculated on a monthly
basis, for the corresponding month in the previous year, (ii) operating
expenses -- the demonstration of the ability to achieve positive gross operating
profit measured on an annual basis, and (iii) capital and maintenance
expenditures -- the demonstration that its capital and maintenance expenditures
over the five year
20
<PAGE> 22
period, which includes the previous 36 calendar months and the upcoming license
period, average at least 5% of net revenue per annum. ITT believes that, at
current operating levels, BRC will have no difficulty in complying with these
requirements.
The New Jersey Commission has the authority to restrict or prohibit the
transfer of cash or the assumption of liabilities by BRC if such action will
adversely impact the financial stability of BRC and the prior approval of the
New Jersey Commission is required to incur indebtedness and guarantees of
affiliated indebtedness by BRC involving amounts greater than $25 million.
If it is determined that New Jersey gaming laws were violated by BRC, BRC
could be subject to fines or its casino license could be limited, conditioned,
suspended or revoked. In addition, if a security holder of ITT, Caesars, CNJ or
BRC is found disqualified but does not dispose of the securities, the New Jersey
Commission is authorized to take any necessary action to protect the public
interest, including the suspension or revocation of the casino license; however,
the New Jersey Commission shall not take any action against ITT, Caesars, CNJ or
BRC with respect to the continued ownership of the security interest by the
disqualified holder if the New Jersey Commission finds that (i) ITT has provided
in its corporate charter that any ITT securities are held subject to the
condition that, if a holder thereof is found to be disqualified by the New
Jersey Commission pursuant to the provisions of the New Jersey Act, such holder
shall dispose of his interest in ITT, (ii) ITT has made a good faith effort,
including the prosecution of all legal remedies, to comply with any order of the
New Jersey Commission requiring the divestiture of the security interest held by
the disqualified holder, and (iii) such disqualified holder does not have the
ability to control ITT, Caesars, CNJ or BRC or to elect one or more members of
the boards of directors of ITT, Caesars, CNJ or BRC. If BRC's license is
revoked, not renewed or suspended for a period in excess of 120 days, the New
Jersey Commission is empowered to appoint a conservator to operate, and to
dispose of, BRC's casino/hotel facilities. If a conservator operates the
casino/hotel facilities, payments to shareholders would be limited to a "fair
return" on their investment, with any excess going to the State of New Jersey.
If a conservator is appointed, the conservator's charges and expenses become a
lien against the property which is paramount to all prior and subsequent liens.
Mississippi Casino Gaming Regulation. Gaming in Mississippi can be legally
conducted only on vessels of a certain minimum size either in navigable waters
of counties bordering the Mississippi River or in the waters of the State of
Mississippi which lie adjacent to the coastline of the three counties bordering
the Gulf of Mexico. STC possesses a license for the ownership and operation of
the Sheraton Casino in Tunica County, Mississippi issued by the Mississippi
Commission pursuant to the Mississippi Act.
The Mississippi Act does not restrict the amount or percentage of space on
a vessel that may be utilized for casino gaming; the Mississippi Act also does
not limit the number of licenses that the Mississippi Commission can grant for a
particular area.
ITT and STC are required to submit detailed financial, operating and other
reports to the Mississippi Commission. Substantially all loans, leases, sales of
securities and similar financing transactions entered into by ITT or by STC must
be reported to or approved by the Mississippi Commission. ITT and STC are also
required to periodically submit detailed financial and operating reports to the
Mississippi Commission and furnish any other information which the Mississippi
Commission may require.
Each of the directors, officers and certain key employees of ITT and STC
who are actively and directly engaged in the administration or supervision of
casino gaming in Mississippi, or who have any other significant involvement with
the activities of STC, must be found suitable therefor and may be required to be
licensed by the Mississippi Commission. A finding of suitability is comparable
to licensing, and both require the submission of detailed personal financial
information followed by a thorough investigation. An application for licensing
may be denied for any cause deemed reasonable by the Mississippi Commission.
Changes in licensed positions must be reported to the Mississippi Commission. In
addition to its authority to deny an application for a license, the Mississippi
Commission has the authority to disapprove a change in corporate position. If
the Mississippi Commission finds a director, officer or key employee of ITT or
STC unsuitable for licensing or unsuitable to continue having a relationship
with ITT or STC, ITT or STC, as the case may be, is required to suspend, dismiss
and sever all relationships with such person. ITT and STC have similar
obligations with regard to any person who fails or refuses to file appropriate
applications. Each gaming employee must obtain a work permit; the Mississippi
Commission may refuse to issue a work permit to a gaming employee (i) if the
employee has
21
<PAGE> 23
committed larceny, embezzlement or any other crime of moral turpitude or
knowingly violated the Mississippi Act or the regulations of the Mississippi
Commission, or (ii) for any other reasonable cause.
Mississippi gaming licenses are not transferable and must be renewed
periodically. The Mississippi Commission is empowered to deny, limit, condition,
revoke and/or suspend any license, finding of suitability or registration, and
to fine any person as it deems reasonable and in the public interest, subject to
the due process considerations of notice and an opportunity for a hearing. The
Mississippi Commission may fine any licensee or other person who is subject to
the Mississippi Act up to $100,000 for each violation of the Mississippi Act
which is the subject of an initial complaint and up to $250,000 for each
violation of the Mississippi Act which is the subject of any subsequent
complaint. The Mississippi Act provides for judicial review of certain decisions
of the Mississippi Commission; however, the filing for such judicial review does
not automatically stay the action taken by the Mississippi Commission pending
the court's review.
License fees and taxes, computed in various ways depending on the type of
casino gaming involved, are payable to the State of Mississippi and to the
counties and cities in which the gaming operations are located. Depending on the
particular fee or tax imposed, these fees and taxes are based on a percentage of
the gross gaming revenues received by the casino operation, the number of slot
machines operated by such casino, or the number of table games operated by such
casino. Moreover, several local governments have been authorized to impose
either additional gross fees on adjusted gross gaming revenues or,
alternatively, per person boarding fees and annual license fees based on the
number of gaming devices aboard the vessel. License fees paid to the State of
Mississippi are allowed as a credit against Mississippi state income taxes.
In all other material respects, casino gaming regulation in Mississippi is
similar to the regulation of casino gaming in Nevada and New Jersey.
Windsor, Ontario Casino Gaming Regulation. Casino Windsor Ltd., Caesars'
unconsolidated one-third owned Canadian corporation which operates the casino in
Windsor, Ontario, Canada, is required to comply with licensing requirements
similar to Nevada and New Jersey and is also subject to operational regulation
by the Province of Ontario.
Nova Scotia Casino Gaming Regulation. ITT Sheraton's subsidiary, which
both (i) owns and operates the casino in the City of Halifax, Nova Scotia, and
(ii) operates the casino in the City of Sydney, Nova Scotia, is required to
comply with licensing requirements similar to the Province of Ontario and is
also subject to operational regulation by the Province of Nova Scotia.
Casino Gaming -- Related Provisions of the Certificate of
Incorporation. ITT's Restated Articles of Incorporation provide that (i) all
securities of ITT are subject to redemption by ITT to the extent necessary to
prevent the loss, or to secure the reinstatement, of any casino gaming license
held by ITT or any of its subsidiaries in any jurisdiction within or without the
United States of America, (ii) all securities of ITT are held subject to the
condition that if a holder thereof is found by a gaming authority in any such
jurisdiction to be disqualified or unsuitable pursuant to any gaming law, such
holder will be required to dispose of all ITT securities held by such holder,
and (iii) it will be unlawful for any such disqualified person to (a) receive
payments of interest or dividends on any ITT securities, (b) exercise, directly
or indirectly, any rights conferred by any ITT securities or (c) receive any
remuneration in any form, for services rendered or otherwise, from the
subsidiary that holds the gaming license in such jurisdiction.
ITEM 2. PROPERTIES
Reference is made to "Business of ITT."
ITEM 3. LEGAL PROCEEDINGS
There are various lawsuits pending against ITT and its subsidiaries some of
which involve claims for substantial amounts. However, the ultimate liability
with respect to these lawsuits is not considered material in relation to the
consolidated financial condition of ITT and its subsidiaries.
22
<PAGE> 24
ITEM 4. SUBMISSION OF MATTERS TO A VOTE
OF SECURITY HOLDERS
No matter was submitted to a vote of security holders of ITT during the
fourth quarter of the fiscal year covered by this report.
EXECUTIVE OFFICERS OF ITT
The following information is provided as to the executive officers of ITT.
<TABLE>
<CAPTION>
DATE OF
AGE AT YEAR OF ELECTION
FEBRUARY 1, INITIAL ELECTION TO PRESENT
NAME 1996 POSITION AS AN OFFICER POSITION
- - --------------------------------------------- --------------------------------------- ---------------- ----------
<S> <C> <C> <C> <C>
Rand V. Araskog................... 64 Chairman and Chief Executive and 1995 12/19/95
Director
Robert A. Bowman.................. 40 President and Chief Operating Officer 1995 12/19/95
and Director
Peter G. Boynton.................. 53 Senior Vice President; President and 1995 12/19/95
Chief Executive Officer of Caesars
World, Inc.
Juan C. Cappello.................. 57 Senior Vice President, Director of 1995 12/19/95
Corporate Relations
Gerald C. Crotty.................. 44 Senior Vice President 1995 12/19/95
Jon F. Danski..................... 43 Senior Vice President and Controller 1995 12/19/95
Nicholas J. Glakas................ 51 Senior Vice President 1995 12/19/95
Ralph W. Pausig................... 61 Senior Vice President 1995 12/19/95
Ann N. Reese...................... 42 Executive Vice President and Chief 1995 12/19/95
Financial Officer
Elizabeth A. Tuttle............... 39 Senior Vice President and Treasurer 1995 12/19/95
Richard S. Ward................... 55 Executive Vice President, General 1995 12/19/95
Counsel and Corporate Secretary
Daniel P. Weadock................. 57 Senior Vice President; President and 1995 12/19/95
Chief Executive Officer of ITT Sheraton
Corporation
</TABLE>
Each of the above-named officers was elected to his or her present position
to serve at the pleasure of the Board of Directors.
For the five years immediately preceding the Distribution, all of the
above-named officers held executive positions with Old ITT bearing at least
substantially the same responsibilities as those borne in their present offices,
except that (i) Mr. Araskog, prior to his election as Chairman and Chief
Executive, was Chairman, President and Chief Executive of Old ITT; (ii) Mr.
Bowman, prior to his election as President and Chief Operating Officer, was
Executive Vice President and Chief Financial Officer of Old ITT since September
1992, Executive Vice President and Chief Financial Officer of ITT Sheraton
Corporation from April 1991 to September 1992, Senior Vice President and Chief
Financial Officer of ITT Sheraton Corporation from January to April 1991 and
prior to that Treasurer of the State of Michigan; (iii) Mr. Boynton, prior to
his election as Senior Vice President of ITT and President and Chief Executive
Officer of Caesars World, Inc., was Senior Vice President of Old ITT since July
1995, President and Chief Operating Officer of Caesars World, Inc. since
February 1995 and President and Chief Operating Officer of Caesars Atlantic City
Hotel/Casino from 1982 to February 1995; (iv) Mr. Crotty, prior to his election
as Senior Vice President, was Senior Vice President of Old ITT since October
1994, Chairman, President and Chief Operating Officer of ITT Information
Services, Inc. from October 1993 to present, President and Chief Operating
Officer of ITT Consumer Financial Corporation from February 1992 until September
1993, Vice President of Old ITT from August 1991 until September 1994 and
Secretary to the Governor of the State of New York ending in July 1991; (v) Mr.
Danski, prior to his election as Senior Vice President and Controller, was
Senior Vice President and Controller of Old ITT since October 1993 and prior to
that Vice President and General Auditor of RJR Nabisco; (vi) Mr. Glakas, prior
to his election as Senior Vice President, was Vice President, Associate General
Counsel & Director of Government Affairs of Old ITT from September 1992 to
October 1995 and Director of Government Affairs of Old ITT prior thereto; (vii)
Ms. Reese, prior to her election as Executive Vice President and Chief Financial
Officer, was Senior Vice President and Treasurer of Old ITT since September 1992
and Vice President and Assistant Treasurer of Old ITT prior thereto; (viii) Ms.
Tuttle, prior to her election as Senior Vice President and Treasurer, was Vice
President and Assistant Treasurer of Old ITT since February 1995, Assistant
Treasurer & Director of Capital Markets of Old ITT from October 1993 to February
1995, Assistant Treasurer & Manager of Financial Planning and Operations of Old
ITT from July 1992 to October 1993 and Manager of Financial Planning and
Operations of Old ITT prior thereto; (ix) Mr. Ward, prior to his election as
Executive Vice President, General Counsel and Corporate Secretary, was Executive
Vice President and General Counsel of Old ITT since May 1994, Senior Vice
President and General Counsel of Old ITT from September 1992 to May 1994 and
Vice President and Associate General Counsel of Old ITT prior thereto; and (x)
Mr. Weadock, prior to his election as Senior Vice President and President and
Chief Executive Officer of ITT Sheraton Corporation, was Senior Vice President
of Old ITT since July 1995, President and Chief Operating Officer of ITT
Sheraton Corporation since November 1993 and Chairman, President and Chief
Executive Officer of ITT Communications and Information Services, Inc. prior
thereto.
23
<PAGE> 25
PART II
ITEM 5. MARKET FOR ITT'S COMMON STOCK
AND RELATED STOCKHOLDER MATTERS
ITT COMMON STOCK -- MARKET PRICES AND DIVIDENDS
<TABLE>
<CAPTION>
1995
-----------------
HIGH LOW
------ ------
<S> <C> <C>
Period commencing December 20, 1995
and ending December 31, 1995.................................................. $53.13 $48.25
</TABLE>
On December 19, 1995, Old ITT distributed to its shareholders of record at
the close of business on such date all of the outstanding shares of common stock
of ITT, then a wholly owned subsidiary of Old ITT. In the Distribution, holders
of common stock of Old ITT received one share of ITT's common stock for every
one share of Old ITT common stock held. On December 20, 1995, the common stock
of ITT commenced "regular way" trading on the New York Stock Exchange under the
symbol "ITT".
During the period from January 1, 1996 through February 29, 1996, the high
and the low reported market prices of ITT common stock were $60.75 and $47.38,
respectively.
ITT has not declared any dividends to date and ITT presently has no plans
to declare and pay any dividends.
There were approximately 54,000 holders of record of ITT Common Stock on
February 29, 1996.
ITT Common Stock is listed on the New York Stock Exchange.
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
1995 1994 1993 1992 1991
------ ------ ------ ------ ------
($ IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues................................................................... $6,346 $4,760 $4,169 $4,253 $3,855
Income before Accounting Changes........................................... $ 147 $ 74 $ 39 $ 2 $ 43
Earnings per share (Pro Forma for 1994 and prior years) before Accounting
Changes.................................................................. $ 1.24 $ .63 $ .33 $ .02 $ .37
BALANCE SHEET DATA:
Total Assets............................................................... $8,692 $5,012 $3,791 $3,375 $2,462
Long-Term Debt, including Capital Leases................................... $3,575 $ 600 $ 169 $ 186 $ 160
OPERATING DATA:
Operating Income........................................................... $ 571 $ 292 $ 142 $ 34 $ 126
EBITDA(1).................................................................. $ 797 $ 396 $ 222 $ 81 $ 163
Cash from Operating Activities............................................. $ 504 $ 230 $ 186 $ 143 $ 133
Number of Employees (in thousands)......................................... 38 25 18 18 20
</TABLE>
- - ---------------
(1) EBITDA is presented here as an alternative measure of the ability of ITT to
generate cash flow and should not be construed as an alternative to
operating income (as determined in accordance with generally accepted
accounting principles) or to cash flows from operating activities (as
determined on the Consolidated Cash Flow Statement in ITT Corporation's
Financial Statements contained herein). EBITDA was computed above as
earnings before interest, taxes, depreciation and amortization.
24
<PAGE> 26
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(DOLLAR AMOUNTS ARE IN MILLIONS UNLESS OTHERWISE STATED)
On December 19, 1995, Old ITT distributed to its shareholders of record at
the close of business on such date all of the outstanding shares of common stock
of ITT, then a wholly owned subsidiary of Old ITT (the "Distribution"). In the
Distribution, holders of common stock of Old ITT received one share of ITT
common stock for every one share of Old ITT common stock held, creating a
separate publicly traded entity. This discussion and analysis of financial
condition and results of operations is prepared as if ITT were a separate entity
for all periods discussed.
BACKGROUND AND BUSINESS CONDITIONS
ITT combines the world's largest hotel and gaming company with a premier
sports and entertainment company and information services businesses to create a
dynamic and rapidly growing enterprise. Management believes ITT's strategic
complement of assets, unmatched international presence and leading brand names
uniquely position it to be a highly competitive participant in each of its
operating segments. Moreover, ITT has the financial flexibility, as evidenced by
1995 comparable pro forma earnings before interest, taxes, depreciation,
amortization and one time unusual items ("comparable pro forma EBITDA") of $892,
to pursue opportunities worldwide. The 1995 comparable pro forma EBITDA results
(which assume all acquisitions during 1994 and 1995 had been consummated on
January 1, 1994) represent a 48% increase over the 1994 pro forma EBITDA of
$604. The comparable pro forma results presented herein may not be indicative of
the results of operations that would actually have been reported had the
transactions underlying the pro forma amounts actually been consummated on such
a date or of the results of operations that may be reported by ITT in the
future.
ITT completed the acquisition of one of the world's most recognized gaming
companies, Caesars in January 1995. In March 1995, ITT, in partnership with
subsidiaries of Cablevision Systems Corporation, acquired the well-known New
York Knickerbockers and New York Rangers sports franchises, the MSG television
network, and the Madison Square Garden Arena, through its investment in MSG. In
addition, the acquisition in 1994 of 70.3% of Ciga, as well as other key hotel
property acquisitions in both 1995 and 1994 have enhanced ITT's geographic
balance along with its image and profile. Furthermore, in August 1995, ITT, in
partnership with Dow Jones, agreed to purchase television station WNYC-TV from
New York City. The purchase, subject to approval by the Federal Communications
Commission and other customary conditions, is expected to close in the first
half of 1996. Together, ITT and Dow Jones hope to transform the station into a
preeminent business and sports television station based in New York City. The
purchase price of $207 will be split evenly by the two companies and the
partnership will be managed on a 50/50 basis.
ITT also operates a telephone directory publishing business for telephone
subscribers outside the United States, as well as in Puerto Rico and the U.S.
Virgin Islands, and a United States-based provider of post-secondary career
education and owns approximately 6% of Alcatel Alsthom, a French
telecommunications equipment company.
Through the ITT Sheraton brand name, ITT is represented in most major
markets of the world. In 1995, over 45 million customers stayed at ITT Sheraton
properties in approximately 60 countries. ITT Sheraton had a worldwide
hospitality network of 412 owned, leased, managed and franchised properties
including hotels, casinos and inns at December 31, 1995. Gaming operations are
marketed under either the Caesars or ITT Sheraton brand names and are
represented in Las Vegas, Atlantic City, Halifax (Nova Scotia), Sydney (Nova
Scotia), Lake Tahoe, Tunica County (Mississippi), Lima (Peru), Cairo (Egypt),
Windsor (Ontario) and Townsville (Australia). The Information Services segment
consists of an 80% interest in ITT World Directories, a directory publishing
business, and an 83.3% interest in ITT Educational, a provider of post-secondary
degree technical education.
25
<PAGE> 27
ITT's revenues, operating income and earnings before interest, taxes,
depreciation and amortization ("EBITDA") have historically been lowest in the
first quarter and highest in the fourth quarter, the result of seasonality in
the Hotels segment and the timing of the directory publishing schedule at ITT
World Directories. In the Gaming segment, results have not been particularly
seasonal as a result of its mix of gaming jurisdictions; however, such results
may be volatile as a result of the nature of high limit baccarat wagering. High
limit baccarat wagering has been confined primarily to the Las Vegas properties
and comprised approximately 23%, 23% and 24% of total Gaming revenues in 1995,
1994 and 1993, respectively. These seasonality factors are not expected to
differ significantly in 1996, although there can be no assurance that the
historical seasonality trends will continue. The following table reflects the
historical seasonality of ITT:
<TABLE>
<CAPTION>
PERCENT OF TOTAL YEAR
-----------------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER TOTAL
------- ------- ------- ------- -----
<S> <C> <C> <C> <C> <C>
Revenues
1995................................ 20% 27% 26% 27% 100%
1994................................ 18% 26% 23% 33% 100%
1993................................ 19% 28% 24% 29% 100%
EBITDA
1995................................ 15% 28% 28% 29% 100%
1994................................ 13% 30% 24% 33% 100%
1993................................ 12% 31% 24% 33% 100%
====== ====== ====== ====== =====
</TABLE>
Operating performance in the Hotels segment has historically been somewhat
cyclical and has fluctuated to some degree based upon general economic
conditions as well as specific factors affecting relevant local markets. In the
Gaming segment, operating performance is impacted by, among other things,
competition in the markets in which ITT operates. Increased competition in this
segment is likely, as other states and countries authorize casino gaming. In the
Information Services segment, ITT World Directories has historically been the
sole provider of yellow page directories in specific markets and has performed
its services on behalf of the local telephone companies. However, due in large
measure to a changing competitive environment in the member states of the
European Union, certain historical contractual relationships existing between
ITT World Directories and the national telecommunications entity (specifically
in Belgium and The Netherlands) were not renewed or extended upon expiration of
the last contract term. ITT World Directories is currently competing with the
national telecommunications entities in these countries. Such competition could
adversely impact the operating results of ITT World Directories, although there
has been no adverse impact to date and 1995 operating results improved; however,
it is not certain that such trends will continue. Additionally, as contracts are
scheduled for renewal in other jurisdictions within the European Union, such
contracts may also not be renewed or extended, thereby possibly adversely
affecting ITT World Directories. The higher-education industry is dependent upon
the health of the national economy, with student enrollment generally softening
in periods of strong job creation. ITT Educational continues to grow through new
school openings and added curricula. Management believes it is well positioned
to benefit from the expected rise in high school graduates entering the work
force over the next ten years (as currently forecast by the U.S. Department of
Labor).
The following table reflects pro forma results of operations which assume
that the acquisitions of Caesars, the 70.3% interest in Ciga, certain other
hotel properties and MSG, in partnership with another entity, were completed on
January 1, 1994. This pro forma information relates to a large degree to periods
prior to ITT's ownership and does not take into account synergies that may be
derived or ongoing
26
<PAGE> 28
cost reduction efforts. Such information may not be indicative of the results
that would have occurred if the acquisitions were completed on January 1, 1994:
<TABLE>
<CAPTION>
REVENUES EBITDA OPERATING INCOME
----------------------------------- ----------------------------------- -----------------------------------
PRO FORMA PRO FORMA PRO FORMA PRO FORMA PRO FORMA PRO FORMA PRO FORMA PRO FORMA PRO FORMA
YEAR ENDED YEAR ENDED % YEAR ENDED YEAR ENDED % YEAR ENDED YEAR ENDED %
12/31/95 12/31/94 CHANGE 12/31/95 12/31/94 CHANGE 12/31/95 12/31/94 CHANGE
---------- ---------- --------- ---------- ---------- --------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Hotels........... $4,120 $3,896 6% $383 $263 46% $259 $150 73%
Gaming........... 1,452 1,232 18 316 212 49 218 129 69
Information
Services........ 856 833 3 237 181 31 207 155 34
Corporate
Overhead, MSG,
and Minority.... -- -- -- (44) (52) -- (71) (77) --
-- -- --
------ ------ ------ ------ ------ ------
$6,428 $5,961 8% $892 $604 48% $613 $357 72%
====== ====== == ====== ====== == ====== ====== ==
</TABLE>
A substantial portion of the remaining discussion and analysis of results
of operations relates to the historical periods of ITT which, for the most part,
do not include the results of the acquisitions completed in late 1994 and the
1995 first quarter.
YEAR ENDED DECEMBER 31, 1995 COMPARED WITH DECEMBER 31, 1994
Revenues of $6,346 in 1995 increased 33% compared with $4,760 in 1994,
reflecting the eleven-month contribution of the Caesars acquisition as well as
the full year contribution of Ciga and other significant hotel acquisitions
completed during the second half of 1994. Caesars revenues totaled $979 from the
date of acquisition while Ciga and other hotel acquisitions contributed $542 in
1995 compared with $271 in 1994 from the dates of acquisition of these
properties. Excluding the effect of acquisitions, hotel revenues increased 4%
primarily due to higher average room rates, particularly in owned and leased
properties in North America. Revenues at ITT World Directories were basically
unchanged during 1995 at $654 compared to $646 in 1994 reflecting increased
competition with certain telephone companies. Revenues at ITT Educational
increased 8% to $202 from $187 in 1994 reflecting additional school openings,
increased census and a continuing expansion of curricula and degree offerings.
Excluding the Caesars and hotel acquisitions discussed above, revenues increased
7%.
Salaries, benefits and other operating costs increased 24% in 1995 to
$4,747 from $3,837 representing the costs of the acquired properties and smaller
increases in the cost of services. Overall, salaries, benefits and other
operating costs represented 75% of revenues in 1995, down from 81% in the
comparable 1994 period, as higher average rates and occupancy outpaced the
increase in costs. In addition, improved performance in the Information Services
segment, representing lower telephone company fees in Belgium; continuing
benefits of cost control programs; and favorable foreign exchange experience,
contributed to the positive results.
Selling, general and administrative expenses increased 48% to $871 in 1995
compared with $587 in 1994, due primarily to the costs associated with Caesars,
Ciga and the other hotel acquisitions. ITT has embarked on several company-wide
cost rationalization programs aimed at reducing administrative costs. In June
1995, ITT announced the closing of the Caesars headquarters in Los Angeles; in
September 1995, ITT provided for severance and other costs associated with
restructuring the headquarters of the hotels and information services business
segments totaling $80 pretax, and in December 1995, ITT recorded charges
associated with the consolidation of certain administrative and other functions
in its gaming segment of $6 pretax. In addition, ITT is undertaking an
aggressive information systems rationalization program. This program is designed
to reduce operating costs and increase efficiency as well as improve
management's ability to access operational and financial data.
Selling, general and administrative expenses include $96 and $88 in 1995
and 1994, respectively, representing reimbursement of overhead expenses related
to world headquarters management and supervision of the entities comprising Old
ITT prior to the Distribution. These expenses represent fees for advice and
assistance provided by ITT in connection with legal, accounting, tax, treasury
and insurance services. In the opinion of management, the methods for allocating
these costs are reasonable. However, the net cost of these services to ITT are
not necessarily indicative of the costs that would have been
27
<PAGE> 29
incurred if ITT had been operated as an unaffiliated entity. It is not practical
to estimate such costs on a stand-alone basis.
Operating income rose 96% in 1995 reflecting the impact of the acquisitions
discussed above, as well as the impact of one-time charges related to the
planned disposals of certain non-core assets and restructuring charges referred
to above. Excluding the acquisitions and restructuring charges, operating income
increased 43% primarily due to higher average room rates, particularly in owned
properties in North America, and the aforementioned improvement in the
Information Services segment. Depreciation and amortization increased 92%
compared with 1994 due primarily to the acquisitions discussed above.
Interest expense (before interest income of $54 in 1995 and $16 in 1994)
increased to $345 from $147 in 1994. In connection with the Distribution, Old
ITT allocated certain indebtedness between ITT and ITT Industries, Inc. As a
result of such allocation, the interest expense incurred in prior periods may
not be indicative of the interest expense which would have been incurred if ITT
was an independent entity during such periods.
Income tax expense rose during 1995 in direct proportion to the higher
pretax earnings as ITT maintained an effective rate of 40% in both years.
Minority equity in 1995 reflects the minority ownership in ITT World
Directories, ITT Educational and Ciga and increased due to higher earnings. Net
income of $147 in 1995 improved 99% compared with $74 in 1994, the results of
the factors discussed above.
Cash from operating activities, as defined by SFAS No. 95, increased to
$504 in 1995 from $230 in 1994 reflecting the improved operating results and the
accretive impact of the acquisitions discussed above. The SFAS definition of
cash from operating activities differs from EBITDA largely due to the inclusion
of interest, income taxes and changes in working capital.
BUSINESS SEGMENTS
Revenues, EBITDA and operating income (excluding the effect of corporate
overhead and minority income) for each of ITT's three major business segments
were as follows:
<TABLE>
<CAPTION>
YEAR ENDED 1995 YEAR ENDED 1994
- - --------------------------------- ---------------------------------
OPERATING OPERATING
REVENUES EBITDA INCOME REVENUES EBITDA INCOME
- - -------- ------ --------- -------- ------ ---------
<C> <C> <C> <S> <C> <C> <C>
$4,120 $314 $ 190 .............Hotels............. $3,700 $239 $ 152
</TABLE>
Hotels 1995 results reflect the full-year benefit of the Ciga and other
significant hotel acquisitions made during 1994 and the $51 restructuring
charge. At December 31, 1995, Hotel properties include 198 properties (48%)
which are owned, leased or managed under long-term agreements and 214 properties
(52%) which are franchised. During 1995, significant benefits were realized at
the owned and leased properties in EBITDA and operating income due to improved
operations and cost control programs. Improvements in these properties have a
greater impact on the Hotels segment results than do improvements in managed
properties, where the majority of the improvements are realized by those
property owners. In addition, during 1995 the average daily room rate at ITT's
owned, leased and managed properties increased 10% to $126 and revenue per
available room rose 10% to $89. These increases reflect management's focus on
attaining the optimal combination of rate and occupancy while enhancing the
level of service and value to ITT's customers. ITT has continued to focus on
expanding and enhancing its image among world travelers, through ongoing
renovations of key properties, upgrading standards, defranchising nonconforming
properties and strategic acquisitions. Management continues to aggressively
pursue revenue growth as well as cost saving opportunities in each of its market
segments through a variety of strategies including: maximizing the integration
of the Ciga hotels; cross promoting ITT's gaming and entertainment assets; and
continued domestic and international expansion.
<TABLE>
<CAPTION>
YEAR ENDED 1995 YEAR ENDED 1994
- - --------------------------------- ---------------------------------
OPERATING OPERATING
REVENUES EBITDA INCOME REVENUES EBITDA INCOME
- - -------- ------ --------- -------- ------ ---------
<C> <C> <C> <S> <C> <C> <C>
$1,370 $301 $ 209 .............Gaming............. $227 $ 19 $ 9
</TABLE>
28
<PAGE> 30
The January 1995 acquisition of one of the most internationally recognized
brand names in gaming, Caesars, positions ITT to be a competitive force in this
rapidly expanding industry. The Gaming segment has key properties in both major
U.S. jurisdictions, Las Vegas, Nevada and Atlantic City, New Jersey as well as
other properties both domestically and internationally. The 1995 results also
reflect a full year of operating results from the Sheraton Casino in Tunica
County, Mississippi which opened in August 1994. In the future, the Gaming
segment is expected to contribute an increasing portion of ITT's results.
<TABLE>
<CAPTION>
YEAR ENDED 1995 YEAR ENDED 1994
- - --------------------------------- ---------------------------------
OPERATING OPERATING
REVENUES EBITDA INCOME REVENUES EBITDA INCOME
- - -------- ------ --------- -------- ------ ---------
<C> <C> <C> <S> <C> <C> <C>
$856 $208 $ 178 .......Information Services....... $833 $181 $ 155
</TABLE>
Revenues at ITT World Directories were basically unchanged compared with
1994. Excluding the restructuring charge of $29, margins improved reflecting
lower telephone company fees in Belgium as ITT World Directories has begun to
compete with the local telephone company. As more fully discussed in the Notes
to Financial Statements, ITT Promedia, a subsidiary of ITT World Directories, is
involved in a dispute with the Belgium Telephone Company ("Belgacom")
challenging Belgacom's current published fee schedule as being unfair,
unreasonable and discriminatory.
ITT Educational achieved record results in its first year as a publicly
traded company reflecting the benefit of four additional school openings,
ongoing cost control measures and a continuing expansion of curricula and degree
offerings. ITT Educational maintained its enrollment base (20,618 students at
December 31, 1995 compared with 20,668 at December 31, 1994) despite a strong
job market in 1995.
YEAR ENDED DECEMBER 31, 1994 COMPARED WITH DECEMBER 31, 1993
Revenues of $4,760 in 1994 increased 14% over 1993 results, reflecting the
contribution of 70.3% of Ciga, which was purchased in stages during the second
half of the year, The Phoenician, the Crescent and The Park Grande Hotel, all
acquired in 1994, along with improved results at Hotels in the North American
and Asia-Pacific regions. The improvement was partially offset by the loss of
revenues from the ITT World Directories United Kingdom unit disposed of in 1993.
Revenues of Ciga and the other acquisitions totaled $271 in 1994. Excluding
these acquisitions, revenues increased 3%. Average occupancy of owned, leased
and managed hotels (excluding the newly acquired Ciga hotels) improved 3.8% to
72.9% in 1994.
Salaries, benefits and other operating costs increased 11% in 1994 over
1993 levels, representing the costs of the acquired properties as well as
smaller increases in the cost of services. Overall, salaries, benefits and other
operating costs represented 81% of revenues in 1994, down from 83% in 1993 as
high average rates and occupancy outpaced the increase in direct costs.
Selling, general and administrative expenses include $118 in 1994 and $122
in 1993, representing overhead expenses related to the management and
supervision of the entities comprising ITT before the Distribution. Of these
amounts, $88 and $73 were charged in the respective years to affiliated
companies and represented fees for advice and assistance provided by ITT in
connection with cash management, legal, accounting, tax and insurance services.
The fees for these services were based upon a general relations agreement with
each affiliate. Excluding these overhead expenses and related service fee
income, selling, general and administrative expenses increased approximately 12%
due primarily to the overhead of the acquired companies and hotels.
Operating income rose 106% in 1994, reflecting the aforementioned North
American occupancy and rate improvement at Hotels, a full year of Gaming
operations and benefits from cost reduction actions initiated in 1993 in all
major business segments. Operating income in 1993 included restructuring
provisions totaling $49 aimed at increasing the efficiency and productivity of
overhead functions at the segment and regional headquarters locations. These
provisions yielded the desired improvements as evidenced, in part, by the
increased operating cash flow in 1994. In addition, the 1993 results included a
$29 provision for the accelerated write-off of capitalized development expenses
stemming from a reevaluation of future plans and projects. Depreciation and
amortization rose 21% due primarily to the fixed asset additions made through
acquisition and the goodwill amortization associated with the Ciga and The
Phoenician acquisitions.
29
<PAGE> 31
Interest expense (before interest income of $16 in 1994 and $14 in 1993)
increased to $147 compared with $47 in 1993, the result of additional debt
required to fund the Desert Inn purchase in 1993 and the 1994 acquisitions
discussed above. Average interest-bearing debt of $1.4 billion in 1994 compares
with $0.4 billion in 1993. Interest-bearing debt represents external borrowings
(averaging $0.4 billion in 1994 and $0.2 billion in 1993) and interest-bearing
advances from ITT Industries, Inc. ($1.0 billion in 1994 and $0.2 billion in
1993).
Miscellaneous income (expense), net reflects non-operating items of a
non-recurring nature including gains and losses on the sale of investments. In
1994, miscellaneous expense of $17 primarily relates to the write-off of
expenses incurred in connection with a terminated gaming project, partly offset
by the gain on the public offering of 16.7% of ITT Educational. In 1993,
miscellaneous income of $10 related primarily to the gain on the sale of an ITT
World Directories unit.
Income taxes of $58 in 1994 were provided on pretax income of $144
representing a 40% effective tax rate. Tax on repatriation of foreign earnings
in addition to U.S. state and local income taxes raises ITT's effective tax rate
above the U.S. statutory rate. The decrease from the 1993 53% effective tax rate
results primarily from the absence of the 1993 tax cost associated with
repatriating cash to the United States from ITT World Directories units in
Portugal, Belgium and The Netherlands.
Minority income in 1994 represents the effect of minority ownership in ITT
World Directories and Ciga. In 1993, minority income related solely to ITT World
Directories. Net income of $74 in 1994 improved 90% compared with $39 in 1993,
the result of the factors discussed above.
EBITDA increased a substantial 78% in 1994 to $396 from the $222 generated
in 1993. Improved occupancy and rates in the Hotels segment (primarily in the
North American region) and lower overhead costs coupled with the absence of 1993
restructuring provisions, which totaled $49, are the primary contributors to the
improvement. Acquisitions made throughout 1994 impacted revenues to a much
larger degree than EBITDA. EBITDA represented 8.3% of revenues in 1994 compared
with 5.3% in 1993.
Cash from operating activities, as defined by SFAS No. 95, increased to
$230 in 1994 from $186 in 1993 for the reasons described above. The SFAS
definition of cash from operating activities differs from EBITDA largely due to
the inclusion of interest, income taxes and changes in working capital.
BUSINESS SEGMENTS
Revenues, EBITDA and operating income (excluding the effect of corporate
overhead, minority income and dispositions) for each of ITT's three major
business segments were as follows:
<TABLE>
<CAPTION>
YEAR ENDED 1994 YEAR ENDED 1993
- - --------------------------------- ---------------------------------
OPERATING OPERATING
REVENUES EBITDA INCOME REVENUES EBITDA INCOME
- - -------- ------ --------- -------- ------ ---------
<C> <C> <C> <S> <C> <C> <C>
$3,700 $239 $ 152 .............Hotels............. $3,160 $167 $87
</TABLE>
Properties in the Hotels segment are marketed under the ITT Sheraton brand
name and include 209 properties (49%) which are owned, leased or managed under
long-term agreements and 214 properties (51%) which are franchised at December
31, 1994. At year end 1993, 176 properties (43%) were owned, leased or managed
and 230 properties (57%) were franchised. The shift in mix toward owned hotels,
including the purchase of a controlling interest in Ciga in 1994, is indicative
of ITT's focus on improving the standards of properties carrying the ITT
Sheraton trade names and service marks. Hotels revenues increased in 1994 due to
improved results in the North American and Asia-Pacific regions and the
contribution of new acquisitions, namely Ciga, The Phoenician and The Park
Grande. EBITDA improved a substantial 43% from 1993, partly as a result of
acquisitions. Operating income in 1994 reflected, among other things, the
improvements in the North American region and benefits from cost reductions. In
1993, operating income reflected the accelerated write-off of capitalized
development expenses totaling $23, partly offset by an $11 gain on the sale of
an investment in Bally's Las Vegas operations. Room rates of owned and leased
properties (excluding the newly acquired Ciga hotels) averaged $110 in 1994,
compared with $105 in 1993, while occupancy rates rose to 72.9% from 70.2% in
the prior year.
30
<PAGE> 32
Hotels segment revenues are geographically diverse with 45% and 48%
generated in North America in 1994 and 1993, respectively. New York, Boston and
Miami are among the larger markets served.
<TABLE>
<CAPTION>
YEAR ENDED 1994 YEAR ENDED 1993
- - --------------------------------- ---------------------------------
OPERATING OPERATING
REVENUES EBITDA INCOME REVENUES EBITDA INCOME
- - -------- ------ --------- -------- ------ ---------
<C> <C> <C> <S> <C> <C> <C>
$227 $ 19 $ 9 .............Gaming............. $ 24 $(3) $ (9)
</TABLE>
The Sheraton Desert Inn is included in the Gaming segment for the full year
in 1994 compared with two months in 1993. ITT Sheraton opened the Sheraton
Casino in Tunica County, Mississippi in August 1994. Gaming contributed $19 to
ITT's EBITDA in 1994, up $22 from $(3) in 1993, when ITT began its gaming
efforts in the United States.
<TABLE>
<CAPTION>
YEAR ENDED 1994 YEAR ENDED 1993
- - --------------------------------- ---------------------------------
OPERATING OPERATING
REVENUES EBITDA INCOME REVENUES EBITDA INCOME
- - -------- ------ --------- -------- ------ ---------
<C> <C> <C> <S> <C> <C> <C>
$833 $181 $ 155 .......Information Services....... $800 $178 $ 162
</TABLE>
Operating income fell at the Information Services segment in 1994 on
modestly higher revenues, reflecting additional expenses of publishing in
competitive markets and ITT World Directories' share of the costs of
establishing a directory joint venture. Both revenues and income improved at ITT
Educational.
LIQUIDITY AND CAPITAL RESOURCES
The preceding discussion of the results of operations describes ITT over a
period of significant transformation and growth. ITT has historically incurred
debt at the parent level to a greater extent than at the operating level,
particularly when funding major capital programs or acquisitions. On November
16, 1995, in preparation for the post-Distribution recapitalization, ITT issued
$1.75 billion of notes and debentures ranging in maturity from 5 to 30 years and
yielding a weighted average interest rate of 6.97%. The proceeds from this
offering were used for the repayment of commercial paper. Effective with the
Distribution, ITT entered into two revolving credit agreements with syndicate
banks totaling $3 billion (five-year facility of $2 billion; 364-day facility of
$1 billion). In addition, ITT maintains lesser credit lines at certain operating
units. These commitments are used to assure working capital needs and to support
commercial paper. As of December 31, 1995, $1,329 of commercial paper has been
classified as long-term since ITT intends to renew or refinance these
obligations through 1996 and future periods. The future liquidity of ITT will,
to a large degree, depend upon the integration and performance of its recent
acquisitions as well as the previously existing businesses of ITT. Additionally,
income taxes have been assessed to ITT in accordance with a tax allocation
agreement with Old ITT that generally requires the computation of income taxes
as if ITT had been a stand-alone entity. In all years presented, credits for
income taxes paid in foreign jurisdictions were fully utilizable in the United
States in the Old ITT consolidated tax return, which may not be achieved in the
future. To the extent foreign tax credits cannot be used to reduce the U.S. tax
obligation, a higher effective income tax rate will be incurred.
ITT generated EBITDA of $797 in 1995 compared with $396 in 1994, which was
prior to the acquisitions of Caesars, MSG, Ciga and other significant hotels.
Comparable pro forma EBITDA was $892 in 1995 compared with $604 in 1994, a 48%
increase. These cash flows are expected to be sufficient to service
indebtedness, satisfy tax obligations and cover maintenance capital expenditures
and other liquidity needs. Additional liquidity needs would be funded through
traditional debt or equity financings, asset sales or any combination thereof.
Funds used in capital expenditures and acquisitions totaled $2.8 billion
and $1.5 billion in 1995 and 1994, respectively, representing combined
expenditures of $4.3 billion since January 1, 1994. Of this amount, the
acquisition of Caesars ($1.7 billion), MSG ($0.6 billion), Ciga ($0.5 billion)
and other significant hotel acquisitions ($0.7 billion) comprised 81%. A portion
of these expenditures were financed through the sale by Old ITT of its ITT
Financial assets. The balance was used for smaller acquisitions and to maintain
ITT's facilities. The Corporation expects to pay $103.5 in connection with its
proposed acquisition of WNYC-TV in partnership with Dow Jones. This transaction
is expected to close in the first half of 1996.
EFFECT OF INFLATION
The rate of inflation as measured by changes in the average consumer price
index has not had a material effect on the revenues or operating results of ITT
during the three most recent fiscal years.
31
<PAGE> 33
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Index to Financial Statements and Schedule contained elsewhere herein.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF ITT
The information called for by Item 10 with respect to directors is
incorporated herein by reference to the definitive proxy statement involving the
election of directors filed or to be filed by ITT with the Securities and
Exchange Commission pursuant to Regulation 14A within 120 days after the end of
the fiscal year covered by this Form 10-K.
The information called for by Item 10 with respect to executive officers is
set forth above in Part I under the caption "Executive Officers of ITT."
ITEM 11. EXECUTIVE COMPENSATION
The information called for by Item 11 is incorporated herein by reference
to the definitive proxy statement referred to above in Item 10.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The information called for by Item 12 is incorporated herein by reference
to the definitive proxy statement referred to above in Item 10.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information called for by Item 13 is incorporated herein by reference
to the definitive proxy statement referred to above in Item 10.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K
(a) Documents filed as a part of this report:
1. See Index to Financial Statements and Schedule appearing on page
F-1 for a list of the financial statements and schedule filed as a part of
this report.
2. See Exhibit Index appearing on pages II-2 and II-3 for a list of
the exhibits filed or incorporated herein as a part of this report.
(b) On November 27, 1995, ITT filed a Current Report on Form 8-K which
attached as exhibits the definitive form of ITT's 6 1/4% Notes Due November 15,
2000, 6 3/4% Notes Due November 15, 2005, 7 3/8% Debentures Due November 15,
2015 and 7 3/4% Debentures Due November 15, 2025 and an opinion of counsel as to
the legality of such securities. On December 22, 1995, ITT filed a Current
Report on Form 8-K to report that on December 19, 1995 the outstanding common
stock of ITT was distributed to the shareholders of Old ITT of record on the
close of business on such date and that, as part of such distribution, "ITT
Destinations, Inc." changed its name to "ITT Corporation".
32
<PAGE> 34
INDEX TO FINANCIAL STATEMENTS
AND SCHEDULE
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Management................................................................. F-2
Report of Independent Public Accountants............................................. F-3
Consolidated Income for the three years ended December 31, 1995...................... F-4
Consolidated Balance Sheet as of December 31, 1995 and 1994.......................... F-5
Consolidated Cash Flow for the three years ended December 31, 1995................... F-6
Consolidated Stockholders Equity for the three years ended December 31, 1995......... F-7
Notes to Financial Statements........................................................ F-8
Quarterly Results for 1995 and 1994 (unaudited)...................................... F-19
Business Segment Information......................................................... F-19
Geographical Information -- Total Segments........................................... F-19
Valuation and Qualifying Accounts.................................................... S-1
</TABLE>
F-1
<PAGE> 35
REPORT OF MANAGEMENT
The management of ITT Corporation is responsible for the preparation and
integrity of the information in the financial statements and other sections of
the Annual Report. The financial statements are prepared in accordance with
generally accepted accounting principles and, where necessary, include amounts
that are based on management's informed judgments and estimates. Other
information in the Annual Report is consistent with the financial statements.
ITT's financial statements are audited by Arthur Andersen LLP, independent
public accountants, elected by the shareholders. Management has made ITT's
financial records and related data available to Arthur Andersen LLP, and
believes that the representations made to the independent public accountants are
valid and complete.
ITT's system of internal controls is a major element in management's
responsibility to provide a fair presentation of the financial statements. The
system includes both accounting controls and the internal auditing program,
which are designed to provide reasonable assurance that ITT's assets are
safeguarded, that transactions are properly recorded and executed in accordance
with management's authorization, and that fraudulent financial reporting is
prevented or detected.
ITT's internal controls provide for the careful selection and training of
personnel and for appropriate divisions of responsibility. The controls are
documented in written codes of conduct, policies and procedures that are
communicated to ITT's employees. Management continually monitors the system of
internal controls for compliance. ITT's internal auditors independently assess
the effectiveness of internal controls and make recommendations for improvement
on a regular basis. The independent public accountants also evaluate internal
controls and perform tests of procedures and accounting records to enable them
to express their opinion on ITT's financial statements. They also make
recommendations for improving internal controls, policies and practices.
Management takes appropriate action in response to each recommendation from the
internal auditors and the independent public accountants.
The Audit Committee of the Board of Directors, composed of nonemployee
directors, meets periodically with management and with the independent public
accountants and internal auditors to evaluate the effectiveness of the work
performed by them in discharging their respective responsibilities and to assure
their independence and free access to the Committee.
F-2
<PAGE> 36
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE SHAREHOLDERS OF ITT CORPORATION:
We have audited the accompanying consolidated balance sheet of ITT
Corporation (a Nevada corporation) and subsidiaries as of December 31, 1995 and
1994, and the related consolidated statements of income, cash flow and
stockholders equity for each of the three years in the period ended December 31,
1995, as described in the accompanying Index to Financial Statements and
Schedule. These financial statements and the schedule referred to below are the
responsibility of the Corporation's management. Our responsibility is to express
an opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of ITT
Corporation and subsidiaries as of December 31, 1995 and 1994, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1995, in conformity with generally accepted accounting
principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the Index to
Financial Statements and Schedule is presented for purposes of complying with
the Securities and Exchange Commission's rules and is not a part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
Arthur Andersen LLP
New York, New York
January 24, 1996
F-3
<PAGE> 37
ITT CORPORATION AND SUBSIDIARIES
CONSOLIDATED INCOME
IN MILLIONS EXCEPT PER SHARE
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Revenues....................................................... $6,346 $4,760 $4,169
Costs and Expenses:
Salaries, benefits and other operating....................... 4,747 3,837 3,451
Selling, general and administrative, net of service fee
income of $96, $88 and $73................................ 775 499 467
Depreciation and amortization................................ 253 132 109
------ ------ ------
5,775 4,468 4,027
------ ------ ------
571 292 142
Interest expense (net of interest income of $54, $16 and
$14)......................................................... (291) (131) (33)
Miscellaneous income (expense), net............................ 2 (17) 10
------ ------ ------
282 144 119
Income tax expense............................................. (114) (58) (63)
Minority equity................................................ (21) (12) (17)
------ ------ ------
Net income..................................................... $ 147 $ 74 $ 39
====== ====== ======
Earnings per share (Pro Forma for 1994 and 1993 --
See Notes to Financial Statements)........................... $ 1.24 $ 0.63 $ 0.33
====== ====== ======
Weighted average common equivalent shares
(Pro Forma for 1994 and 1993 -- See Notes to Financial
Statements).................................................. 118 117 117
====== ====== ======
</TABLE>
The accompanying notes to financial statements are an integral part of the above
statement.
F-4
<PAGE> 38
ITT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
IN MILLIONS EXCEPT FOR SHARES
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1995 1994
------ ------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................... $ 177 $ 191
Receivables, net.................................................... 784 498
Inventories......................................................... 86 59
Prepaid expenses and other.......................................... 96 217
------ ------
Total current assets........................................... 1,143 965
Plant, property and equipment, net....................................... 3,979 2,882
Investments.............................................................. 1,757 655
Goodwill, net............................................................ 1,332 232
Long-term receivables, net............................................... 150 133
Other assets............................................................. 331 145
------ ------
$8,692 $5,012
====== ======
LIABILITIES AND STOCKHOLDERS EQUITY
Current liabilities:
Accounts payable.................................................... $ 309 $ 72
Accrued expenses.................................................... 695 426
Notes payable and current maturities of long-term debt.............. 265 31
Other current liabilities........................................... 161 95
------ ------
Total current liabilities...................................... 1,430 624
Long-term debt........................................................... 3,575 600
Deferred income taxes.................................................... 141 39
Other liabilities........................................................ 350 192
Minority interest........................................................ 260 204
------ ------
5,756 1,659
------ ------
Stockholders Equity:
Common stock: authorized 200,000,000 shares, no par or stated value,
outstanding 117,196,370 shares..................................... 2,944 --
Accumulated deficit................................................. (8) --
Investments and advances from ITT Industries, Inc.(1)............... -- 3,353
------ ------
Total stockholders equity...................................... 2,936 3,353
------ ------
$8,692 $5,012
====== ======
</TABLE>
- - ---------------
(1) Investments and Advances From ITT Industries, Inc. represents the means by
which ITT was funded by Old ITT prior to the Distribution and consisted of
both equity and interest bearing advances.
The accompanying notes to financial statements are an integral part of the above
statement.
F-5
<PAGE> 39
ITT CORPORATION AND SUBSIDIARIES
CONSOLIDATED CASH FLOW
IN MILLIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1995 1994 1993
------- ------- -----
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net Income.................................................... $ 147 $ 74 $ 39
Adjustments to net income:
Depreciation and amortization............................... 253 132 109
Provision for doubtful receivables.......................... 132 69 26
Equity income, net of dividends received.................... 21 16 15
Loss (gain) on divestments -- pretax........................ 2 -- (19)
Changes in working capital:
Accounts receivable......................................... (219) (92) 2
Inventories................................................. (4) (5) (7)
Accounts payable............................................ 59 (6) 9
Accrued expenses............................................ 77 29 117
Accrued and deferred taxes.................................... 44 11 (52)
Other, net.................................................... (8) 2 (53)
------- ------- -----
Cash from operating activities........................... 504 230 186
------- ------- -----
INVESTING ACTIVITIES
Additions to plant, property and equipment.................... (571) (453) (91)
Proceeds from divestments..................................... 10 18 41
Acquisitions, net of acquired cash of $164 in 1995............ (2,188) (1,038) (180)
Other, net.................................................... 110 6 (99)
------- ------- -----
Cash used for investing activities....................... (2,639) (1,467) (329)
------- ------- -----
FINANCING ACTIVITIES
Short-term debt, net.......................................... 94 13 (19)
Long-term debt issued......................................... 3,132 260 --
Long-term debt repaid......................................... (121) (124) (18)
Change in investments and advances from ITT Industries,
Inc......................................................... (929) 457 428
Other, net.................................................... (55) (11) (45)
------- ------- -----
Cash from financing activities........................... 2,121 595 346
------- ------- -----
EXCHANGE RATE EFFECT ON CASH AND CASH EQUIVALENTS............. -- (1) (5)
------- ------- -----
(Decrease) increase in cash and cash equivalents.............. (14) (643) 198
Cash and Cash Equivalents -- Beginning of Year................ 191 834 636
------- ------- -----
CASH AND CASH EQUIVALENTS -- END OF YEAR...................... $ 177 $ 191 $ 834
======= ======= =====
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest...................................................... $ 314 $ 119 $ 27
======= ======= =====
Income taxes.................................................. $ 55 $ 117 $ 19
======= ======= =====
</TABLE>
The accompanying notes to financial statements are an integral part of the above
statement.
F-6
<PAGE> 40
ITT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STOCKHOLDERS EQUITY
IN MILLIONS EXCEPT FOR SHARES
<TABLE>
<CAPTION>
INVESTMENTS COMMON STOCK
AND ADVANCES FROM ---------------------- ACCUMULATED
ITT INDUSTRIES, INC.(1) SHARES AMOUNT DEFICIT
----------------------- ----------- ------ -----------
<S> <C> <C> <C> <C>
Balance -- January 1, 1993.......... $ 2,313 -- $ -- $--
Net Income.......................... 39 -- -- --
Transfers from ITT Industries,
Inc............................... 431 -- -- --
Translation of financial
statements........................ (18) -- -- --
------ ----------- ------ ---
Balance -- December 31, 1993........ 2,765 -- -- --
Net Income.......................... 74 -- -- --
Transfers from ITT Industries,
Inc............................... 549 -- -- --
Translation of financial
statements........................ (35) -- -- --
------ ----------- ------ ---
Balance -- December 31, 1994........ 3,353 -- -- --
Net Income.......................... 155 -- -- --
Transfers to ITT Industries, Inc.,
net............................... (539) -- -- --
Translation of financial
statements........................ (25) -- -- --
Issuance of common stock in
connection with the
Distribution...................... (2,944) 117,196,370 2,944 --
------ ----------- ------ ---
Balance -- December 19, 1995........ -- 117,196,370 2,944 --
Net Loss............................ -- -- -- (8)
------ ----------- ------ ---
Balance -- December 31, 1995........ $ -- 117,196,370 $2,944 $(8)
====== =========== ====== ===
</TABLE>
- - ---------------
(1) Investments and Advances From ITT Industries, Inc. represents the means by
which ITT was funded by Old ITT prior to the Distribution and consisted of
both equity and interest bearing advances. As of December 19, 1995, ITT was
recapitalized through issuances of its own debt and equity securities.
The accompanying notes to financial statements are an integral part of the above
statement.
F-7
<PAGE> 41
ITT CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
DOLLAR AMOUNTS ARE IN MILLIONS UNLESS OTHERWISE STATED
BASIS OF PRESENTATION
ITT Corporation ("ITT") is the world's largest hotel and gaming company.
ITT's principal lines of business are hotels, gaming and information services.
The hotels segment is comprised of a worldwide hospitality network of over 400
full-service hotels serving three markets: luxury, upscale and mid-price. ITT's
hotel operations are represented on every continent and in nearly every major
world market. ITT's gaming operations are located in several key domestic
jurisdictions. ITT also operates various hotel/casino ventures outside the
United States. ITT's information services segment publishes telephone
directories in many countries outside the United States and provides
post-secondary career education in the United States.
On December 19, 1995 (the "Distribution Date"), the former ITT Corporation
("Old ITT", which has been renamed ITT Industries, Inc.), distributed to its
shareholders of record at the close of business on such date all of the
outstanding shares of common stock of ITT, then a wholly owned subsidiary of Old
ITT (the "Distribution"). In such distribution, holders of common stock of Old
ITT received one share of ITT common stock for every one share of Old ITT common
stock held. In connection with such distribution, ITT, which was then named "ITT
Destinations, Inc.", changed its name to ITT Corporation.
These financial statements present the financial position, results of
operations and cash flows of ITT as if it were a separate entity for all periods
presented. Old ITT's historical basis in the assets and liabilities of ITT has
been carried over and all majority-owned subsidiaries have been consolidated.
All material intercompany transactions and balances between ITT and its
subsidiaries have been eliminated.
ITT included many of the corporate functions of Old ITT and provided to Old
ITT centralized systems for legal, accounting, tax, treasury and insurance
services. ITT charged fees for these services to Old ITT and its affiliates (see
"Transactions with Companies Affiliated with ITT Industries"). The net cost to
ITT of providing these services, after allocation to Old ITT and its affiliates,
is $34, $39 and $56 for 1995, 1994 and 1993, respectively. In the opinion of
management, ITT's methods for allocating costs are believed to be reasonable.
However, the net cost of these services to ITT are not necessarily indicative of
the costs that would have been incurred if ITT had been operated as an
unaffiliated entity. It is not practicable to estimate such costs on a
stand-alone basis.
For purposes of governing certain of the ongoing relationships between ITT
and Old ITT after the Distribution and to provide for an orderly transition, ITT
and Old ITT have entered into various agreements including a Distribution
Agreement, Employee Benefits Services and Liability Agreement, Tax Allocation
Agreement and Intellectual Property Transfer and License Agreements. ITT may be
liable to or due reimbursement from Old ITT relating to the resolution of
certain pre-Distribution matters under these agreements.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
ACCOUNTING POLICIES
Revenue Recognition: Generally, revenues are recognized when the services
have been rendered. The following is a description of the composition of
revenues for each of ITT Corporation's business segments:
Hotels Operations: At December 31, 1995 ITT operated 130 hotels under
long-term management agreements. These agreements effectively convey to ITT the
right to use the hotel properties in exchange for payments to the property
owners which are based primarily on the hotels' profitability. Accordingly, ITT
includes the operating results of hotel properties under long-term management
agreements in its
F-8
<PAGE> 42
ITT CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DOLLAR AMOUNTS ARE IN MILLIONS UNLESS OTHERWISE STATED
consolidated financial statements. Revenues related to these hotel properties
were $2.7 billion, $2.6 billion and $2.4 billion for 1995, 1994 and 1993,
respectively, and amounts provided for payments to the property owners for the
use of the hotel properties were $.5 billion, $.5 billion and $.4 billion for
1995, 1994 and 1993, respectively.
Gaming Operations: Casino revenues represent the net win from gaming wins
and losses. Revenues exclude the retail value of rooms, food, beverage,
entertainment and other promotional allowances provided on a complimentary basis
to customers. The estimated retail value of these promotional allowances was
$144, $17 and $-- for the years ended December 31, 1995, 1994 and 1993,
respectively. The estimated cost of such promotional allowances was $99, $11 and
$- for the years ended December 31, 1995, 1994 and 1993, respectively, and has
been included in Costs and Expenses in the accompanying statement of
Consolidated Income.
Revenues and costs and expenses of the Gaming operations are comprised of
the following for the years ended December 31, 1995, 1994 and 1993:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------------
1995 1994 1993
---------------------- ---------------------- ----------------------
COSTS AND COSTS AND COSTS AND
REVENUES EXPENSES REVENUES EXPENSES REVENUES EXPENSES
-------- --------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Gaming......................................... $1,068 $ 535 $165 $ 75 $ 15 $ 12
Rooms.......................................... 101 31 28 12 4 2
Food and beverage.............................. 108 93 22 23 3 3
Other operations............................... 93 105 12 13 2 6
Selling, general and administrative............ -- 191 -- 37 -- 3
Depreciation and amortization.................. -- 92 -- 10 -- 6
Provision for doubtful accounts................ -- 114 -- 48 -- 1
------ ------ ---- ---- --- ---
Total.................................. $1,370 $ 1,161 $227 $ 218 $ 24 $ 33
====== ====== ==== ==== === ===
</TABLE>
Information Services Operations: Revenues for the Directories unit of
Information Services are
comprised of the total value of advertising contracts sold by ITT. Costs and
expenses include remuneration and franchise fees paid to telephone authorities
in places where ITT operates as a publisher of directories or operates as an
agent.
Tuition revenue at ITT Educational Services is recorded on a straight-line
basis over the length of the applicable course. If a student discontinues
training, the revenue related to the remainder of that quarter is recorded with
the amount of refund resulting from the application of federal, state, or
accreditation requirements recorded as an expense.
Cash and Cash Equivalents: ITT considers all highly liquid investments
purchased with an original maturity of three months or less to be cash
equivalents.
Inventories: Inventories, comprised principally of hotel and gaming
supplies, are generally valued at the lower of cost (first-in, first-out) or
market and potential losses from obsolete and slow-moving inventories are
provided for in the current period.
Plant, Property and Equipment: Plant, property and equipment, including
capitalized interest applicable to major project expenditures, are recorded at
cost. ITT normally claims the maximum depreciation deduction allowable for tax
purposes. In general, for financial reporting purposes, depreciation is provided
on a straight-line basis over the useful economic lives of the assets involved
as follows: Buildings and improvements -- primarily 15 to 40 years, Machinery
and equipment -- 2 to 10 years, and Other -- 5 to 40 years. Gains or losses on
sale or retirement of assets are included in income.
Derivative Financial Instruments: ITT uses derivative financial
instruments from time to time, including foreign currency forward contracts
and/or swaps, as a means of hedging exposure to foreign
F-9
<PAGE> 43
ITT CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DOLLAR AMOUNTS ARE IN MILLIONS UNLESS OTHERWISE STATED
currency risks. ITT is an end-user and does not utilize these instruments for
speculative purposes. ITT has strict policies regarding financial stability and
credit standing of its major counterparties.
Forward exchange contracts and foreign currency swaps are accounted for in
accordance with SFAS No. 52. Changes in the spot rate of instruments designated
as hedges of the net investment in a foreign subsidiary are reflected in
Stockholders Equity.
Foreign Currency: Balance sheet accounts are translated at the exchange
rates in effect at each year end and income and expense accounts are translated
at the average rates of exchange prevailing during the year. The national
currencies of foreign operations are generally the functional currencies. Gains
and (losses) from foreign currency transactions are reported currently in costs
and expenses and were insignificant for all periods presented.
Income Tax: Prior to the Distribution, ITT and its subsidiaries were
included in the consolidated U.S. Federal tax return of Old ITT and remitted to
(received from) Old ITT an income tax provision (benefit) computed in accordance
with a tax sharing arrangement. This arrangement generally required that ITT
determine its tax provision (benefit) as if it were filing a separate U.S.
Federal income tax return. However, the agreement allowed ITT to record benefits
of certain tax attributes, primarily foreign tax credits, utilizable on the Old
ITT consolidated tax return, which may not have been available on a separate
company basis.
Subsidiary Stock Issuance: ITT recognizes gains (losses) on sales of
subsidiary stock. For the year ended December 31, 1994, Miscellaneous income
(expense), net includes a gain of $10, pretax, from the sale for 16.7% of the
common stock of ITT Educational Services, Inc.
Goodwill: The excess of cost over the fair value of net assets acquired is
amortized on a straight-line basis over 40 years. Accumulated amortization was
$38, $6 and $3 at December 31, 1995, 1994 and 1993, respectively. ITT
continually reviews goodwill to assess recoverability from future operations
using undiscounted cash flows. Impairments would be recognized in operating
results if a permanent diminution in value is deemed to have occurred.
Earnings Per Share: Earnings per share through the Distribution Date were
computed based upon the number of ITT common shares that were outstanding on the
Distribution Date. Earnings per share from the Distribution Date through
December 31, 1995 were determined based upon the weighted average of common and
common equivalent shares outstanding during the period. For purposes of this
calculation, common equivalent shares were assumed to have been outstanding from
the beginning of 1995.
Reclassifications: Certain amounts in the prior years' financial
statements have been reclassified to conform to the current year presentation.
TRANSACTIONS WITH COMPANIES AFFILIATED WITH ITT INDUSTRIES, INC.
ITT included many of the corporate functions of Old ITT and provided Old
ITT and other affiliates certain centralized systems (see "Basis of
Presentation"). ITT received fees for such services which ranged between 0.5%
and 1% of net sales of the affiliate. Service fee income is recorded in costs
and expenses as earned.
Interest expense was charged to ITT on the portion of its Investments and
Advances from ITT Industries, Inc. which was deemed debt. Interest expense was
charged at 8% and totaled $232, $86 and $13 for the years 1995, 1994 and 1993,
respectively.
ITT was one of the several affiliates participating in the ITT Salaried
Retirement Plan as well as health care and life insurance programs for salaried
employees and retirees sponsored by Old ITT through the time of the Distribution
(see "Employee Benefit Plans").
F-10
<PAGE> 44
ITT CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DOLLAR AMOUNTS ARE IN MILLIONS UNLESS OTHERWISE STATED
ACQUISITIONS
On January 30, 1995, ITT completed a cash tender offer for the outstanding
shares of Caesars World, Inc. ("Caesars") for approximately $1.76 billion
(including expenses directly attributable to the acquisition of approximately
$10). The acquisition was accounted for using the purchase method. Accordingly,
the purchase price was allocated to assets based on their estimated fair values.
The purchase price, including assumed liabilities of $450, exceeded the fair
value of assets acquired by approximately $1.1 billion. Caesars results of
operations are included in Consolidated Income from the date of acquisition.
On March 10, 1995, ITT, in a joint venture with Rainbow Programming
Holdings, Inc., a subsidiary of Cablevision Systems Corporation, completed the
acquisition of the businesses comprising Madison Square Garden ("MSG") for
approximately $1 billion. The acquisition was funded by equity contributions
from the venture partners of approximately $720 and the remainder was financed
through bank debt. ITT's initial investment ($610) is reported using the equity
method as ITT's venture partner is expected to increase its equity investment to
50%. ITT's share of the results of MSG are included in Consolidated Income from
the date of acquisition.
During 1994, ITT completed several acquisitions in its Hotel operations.
The acquisitions were accounted for using the purchase method. The purchase
price of each acquisition was allocated to assets based on their estimated fair
values. The aggregate purchase price, including assumed liabilities of $400,
exceeded the fair value of assets acquired by approximately $200. The results of
operations of these acquisitions are included in Consolidated Income from the
dates of their respective acquisitions.
The following unaudited pro forma summary presents information as if the
acquisitions had occurred at the beginning of the respective periods:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
---------------------
1995 1994
------ ------
<S> <C> <C>
Net revenues................................................................ $6,428 $5,961
Net income.................................................................. $ 132 $ 8
====== ======
Earnings per share.......................................................... $ 1.11 $ 0.07
====== ======
</TABLE>
The pro forma information is not necessarily indicative of the results that
would have occurred had the acquisitions taken place at the beginning of the
respective periods.
RECEIVABLES
Current receivables of $784 and $498 at December 31, 1995 and 1994,
including current maturities of notes receivable, are reported net of allowances
for doubtful accounts of $106 and $55.
Long-term receivables of $150 and $133 at December 31, 1995 and 1994, are
net of allowances for doubtful accounts of $98 and $78, exclude current
maturities of $21 and $126 and approximate fair value.
F-11
<PAGE> 45
ITT CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DOLLAR AMOUNTS ARE IN MILLIONS UNLESS OTHERWISE STATED
PLANT, PROPERTY AND EQUIPMENT
Plant, property and equipment consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1995 1994
------ ------
<S> <C> <C>
Land and improvements....................................................................... $1,178 $ 598
Buildings and improvements.................................................................. 2,311 2,095
Machinery, furniture, fixtures and equipment................................................ 789 505
Construction work in process................................................................ 250 1
Other....................................................................................... 97 164
------ ------
4,625 3,363
Less: Accumulated depreciation and amortization............................................. (646) (481)
------ ------
$3,979 $2,882
====== ======
</TABLE>
INVESTMENTS
Investments consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1995 1994
------ ------
<S> <C> <C>
Equity in Madison Square Garden............................................................. $ 607 $ --
Equity in and advances to other 20-50% owned companies...................................... 261 164
Alcatel Alsthom at cost..................................................................... 834 426
Other investments at cost................................................................... 55 65
------ ------
$1,757 $ 655
====== ======
</TABLE>
Equity in earnings (losses) of unconsolidated subsidiaries accounted for on
the equity basis was $1, $ -- and $(5) in 1995, 1994 and 1993, respectively. At
December 31, 1995 and 1994, the market value of the Alcatel Alsthom stock, which
is restricted through 1997, was approximately $826 and $410, respectively, based
on the quoted market prices. Dividend income from Alcatel Alsthom was $29 in
1995.
RESTRUCTURING
ITT recorded an $80 pretax charge in the 1995 third quarter to restructure
and rationalize headquarter operations and provide for the planned disposal of
non-core assets. These charges related to operations in the Hotels ($51 pretax)
and Information Services ($29 pretax) business segments.
Of the total pretax charges, approximately $28 represents severance and
other related employee termination costs associated with the elimination of
nearly 275 positions worldwide. The employee groups affected included field
sales personnel as well as headquarters and divisional managerial and
administrative staff from a number of disciplines, primarily finance/accounting,
human resources, information technology, operations, purchasing and corporate
development. Of the 275 positions eliminated, approximately 130 employees have
been terminated at a cost of approximately $11 as of December 31, 1995. It is
expected that the majority of the severance costs will be paid by the end of
1996.
The balance of the restructuring charges ($52 pretax) relate primarily to
asset write-offs, lease commitments and termination penalties and reserve
actions in connection with the planned disposal of non-core assets and reduced
facilities utilization. At December 31, 1995, approximately $32 of costs for the
aforementioned items have been charged against this reserve. The balance of the
reserve is expected to be utilized by the end of 1997.
F-12
<PAGE> 46
ITT CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DOLLAR AMOUNTS ARE IN MILLIONS UNLESS OTHERWISE STATED
INCOME TAX
Income tax data is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Pretax income (loss)
U.S.......................................................................... $ 64 $(23) $(34)
Foreign...................................................................... 218 167 153
---- ---- ----
$282 $144 $119
==== ==== ====
Provision (benefit) for income tax*
Current
U.S. Federal................................................................. $(27) $ 36 $(80)
State and local.............................................................. 13 6 6
Foreign...................................................................... 99 73 85
---- ---- ----
85 115 11
---- ---- ----
Deferred
U.S. Federal................................................................. 33 (54) 73
Foreign and other............................................................ (4) (3) (21)
---- ---- ----
29 (57) 52
---- ---- ----
$114 $ 58 $ 63
==== ==== ====
</TABLE>
- - ---------------
* The provision (benefit) for income taxes has been computed in accordance with
a tax sharing agreement between ITT and ITT Industries, Inc. that generally
requires that such provision (benefit) be computed as if the enterprise were a
stand-alone entity. The primary exception to the stand-alone computation
relates to the utilization of foreign tax credits. The agreement allows for
the realization of such credits since they have been utilized by ITT
Industries, Inc. in the consolidated tax return.
No provision was made for U.S. taxes payable on undistributed foreign
earnings amounting to approximately $211 since these amounts are permanently
reinvested.
Deferred income taxes represent the tax effect of the differences between
the book and tax bases of assets and liabilities. The December 31, 1995 and 1994
Consolidated Balance Sheets include net U.S. Federal deferred tax liabilities of
$113 and $10, and net foreign and other deferred tax liabilities of $28 and $29,
respectively.
Deferred tax assets (liabilities) include the following:
<TABLE>
<CAPTION>
1995 1994
----------------------- -----------------------
U.S. FOREIGN U.S. FOREIGN
FEDERAL & OTHER FEDERAL & OTHER
------- --------- ------- ---------
<S> <C> <C> <C> <C>
Employee benefits................................................. $ 33 $ -- $ 49 $ --
Reserve for bad debts............................................. 45 -- 11 --
Plant, property and equipment..................................... (183) (14) (66) (11)
Other............................................................. (8) (14) (4) (18)
----- ---- ----
$(113) $ (28) $ (10) $ (29)
===== ==== ====
</TABLE>
F-13
<PAGE> 47
ITT CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DOLLAR AMOUNTS ARE IN MILLIONS UNLESS OTHERWISE STATED
A reconciliation of the tax provision at the U.S. statutory rate to the
provision for income tax as reported is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Tax provision at U.S. statutory rate............................................... $ 99 $50 $42
Tax on repatriation of foreign earnings............................................ (16) 3 22
Non-deductible goodwill............................................................ 9 -- --
Foreign tax rate differential...................................................... 12 (1 ) (1 )
U.S. state and local income taxes.................................................. 9 4 4
Other.............................................................................. 1 2 (4 )
---- --- ---
Provision for income tax........................................................... $114 $58 $63
==== === ===
</TABLE>
DEBT
Debt consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1995 1994
------ ----
<S> <C> <C>
Bank loans and other short-term............................................. $ 252 $ 28
Long-term................................................................... 3,588 603
------ ----
$3,840 $631
====== ====
</TABLE>
The weighted average interest rate for bank loans and other short-term
borrowings was 10.11% at December 31, 1995 and 8.26% at December 31, 1994 and
their fair values approximated carrying value. The estimated fair value of
long-term debt at December 31, 1995 and 1994 is $3,637 and $605, based on
discounted cash flows using ITT's incremental borrowing rates for similar
arrangements.
ITT maintains lines of credit under which bank loans and other short-term
debt are drawn. In November 1995, ITT entered into two major revolving credit
facilities, effective December 19, 1995, with syndicate banks totaling $3.0
billion (five-year facility of $2.0 billion; 364-day facility of $1.0 billion).
In addition, smaller credit lines are maintained by ITT's foreign subsidiaries.
As of December 31, 1995, ITT had unused credit lines of approximately $3.0
billion, 45% of which supports outstanding commercial paper. As of December 31,
1995, $1,329 of commercial paper has been classified as long-term since ITT
intends to renew or refinance these obligations through 1996 and future periods.
Long-term debt consisted of the following at December 31:
<TABLE>
<CAPTION>
Description 1995 1994
---------------------------------------------------------------------------- ------ ----
<S> <C> <C>
Commercial paper (5.94% weighted average rate).............................. $1,329 $ --
6.25% notes due 2000........................................................ 698 --
6.75% notes due 2005........................................................ 449 --
7.375% debentures due 2015.................................................. 448 --
7.75% debentures due 2025................................................... 148 --
8.875% senior subordinated notes due 2002................................... 150 --
5.9%-10.1% domestic mortgage loans due 1998-2001............................ 151 149
6.2%-14.4% foreign loans due 1996-2009...................................... 204 448
Other....................................................................... 11 6
------ ----
Total....................................................................... 3,588 603
Less current maturities..................................................... 13 3
------ ----
$3,575.. $600
====== ====
</TABLE>
The aggregate maturities of long-term debt, excluding debt discount of $7,
are $13 in 1996, $89 in 1997, $40 in 1998, $10 in 1999, $2,054 in 2000, and
$1,389 thereafter. Assets pledged to secure indebtedness (including mortgage
loans) amounted to $330 as of December 31, 1995.
F-14
<PAGE> 48
ITT CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DOLLAR AMOUNTS ARE IN MILLIONS UNLESS OTHERWISE STATED
EMPLOYEE BENEFIT PLANS
Pension Plans -- ITT and its subsidiaries sponsor numerous pension plans.
The plans are funded with trustees, except in some countries outside the U.S.
where funding is not required. The plans' assets are comprised of a broad range
of domestic and foreign equity securities, fixed income investments and real
estate. Prior to the Distribution, certain employees of ITT participated in the
ITT Salaried Retirement Plan sponsored by Old ITT. Subsequent to the
Distribution, those employees became participants of ITT plans.
Total pension expenses were:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Defined Benefit Plans
Service cost............................................................. $ 19 $ 14 $ 11
Interest cost............................................................ 19 16 15
Return on assets......................................................... (35) (1) (27)
Net amortization and deferral............................................ 17 (14) 13
---- ---- ----
Net periodic pension cost................................................ 20 15 12
Other Pension Cost
Allocated cost of ITT
Salaried Retirement Plan............................................. 3 4 3
Defined contribution (savings) plans..................................... 5 5 5
Other.................................................................... 6 3 3
---- ---- ----
Total Pension Expense............................................ $ 34 $ 27 $ 23
==== ==== ====
</TABLE>
U.S. pension expenses included in the net periodic pension costs in the
table above were $10, $10 and $8 for 1995, 1994 and 1993, respectively.
The following table sets forth the funded status of ITT's pension plans,
amounts recognized in ITT's Consolidated Balance Sheet at December 31, 1995 and
1994, and the principal weighted average assumptions inherent in their
determination:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------
1995 1994
-------------------- --------------------
DOMESTIC FOREIGN DOMESTIC FOREIGN
-------- ------- -------- -------
<S> <C> <C> <C> <C>
Actuarial present value of benefit obligations --
Vested benefit obligation......................................... $ 169 $ 83 $ 101 $ 43
Accumulated benefit obligation.................................... $ 189 $ 88 $ 112 $ 48
==== ==== ==== ====
Projected benefit obligation........................................ $ 257 $ 109 $ 141 $ 65
Plan assets at fair value........................................... 168 82 133 64
---- ---- ---- ----
Projected benefit obligation (in excess of) plan assets............. (89) (27) (8) (1)
Unrecognized net (gain)/loss........................................ 59 (2) 8 (1)
Unrecognized net obligation/(asset)................................. (2) 4 (3) 4
---- ---- ---- ----
Pension asset (liability) recognized in the consolidated balance
sheet............................................................. $ (32) $ (25) $ (3) $ 2
==== ==== ==== ====
Discount rate....................................................... 7.50% 7.08% 8.50% 7.38%
Rate of return on invested assets................................... 9.75% 7.51% 9.75% 7.69%
Salary increase assumption.......................................... 6.00% 5.42% 6.10% 5.38%
==== ==== ==== ====
</TABLE>
For substantially all domestic and foreign plans, the total of assets and
recorded liabilities exceed accumulated benefits.
Investment and Savings Plan -- Employees of ITT have participated in ITT
Industries' Investment and Savings Plans. ITT contributions to the plan are
determined annually and are based, in part, on contributions of participating
employees. The cost of this plan charged to ITT was $5 in 1995, 1994 and 1993.
As part of the Distribution, ITT has established a similar plan. Subsequent to
December 31, 1995,
F-15
<PAGE> 49
ITT CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DOLLAR AMOUNTS ARE IN MILLIONS UNLESS OTHERWISE STATED
ITT employees' balances in the ITT Industries, Inc. plan were transferred to the
newly established ITT plan.
Postretirement Health and Life -- ITT and its subsidiaries provide health
care and life insurance benefits for certain eligible retired employees. ITT has
prefunded a portion of the health care and life insurance obligations through
trust funds where such prefunding can be accomplished on a tax effective basis.
Postretirement health care and life insurance benefits expense was comprised of
the following:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Service cost............................................................................... $ 1 $ 1 $ 1
Interest cost.............................................................................. 2 1 1
Return on assets........................................................................... (2 ) -- --
Net amortization and deferral.............................................................. -- (1 ) (1 )
--- --- ---
Net periodic expense............................................................... $ 1 $ 1 $ 1
=== === ===
</TABLE>
The following table sets forth the funded status of the postretirement
benefit plans other than pensions, amounts recognized in ITT's Consolidated
Balance Sheet at December 31, 1995 and 1994 and the principal weighted average
assumptions inherent in their determination:
<TABLE>
<CAPTION>
1995 1994
----- -----
<S> <C> <C>
Accumulated postretirement benefit obligation.................................................. $ 26 $ 18
Plan assets at fair value...................................................................... 10 7
----- -----
Accumulated postretirement benefit obligation (in excess of) plan assets....................... (16) (11)
Unrecognized net (gain)........................................................................ (2) (4)
Unrecognized past service liability............................................................ (4) (5)
----- -----
Liability recognized in the consolidated balance sheet......................................... $ (22) $ (20)
===== =====
Discount rate.................................................................................. 7.50% 8.50%
Rate of return on invested assets.............................................................. 9.75% 9.75%
Ultimate health care trend rate................................................................ 6.00% 6.00%
===== =====
</TABLE>
The assumed rate of future increases in the per capita cost of health care
(the health care trend rate) was 10% for 1995, decreasing ratably to 6% in the
year 2001. Increasing the table of health care trend rates by 1% per year would
have the effect of increasing the accumulated postretirement benefit obligation
by $1 and the annual expense by $--. To the extent that the actual experience
differs from the inherent assumptions, the effect will be amortized over the
average future service of the covered active employees.
LEASES AND RENTALS
As of December 31, 1995, minimum rental commitments under operating leases
were $62, $56, $52, $46 and $42 for 1996, 1997, 1998, 1999 and 2000,
respectively. For the remaining years, such commitments amounted to $312,
aggregating total minimum lease payments of $570. Rental expenses for operating
leases were $77, $76 and $83 for 1995, 1994 and 1993, respectively.
CAPITAL STOCK
ITT is authorized to issue 50 million shares of preferred stock, none of
which was outstanding at December 31, 1995.
In connection with the Distribution, ITT issued one Series A Participating
Cumulative Preferred Stock Purchase Right (the "Right") for each share of ITT
common stock outstanding. Additionally, Rights will be issued in respect of
common stock subsequently issued until the Rights Distribution Date, as defined,
and, in certain circumstances, with respect to common stock issued after the
Rights Distribution Date. In the event a person or group has acquired, or has
obtained the right to acquire, beneficial ownership of
F-16
<PAGE> 50
ITT CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DOLLAR AMOUNTS ARE IN MILLIONS UNLESS OTHERWISE STATED
more than 15% of the outstanding shares of common stock or certain specified
tender offers occur for more than 15% of the common stock, or in the event ITT
is acquired in a merger or other business combination or certain other specified
events occur, the Right entitles each holder, subject to certain exceptions, to
purchase the number of 1/1,000ths of a share of Series A Participating
Cumulative Preferred Stock of ITT equivalent to the number of shares of ITT
common stock or common stock of the surviving corporation or other specified
entity, as applicable, which have a market value of twice the specified Purchase
Price at the relevant date. The Rights, which do not have voting rights, expire
on the tenth anniversary of the related rights agreement and are redeemable by
ITT at any time at a price of $.01 per Right.
STOCK INCENTIVE PLAN
Concurrent with the Distribution, the Company adopted the 1995 ITT
Corporation Incentive Stock Plan (the "Plan") for key employees. Awards may be
made under the Plan through the year 2005. The Plan provides for the granting of
nonqualified or incentive stock options, stock appreciation rights payable in
stock or cash, performance shares, restricted stock or any combination of the
foregoing.
In connection with the Distribution, ITT granted substitute stock options
to acquire 6,276,596 of the Company's common shares. These substitute options
replaced 2,627,591 options which were outstanding prior to the Distribution. At
December 31, 1995, all of these options were outstanding and 3,414,809 were
exercisable. These substitute options were granted at exercise prices ranging
from $18.00 to $45.53 per share and maintain the same economic value, vesting,
expiration dates and other restrictions, terms and conditions which existed
under Old ITT Incentive Plans prior to the Distribution. In addition to the
stock options noted above, ITT granted 127,401 substitute shares of restricted
stock. These substitute shares replaced 53,334 restricted shares which were
outstanding prior to the Distribution. These shares vest at various dates
through January 1, 2001. None of these shares were vested at December 31, 1995.
Under the Plan the total number of shares available with respect to which
awards may be made shall not exceed 1.5% of the issued and outstanding shares
(including treasury shares) on the last day of each year, plus unused portions
of such limit carried over from prior years. No more than 5,000,000 shares may
be available for incentive stock options and no more than 20% of the total may
be available for awards of restricted stock or performance shares under the
Plan. During 1996, approximately 1,758,000 shares are available for grant in
accordance with the Plan's allotment formula. The Plan limits the award of stock
options to any one person to no more than 10% of the annual limit of available
shares that year.
DERIVATIVE FINANCIAL INSTRUMENTS
ITT has entered into two foreign currency swaps with a major financial
institution to hedge exchange rate exposure on ITT's net investment in a foreign
country. The contractual amounts of these foreign currency swaps at December 31,
1995 and 1994 totaled $250 and mature in 1997. The entire amount hedges dollars
against French francs. The unrealized loss at December 31, 1995 was $36 and the
estimated fair value was a loss of $31. At December 31, 1994, there was no
significant gain or loss on these contracts and the estimated fair value
approximated the recorded amounts. The estimated fair value is the present value
of the change in cash flows that would result from the agreements being replaced
at the year-end market rate for the remaining term of the agreements.
COMMITMENTS AND CONTINGENCIES
In 1994, at the expiration of its contract with the Belgium Telephone
Company ("Belgacom"), ITT Promedia decided to continue publishing its
directories in competition with a newly created Belgacom Directory Services. A
Belgian Royal Decree was issued in July 1994, which required Belgacom to provide
subscriber data information at fair, reasonable and nondiscriminatory tariffs.
ITT Promedia has challenged
F-17
<PAGE> 51
ITT CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DOLLAR AMOUNTS ARE IN MILLIONS UNLESS OTHERWISE STATED
Belgacom's current fee schedule as being unfair, unreasonable and discriminatory
in both the European Commission and in the Commercial Court of Brussels. ITT
Promedia has accrued a fee to Belgacom which it believes is adequate considering
the issues involved. Hearings in the European Commission and the Court are
scheduled for April 1996 with decisions expected by the end of 1996.
ITT and its subsidiaries are involved in various other legal matters, some
of which include claims for substantial sums. Reserves have been established
when the outcome is probable and can be reasonably estimated. While the ultimate
result of claims and litigation cannot be determined, ITT does not expect that
the resolution of all legal matters will have a material adverse effect on its
consolidated results of operations, financial position or cash flow.
ITT has guaranteed certain loans and commitments of various ventures to
which it is a party. These commitments, which in the aggregate were
approximately $290 at December 31, 1995, are not expected to have a material
adverse effect on ITT's consolidated financial position or results of
operations.
F-18
<PAGE> 52
ITT CORORATION AND SUBSIDIARIES
QUARTERLY RESULTS FOR 1995 AND 1994
IN MILLIONS EXCEPT PER SHARE
UNAUDITED
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------------------------
MAR. 31 JUNE 30 SEPT. 30 DEC. 31 YEAR
------- ------- -------- ------- ------
<S> <C> <C> <C> <C> <C>
1995
Revenues.......................................................... $ 1,285 $ 1,697 $1,647 $ 1,717 $6,346
Costs and Expenses................................................ $ 1,219 $ 1,498 $1,510 $ 1,548 $5,775
Net Income........................................................ $ 7 $ 46 $ 50 $ 44 $ 147
Earnings Per Share (Pro Forma through September 30)............... $ .06 $ .39 $ .42 $ .37 $ 1.24
1994
Revenues.......................................................... $ 876 $ 1,240 $1,108 $ 1,536 $4,760
Costs and Expenses................................................ $ 848 $ 1,140 $1,046 $ 1,434 $4,468
Net Income........................................................ $ 8 $ 29 $ 22 $ 15 $ 74
Pro Forma Earnings Per Share...................................... $ .07 $ .24 $ .19 $ .13 $ .63
</TABLE>
BUSINESS SEGMENT INFORMATION
IN MILLIONS
<TABLE>
<CAPTION>
IDENTIFIABLE ASSETS GROSS PLANT ADDITIONS DEPRECIATION
---------------------------- ---------------------- ----------------------
1995 1994 1993 1995 1994 1993 1995 1994 1993
------ ------ ------ ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Hotels............................. $3,685 $3,484 $1,754 $380 $328 $62 $102 $70 $56
Gaming............................. 2,730 345 217 173 108 9 59 6 1
Information Services............... 448 378 371 15 14 15 16 15 14
Dispositions and Other............. -- (17) 7 -- -- -- -- -- --
------ ------ ------ ---- ---- --- ---- --- ---
Total Segments..................... 6,863 4,190 2,349 568 450 86 177 91 71
Other.............................. 1,829 822 1,442 3 4 4 8 8 8
------ ------ ------ ---- ---- --- ---- --- ---
$8,692 $5,012 $3,791 $571 $454 $90 $185 $99 $79
====== ====== ====== ==== ==== === ==== === ===
</TABLE>
HOTELS: Operates a worldwide network of hotels and resorts under the
Sheraton name, including the hotels and resorts in the ITT Sheraton Luxury
Collection.
GAMING: Includes the casino operations of ITT Sheraton Gaming Corporation
and effective January 31, 1995, includes the newly acquired operations of
Caesars. Caesars owns and operates three hotel/casinos in Las Vegas and
Stateline, Nevada, and in Atlantic City, New Jersey. In conjunction with two
other partners, Caesars manages a casino owned by the Ontario government in
Windsor, Canada.
INFORMATION SERVICES: Engages in the publication of telephone directories,
including classified directory services for telephone subscribers in numerous
countries outside the United States, as well as in Puerto Rico and the U.S.
Virgin Islands, and in providing post-secondary career education in the U.S.
"Dispositions and Other" includes the operating results of units sold and
includes World Directories' U.K. and Turkey operations.
"Other" includes non-operating income, corporate expenses and minority
equity. Intercompany revenues, which are priced on an arm's-length basis, are
not material.
GEOGRAPHICAL INFORMATION -- TOTAL SEGMENTS
IN MILLIONS
<TABLE>
<CAPTION>
REVENUES OPERATING INCOME IDENTIFIABLE ASSETS
---------------------------- ---------------------- ----------------------------
1995 1994 1993 1995 1994 1993 1995 1994 1993
------ ------ ------ ---- ---- ---- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S........................... $3,393 $2,139 $1,723 $245 $ 75 $ 21 $4,345 $2,249 $1,694
Western Europe................ 1,385 1,203 1,154 194 135 157 1,811 1,311 353
Canada and Other.............. 1,568 1,418 1,292 138 107 70 707 630 302
------ ------ ------ ---- ---- ---- ------ ------ ------
Total Segments................ $6,346 $4,760 $4,169 $577 $317 $248 $6,863 $4,190 $2,349
====== ====== ====== ==== ==== ==== ====== ====== ======
</TABLE>
F-19
<PAGE> 53
SCHEDULE II
ITT CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
IN MILLIONS
<TABLE>
<CAPTION>
ADDITIONS (DEDUCTIONS)
---------------------------------------------
CHARGED TO WRITE-OFFS/
BALANCE COSTS AND TRANSLATION PAYMENTS/ BALANCE
DESCRIPTION JANUARY 1 EXPENSES ADJUSTMENT OTHER DECEMBER 31
- - -------------------------------------- ------------- ------------- ------------- ------------- -----------------
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1995
Trade Receivables -- Allowance for
doubtful accounts................... $ 55 $ 132 $ 1 $ (82) $ 106
Notes Receivable -- Allowance for
doubtful accounts................... 78 -- -- 20 98
Accumulated depreciation of plant,
property and equipment.............. 481 185 9 (29)(1) 646
YEAR ENDED DECEMBER 31, 1994
Trade Receivables -- Allowance for
doubtful accounts................... $ 38 $ 63 $ 3 $ (49) $ 55
Notes Receivable -- Allowance for
doubtful accounts................... 76 6 -- (4) 78
Accumulated depreciation of plant,
property and equipment.............. 353 99 -- 29(2) 481
YEAR ENDED DECEMBER 31, 1993
Trade Receivables -- Allowance for
doubtful accounts................... $ 52 $ 21 $ (3) $ (32) $ 38
Notes Receivable -- Allowance for
doubtful accounts................... 72 5 -- (1) 76
Accumulated depreciation of plant,
property and equipment.............. 323 79 (10) (39)(1) 353
</TABLE>
- - ---------------
(1) Principally retirements as well as companies sold during the year.
(2) Primarily reflects the consolidation of properties previously accounted for
on the equity method.
S-1
<PAGE> 54
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OF THE SECURITIES EXCHANGE ACT
OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF
BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, AND BY THE UNDERSIGNED IN THE
CAPACITY INDICATED.
ITT CORPORATION
By JON F. DANSKI
JON F. DANSKI
SENIOR VICE PRESIDENT AND CONTROLLER
(PRINCIPAL ACCOUNTING OFFICER)
March 29, 1996
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- - ------------------------- ---------------
<C> <S> <C>
RAND V. ARASKOG Chairman and Chief Executive and March 29, 1996
RAND V. ARASKOG Director
(PRINCIPAL EXECUTIVE
OFFICER)
ANN N. Executive Vice President and Chief March 29, 1996
REESE Financial Officer
ANN N. REESE
(PRINCIPAL FINANCIAL
OFFICER)
</TABLE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE SIGNATURE TITLE DATE
- - ---------------------- -------------------- --------------- ---------------------- --------- ---------------
<S> <C> <C> <C> <C> <C>
BETTE B. ANDERSON Director March 29, 1996 EDWARD C. MEYER Director March 29, 1996
BETTE B. ANDERSON EDWARD C. MEYER
NOLAN D. ARCHIBALD Director March 29, 1996 BENJAMIN F. PAYTON Director March 29, 1996
NOLAN D. ARCHIBALD BENJAMIN F. PAYTON
ROBERT A. BOWMAN Director, President March 29, 1996 VIN WEBER Director March 29, 1996
ROBERT A. BOWMAN and Chief Operating VIN WEBER
Officer
ROBERT A. BURNETT Director March 29, 1996 MARGITA E. WHITE Director March 29, 1996
ROBERT A. BURNETT MARGITA E. WHITE
PAUL G. KIRK, Director March 29, 1996 KENDRICK R. WILSON Director March 29, 1996
JR. III
PAUL G. KIRK, JR. KENDRICK R. WILSON III
</TABLE>
II-1
<PAGE> 55
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION LOCATION
<C> <S> <C>
3.1 Restated Articles of Incorporation....... Incorporated by reference to Exhibit 3.1
to the Registrant's Amendment No. 1 to
Form 10/A dated November 13, 1995 (File
No. 1-13960).
3.2 Certificate of Amendment of Articles of
Incorporation.......................... Incorporated by reference to Exhibit No.
1 to the Registrant's Current Report on
Form 8-K dated December 22, 1995 (File
No. 1-13960).
3.3 By-Laws.................................. Incorporated by reference to Exhibit 3.2
to the Registrant's Amendment No. 1 for
Form 10/A dated November 13, 1995 (File
No. 1-13960).
4.1 Specimen common share certificate........ Incorporated by reference to Exhibit 4.1
to the Registrant's Amendment No. 1 to
Form 10/A dated November 13, 1995 (File
No. 1-13960).
4.2 Rights Agreement dated as of November 1,
1995 between the Registrant and The
Bank of New York, as Rights Agent...... Incorporated by reference to Exhibit 4.4
to the Registrant's Amendment No. 1 for
Form 10/A dated November 13, 1995 (File
No. 1-13960).
4.3 Form of Certificate of Voting Powers,
Preferences and Relative Participating,
Optional and Other Special Rights and
Qualifications, Limitations or
Restrictions of Series A Participating
Cumulative Preferred Stock............. Incorporated by reference to Exhibit 4.4
(attached as Exhibit A thereto) to the
Registrant's Amendment No. 1 for Form
10/A dated November 13, 1995 (File No.
1-13960).
4.4 Form of Right Certificate................ Incorporated by reference to Exhibit 4.4
(attached as Exhibit B thereto) to the
Registrant's Amendment No. 1 to Form
10/A dated November 13, 1995 (File No.
1-13960).
4.5 Other instruments defining rights of
security holders, including
indentures............................. The Registrant hereby agrees to file with
the Commission a copy of any instrument
defining the rights of long-term debt
holders of the Registrant and its
consolidated subsidiaries upon request
of the Commission.
9. Voting Trust Agreement................... None.
10.1 Distribution Agreement among ITT
Industries, Inc., the Registrant and
ITT Hartford Group, Inc. .............. Filed herewith.
10.2 Intellectual Property License Agreement
between and among ITT Industries, Inc.,
the Registrant and ITT Hartford Group,
Inc. .................................. Filed herewith.
10.3 Trademark Assignment Agreement between
ITT Industries, Inc. and the
Registrant ............................ Filed herewith.
10.4 License Assignment Agreement between ITT
Industries, Inc. and the Registrant ... Filed herewith.
</TABLE>
II-2
<PAGE> 56
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION LOCATION
<C> <S> <C>
10.5 License Assignment Agreement among the
Registrant, ITT Hartford Group, Inc.
and Nutmeg Insurance Company........... Filed herewith.
10.6 License Assignment Agreement among the
Registrant, Nutmeg Insurance Company
and Hartford Fire Insurance Company.... Filed herewith.
10.7 Tax Allocation Agreement among ITT
Industries, Inc., the Registrant and
ITT Hartford Group, Inc. .............. Filed herewith.
10.8 Employee Benefit Services and Liability
Agreement among ITT Industries, Inc.,
the Registrant and ITT Hartford Group,
Inc. .................................. Filed herewith.
10.9 Form of ITT Corporation 1996 Restricted
Stock Plan for Non-Employee
Directors.............................. Incorporated by reference to Exhibit 10.9
to the Registrant's Amendment No. 1 to
Form 10/A dated November 13, 1995 (File
No. 1-13960).
10.10 Form of indemnification agreement with
members of the Board of Directors...... Incorporated by reference to Exhibit
10.10 to the Registrant's Form 10 dated
September 18, 1995 (File No. 1-13960).
10.11 Form of 1995 Corporation Incentive Stock
Plan................................... Incorporated by reference to Exhibit
10.11 to the Registrant's Form 10 dated
September 18, 1995 (File No. 1-13960).
10.12 Form of ITT Corporation Senior Executive
Severance Pay Plan..................... Incorporated by reference to Exhibit
10.12 to the Registrant's Form 10 dated
September 18, 1995 (File No. 1-13960).
10.13 Form of R.V. Araskog employment
agreement.............................. Incorporated by reference to Exhibit
10.13 to the Registrant's Form 10 dated
September 18, 1995 (File No. 1-13960).
10.14 364-Day Competitive Advance and Revolving
Credit Facility Agreement dated as of
November 10, 1995 among the Registrant,
the lenders parties thereto and
Chemical Bank, as administrative
agent.................................. Filed herewith.
10.15 Five-Year Competitive Advance and
Revolving Credit Facility Agreement
dated as of November 10, 1995 among the
Registrant, the lenders parties thereto
and Chemical Bank, as issuing bank and
administrative agent................... Filed herewith.
12 Statement re computation of ratios....... Filed herewith.
13 Annual report to security holders, Form
10-Q or quarterly report to security
holders................................ Not required to be filed.
16 Letter re change in certifying
accountant............................. None.
18 Letter re change in accounting
principles............................. None.
21 Subsidiaries of the Registrant........... Filed herewith.
22 Published report regarding matters
submitted to vote of security
holders................................ Not required to be filed.
23 Consents of experts and counsel
Consent of Arthur Andersen LLP........... Filed herewith.
24 Power of attorney........................ None.
27 Financial data schedule.................. Filed herewith.
99 Additional exhibits...................... None.
</TABLE>
II-3
<PAGE> 1
CONFORMED COPY
DISTRIBUTION AGREEMENT dated as of November 1, 1995, among ITT
CORPORATION, a Delaware corporation ("ITT"), ITT DESTINATIONS, INC., a
Nevada corporation ("ITT Destinations"), and ITT HARTFORD GROUP, INC.,
a Delaware corporation ("ITT Hartford").
WHEREAS, the Board of Directors of ITT has determined that it is
appropriate and desirable to distribute to the holders of shares of Common
Stock, par value $1.00 per share, of ITT (the "ITT Common Stock") all the
outstanding shares of common stock of ITT Destinations (the "ITT Destinations
Common Shares") and all the outstanding shares of common stock of ITT Hartford
(the "ITT Hartford Common Shares");
WHEREAS, each of ITT, ITT Destinations and ITT Hartford has determined
that it is necessary and desirable to allocate and assign responsibility for
those liabilities in respect of the activities of the businesses of such
entities on the Distribution Date (as defined herein) and those liabilities in
respect of other businesses and activities of ITT and its former subsidiaries
and other matters; and
WHEREAS, each of ITT, ITT Destinations and ITT Hartford has determined
that it is necessary and desirable to set forth the principal corporate
transactions required to effect such distribution and to set forth other
agreements that will govern certain other matters following the distribution.
NOW, THEREFORE, in consideration of the mutual agreements, provisions
and covenants contained in this Agreement, the parties hereby agree as follows:
ARTICLE I. DEFINITIONS
SECTION 1.01. General. As used in this Agreement, the following terms
shall have the following meanings
<PAGE> 2
2
(such meanings to be equally applicable to both the singular and plural forms of
the terms defined):
"Action" shall mean any action, suit, arbitration, inquiry, proceeding
or investigation by or before any court, any governmental or other regulatory or
administrative agency, body or commission or any arbitration tribunal.
"Affiliate" shall mean, when used with respect to a specified person,
another person that directly, or indirectly through one or more intermediaries,
controls or is controlled by or is under common control with the person
specified.
"Agent" shall have the meaning as defined in Section 2.01(b).
"Ancillary Agreements" shall mean all of the written agreements,
instruments, understandings, assignments or other arrangements (other than this
Agreement) entered into in connection with the transactions contemplated hereby,
including, without limitation, the Conveyancing and Assumption Instruments, the
Employee Benefits Services and Liability Agreement, the Tax Allocation Agreement
and the Intellectual Property Agreements.
"Claims Administration" shall mean the processing of claims made under
the Company Policies, including, without limitation, the reporting of losses or
claims to insurance carriers (including, without limitation, as a result of
reports provided to ITT Industries by ITT Destinations or ITT Hartford),
management and defense of claims, the settlement of claims (except to the extent
settlement authority remains with another party as contemplated by the second
proviso to Section 7.03(a)) and providing for appropriate releases upon
settlement of claims.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
the Treasury regulations promulgated thereunder, including any successor
legislation.
"Commission" shall have the meaning as defined in Section 4.02(b).
"Company Policies" shall mean all Policies, current or past, which are
or at any time were maintained by or on behalf of or for the benefit or
protection of ITT or any
<PAGE> 3
3
of its predecessors which relate to any Shared Liability, the ITT Industries
Business, the ITT Destinations Business or the ITT Hartford Business, or current
or past directors, officers, employees or agents of any of the foregoing
Businesses, including, without limitation, the Policies identified on Schedule
7.01(a) hereto.
"Conveyancing and Assumption Instruments" shall mean, collectively, the
various agreements, instruments and other documents to be entered into to effect
the transfer of assets and the assumption of Liabilities in the manner
contemplated by this Agreement.
"Distribution" shall mean the distribution on the Distribution Date to
holders of record of shares of ITT Common Stock as of the Distribution Record
Date of (i) the ITT Destinations Common Shares owned by ITT on the basis of one
ITT Destinations Common Share for each outstanding share of ITT Common Stock and
(ii) the ITT Hartford Common Shares owned by ITT on the basis of one ITT
Hartford Common Share for each outstanding share of ITT Common Stock.
"Distribution Date" shall mean such date as may hereafter be determined
by ITT's Board of Directors as the date as of which the Distribution shall be
effected.
"Distribution Record Date" shall mean such date as may hereafter be
determined by ITT's Board of Directors as the record date for the Distribution.
"Effective Time" shall mean 11:59 p.m., New York time, on the
Distribution Date.
"Employee Benefits Services and Liability Agreement" shall mean the
Employee Benefits Services and Liability Agreement dated as of November 1, 1995,
among ITT, ITT Destinations and ITT Hartford.
"Indemnifiable Losses" shall mean any and all losses, liabilities,
claims, damages, demands, costs or expenses (including, without limitation,
reasonable attorneys' fees and any and all out-of-pocket expenses) whatsoever
reasonably incurred in investigating, preparing for or defending against any
Actions or potential Actions.
"Indemnifying Party" shall have the meaning as defined in Section 3.04.
<PAGE> 4
4
"Indemnitee" shall have the meaning as defined in Section 3.04.
"Insurance Administration" shall mean, with respect to each Company
Policy, the accounting for premiums, retrospectively-rated premiums, defense
costs, indemnity payments, deductibles and retentions, as appropriate, under the
terms and conditions of each of the Company Policies, and the distribution of
Insurance Proceeds as contemplated by this Agreement.
"Insurance Proceeds" shall mean those monies (i) received by an insured
from an insurance carrier or (ii) paid by an insurance carrier on behalf of an
insured, in either case net of any applicable premium adjustment,
retrospectively-rated premium, deductible, retention, or cost of reserve paid or
held by or for the benefit of such insured.
"Insured Claims" shall mean those Liabilities that, individually or in
the aggregate, are covered within the terms and conditions of any of the Company
Policies, whether or not subject to deductibles, co-insurance, uncollectability
or retrospectively-rated premium adjustments, but only to the extent that such
Liabilities are within applicable Company Policy limits, including aggregates.
"Intellectual Property Agreements" shall mean the various intellectual
property and licensing agreements entered into in connection with the
Distribution.
"ITT" shall mean ITT Corporation, a Delaware corporation and its
predecessor Maryland corporation.
"ITT Destinations" shall mean ITT Destinations, Inc., a Nevada
corporation.
"ITT Destinations Assets" shall mean, collectively, all the rights and
assets of ITT and its Subsidiaries relating to the ITT Destinations Business,
including, without limitation, (i) the assets included on the consolidated
balance sheet of ITT Destinations as of September 30, 1995, and any assets
acquired by ITT or any of its Subsidiaries relating to the ITT Destinations
Business from October 1, 1995, to the Distribution Date, (ii) all the
outstanding capital stock or other interests of ITT
<PAGE> 5
5
Destinations in Subsidiaries of ITT Destinations and (iii) rights to the Company
Policies to the extent set forth in Article VII hereof.
"ITT Destinations Business" shall mean the businesses of (i) those
business entities listed on Schedule 1.01(b) hereto, (ii) any other division,
Subsidiary or investment of ITT managed or operated as of the date of this
Agreement or any prior time by any such business entity unless such other
division, Subsidiary or investment is listed on Schedule 1.01(a), Schedule
1.01(c) or Schedule 1.01(d) hereto and (iii) business entities acquired or
established by or for ITT Destinations or any of its Subsidiaries after the date
of this Agreement.
"ITT Destinations Indemnitees" shall mean ITT Destinations, each
Affiliate of ITT Destinations, each of their respective directors, officers,
employees and agents and each of the heirs, executors, successors and assigns of
any of the foregoing.
"ITT Destinations Liabilities" shall mean, collectively, (i) all the
Liabilities of ITT Destinations and its Subsidiaries under this Agreement and
any of the Ancillary Agreements and (ii) all the Liabilities of the parties
hereto or their respective Subsidiaries (whenever arising whether prior to, at
or following the Effective Time) arising out of or in connection with or
otherwise relating to the management or conduct before or after the Effective
Time of the ITT Destinations Business (the Liabilities listed in clauses (i) and
(ii) above being collectively referred to as the "True ITT Destinations
Liabilities") and (iii) 33-1/3% of the amount of all Shared Liabilities.
"ITT Hartford" shall mean ITT Hartford Group, Inc., a Delaware
corporation.
"ITT Hartford Assets" shall mean, collectively, all the rights and
assets of ITT and its Subsidiaries relating to the ITT Hartford Business,
including, without limitation, (i) the assets included on the consolidated
balance sheet of ITT Hartford as of September 30, 1995, and any assets acquired
by ITT or any of its Subsidiaries relating to the ITT Hartford Business from
October 1, 1995, to the Distribution Date, (ii) all the outstanding capital
stock or other interests of ITT Hartford in Subsidiaries of ITT Hartford and
(iii) rights to the Company Policies to the extent set forth in Article VII
hereof.
<PAGE> 6
6
"ITT Hartford Business" shall mean the businesses of (i) those business
entities listed on Schedule 1.01(c) hereto, (ii) any other division, Subsidiary
or investment of ITT managed or operated as of the date of this Agreement or any
prior time by any such business entity unless such other division, Subsidiary or
investment is listed on Schedule 1.01(a), Schedule 1.01(b) or Schedule 1.01(d)
hereto and (iii) business entities acquired or established by or for ITT
Hartford or any of its Subsidiaries after the date of this Agreement.
"ITT Hartford Indemnitees" shall mean ITT Hartford, each Affiliate of
ITT Hartford, each of their respective directors, officers, employees and agents
and each of the heirs, executors, successors and assigns of any of the
foregoing.
"ITT Hartford Liabilities" shall mean, collectively, (i) all the
Liabilities of ITT Hartford and its Subsidiaries under this Agreement and any of
the Ancillary Agreements and (ii) all the Liabilities of the parties hereto or
their respective Subsidiaries (whenever arising whether prior to, at or
following the Effective Time) arising out of or in connection with or otherwise
relating to the management or conduct before or after the Effective Time of the
ITT Hartford Business (the Liabilities listed in clauses (i) and (ii) above
being collectively referred to as the "True ITT Hartford Liabilities") and (iii)
33-1/3% of the amount of all Shared Liabilities.
"ITT Industries" shall mean (i) ITT Industries, Inc., an Indiana
corporation and the legal successor to ITT, or (ii) ITT, after giving effect to
the transactions contemplated by Section 2.01 hereof or as if such transactions
had occurred, in each case as the context requires.
"ITT Industries Assets" shall mean, collectively, all the rights and
assets of ITT and its Subsidiaries relating to the ITT Industries Business,
including, without limitation, (i) the assets included on the consolidated
balance sheet of ITT Industries as of September 30, 1995, and any assets
acquired by ITT or any of its Subsidiaries relating to the ITT Industries
Business from October 1, 1995, to the Distribution Date, (ii) all the
outstanding capital stock or other interests of ITT Industries in Subsidiaries
of ITT Industries and (iii) rights to the Company Policies to the extent set
forth in Article VII hereof.
<PAGE> 7
7
"ITT Industries Business" shall mean the businesses of (i) those
business entities listed on Schedule 1.01(a) hereto, (ii) any other division,
Subsidiary or investment of ITT managed or operated as of the date of this
Agreement or any prior time by any such business entity unless such other
division, Subsidiary or investment is listed on Schedule 1.01(b), Schedule
1.01(c) or Schedule 1.01(d) hereto and (iii) business entities acquired or
established by or for ITT Industries or any of its Subsidiaries after the date
of this Agreement.
"ITT Industries Indemnitees" shall mean ITT Industries, each Affiliate
of ITT Industries, each of their respective directors, officers, employees and
agents and each of the heirs, executors, successors and assigns of any of the
foregoing.
"ITT Industries Liabilities" shall mean collectively, (i) all the
Liabilities of ITT Industries and its Subsidiaries under this Agreement and any
of the Ancillary Agreements and (ii) all the Liabilities of the parties hereto
or their respective Subsidiaries (whenever arising whether prior to, at or
following the Effective Time) arising out of or in connection with or otherwise
relating to the management or conduct before or after the Effective Time of the
ITT Industries Business (the Liabilities listed in clauses (i) and (ii) above
being collectively referred to as the "True ITT Industries Liabilities") and
(iii) 33-1/3% of the amount of all Shared Liabilities.
"Liabilities" shall mean any and all debts, liabilities and
obligations, absolute or contingent, matured or unmatured, liquidated or
unliquidated, accrued or unaccrued, known or unknown, whenever arising,
including, without limitation, those debts, liabilities and obligations arising
under any law, rule, regulation, Action, threatened Action, order or consent
decree of any court, any governmental or other regulatory or administrative
agency or commission or any award of any arbitration tribunal, and those arising
under any contract, guarantee, commitment or undertaking.
"person" shall mean any natural person, corporation, business trust,
joint venture, association, company, partnership or government, or any agency or
political subdivision thereof.
"Policies" shall mean insurance policies and insurance contracts of any
kind (other than life and
<PAGE> 8
8
benefits policies or contracts), including, without limitation, primary, excess
and umbrella policies, commercial general liability policies, fiduciary
liability, automobile, aircraft, property and casualty, workers' compensation
and employee dishonesty insurance policies, bonds and self-insurance and captive
insurance company arrangements, together with the rights, benefits and
privileges thereunder.
"Provider" shall have the meaning as defined in Section 5.01.
"Proxy Statement" shall mean the Proxy Statement sent to the holders of
shares of ITT Common Stock in connection with the Distribution, including any
amendment or supplement thereto.
"Recipient" shall have the meaning as defined in Section 5.01.
"Shared Liability" means any Liability of the parties hereto or their
respective Subsidiaries (whether arising prior to, at or following the Effective
Time) which (i) arises out of or is in connection with or otherwise relates to
the management or conduct prior to the Effective Time of the businesses of ITT
and its Subsidiaries and (ii) is not a True ITT Industries Liability, True ITT
Destinations Liability or True ITT Hartford Liability, including, without
limitation, Shared Liabilities listed on Schedule 1.01(d) hereto.
"Subsidiary" shall mean any corporation, partnership or other entity of
which another entity (i) owns, directly or indirectly, ownership interests
sufficient to elect a majority of the Board of Directors (or persons performing
similar functions) (irrespective of whether at the time any other class or
classes of ownership interests of such corporation, partnership or other entity
shall or might have such voting power upon the occurrence of any contingency) or
(ii) is a general partner or an entity performing similar functions (e.g., a
trustee). For purposes of this Agreement, Madison Square Garden, L.P., and
ITT-Dow Jones Television and their respective Subsidiaries are Subsidiaries of
ITT Destinations.
"Tax" shall mean all Federal, state, local and foreign taxes and
assessments, including all interest,
<PAGE> 9
9
penalties and additions imposed with respect to such amounts.
"Tax Allocation Agreement" shall mean the Tax Allocation Agreement
dated as of November 1, 1995, among ITT, ITT Destinations and ITT Hartford.
"Third Party Claim" shall have the meaning as defined in Section 3.05.
"True ITT Destinations Liabilities" shall have the meaning as defined
under "ITT Destinations Liabilities."
"True ITT Hartford Liabilities" shall have the meaning as defined under
"ITT Hartford Liabilities."
"True ITT Industries Liabilities" shall have the meaning as defined
under "ITT Industries Liabilities."
SECTION 1.02. References; Interpretation. References to an "Exhibit" or
to a "Schedule" are, unless otherwise specified, to one of the Exhibits or
Schedules attached to this Agreement, and references to a "Section" are, unless
otherwise specified, to one of the Sections of this Agreement.
ARTICLE II. DISTRIBUTION AND OTHER TRANSACTIONS; CERTAIN COVENANTS
SECTION 2.01. The Distribution and Other Transactions.
(a) Certain Transactions. On or prior to the Distribution Date:
(i) ITT will contribute to ITT Destinations the business entities that
are to comprise the ITT Destinations Business (to the extent they are not owned
by ITT Destinations or any of its Subsidiaries).
(ii) ITT will contribute to ITT Hartford the business entities that are
to comprise the ITT Hartford Business (to the extent they are not owned by ITT
Hartford or any of its Subsidiaries).
(iii) ITT Industries shall, on behalf of itself and its Subsidiaries,
transfer to ITT Destinations effective as of the Effective Time all of ITT
Industries' and its
<PAGE> 10
10
Subsidiaries' right, title and interest in the ITT Destinations Assets. ITT
Industries shall, on behalf of itself and its Subsidiaries, transfer to ITT
Hartford effective as of the Effective Time all of ITT Industries' and its
Subsidiaries' right, title and interest in the ITT Hartford Assets.
(iv) ITT Destinations shall, on behalf of itself and its Subsidiaries,
transfer to ITT Industries effective as of the Effective Time all of ITT
Destinations' and its Subsidiaries' right, title and interest in the ITT
Industries Assets. ITT Destinations shall, on behalf of itself and its
Subsidiaries, transfer to ITT Hartford effective as of the Effective Time all of
ITT Destinations' and its Subsidiaries' right, title and interest in the ITT
Hartford Assets.
(v) ITT Hartford shall, on behalf of itself and its Subsidiaries,
transfer to ITT Destinations effective as of the Effective Time all of ITT
Hartford's and its Subsidiaries' right, title and interest in the ITT
Destinations Assets. ITT Hartford shall, on behalf of itself and its
Subsidiaries, transfer to ITT Industries effective as of the Effective Time all
of ITT Hartford's and its Subsidiaries' right, title and interest in the ITT
Industries Assets.
(b) Stock Dividends to ITT. On or prior to the Distribution Date:
(i) ITT Destinations shall issue to ITT as a stock dividend a number of
ITT Destinations Common Shares as required to effect the Distribution, as
certified by the ITT Corporate Stock Services Department (the "Agent"). In
connection therewith ITT shall deliver to ITT Destinations for cancellation the
share certificate (or certificates) currently held by it representing ITT
Destinations Common Shares and shall receive a new certificate (or certificates)
representing the total number of ITT Destinations Common Shares to be owned by
ITT after giving effect to such stock dividend.
(ii) ITT Hartford shall issue to ITT as a stock dividend a number of ITT
Hartford Common Shares as required to effect the Distribution, as certified by
the Agent. In connection therewith ITT shall deliver to ITT Hartford for
cancellation the share certificate currently held by it representing ITT
Hartford Common Shares and shall receive a new certificate (or certificates)
representing the total
<PAGE> 11
11
number of ITT Hartford Common Shares to be owned by ITT after giving effect to
such stock dividend.
(c) Charters; By-laws. On or prior to the Distribution Date:
(i) All necessary actions shall have been taken to provide for the
adoption of the form of Articles of Incorporation and By-laws filed by ITT
Destinations with the Commission.
(ii) All necessary actions shall have been taken to provide for the
adoption of the form of Articles of Incorporation and By-laws filed by ITT
Hartford with the Commission.
(iii) ITT Destinations shall have filed with the Secretary of State of
Nevada an amendment to its Articles of Incorporation to change its name to "ITT
Corporation".
(d) Directors. On or prior to the Distribution Date, ITT, as the sole
shareholder of ITT Destinations and ITT Hartford, shall have taken all necessary
action to elect, or cause to be elected, to the Board of Directors of ITT
Destinations and the Board of Directors of ITT Hartford the individuals
identified in the Proxy Statement as directors of New ITT (as defined in the
Proxy Statement) and ITT Hartford, respectively.
(e) Certain Licenses and Permits. (i) On or prior to the Distribution
Date or as soon as reasonably practicable thereafter, all transferrable
licenses, permits and authorizations issued by governmental or regulatory
entities which relate to the ITT Destinations Business or the ITT Hartford
Business but which are held in the name of ITT or any of its Subsidiaries (other
than ITT Destinations or ITT Hartford or any of their respective Subsidiaries),
or any of their respective employees, officers, directors, stockholders, agents,
or otherwise, on behalf of ITT Destinations (or its Subsidiaries) or ITT
Hartford (or its Subsidiaries), as applicable, shall be duly and validly
transferred by ITT to ITT Destinations (or its Subsidiaries) or ITT Hartford (or
its Subsidiaries), as applicable.
(ii) On or prior to the Distribution Date or as soon as reasonably
practicable thereafter, all transferrable licenses, permits and authorizations
issued by governmental or regulatory entities which relate to the ITT Industries
<PAGE> 12
12
Business or the ITT Hartford Business but which are held in the name of ITT
Destinations or any of its Subsidiaries, or any of their respective employees,
officers, directors, stockholders, agents, or otherwise, on behalf of ITT
Industries (or its Subsidiaries) or ITT Hartford (or its Subsidiaries), as
applicable, shall be duly and validly transferred by ITT Destinations to ITT
Industries (or its Subsidiaries) or ITT Hartford (or its Subsidiaries), as
applicable.
(iii) On or prior to the Distribution Date or as soon as reasonably
practicable thereafter, all transferrable licenses, permits and authorizations
issued by governmental or regulatory entities which relate to the ITT
Destinations Business or the ITT Industries Business but which are held in the
name of ITT Hartford or any of its Subsidiaries, or any of their respective
employees, officers, directors, stockholders, agents, or otherwise, on behalf of
ITT Destinations (or its Subsidiaries) or ITT Industries (or its Subsidiaries),
as applicable, shall be duly and validly transferred by ITT Hartford to ITT
Destinations (or its Subsidiaries) or ITT Industries (or its Subsidiaries), as
applicable.
(f) Transfer of Agreements. (i) ITT hereby agrees that on or prior to
the Distribution Date or as soon as reasonably practicable thereafter, subject
to the limitations set forth in this Section 2.01(f), it will, and it will cause
its Subsidiaries (other than ITT Destinations or ITT Hartford or any of their
respective Subsidiaries) to, assign, transfer and convey to ITT Destinations or
ITT Hartford, as applicable, all of ITT's or such Subsidiary's respective right,
title and interest in and to any and all agreements that relate exclusively to
the ITT Destinations Business or ITT Hartford Business, as applicable. ITT
Destinations hereby agrees that on or prior to the Distribution Date or as soon
as reasonably practicable thereafter, subject to the limitations set forth in
this Section 2.01(f), it will, and it will cause its Subsidiaries to, assign,
transfer and convey to ITT Industries or ITT Hartford, as applicable, all of ITT
Destinations' or such Subsidiary's respective right, title and interest in and
to any and all agreements that relate exclusively to the ITT Industries Business
or ITT Hartford Business, as applicable. ITT Hartford hereby agrees that on or
prior to the Distribution Date or as soon as reasonably practicable thereafter,
subject to the limitations set forth in this Section 2.01(f), it will, and it
will cause its Subsidiaries
<PAGE> 13
13
to, assign, transfer and convey to ITT Industries or ITT Destinations, as
applicable, all of ITT Hartford's or such Subsidiary's respective right, title
and interest in and to any and all agreements that relate exclusively to the ITT
Industries Business or ITT Destinations Business, as applicable.
(ii) Subject to the provisions of this Section 2.01(f), any agreement
to which any of the parties hereto or any of their Subsidiaries is a party that
inures to the benefit of more than one of the ITT Industries Business, ITT
Destinations Business and ITT Hartford Business shall be assigned in part, on or
prior to the Distribution Date or as soon as reasonably practicable thereafter,
so that each party shall be entitled to the rights and benefits inuring to its
business under such agreement.
(iii) The assignee of any agreement assigned, in whole or in part,
hereunder (an "Assignee") shall assume and agree to pay, perform, and fully
discharge all obligations of the assignor under such agreement or, in the case
of a partial assignment under paragraph (f)(ii), such Assignee's related portion
of such obligations as determined in accordance with the terms of the relevant
agreement, where determinable on the face thereof, and otherwise as determined
in accordance with the practice of the parties prior to the Distribution.
(iv) Notwithstanding anything in this Agreement to the contrary, this
Agreement shall not constitute an agreement to assign any agreement, in whole or
in part, or any rights thereunder if the agreement to assign or attempt to
assign, without the consent of a third party, would constitute a breach thereof
or in any way adversely affect the rights of the Assignee thereof. Until such
consent is obtained, or if an attempted assignment thereof would be ineffective
or would adversely affect the rights of any party hereto so that the Assignee
would not, in fact, receive all such rights, the parties will cooperate with
each other in any arrangement designed to provide for the Assignee the benefits
of, and to permit the Assignee to assume liabilities under, any such agreement.
(g) Consents. The parties hereto shall use their commercially
reasonable efforts to obtain required consents to assignment of agreements
hereunder.
<PAGE> 14
14
(h) Delivery of Shares to Agent. ITT shall deliver to the Agent the
share certificates representing the ITT Destinations Common Shares and the ITT
Hartford Common Shares issued to ITT by ITT Destinations and ITT Hartford,
respectively, pursuant to Section 2.01(b) and shall instruct the Agent to
distribute, on or as soon as practicable following the Distribution Date, such
Common Shares to holders of record of shares of ITT Common Stock on the
Distribution Record Date as further contemplated by, and subject to the
conditions contained in, the Proxy Statement and this Agreement. ITT
Destinations and ITT Hartford shall provide all share certificates that the
Agent shall require in order to effect the Distribution.
(i) Other Transactions. On or prior to the Distribution Date, each of
ITT, ITT Destinations and ITT Hartford shall have consummated those other
transactions in connection with the Distribution that are contemplated by the
Proxy Statement and the ruling request submission by ITT to the Internal Revenue
Service dated June 22, 1995 (as subsequently supplemented), and not specifically
referred to in subparagraphs (a)-(h) above.
SECTION 2.02. Certain Financial and Other Arrangements.
(a) Intercompany Accounts.
(i) Without limiting the terms of Section 2.03, all intercompany
receivables, payables and loans (other than receivables, payables and loans
otherwise specifically provided for in any of the Ancillary Agreements or
hereunder), including, without limitation, in respect of any cash balances, any
cash balances representing deposited checks or drafts for which only a
provisional credit has been allowed or any cash held in any centralized cash
management system, between ITT Destinations or any of its Subsidiaries, on the
one hand, and ITT Industries or any of its Subsidiaries, on the other hand,
shall, as of the Effective Time, be settled, capitalized or converted into
ordinary trade accounts, in each case as may be agreed in writing prior to the
Effective Time by duly authorized representatives of ITT Industries and ITT
Destinations.
(ii) Without limiting the terms of Section 2.03, all intercompany
receivables, payables and loans (other than receivables, payables and loans
otherwise specifically provided for in any of the Ancillary Agreements or
hereunder),
<PAGE> 15
15
including, without limitation, in respect of any cash balances, any cash
balances representing deposited checks or drafts for which only a provisional
credit has been allowed or any cash held in any centralized cash management
system, between ITT Hartford or any of its Subsidiaries, on the one hand, and
ITT Industries or any of its Subsidiaries, on the other hand, shall, as of the
Effective Time, be settled, capitalized or converted into ordinary trade
accounts, in each case as may be agreed in writing prior to the Effective Time
by duly authorized representatives of ITT Industries and ITT Hartford.
(iii) Without limiting the terms of Section 2.03, all intercompany
receivables, payables and loans (other than receivables, payables and loans
otherwise specifically provided for in any of the Ancillary Agreements or
hereunder), including, without limitation, in respect of any cash balances, any
cash balances representing deposited checks or drafts for which only a
provisional credit has been allowed or any cash held in any centralized cash
management system, between ITT Destinations or any of its Subsidiaries, on the
one hand, and ITT Hartford or any of its Subsidiaries, on the other hand, shall,
as of the Effective Time, be settled, capitalized or converted into ordinary
trade accounts, in each case as may be agreed in writing prior to the Effective
Time by duly authorized representatives of ITT Destinations and ITT Hartford.
(b) Operations in Ordinary Course. Each of ITT Industries, ITT
Destinations and ITT Hartford covenants and agrees that, except as otherwise
provided in any Ancillary Agreement, during the period from the date of this
Agreement through the Distribution Date, it will, and will cause any entity that
is a Subsidiary of such party at any time during such period to, conduct its
business in a manner substantially consistent with current and past operating
practices and in the ordinary course, including, without limitation, with
respect to the payment and administration of accounts payable and the
administration of accounts receivable, the purchase of capital assets and
equipment and the management of inventories.
SECTION 2.03. Capital Structure. ITT, ITT Destinations and ITT Hartford
each agrees to use its commercially reasonable efforts to achieve a
capitalization at December 31, 1995 which is substantially the same as its
respective forecasted capitalization under the heading "ITT Industries
Forecasted Capitalization", "New ITT Forecasted
<PAGE> 16
16
Capitalization" or "ITT Hartford Forecasted Capitalization" in ITT's Current
Report on Form 8-K filed with the Commission on November 7, 1995.
SECTION 2.04. Assumption and Satisfaction of Liabilities; Management
Responsibility for Shared Liabilities; Rights and Assets Relating to Shared
Liabilities. (a) Except as otherwise specifically set forth in any Ancillary
Agreement, from and after the Effective Time, (i) ITT Industries shall, and
shall cause its Subsidiaries to, assume, pay, perform and discharge all ITT
Industries Liabilities, (ii) ITT Destinations shall, and shall cause its
Subsidiaries to, assume, pay, perform and discharge all ITT Destinations
Liabilities, and (iii) ITT Hartford shall, and shall cause its Subsidiaries to,
assume, pay, perform and discharge all ITT Hartford Liabilities.
(b) The parties acknowledge that various claims and administrative
matters may arise from time to time in respect of Shared Liabilities and that it
would be in the best interests of the parties hereto to designate responsibility
for managing and administering Shared Liabilities, including, without
limitation, as contemplated by Section 3.05(b) hereto. The parties accordingly
agree that such responsibilities shall be allocated as provided in Schedule
1.01(d) hereto; such responsibilities for Shared Liabilities not covered by
Schedule 1.01(d) shall be as mutually agreed upon among the parties. All costs
and expenses (including, without limitation, reasonable attorneys' fees and all
out-of-pocket expenses whatsoever reasonably incurred) incurred by or on behalf
of the party with such management and administrative responsibility shall be
shared among the parties equally.
(c) The parties hereto shall be entitled to share in any rights and
assets (including, without limitation, recoveries, claims and proceeds of asset
sales) that relate to Shared Liabilities (including, without limitation,
Insurance Proceeds received under Company Policies) equally.
SECTION 2.05. Resignations. (a) ITT Industries shall cause all its
employees to resign, effective as of the Effective Time, from all positions as
officers of ITT Destinations or as officers or directors of any Subsidiary of
ITT Destinations in which they serve. ITT Destinations shall cause all its
employees to resign, effective as of the Effective Time, from all positions as
officers of ITT
<PAGE> 17
17
Industries or as officers or directors of any Subsidiary of ITT Industries in
which they serve.
(b) ITT Industries shall cause all its employees to resign, effective
as of the Effective Time, from all positions as officers of ITT Hartford or as
officers or directors of any Subsidiary of ITT Hartford in which they serve. ITT
Hartford shall cause all its employees to resign, effective as of the Effective
Time, from all positions as officers of ITT Industries or as officers or
directors of any Subsidiary of ITT Industries in which they serve.
(c) ITT Hartford shall cause all its employees to resign, effective as
of the Effective Time, from all positions as officers of ITT Destinations or as
officers or directors of any Subsidiary of ITT Destinations in which they serve.
ITT Destinations shall cause all its employees to resign, effective as of the
Effective Time, from all positions as officers of ITT Hartford or as officers or
directors of any Subsidiary of ITT Hartford in which they serve.
SECTION 2.06. Further Assurances. In case at any time after the
Effective Time any further action is reasonably necessary or desirable to carry
out the purposes of this Agreement and the Ancillary Agreements, the proper
officers of each party to this Agreement shall take all such necessary action.
Without limiting the foregoing, ITT, ITT Destinations and ITT Hartford shall use
their commercially reasonable efforts to obtain all consents and approvals, to
enter into all amendatory agreements and to make all filings and applications
that may be required for the consummation of the transactions contemplated by
this Agreement and the Ancillary Agreements, including, without limitation, all
applicable governmental and regulatory filings.
SECTION 2.07. No Representations or Warranties. Each of the parties
hereto understands and agrees that, except as otherwise expressly provided, no
party hereto is, in this Agreement or in any other agreement or document
contemplated by this Agreement or otherwise, making any representation or
warranty whatsoever, including, without limitation, as to title, value or legal
sufficiency. It is also agreed and understood that all assets either transferred
to or retained by the parties, as the case may be, shall be "as is, where is"
and that (subject to Section 2.06) the party to which such assets are to be
transferred hereunder shall
<PAGE> 18
18
bear the economic and legal risk that any conveyances of such assets shall prove
to be insufficient or that such party's or any of the Subsidiaries' title to any
such assets shall be other than good and marketable and free from encumbrances.
Similarly, each party hereto understands and agrees that no party hereto is, in
this Agreement or in any other agreement or document contemplated by this
Agreement or otherwise, representing or warranting in any way that the obtaining
of any consents or approvals, the execution and delivery of any amendatory
agreements and the making of any filings or applications contemplated by this
Agreement will satisfy the provisions of any or all applicable agreements or the
requirements of any or all applicable laws or judgments, it being agreed and
understood that the party to which any assets are transferred shall bear the
economic and legal risk that any necessary consents or approvals are not
obtained or that any requirements of laws or judgments are not complied with.
SECTION 2.08. Guarantees. (a) Except as otherwise specified in any
Ancillary Agreement, ITT Industries, ITT Destinations and ITT Hartford shall use
their commercially reasonable efforts to have, on or prior to the Distribution
Date, or as soon as practicable thereafter, ITT Industries and any of its
Subsidiaries removed as guarantor of or obligor for any ITT Destinations
Liability or ITT Hartford Liability, including, without limitation, in respect
of those guarantees set forth on Schedule 2.08(a).
(b) Except as otherwise specified in any Ancillary Agreement, ITT
Industries, ITT Destinations and ITT Hartford shall use their commercially
reasonable efforts to have, on or prior to the Distribution Date, or as soon as
practicable thereafter, ITT Destinations and any of its Subsidiaries removed as
guarantor of or obligor for any ITT Industries Liability or ITT Hartford
Liability, including, without limitation, in respect of those guarantees set
forth on Schedule 2.08(b).
(c) Except as otherwise specified in any Ancillary Agreement, ITT
Industries, ITT Destinations and ITT Hartford shall use their commercially
reasonable efforts to have, on or prior to the Distribution Date, or as soon as
practicable thereafter, ITT Hartford and any of its Subsidiaries removed as
guarantor of or obligor for any ITT Industries Liability or ITT Destinations
Liability, including, without limitation, in respect of those guarantees set
forth on Schedule 2.08(c).
<PAGE> 19
19
SECTION 2.09. Witness Services. At all times from and after the
Distribution Date, each of ITT Industries, ITT Destinations and ITT Hartford
shall use their commercially reasonable efforts to make available to each other
party hereto, upon reasonable written request, its and its Subsidiaries'
officers, directors, employees and agents as witnesses to the extent that (i)
such persons may reasonably be required in connection with the prosecution or
defense of any Action in which the requesting party may from time to time be
involved and (ii) there is no conflict in the Action between the requesting
party and ITT Industries, ITT Destinations or ITT Hartford, as applicable. A
party providing witness services to the other party under this Section shall be
entitled to receive from the recipient of such services, upon the presentation
of invoices therefor, payments for such amounts, relating to supplies,
disbursements and other out-of-pocket expenses and direct and indirect costs of
employees who are witnesses, as may be reasonably incurred in providing such
witness services.
SECTION 2.10. Certain Post-Distribution Transactions. (a)(i) ITT
Industries shall comply with and otherwise not take action inconsistent with
each representation and statement made, or to be made, to the Internal Revenue
Service in connection with the request by ITT for a revenue ruling in respect of
the Distribution or to ITT's outside tax counsel in connection with such firm's
rendering an opinion to ITT, ITT Destinations and ITT Hartford as to certain tax
aspects of the Distribution and (ii) until one year after the Distribution Date,
ITT Industries will maintain its status as a company engaged in the active
conduct of a trade or business, as defined in Section 355(b) of the Code.
(b)(i) ITT Destinations shall comply with and otherwise not take action
inconsistent with each representation and statement made, or to be made, to the
Internal Revenue Service in connection with the request by ITT for a revenue
ruling in respect of the Distribution or to ITT's outside tax counsel in
connection with such firm's rendering an opinion to ITT, ITT Destinations and
ITT Hartford as to certain tax aspects of the Distribution and (ii) until one
year after the Distribution Date, ITT Destinations will maintain its status as a
company engaged in the active conduct of a trade or business, as defined in
Section 355(b) of the Code.
<PAGE> 20
20
(c)(i) ITT Hartford shall comply with and otherwise not take action
inconsistent with each representation and statement made, or to be made, to the
Internal Revenue Service in connection with the request by ITT for a revenue
ruling in respect of the Distribution or to ITT's outside tax counsel in
connection with such firm's rendering an opinion to ITT, ITT Destinations and
ITT Hartford as to certain tax aspects of the Distribution and (ii) until one
year after the Distribution Date, ITT Hartford will maintain its status as a
company engaged in the active conduct of a trade or business, as defined in
Section 355(b) of the Code.
SECTION 2.11. Directors and Officers Liability Insurance. ITT
Industries agrees that, from and after the Effective Time to the seventh
anniversary of the Distribution Date, it will maintain in full force and effect
the Company Policy numbered 16 on Schedule 7.01(a) hereto (or, through the
purchase of extended discovery, the full benefits and coverage of such Company
Policy) and shall not amend the terms of such Policy in a manner adverse to any
persons covered by such insurance. The provisions of this Section 2.11 are
intended for the benefit of, and shall be enforceable by, each of the persons
covered by the Company Policy numbered 16 on Schedule 7.01(a) hereto.
SECTION 2.12. Insurance. Except as contemplated by Article VII and
Section 2.11 hereof, any and all coverage of ITT Destinations, ITT Hartford and
their respective Subsidiaries under Company Policies has terminated or will
terminate no later than the Effective Time (and will not be replaced by ITT).
SECTION 2.13. Transfers Not Effected Prior to the Distribution;
Transfers Deemed Effective as of the Distribution Date. To the extent that any
transfers contemplated by this Article II shall not have been consummated on or
prior to the Distribution Date, the parties shall cooperate to effect such
transfers as promptly following the Distribution Date as shall be practicable.
Nothing herein shall be deemed to require the transfer of any assets or the
assumption of any Liabilities which by their terms or operation of law cannot be
transferred; provided, however, that the parties hereto and their respective
Subsidiaries shall cooperate to seek to obtain any necessary consents or
approvals for the transfer of all assets and Liabilities contemplated to be
transferred pursuant to this Article II. In the event that any such transfer of
assets or Liabilities has not been consummated, from and after the Distribution
<PAGE> 21
21
Date the party retaining such asset or Liability shall hold such asset in trust
for the use and benefit of the party entitled thereto (at the expense of the
party entitled thereto) or retain such Liability for the account of the party by
whom such Liability is to be assumed pursuant hereto, as the case may be, and
take such other action as may be reasonably requested by the party to whom such
asset is to be transferred, or by whom such Liability is to be assumed, as the
case may be, in order to place such party, insofar as is reasonably possible, in
the same position as would have existed had such asset or Liability been
transferred as contemplated hereby. As and when any such asset or Liability
becomes transferable, such transfer shall be effected forthwith. The parties
agree that, as of the Distribution Date, each party hereto shall be deemed to
have acquired complete and sole beneficial ownership over all of the assets,
together with all rights, powers and privileges incident thereto, and shall be
deemed to have assumed in accordance with the terms of this Agreement all of the
Liabilities, and all duties, obligations and responsibilities incident thereto,
which such party is entitled to acquire or required to assume pursuant to the
terms of this Agreement.
SECTION 2.14. Ancillary Agreements. Prior to the Distribution Date,
each of ITT Industries, ITT Destinations and ITT Hartford shall enter into,
and/or (where applicable) shall cause their respective Subsidiaries to enter
into, the Ancillary Agreements and any other agreements in respect of the
Distribution reasonably necessary or appropriate in connection with the
transactions contemplated hereby and thereby.
ARTICLE III. INDEMNIFICATION
SECTION 3.01. Indemnification by ITT Industries. Except as otherwise
specifically set forth in any provision of this Agreement or of any Ancillary
Agreement, ITT Industries shall indemnify, defend and hold harmless the ITT
Destinations Indemnitees and the ITT Hartford Indemnitees from and against any
and all Indemnifiable Losses of the ITT Destinations Indemnitees and the ITT
Hartford Indemnitees, respectively, arising out of, by reason of or otherwise in
connection with (i) the ITT Industries Liabilities or (ii) the breach by ITT
Industries of any provision of this Agreement or any Ancillary Agreement.
<PAGE> 22
22
SECTION 3.02. Indemnification by ITT Destinations. Except as otherwise
specifically set forth in any provision of this Agreement or of any Ancillary
Agreement, ITT Destinations shall indemnify, defend and hold harmless the ITT
Industries Indemnitees and the ITT Hartford Indemnitees from and against any and
all Indemnifiable Losses of the ITT Industries Indemnitees and the ITT Hartford
Indemnitees, respectively, arising out of, by reason of or otherwise in
connection with (i) the ITT Destinations Liabilities or (ii) the breach by ITT
Destinations of any provision of this Agreement or any Ancillary Agreement.
SECTION 3.03. Indemnification by ITT Hartford. Except as otherwise
specifically set forth in any provision of this Agreement or of any Ancillary
Agreement, ITT Hartford shall indemnify, defend and hold harmless the ITT
Industries Indemnitees and the ITT Destinations Indemnitees from and against any
and all Indemnifiable Losses of the ITT Industries Indemnitees and the ITT
Destinations Indemnitees, respectively, arising out of, by reason of or
otherwise in connection with (i) the ITT Hartford Liabilities or (ii) the breach
by ITT Hartford of any provision of this Agreement or any Ancillary Agreement.
SECTION 3.04. Limitations on Indemnification Obligations. The amount
that any party (an "Indemnifying Party") is or may be required to pay to any
other person (an "Indemnitee") pursuant to Section 3.01, Section 3.02 or Section
3.03, as applicable, shall be reduced (retroactively or prospectively) by any
Insurance Proceeds or other amounts actually recovered by or on behalf of such
Indemnitee in respect of the related Indemnifiable Loss. If an Indemnitee shall
have received the payment required by this Agreement from an Indemnifying Party
in respect of an Indemnifiable Loss and shall subsequently actually receive
Insurance Proceeds or other amounts in respect of such Indemnifiable Loss, then
such Indemnitee shall pay to such Indemnifying Party a sum equal to the amount
of such Insurance Proceeds or other amounts actually received, up to the
aggregate amount of any payments received from such Indemnifying Party pursuant
to this Agreement in respect of such Indemnifiable Loss.
SECTION 3.05. Procedures for Indemnification. (a) Third Party Claims
(other than in respect of Shared Liabilities). If a claim or demand is made
against an Indemnitee by any person who is not a party to this Agree-
<PAGE> 23
23
ment (a "Third Party Claim") as to which such Indemnitee is entitled to
indemnification pursuant to this Agreement, such Indemnitee shall notify the
Indemnifying Party in writing, and in reasonable detail, of the Third Party
Claim promptly (and in any event within 15 business days) after receipt by such
Indemnitee of written notice of the Third Party Claim; provided, however, that
failure to give such notification shall not affect the indemnification provided
hereunder except to the extent the Indemnifying Party shall have been actually
prejudiced as a result of such failure (except that the Indemnifying Party shall
not be liable for any expenses incurred during the period in which the
Indemnitee failed to give such notice). Thereafter, the Indemnitee shall deliver
to the Indemnifying Party, promptly (and in any event within 15 business days)
after the Indemnitee's receipt thereof, copies of all notices and documents
(including court papers) received by the Indemnitee relating to the Third Party
Claim.
If a Third Party Claim is made against an Indemnitee, the Indemnifying
Party shall be entitled to participate in the defense thereof and, if it so
chooses and acknowledges in writing its obligation to indemnify the Indemnitee
therefor, to assume the defense thereof with counsel selected by the
Indemnifying Party; provided that such counsel is not reasonably objected to by
the Indemnitee. Should the Indemnifying Party so elect to assume the defense of
a Third Party Claim, the Indemnifying Party shall not be liable to the
Indemnitee for legal or other expenses subsequently incurred by the Indemnitee
in connection with the defense thereof. If the Indemnifying Party assumes such
defense, the Indemnitee shall have the right to participate in the defense
thereof and to employ counsel, at its own expense, separate from the counsel
employed by the Indemnifying Party, it being understood that the Indemnifying
Party shall control such defense. The Indemnifying Party shall be liable for the
fees and expenses of counsel employed by the Indemnitee for any period during
which the Indemnifying Party has failed to assume the defense thereof (other
than during the period prior to the time the Indemnitee shall have given notice
of the Third Party Claim as provided above). If the Indemnifying Party so elects
to assume the defense of any Third Party Claim, all of the Indemnitees shall
cooperate with the Indemnifying Party in the defense or prosecution thereof.
If the Indemnifying Party acknowledges in writing liability for a Third
Party Claim, then in no event will the
<PAGE> 24
24
Indemnitee admit any liability with respect to, or settle, compromise or
discharge, any Third Party Claim without the Indemnifying Party's prior written
consent; provided, however, that the Indemnitee shall have the right to settle,
compromise or discharge such Third Party Claim without the consent of the
Indemnifying Party if the Indemnitee releases the Indemnifying Party from its
indemnification obligation hereunder with respect to such Third Party Claim and
such settlement, compromise or discharge would not otherwise adversely affect
the Indemnifying Party. If the Indemnifying Party acknowledges in writing
liability for a Third Party Claim, the Indemnitee will agree to any settlement,
compromise or discharge of a Third Party Claim that the Indemnifying Party may
recommend and that by its terms obligates the Indemnifying Party to pay the full
amount of the liability in connection with such Third Party Claim and releases
the Indemnitee completely in connection with such Third Party Claim and that
would not otherwise adversely affect the Indemnitee; provided, however, that the
Indemnitee may refuse to agree to any such settlement, compromise or discharge
if the Indemnitee agrees that the Indemnifying Party's indemnification
obligation with respect to such Third Party Claim shall not exceed the amount
that would be required to be paid by or on behalf of the Indemnifying Party in
connection with such settlement, compromise or discharge.
Notwithstanding the foregoing, the Indemnifying Party shall not be
entitled to assume the defense of any Third Party Claim (and shall be liable for
the fees and expenses of counsel incurred by the Indemnitee in defending such
Third Party Claim) if the Third Party Claim seeks an order, injunction or other
equitable relief or relief for other than money damages against the Indemnitee
which the Indemnitee reasonably determines, after conferring with its counsel,
cannot be separated from any related claim for money damages. If such equitable
relief or other relief portion of the Third Party Claim can be so separated from
that for money damages, the Indemnifying Party shall be entitled to assume the
defense of the portion relating to money damages.
This Section 3.05(a) shall govern all claims under this Article III for
indemnification against Third Party Claims except Third Party Claims in respect
of Shared Liabilities, as to which Section 3.05(b) shall govern.
<PAGE> 25
25
(b) Third Party Claims in Respect of Shared Liabilities. If a Third
Party Claim in respect of a Shared Liability is made against an Indemnitee, such
Indemnitee shall notify the Indemnifying Parties in writing, and in reasonable
detail, of the Third Party Claim promptly (and in any event within 15 business
days) after receipt by such Indemnitee of written notice of the Third Party
Claim; provided, however, that failure to give such notification shall not
affect the indemnification provided hereunder except to the extent an
Indemnifying Party shall have been actually prejudiced as a result of such
failure (except that the Indemnifying Parties shall not be liable for any
expenses incurred during the period in which the Indemnitee failed to give such
notice). Thereafter, the Indemnitee shall deliver to the Indemnifying Parties,
promptly (and in any event within 15 business days) after the Indemnitee's
receipt thereof, copies of all notices and documents (including court papers)
received by the Indemnitee relating to the Third Party Claim.
Each Indemnifying Party shall be entitled to participate in the defense
of such Third Party Claim subject to the following provisions of this paragraph.
Without limiting the terms of Section 3.01, Section 3.02 or Section 3.03 hereof,
the Indemnitee and Indemnifying Parties shall use commercially reasonable
efforts to agree as soon as reasonably practicable upon a party (the "Managing
Party") which shall have management and administrative responsibility in respect
of the Third Party Claim against the Indemnitee unless a party is designated on
Schedule 1.01(d) to have management responsibility for the related Shared
Liability (in which case the party so designated shall be the "Managing Party").
Such management and administrative responsibility shall entail the defense of
such Third Party Claim, negotiation with claimants and potential claimants
(subject to the limitations in the following paragraph) and other reasonably
related activities. If the Indemnifying Parties acknowledge in writing their
respective obligations to indemnify the Indemnitee for the Third Party Claim to
the extent contemplated by this Agreement, and an Indemnifying Party is selected
as the Managing Party, such Indemnifying Party may assume the defense thereof
with counsel selected by such Indemnifying Party; provided that such counsel is
not reasonably objected to by the Indemnitee or any other Indemnifying Party. If
there is a Managing Party and such party conducts the defense of the Third Party
Claim, the legal or other expenses in respect of such Third Party Claim incurred
by or
<PAGE> 26
26
on behalf of any person other than such Managing Party shall not be
Indemnifiable Losses for purposes of this Agreement; provided, however, the
Indemnifying Parties shall be liable for fees and expenses of counsel employed
by the Indemnitee for any period during which an Indemnifying Party, in its
capacity as Managing Party, has failed to assume the defense thereof (other than
during the period prior to the time the Indemnitee shall have given notice of
such Third Party Claim as provided above), but only to the extent contemplated
by the final paragraph of this Section 3.05(b). If there is a Managing Party and
such party conducts the defense of the Third Party Claim, the Managing Party
shall control the defense of such Third Party Claim, although the Indemnitee (if
not the Managing Party) shall have the right to participate in such defense and
to employ counsel, at its own expense, separate from the counsel employed by the
Managing Party. All of the Indemnitees and each Indemnifying Party shall
cooperate with any Managing Party and each other in the defense or prosecution
of such Third Party Claim.
If each of the Indemnifying Parties acknowledges in writing liability
for such Third Party Claim to the extent contemplated by this Agreement, then in
no event will the Indemnitee admit any liability with respect to, or settle,
compromise or discharge, any such Third Party Claim without each of the
Indemnifying Party's prior written consent; provided, however, that the
Indemnitee shall have the right to settle, compromise or discharge such Third
Party Claim without the consent of the Indemnifying Parties if the Indemnitee
releases each of the Indemnifying Parties from their respective indemnification
obligation hereunder with respect to such Third Party Claim and such settlement,
compromise or discharge would not otherwise adversely affect the Indemnifying
Parties. If the Indemnifying Parties acknowledge in writing liability for such
Third Party Claim, an Indemnitee will agree to any settlement, compromise or
discharge of such Third Party Claim that the Managing Party may recommend and
that by its terms obligates the Indemnifying Parties to pay the full amount of
the liability in connection with such Third Party Claim and releases the
Indemnitee completely in connection with such Third Party Claim (or portion
thereof, as applicable) and that would not otherwise adversely affect the
Indemnitee; provided, however, that the Indemnitee may refuse to agree to any
such settlement, compromise or discharge if the Indemnitee agrees that each of
the Indemnifying Party's indemnification obligations with respect to such Third
Party Claim shall not
<PAGE> 27
27
exceed the amount that would be required to be paid by or on behalf of such
Indemnifying Party in connection with such settlement, compromise or discharge.
Notwithstanding the foregoing, an Indemnifying Party shall not be
entitled to assume the defense of such Third Party Claim (and shall be liable
for the fees and expenses of counsel incurred by an Indemnitee in defending such
Third Party Claim to the extent contemplated by this Agreement) if the Third
Party Claim seeks an order, injunction or other equitable relief or relief for
other than money damages against the Indemnitee which the Indemnitee reasonably
determines, after conferring with its counsel, cannot be separated from any
related claim for money damages. If such equitable relief or other relief
portion of the Third Party Claim can be so separated from that for money
damages, an Indemnifying Party shall be entitled to assume the defense of the
portion relating to money damages as contemplated above.
Legal and other expenses incurred in connection with each such Third
Party Claim which are Indemnifiable Losses shall be shared by the parties in the
same proportions in which the related Shared Liability is shared.
SECTION 3.06. Indemnification Payments. Indemnification required by
this Article III shall be made by periodic payments of the amount thereof during
the course of the investigation or defense, as and when bills are received or
loss, liability, claim, damage or expense is incurred.
SECTION 3.07. Other Adjustments. (i) The amount of any Indemnifiable
Loss shall be (x) increased to take into account any net Tax cost actually
incurred by the Indemnitee arising from any payments received from the
Indemnifying Party (grossed up for such increase) and (y) reduced to take
account of any net Tax benefit actually realized by the Indemnitee arising from
the incurrence or payment of any such Indemnifiable Loss. In computing the
amount of such Tax cost or Tax benefit, the Indemnitee shall be deemed to
recognize all other items of income, gain, loss, deduction or credit before
recognizing any item arising from the receipt of any payment with respect to an
Indemnifiable Loss or the incurrence or payment of any Indemnifiable Loss.
<PAGE> 28
28
(ii) In addition to any adjustments required pursuant to Section 3.04
hereof or clause (i) of this Section 3.07, if the amount of any Indemnifiable
Loss shall, at any time subsequent to the payment required by this Agreement, be
reduced by recovery, settlement or otherwise, the amount of such reduction, less
any expenses incurred in connection therewith, shall promptly be repaid by the
Indemnitee to the Indemnifying Party, up to the aggregate amount of any payments
received from such Indemnifying Party pursuant to this Agreement in respect of
such Indemnifiable Loss.
SECTION 3.08. Survival of Indemnities. The obligations of ITT
Industries, ITT Destinations and ITT Hartford under this Article III shall
survive the sale or other transfer by any of them of any assets or businesses or
the assignment by any of them of any Liabilities, with respect to any
Indemnifiable Loss of any Indemnitee related to such assets, businesses or
Liabilities.
ARTICLE IV. ACCESS TO INFORMATION
SECTION 4.01. Provision of Corporate Records.
(a) Unless otherwise specified in the procedures set forth in Schedule
4.03(b) hereto, after the Distribution Date, upon the prior written request by
ITT Destinations or ITT Hartford for specific and identified agreements,
documents, books, records or files including, without limitation, computer
files, microfiche, tape recordings and photographs (collectively, "Records"),
relating to or affecting ITT Destinations or ITT Hartford, as applicable, ITT
Industries shall arrange, as soon as reasonably practicable following the
receipt of such request, for the provision of appropriate copies of such Records
(or the originals thereof if the party making the request has a reasonable need
for such originals) in the possession of ITT Industries or any of its
Subsidiaries, but only to the extent such items are not already in the
possession of the requesting party.
(b) Unless otherwise specified in the procedures set forth in Schedule
4.03(b) hereto, after the Distribution Date, upon the prior written request by
ITT Industries or ITT Hartford for specific and identified Records relating to
or affecting ITT Industries or ITT Hartford, as applicable, ITT Destinations
shall arrange, as soon as reasonably prac-
<PAGE> 29
29
ticable following the receipt of such request, for the provision of appropriate
copies of such Records (or the originals thereof if the party making the request
has a reasonable need for such originals) in the possession of ITT Destinations
or any of its Subsidiaries, but only to the extent such items are not already in
the possession of the requesting party.
(c) Unless otherwise specified in the procedures set forth in Schedule
4.03(b) hereto, after the Distribution Date, upon the prior written request by
ITT Industries or ITT Destinations for specific and identified Records relating
to or affecting ITT Industries or ITT Destinations, as applicable, ITT Hartford
shall arrange, as soon as reasonably practicable following the receipt of such
request, for the provision of appropriate copies of such Records (or the
originals thereof if the party making the request has a reasonable need for such
originals) in the possession of ITT Hartford or any of its Subsidiaries, but
only to the extent such items are not already in the possession of the
requesting party.
SECTION 4.02. Access to Information. (a) Unless otherwise specified in
the procedures set forth in Schedule 4.03(b) hereto, from and after the
Distribution Date, each of ITT Industries, ITT Destinations and ITT Hartford
shall afford to the other and its authorized accountants, counsel and other
designated representatives reasonable access during normal business hours,
subject to appropriate restrictions for classified, privileged or confidential
information, to the personnel, properties, books and records of such party and
its Subsidiaries insofar as such access is reasonably required by the other
party.
(b) For a period of five years following the Distribution Date, each of
ITT Industries, ITT Destinations and ITT Hartford shall provide to the other,
promptly following such time at which such documents shall be filed with the
Securities and Exchange Commission (the "Commission"), all documents that shall
be filed by it and by any of its respective Subsidiaries with the Commission
pursuant to the periodic and interim reporting requirements of the Securities
Exchange Act of 1934, and the rules and regulations of the Commission
promulgated thereunder.
SECTION 4.03. Reimbursement; Other Matters. (a) Except to the extent
otherwise contemplated by any Ancillary Agreement, a party providing Records or
access to
<PAGE> 30
30
information to the other party under this Article IV shall be entitled to
receive from the recipient, upon the presentation of invoices therefor, payments
for such amounts, relating to supplies, disbursements and other out-of-pocket
expenses, as may be reasonably incurred in providing such Records or access to
information.
(b) The parties hereto shall comply with those document retention
policies as shall be set forth in Schedule 4.03(b) hereto or established and
agreed to in writing by their respective authorized officers on or prior to the
Distribution Date in respect of Records and related matters.
SECTION 4.04. Confidentiality. Each of (i) ITT Industries and its
Subsidiaries, (ii) ITT Destinations and its Subsidiaries and (iii) ITT Hartford
and its Subsidiaries shall not use or permit the use of (without the prior
written consent of the other) and shall hold, and shall cause its consultants
and advisors to hold, in strict confidence, all information concerning the other
parties in its possession, its custody or under its control (except to the
extent that (A) such information has been in the public domain through no fault
of such party or (B) such information has been later lawfully acquired from
other sources by such party or (C) this Agreement or any other Ancillary
Agreement or any other agreement entered into pursuant hereto permits the use or
disclosure of such information) to the extent such information (x) relates to
the period up to the Effective Time, (y) relates to any Ancillary Agreement or
(z) is obtained in the course of performing services for the other party
pursuant to any Ancillary Agreement, and each party shall not (without the prior
written consent of the other) otherwise release or disclose such information to
any other person, except such party's auditors and attorneys, unless compelled
to disclose such information by judicial or administrative process or unless
such disclosure is required by law and such party has used commercially
reasonable efforts to consult with the other affected party or parties prior to
such disclosure. To the extent that a party hereto is compelled by judicial or
administrative process to disclose such information under circumstances in which
any evidentiary privilege would be available, such party agrees to assert such
privilege in good faith prior to making such disclosure. Each of the parties
hereto agrees to consult with each relevant other party in connection with any
such judicial or administrative process, including, without limitation, in
determining whether any privilege is
<PAGE> 31
31
available, and further agrees to allow each such relevant party and its counsel
to participate in any hearing or other proceeding (including, without
limitation, any appeal of an initial order to disclose) in respect of such
disclosure and assertion of privilege.
ARTICLE V. ADMINISTRATIVE SERVICES
SECTION 5.01. Performance of Services. Beginning on the Distribution
Date, each party will provide, or cause one or more of its Subsidiaries to
provide, to the other party and its Subsidiaries such services on such terms as
may be agreed upon between (i) ITT Industries (or any of its Subsidiaries) and
ITT Destinations (or any of its Subsidiaries), (ii) ITT Industries (or any of
its Subsidiaries) and ITT Hartford (or any of its Subsidiaries) or (iii) ITT
Destinations (or any of its Subsidiaries) and ITT Hartford (or any of its
Subsidiaries) from time to time in writing. The party that is to provide the
services (the "Provider") will use (and will cause its Subsidiaries to use) its
commercially reasonable efforts to provide such services to the other party (the
"Recipient") and its Subsidiaries in a satisfactory and timely manner and as
further specified in writing by the parties.
SECTION 5.02. Independence. All employees and representatives of the
Provider providing the scheduled services to the Recipient will be deemed for
purposes of all compensation and employee benefits matters to be employees or
representatives of the Provider and not employees or representatives of the
Recipient. In performing such services, such employees and representatives will
be under the direction, control and supervision of the Provider (and not the
Recipient) and the Provider will have the sole right to exercise all authority
with respect to the employment (including, without limitation, termination of
employment), assignment and compensation of such employees and representatives.
SECTION 5.03. Non-exclusivity. Nothing in this Agreement precludes any
party from obtaining, in whole or in part, services of any nature that may be
obtainable from the other parties from its own employees or from providers other
than the other parties.
<PAGE> 32
32
ARTICLE VI. DISPUTE RESOLUTION
In the event of a controversy, dispute or claim arising out of, in
connection with, or in relation to the interpretation, performance,
nonperformance, validity or breach of this Agreement or otherwise arising out
of, or in any way related to this Agreement, including, without limitation, any
claim based on contract, tort, statute or constitution (collectively, "Agreement
Disputes"), the general counsels of the relevant parties shall negotiate in good
faith for a reasonable period of time to settle such Agreement Dispute.
If after such reasonable period such general counsels are unable to
settle such Agreement Dispute (and in any event after 60 days have elapsed from
the time the relevant parties began such negotiations), such Agreement Dispute
shall be determined, at the request of any relevant party, by arbitration
conducted in New York City, before and in accordance with the then-existing
Rules for Commercial Arbitration of the American Arbitration Association (the
"Rules"), and any judgment or award rendered by the arbitrator shall be final,
binding and nonappealable (except upon grounds specified in 9 U.S.C. Section
10(a) as in effect on the date hereof), and judgment may be entered by any state
or Federal court having jurisdiction thereof in accordance with Section 8.19
hereof. Unless the arbitrator otherwise determines, the pre-trial discovery of
the then-existing Federal Rules of Civil Procedure and the then-existing Rules
46 and 47 of the Civil Rules for the United States District Court for the
Southern District of New York shall apply to any arbitration hereunder. Any
controversy concerning whether an Agreement Dispute is an arbitrable Agreement
Dispute, whether arbitration has been waived, whether an assignee of this
Agreement is bound to arbitrate, or as to the interpretation of enforceability
of this Article VI shall be determined by the arbitrator. The arbitrator shall
be a retired or former judge of any United States District Court or Court of
Appeals or such other qualified person as the relevant parties may agree to
designate, provided such individual has had substantial professional experience
with regard to settling sophisticated commercial disputes. The parties intend
that the provisions to arbitrate set forth herein be valid, enforceable and
irrevocable. The designation of a situs or a governing law for this Agreement or
the arbitration shall not be deemed an election to preclude application of the
Federal Arbitration Act, if it would be applicable. In his award the arbitrator
shall allocate, in
<PAGE> 33
33
his discretion, among the parties to the arbitration all costs of the
arbitration, including, without limitation, the fees and expenses of the
arbitrator and reasonable attorneys' fees, costs and expert witness expenses of
the parties. The undersigned agree to comply with any award made in any such
arbitration proceedings that has become final in accordance with the Rules and
agree to the entry of a judgment in any jurisdiction upon any award rendered in
such proceedings becoming final under the Rules. The arbitrator shall be
entitled, if appropriate, to award any remedy in such proceedings, including,
without limitation, monetary damages, specific performance and all other forms
of legal and equitable relief; provided, however, the arbitrator shall not be
entitled to award punitive damages.
ARTICLE VII. INSURANCE
SECTION 7.01. Policies and Rights Included Within Assets. (a) The ITT
Destinations Assets shall include any and all rights of an insured party under
each of the Company Policies set forth on Schedule 7.01(a) hereto and all
predecessor Policies thereto, subject to the terms of such Company Policies and
any limitations or obligations of ITT Destinations contemplated by this Article
VII or Schedule 7.01(a), specifically including rights of indemnity and the
right to be defended by or at the expense of the insurer, with respect to all
claims, suits, actions, proceedings, injuries, losses, liabilities, damages and
expenses incurred or claimed to have been incurred prior to the Distribution
Date by any party in or in connection with the conduct of the ITT Destinations
Business or, to the extent any claim is made against ITT Destinations or any of
its Subsidiaries, the conduct of the ITT Industries Business or the ITT Hartford
Business, and which claims, suits, actions, proceedings, injuries, losses,
liabilities, damages and expenses may arise out of an insured or insurable
occurrence under one or more of such Company Policies; provided, however, that
nothing in this clause shall be deemed to constitute (or to reflect) an
assignment of such Company Policies, or any of them, to ITT Destinations.
(b) The ITT Hartford Assets shall include any and all rights of an
insured party under the Company Policies numbered 16 and 17 on Schedule 7.01(a)
hereto and all predecessor Policies thereto, subject to the terms of such
Company Policies and any limitations or obligations of ITT Hartford contemplated
by this Article VII or
<PAGE> 34
34
Schedule 7.01(a), specifically including rights of indemnity and the right to be
defended by or at the expense of the insurer, with respect to all claims, suits,
actions, proceedings, injuries, losses, liabilities, damages and expenses
incurred or claimed to have been incurred prior to the Distribution Date by any
party in or in connection with the conduct of the ITT Hartford Business or, to
the extent any claim is made against ITT Hartford or any of its Subsidiaries,
the conduct of the ITT Industries Business or the ITT Destinations Business, and
which claims, suits, actions, proceedings, injuries, losses, liabilities,
damages and expenses may arise out of an insured or insurable occurrence under
either such Company Policy; provided, however, that nothing in this clause shall
be deemed to constitute (or to reflect) an assignment of either of such Company
Policies to ITT Hartford.
(c) The ITT Industries Assets shall include any and all rights of a
named additional insured party under Policies where ITT is a named additional
insured party, subject to the terms of such Policies and any limitations or
obligations of ITT contemplated by this Article VII, specifically including
rights of indemnity and the right to be defended by or at the expense of the
insurer, with respect to all claims, suits, actions, proceedings, injuries,
losses, liabilities, damages and expenses incurred or claimed to have been
incurred prior to the Distribution Date by any party in or in connection with
the conduct of the ITT Industries Business or, to the extent any claim is made
against ITT Industries or any of its Subsidiaries, the conduct of the ITT
Destinations Business or the ITT Hartford Business, and which claims, suits,
actions, proceedings, injuries, losses, liabilities, damages and expenses may
arise out of an insured or insurable occurrence under either such Policy;
provided, however, that nothing in this clause shall be deemed to constitute (or
to reflect) an assignment of such Policies to ITT Industries.
SECTION 7.02. Post-Distribution Date Claims. (a) If, subsequent to the
Distribution Date, any person shall assert a claim against ITT Destinations or
any of its Subsidiaries (including, without limitation, where ITT Destinations
or its Subsidiaries are joint defendants with other persons) with respect to any
claim, suit, action, proceeding, injury, loss, liability, damage or expense
incurred or claimed to have been incurred prior to the Distribution Date in or
in connection with the conduct of the ITT Destinations Business or, to the
extent any claim is made
<PAGE> 35
35
against ITT Destinations or any of its Subsidiaries (including, without
limitation, where ITT Destinations or its Subsidiaries are joint defendants with
other persons), the conduct of the ITT Industries Business or the ITT Hartford
Business, and which claim, suit, action, proceeding, injury, loss, liability,
damage or expense may arise out of an insured or insurable occurrence under one
or more of the Company Policies, ITT Industries shall, at the time such claim is
asserted, to the extent any such Policy may require that Insurance Proceeds
thereunder be collected directly by the party against whom the Insured Claim is
asserted, be deemed to designate, without need of further documentation, ITT
Destinations as the agent and attorney-in-fact to assert and to collect any
related Insurance Proceeds under such Company Policy, and shall further be
deemed to assign, without need of further documentation, to ITT Destinations any
and all rights of an insured party under such Company Policy with respect to
such asserted claim, specifically including rights of indemnity and the right to
be defended by or at the expense of the insurer and the right to any applicable
Insurance Proceeds thereunder; provided, however, that nothing in this Section
7.02(a) shall be deemed to constitute (or to reflect) an assignment of the
Company Policies, or any of them, to ITT Destinations; provided further,
however, that, with respect to those Company Policies set forth on Schedule
7.01(a) hereto for which ITT Destinations has payment obligations as reflected
on such Schedule, ITT Destinations and its Subsidiaries shall only have the
rights set forth under this Section 7.02(a) with respect to such Company
Policies if such payment obligations have been satisfied by ITT Destinations at
the relevant time as contemplated by Schedule 7.01(a).
(b) If, subsequent to the Distribution Date, any person shall assert a
claim against ITT Hartford or any of its Subsidiaries (including, without
limitation, where ITT Hartford or its Subsidiaries are joint defendants with
other persons) with respect to any claim, suit, action, proceeding, injury,
loss, liability, damage or expense incurred or claimed to have been incurred
prior to the Distribution Date in or in connection with the conduct of the ITT
Hartford Business or, to the extent any claim is made against ITT Hartford or
any of its Subsidiaries (including, without limitation, where ITT Hartford or
its Subsidiaries are joint defendants with other persons), the conduct of the
ITT Industries Business or the ITT Destinations Business, and which claim, suit,
action, pro-
<PAGE> 36
36
ceeding, injury, loss, liability, damage or expense may arise out of an insured
or insurable occurrence under the Company Policy numbered 16 or 17 on Schedule
7.01(a) hereto, ITT Industries shall, at the time such claim is asserted, to the
extent such Policy may require that Insurance Proceeds thereunder be collected
directly by the party against whom the Insured Claim is asserted, be deemed to
designate, without need of further documentation, ITT Hartford as the agent and
attorney-in-fact to assert and to collect any related Insurance Proceeds under
such Company Policy, and shall further be deemed to assign, without need of
further documentation, to ITT Hartford any and all rights of an insured party
under such Company Policy with respect to such asserted claim, specifically
including rights of indemnity and the right to be defended by or at the expense
of the insurer and the right to any applicable Insurance Proceeds thereunder;
provided, however, that nothing in this Section 7.02(b) shall be deemed to
constitute (or to reflect) an assignment of either of such Company Policies to
ITT Hartford; provided further, however, that, with respect to the Company
Policy numbered 17 on Schedule 7.01(a) hereto, ITT Hartford and its Subsidiaries
shall only have the rights set forth under this Section 7.02(b) with respect to
such Company Policy if the payment obligations of ITT Hartford set forth in
Schedule 7.01(a) with respect to such Policy have been satisfied by ITT Hartford
at the relevant time as contemplated by Schedule 7.01(a).
SECTION 7.03. Administration; Other Matters. (a) Administration. Except
as otherwise provided in Section 7.02 hereof, from and after the Distribution
Date ITT Industries shall be responsible for (i) Insurance Administration of the
Company Policies and (ii) Claims Administration under such Company Policies with
respect to ITT Industries Liabilities, ITT Destinations Liabilities and ITT
Hartford Liabilities; provided that the retention of such responsibilities by
ITT Industries is in no way intended to limit, inhibit or preclude any right to
insurance coverage for any Insured Claim of a named insured under such Policies
as contemplated by the terms of this Agreement; and provided further that ITT
Industries' retention of the administrative responsibilities for the Company
Policies shall not relieve the party submitting any Insured Claim of the primary
responsibility for reporting such Insured Claim accurately, completely and in a
timely manner (it being understood that, as specified in the definitions of
"Claims Administration" and "Insurance Administration", ITT Destinations and ITT
Hartford shall report Insured
<PAGE> 37
37
Claims to the relevant carrier through ITT Industries) or of such party's
authority to settle (within the periods specified in Schedule 7.01(a) in the
cases of the Company Policies numbered 1, 3 and 4 on said Schedule) any such
Insured Claim. ITT Industries may discharge its administrative responsibilities
under this Section 7.03 by contracting for the provision of services by
independent parties. Except as contemplated by Schedule 7.01(a) hereto or this
Agreement, each of the parties hereto shall administer and pay any costs
relating to defending its respective Insured Claims under Company Policies to
the extent such defense costs are not covered under such Policies and shall be
responsible for obtaining or reviewing the appropriateness of releases upon
settlement of its respective Insured Claims under Company Policies. The
disbursements, out-of-pocket expenses and direct and indirect costs of employees
or agents of ITT Industries relating to Claims Administration and Insurance
Administration contemplated by this Section 7.03(a) shall be the responsibility
of ITT Industries, provided that, if such disbursements, out-of-pocket expenses
and direct and indirect costs of employees or agents of ITT Industries shall be
materially in excess of the comparable historical disbursements, out-of-pocket
expenses and direct and indirect costs of employees or agents of ITT, the
relevant parties hereto agree to negotiate in good faith an equitable allocation
of responsibility for such disbursements, out-of-pocket expenses and direct and
indirect costs of employees or agents of ITT Industries.
(b) Access to Specified Policies. Where ITT Destinations Liabilities or
ITT Hartford Liabilities, as applicable, are specifically covered under the
Company Policies set forth on Schedule 7.01(a) hereto numbered 16 or 17 for
periods prior to the Distribution Date, or under either such Company Policy
covering claims made after the Distribution Date with respect to an occurrence
prior to the Distribution Date, then from and after the Distribution Date ITT
Destinations and ITT Hartford may claim coverage for Insured Claims under such
Company Policy as and to the extent that such insurance is available up to the
full extent of the applicable limits of liability of such Company Policy (and
may receive any Insurance Proceeds with respect thereto as contemplated by
Section 7.02 or Section 7.03(d) hereof).
(c) Liability Limitation. Except as specifically contemplated by
lettered items under Schedule 7.01(a), ITT
<PAGE> 38
38
Industries, ITT Destinations and ITT Hartford shall not be liable to one another
for claims not reimbursed by insurers for any reason not within the control of
ITT Industries, ITT Destinations or ITT Hartford, as the case may be, including,
without limitation, coinsurance provisions, deductibles, quota share
deductibles, exhaustion of aggregates, self-insured retentions, bankruptcy or
insolvency of an insurance carrier, Company Policy limitations or restrictions,
any coverage disputes, any failure to timely claim by ITT Industries, ITT
Destinations or ITT Hartford or any defect in such claim or its processing.
(d) Allocation of Insurance Proceeds. Except as otherwise provided in
Section 7.02, Insurance Proceeds received with respect to claims, costs and
expenses under the Company Policies shall be paid to ITT Industries in trust,
which shall thereafter administer the Company Policies by paying the Insurance
Proceeds, as appropriate, to ITT Industries with respect to ITT Industries
Liabilities, to ITT Destinations with respect to ITT Destinations Liabilities,
to ITT Hartford with respect to the ITT Hartford Liabilities and as provided in
Section 2.04(c) with respect to Shared Liabilities. Payment of the allocable
portions of indemnity costs of Insurance Proceeds resulting from such Policies
will be made by ITT Industries to the appropriate party upon receipt from the
insurance carrier. In the event that the aggregate limits on any Company
Policies are exceeded by the aggregate of outstanding Insured Claims by two or
more of the relevant parties hereto, such parties shall agree on an equitable
allocation of Insurance Proceeds based upon their respective bona fide claims.
The parties agree to use commercially reasonable efforts to maximize available
coverage under those Company Policies applicable to it, and to take all
commercially reasonable steps to recover from all other responsible parties in
respect of an Insured Claim to the extent coverage limits under a Company Policy
have been exceeded or would be exceeded as a result of such Insured Claim.
SECTION 7.04. Agreement for Waiver of Conflict and Shared Defense. In
the event that Insured Claims of more than one of the parties hereto exist
relating to the same occurrence, the relevant parties shall jointly defend and
waive any conflict of interest necessary to the conduct of the joint defense.
Nothing in this Section 7.04 shall be
<PAGE> 39
39
construed to limit or otherwise alter in any way the obligations of the parties
to this Agreement, including those created by this Agreement, by operation of
law or otherwise.
SECTION 7.05. Cooperation. The parties agree to use their commercially
reasonable efforts to cooperate with respect to the various insurance matters
contemplated by this Agreement (including, without limitation, in connection
with Policies where ITT is a named additional insured party).
ARTICLE VIII. MISCELLANEOUS
SECTION 8.01. Complete Agreement; Construction. This Agreement,
including the Exhibits and Schedules, and the Ancillary Agreements shall
constitute the entire agreement between the parties with respect to the subject
matter hereof and shall supersede all previous negotiations, commitments and
writings with respect to such subject matter. In the event of any inconsistency
between this Agreement and any Schedule hereto, the Schedule shall prevail.
Notwithstanding any other provisions in this Agreement to the contrary, in the
event and to the extent that there shall be a conflict between the provisions of
this Agreement and the provisions of any Ancillary Agreement, such Ancillary
Agreement shall control.
SECTION 8.02. Ancillary Agreements. This Agreement is not intended to
address, and should not be interpreted to address, the matters specifically and
expressly covered by the Ancillary Agreements.
SECTION 8.03. Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement,
and shall become effective when one or more such counterparts have been signed
by each of the parties and delivered to the other parties.
SECTION 8.04. Survival of Agreements. Except as otherwise contemplated
by this Agreement, all covenants and agreements of the parties contained in this
Agreement shall survive the Distribution Date.
SECTION 8.05. Expenses. Except as otherwise set forth in this Agreement
or any Ancillary Agreement, all costs and expenses incurred on or prior to the
Distribution
<PAGE> 40
40
Date (whether or not paid on or prior to the Distribution Date) in connection
with the preparation, execution, delivery and implementation of this Agreement
and any Ancillary Agreement, the Proxy Statement and the Distribution and the
consummation of the transactions contemplated thereby shall be charged to and
paid by ITT, provided that ITT shall not be responsible for those costs or
expenses incurred by ITT Hartford or ITT Destinations (including, without
limitation, any attorney or financial advisor fees owing to attorneys or
financial advisors retained by ITT Destinations or ITT Hartford). Except as
otherwise set forth in this Agreement or any Ancillary Agreement, each party
shall bear its own costs and expenses incurred after the Distribution Date.
SECTION 8.06. Notices. All notices and other communications hereunder
shall be in writing and hand delivered or mailed by registered or certified mail
(return receipt requested) or sent by any means of electronic message
transmission with delivery confirmed (by voice or otherwise) to the parties at
the following addresses (or at such other addresses for a party as shall be
specified by like notice) and will be deemed given on the date on which such
notice is received:
To ITT Corporation (ITT Industries, Inc.
after the Distribution):
4 West Red Oak Lane
White Plains, NY 10604
Attn: Senior Vice President and General Counsel
To ITT Destinations, Inc. (ITT Corporation
after the Distribution):
1330 Avenue of the Americas
New York, NY 10019
Attn: Executive Vice President
and General Counsel
To ITT Hartford Group, Inc.:
Hartford Plaza
Hartford, CT 06115
Attn: Senior Vice President and General Counsel
<PAGE> 41
41
SECTION 8.07. Waivers. The failure of either party to require strict
performance by the other party of any provision in this Agreement will not waive
or diminish that party's right to demand strict performance thereafter of that
or any other provision hereof.
SECTION 8.08. Amendments. Subject to the terms of Section 8.11 hereof,
this Agreement may not be modified or amended except by an agreement in writing
signed by the parties.
SECTION 8.09. Assignment. This Agreement shall be assignable in whole
in connection with a merger or consolidation or the sale of all or substantially
all the assets of a party hereto so long as the resulting, surviving or
transferee entity assumes all the obligations of the relevant party hereto by
operation of law or pursuant to an agreement in form and substance reasonably
satisfactory to the other parties to this Agreement. Otherwise this Agreement
shall not be assignable, in whole or in part, directly or indirectly, by any
party hereto without the prior written consent of the others, and any attempt to
assign any rights or obligations arising under this Agreement without such
consent shall be void.
SECTION 8.10. Successors and Assigns. The provisions of this Agreement
shall be binding upon, inure to the benefit of and be enforceable by the parties
and their respective permitted successors and permitted assigns.
SECTION 8.11. Termination. This Agreement (including, without
limitation, Section 2.11 and Article III hereof) may be terminated and the
Distribution may be amended, modified or abandoned at any time prior to the
Distribution by and in the sole discretion of ITT without the approval of ITT
Destinations or ITT Hartford or the shareholders of ITT. In the event of such
termination, no party shall have any liability of any kind to any other party or
any other person. After the Distribution, this Agreement may not be terminated
except by an agreement in writing signed by the parties; provided, however, that
Section 2.11 and Article III shall not be terminated or amended after the
Distribution in respect of the third party beneficiaries thereto without the
consent of such persons.
SECTION 8.12. Subsidiaries. Each of the parties hereto shall cause to
be performed, and hereby guarantees the performance of, all actions, agreements
and obligations
<PAGE> 42
42
set forth herein to be performed by any Subsidiary of such party or by any
entity that is contemplated to be a Subsidiary of such party on and after the
Distribution Date.
SECTION 8.13. Third Party Beneficiaries. Except as provided in Section
2.11 relating to directors and officers liability insurance and in Article III
relating to Indemnitees, this Agreement is solely for the benefit of the parties
hereto and their respective Subsidiaries and Affiliates and should not be deemed
to confer upon third parties any remedy, claim, liability, reimbursement, claim
of action or other right in excess of those existing without reference to this
Agreement.
SECTION 8.14. Attorney Fees. Except as contemplated by the third to the
last sentence of Article VI hereof, a party in breach of this Agreement shall,
on demand, indemnify and hold harmless the other parties hereto for and against
all out-of-pocket expenses, including, without limitation, legal fees, incurred
by such other party by reason of the enforcement and protection of its rights
under this Agreement. The payment of such expenses is in addition to any other
relief to which such other party may be entitled hereunder or otherwise.
SECTION 8.15. Title and Headings. Titles and headings to sections
herein are inserted for the convenience of reference only and are not intended
to be a part of or to affect the meaning or interpretation of this Agreement.
SECTION 8.16. Exhibits and Schedules. The Exhibits and Schedules shall
be construed with and as an integral part of this Agreement to the same extent
as if the same had been set forth verbatim herein.
SECTION 8.17. Specific Performance. Each of the parties hereto
acknowledges that there is no adequate remedy at law for failure by such parties
to comply with the provisions of this Agreement and that such failure would
cause immediate harm that would not be adequately compensable in damages, and
therefore agree that their agreements contained herein may be specifically
enforced without the requirement of posting a bond or other security, in
addition to all other remedies available to the parties hereto under this
Agreement.
SECTION 8.18. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE
<PAGE> 43
43
LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS EXECUTED IN AND TO BE
PERFORMED IN THAT STATE.
SECTION 8.19. Consent to Jurisdiction. Without limiting the provisions
of Article VI hereof, each of the parties irrevocably submits to the exclusive
jurisdiction of (a) the Supreme Court of the State of New York, New York County,
and (b) the United States District Court for the Southern District of New York,
for the purposes of any suit, action or other proceeding arising out of this
Agreement or any transaction contemplated hereby. Each of the parties agrees to
commence any action, suit or proceeding relating hereto either in the United
States District Court for the Southern District of New York or if such suit,
action or other proceeding may not be brought in such court for jurisdictional
reasons, in the Supreme Court of the State of New York, New York County. Each of
the parties further agrees that service of any process, summons, notice or
document by U.S. registered mail to such party's respective address set forth
above shall be effective service of process for any action, suit or proceeding
in New York with respect to any matters to which it has submitted to
jurisdiction in this Section 8.19. Each of the parties irrevocably and
unconditionally waives any objection to the laying of venue of any action, suit
or proceeding arising out of this Agreement or the transactions contemplated
hereby in (i) the Supreme Court of the State of New York, New York County, or
(ii) the United States District Court for the Southern District of New York, and
hereby further irrevocably and unconditionally waives and agrees not to plead or
claim in any such court that any such action, suit or proceeding brought in any
such court has been brought in an inconvenient forum.
SECTION 8.20. Severability. In the event any one or more of the
provisions contained in this Agreement should be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein and therein shall not in any way be
affected or impaired thereby. The parties shall endeavor in good-faith
negotiations to replace the invalid, illegal or unenforceable provisions with
valid provisions, the economic effect of which comes as close as possible to
that of the invalid, illegal or unenforceable provisions.
<PAGE> 44
44
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the day and year first above written.
ITT CORPORATION,
by
/s/ D. Travis Engen
-----------------------------------
Name: D. Travis Engen
Title: Executive Vice
President
ITT DESTINATIONS, INC.,
by
/s/ R. S. Ward
-----------------------------------
Name: R. S. Ward
Title: Executive Vice
President, General
Counsel
ITT HARTFORD GROUP, INC.,
by
/s/ Donald R. Frahm
-----------------------------------
Name: Donald R. Frahm
Title: Executive Vice
President
<PAGE> 1
INTELLECTUAL PROPERTY
LICENSE AGREEMENT
INTELLECTUAL PROPERTY LICENSE AGREEMENT ("IP Agreement") dated as of
November 1, 1995 between and among ITT CORPORATION, a Delaware corporation
("ITT Corporation"), ITT DESTINATIONS, INC., a Nevada corporation ("ITT
Destinations"), and ITT HARTFORD GROUP, INC., a Delaware corporation ("ITT
Hartford") (collectively the "Parties").
RECITALS
WHEREAS, in order to carry out the Distribution (as hereinafter
defined) whereby the holders of the shares of common stock of ITT Corporation
will receive all of the outstanding shares of common stock of ITT Destinations
(as hereinafter defined) and all the outstanding shares of common stock of ITT
Hartford (as hereinafter defined), it is necessary to license certain
intellectual property assets and rights between and among the Parties to
provide for the continued conduct of the Parties' respective businesses;
WHEREAS, a series of General Relations Agreements are in effect
between and among ITT Corporation and its Subsidiaries, including ITT
Destinations, ITT Hartford and their Subsidiaries, granting certain rights and
licenses under intellectual property in connection with the conduct of their
respective businesses; and
WHEREAS, the Parties desire that certain rights and licenses under
such intellectual property enjoyed by the Parties and their Subsidiaries prior
to the Distribution Date should continue after the Distribution Date as
specified herein.
NOW, THEREFORE, in consideration of the mutual agreements,
undertakings and covenants herein, the Parties hereby agree as follows:
1
<PAGE> 2
(1)
ARTICLE I. DEFINITIONS
Section 1.01 General. As used in this IP Agreement, the following
terms shall have the following meanings (such meanings to be equally applicable
to both the singular and plural forms of the terms defined):
"Intellectual Property" shall mean and include inventions, invention
disclosures, patents, patent applications, computer programs (including source
code, object code and data), copyrights, copyright registrations, copyright
registration applications, mask works, designs, technical information,
proprietary information, trade secrets, manufacturing processes, formulas,
algorithms, data, and all other kinds of intellectual property protected or
protectable under state, federal or foreign law owned by a Party or its
Subsidiaries as of the Distribution Date, except Trademarks (as hereinafter
defined).
"Distribution Agreement" shall mean the Distribution Agreement to be
entered into by ITT Corporation, ITT Destinations, and ITT Hartford relating to
the distribution of the shares of ITT Destinations and ITT Hartford to the
holders of ITT Corporation Common Stock.
"Distribution Date" shall mean such date as may hereafter be
determined by ITT Corporation's Board of Directors as the date on which the
Distribution shall be effected.
"Effective Time" shall mean 11:59 p.m., New York time, on the
Distribution Date.
"Distribution" shall mean the distribution on the Distribution Date to
holders of record of shares of ITT Corporation Common Stock as of the
Distribution Record Date of (i) the ITT Destinations Common Shares owned by ITT
Corporation on the basis of one ITT Destinations Common Share for each
outstanding share of ITT Corporation Common Stock, and (ii) the ITT Hartford
Common Shares owned by ITT Corporation on the basis of one ITT Hartford Common
Share for each outstanding share of ITT Corporation Common Stock.
2
<PAGE> 3
(1)
"Distribution Record Date" shall mean such date as may hereafter be
determined by ITT Corporation 's Board of Directors as the record date for the
Distribution.
"GRA" shall mean the General Relations Agreements in effect as of the
Distribution Date between and among ITT Corporation and its Subsidiaries,
including ITT Destinations, ITT Hartford and their Subsidiaries, pursuant to
ITT Corporation Administrative Practice 60.3.
"ITT Corporation" shall mean ITT Corporation, a Delaware corporation
and its predecessor Maryland corporation up to the Effective Time (to be merged
thereafter into ITT Indiana, Inc., an Indiana corporation which will be renamed
ITT Industries, Inc.).
"ITT Destinations" shall mean ITT Destinations, Inc., a Nevada
corporation, to be renamed "ITT Corporation" immediately prior to the Effective
Time.
"ITT Destinations Business" shall mean the principal businesses and
operations conducted by ITT Destinations and its Subsidiaries on the
Distribution Date, such businesses being hospitality, entertainment,
information and educational services as specifically described in Exhibit A1
annexed hereto and, in addition, shall also mean the Closely Related Businesses
described in Exhibit A1, provided that ITT Destinations Business does not
include the ITT Industries Business or the ITT Hartford Business.
"ITT Hartford" means ITT Hartford Group, Inc., a Delaware corporation.
"ITT Hartford Business" shall mean the principal businesses and
operations conducted by ITT Hartford and its Subsidiaries on the Distribution
Date, such businesses being the insurance services in the fields of property,
casualty, life and reinsurance as specifically described in Exhibit A2 annexed
hereto and, in addition, shall also mean the Closely Related Businesses
described in Exhibit A2, provided that ITT Hartford
3
<PAGE> 4
(1)
Business does not include the ITT Industries Business or the ITT Destinations
Business.
"ITT Industries" shall mean (i) ITT Industries, Inc., an Indiana
corporation and the legal successor after the Distribution to ITT Corporation,
or (ii) ITT Corporation, after giving legal effect to the transactions
contemplated by Section 2.01 of the Distribution Agreement or as if such
transactions had occurred, in each case as the context requires.
"ITT Industries Business" shall mean the principal businesses and
operations conducted by ITT Industries and its Subsidiaries on the Distribution
Date, such businesses being the design, manufacture, sale, and servicing of
automotive products, defense products, electronic component products, fluid
handling products, and management services for military and space satellite
launch facilities as specifically described in Exhibit A3 annexed hereto and,
in addition, shall also mean the Closely Related Businesses described in
Exhibit A3, provided that ITT Industries Business does not include ITT
Destinations Business or ITT Hartford Businesses.
"Proxy Statement" shall mean the Proxy Statement sent to the holders
of shares of ITT Corporation Common Stock in connection with the Distribution,
including any amendment or supplement thereto.
"Subsidiary", with respect to any Party, shall mean any corporation,
partnership, joint venture or other entity of which such Party, directly or
indirectly, owns an interest sufficient to elect a majority of the Board of
Directors (or persons performing similar functions) (irrespective of whether at
the time any other class or classes of ownership interests of such corporation,
partnership or other entity shall or might have such voting power upon the
occurrence of any contingency). Irrespective of this definition and for
purposes of this IP Agreement, Madison Square Garden, L.P., and ITT-Dow Jones
Television and their respective Subsidiaries are Subsidiaries of ITT
Destinations.
4
<PAGE> 5
(1)
"Trademarks" shall mean and include trademarks, trade names, company
names, service marks, trade dress, the registrations thereof, the applications
therefor and the goodwill associated therewith.
ARTICLE II. OWNERSHIP OF INTELLECTUAL PROPERTY ASSETS
Section 2.01 The Parties agree that ITT Hartford and the ITT Hartford
Subsidiaries own all right, title, and interest, including the right to sue and
collect past and future damages, in any Intellectual Property which: (i)
originated with ITT Hartford or the ITT Hartford Subsidiaries in the conduct of
ITT Hartford Business; (ii) was obtained by, or exclusively or primarily for,
ITT Hartford or the ITT Hartford Subsidiaries for the conduct of ITT Hartford
Business; (iii) was developed exclusively or primarily for ITT Hartford or the
ITT Hartford Subsidiaries for the conduct of ITT Hartford Business; (iv) arose
from funding by, or exclusively or primarily for the benefit of, ITT Hartford
or the ITT Hartford Subsidiaries in the conduct of ITT Hartford Business; or,
(v) as of the Distribution Date is used or held for use exclusively by ITT
Hartford or the ITT Hartford Subsidiaries solely for the conduct of ITT
Hartford Business. If a conflict exists
5
<PAGE> 6
(1)
between any of the subsections (i) through (iv) of this Section on the one hand
and subsection (v) of this Section on the other hand, then subsection (v) shall
prevail.
Section 2.02 The Parties agree that ITT Destinations and the ITT
Destinations Subsidiaries own all right, title, and interest, including the
right to sue and collect past and future damages, in any Intellectual Property
which: (i) originated with ITT Destinations or the ITT Destinations
Subsidiaries in the conduct of ITT Destinations Business; (ii) was obtained by,
or exclusively or primarily for, ITT Destinations or the ITT Destinations
Subsidiaries for the conduct of ITT Destinations Business; (iii) was developed
exclusively or primarily for ITT Destinations or the ITT Destinations
Subsidiaries for the conduct of ITT Destinations Business; (iv) arose from
funding by, or exclusively or primarily for the benefit of, ITT Destinations or
the ITT Destinations Subsidiaries in the conduct of ITT Destinations Business;
or, (v) as of the Distribution Date is used or held for use exclusively by ITT
Destinations or the ITT Destinations Subsidiaries solely for the conduct of ITT
Destinations Business. If a conflict exists between any of the subsections (i)
through (iv) of this Section on the one hand and subsection (v) of this Section
on the other hand, then subsection (v) shall prevail.
Section 2.03 The Parties agree that ITT Industries and the ITT
Industries Subsidiaries own all right, title, and interest, including the right
to sue and collect past and future damages, in any Intellectual Property which:
(i) originated with ITT Industries or the ITT Industries Subsidiaries in the
conduct of ITT Industries Business; (ii) was obtained by, or exclusively or
primarily for, ITT Industries or the ITT Industries Subsidiaries for the
conduct of ITT Industries Business; (iii) was developed exclusively or
primarily for ITT Industries or the ITT Industries Subsidiaries for the conduct
of ITT Industries Business; (iv) arose from funding by, or exclusively or
primarily for the benefit of, ITT Industries or the ITT Industries Subsidiaries
in the conduct of ITT Industries Business; or, (v) as of the Distribution Date
is used or held for use exclusively by ITT Industries or the ITT Industries
Subsidiaries solely for the conduct of ITT Industries Business. If a conflict
exists between any of the subsections (i) through (iv) of this Section on the
one hand and subsection (v) of this Section on the other hand, then subsection
(v) shall prevail.
Section 2.04 Except as otherwise specifically provided for in this IP
Agreement or the Distribution Agreement, the Parties agree that no Party shall
be obligated to provide any technical assistance, or to transfer any technical
information or documentation associated therewith.
Section 2.05 The confirmation of ownership of the Intellectual
Property rights provided for under Sections 2.01-2.03 are subject to all
pre-existing third party rights, obligations and restrictions as of the
Distribution Date.
ARTICLE III. INTELLECTUAL PROPERTY LICENSES
Section 3.01 ITT Industries, on behalf of itself and the ITT
Industries Subsidiaries, hereby grants as of the Distribution Date to ITT
Hartford, ITT Destinations and their respective Subsidiaries a non-assignable,
worldwide,
6
<PAGE> 7
(1)
perpetual, paid up, royalty free, non-exclusive license, without right to grant
sublicenses except to future Subsidiaries and except as provided in Section
3.06, under Intellectual Property owned by ITT Industries or the ITT Industries
Subsidiaries as of the Distribution Date to manufacture, have manufactured,
use, offer to sell, and sell any and all methods, processes, compositions, and
products and offer and provide any services in connection with all fields of
activity other than the fields of activity of the ITT Industries Business.
Section 3.02 ITT Destinations, on behalf of itself and the ITT
Destinations Subsidiaries, hereby grants as of the Distribution Date to ITT
Industries, ITT Hartford and their Subsidiaries a non-assignable, worldwide,
perpetual, paid up, royalty free, non-exclusive license, without right to grant
sublicenses except to future Subsidiaries and except as provided in Section
3.06, under Intellectual Property owned by ITT Destinations or the ITT
Destinations Subsidiaries as of the Distribution Date to manufacture, have
manufactured, use, offer to sell, and sell any and all methods, processes,
compositions, and products and offer and provide any services in connection
with all fields of activity other than the fields of activity of the ITT
Destinations Business.
Section 3.03 ITT Hartford, on behalf of itself and the ITT Hartford
Subsidiaries, hereby grants as of the Distribution Date to ITT Industries, ITT
Destinations and their Subsidiaries a non-assignable, worldwide, perpetual,
paid up, royalty free, non- exclusive license, without right to grant
sublicenses except to future Subsidiaries and except as provided in Section
3.06, under Intellectual Property owned by ITT Hartford or the ITT Hartford
Subsidiaries as of the Distribution Date to manufacture, have manufactured,
use, offer to sell, and sell any and all methods, processes, compositions, and
products and offer and provide any services in connection with all fields of
activity other than the fields of activity of the ITT Hartford Business.
Section 3.04 The rights granted by the Parties under Sections
3.01-3.03 are subject to all pre-existing third party rights, obligations and
restrictions as of the Distribution Date.
7
<PAGE> 8
(1)
Section 3.05 Any GRA between a Party and its Subsidiaries on the one
hand and any other Party and/or its Subsidiaries on the other hand will be
terminated as of the Effective Time. To the extent that residual rights under
Section 10.4 of the GRAs are in conflict with the rights and licenses granted
under this Article III, then this IP Agreement controls.
Section 3.06 Each Party may sublicense the rights granted to such
Party under Sections 3.01 - 3.03 hereof to third parties, provided, however,
the scope of such sublicenses shall be in writing and shall be expressly
limited to the scope of the license granted to such Party.
Section 3.07 Each of the Parties hereto understands and agrees that,
except as otherwise expressly provided, no party hereto is, in this IP
Agreement or in any other agreement or document contemplated by this IP
Agreement or otherwise, making any representation or warranty whatsoever,
including, without limitation, as to title, value or legal sufficiency. It is
also agreed and understood that any and all assets either transferred or
licensed to or retained or licensed by the Parties, as the case may be, shall
be "as is, where is".
ARTICLE IV. UNDERTAKINGS
Section 4.01 To the extent that the grants of Intellectual Property
rights and licenses under Articles II and III herein would violate or be
prohibited by any agreement with a third party, and such Intellectual Property
is actually used by the grantee Party, then the granting Party undertakes to
use reasonable efforts to obtain the necessary consent(s) from such third party
so as to be permitted to make such grants. However, each Party hereto
understands and agrees that no Party hereto is, in this IP Agreement or in any
other agreement or document contemplated by this IP Agreement or otherwise,
representing or warranting in any way that the obtaining of any consents or
approvals, the execution and delivery of any amendatory agreements and the
making of any filings or applications, possibly contemplated by this IP
Agreement will satisfy the provisions of any and all applicable agreements or
the requirements of any or all applicable laws or judgments.
8
<PAGE> 9
(1)
Section 4.02 To the extent a Party or its Subsidiaries shall require
technical assistance in connection with technology, technical information or
software transferred or licensed from another Party, then that technical
assistance shall be provided pursuant to a separate agreement entered into by
the Parties pursuant to terms agreed to by the Parties.
ARTICLE V. DISPUTE RESOLUTION
In the event of a controversy, dispute or claim arising out of, in
connection with, or in relation to the interpretation, performance,
nonperformance, validity or breach of this IP Agreement or otherwise arising
out of, or in any way related to this IP Agreement, including, without
limitation, any claim based on contract, tort, statute or constitution
(collectively, "Agreement Disputes"), the general counsels of the relevant
parties shall negotiate in good faith for a reasonable period of time to settle
such Agreement Dispute.
If after such reasonable period such general counsels are unable to
settle such Agreement Dispute (and in any event after 60 days have elapsed from
the time the relevant parties began such negotiations), such Agreement Dispute
shall be determined, at the request of any relevant party, by arbitration
conducted in New York City, before and in accordance with the then-existing
Rules for Commercial Arbitration of the American Arbitration Association (the
"Rules"), and any judgment or award rendered by the arbitrator shall be final,
binding and unappealable (except upon grounds specified in 9 U.S.C., Section
10(a) as in effect on the date hereof), and judgment may be entered by any
state or Federal court having jurisdiction thereof in accordance with Section
6.16 hereof. Unless the arbitrator otherwise determines, the pre- trial
discovery of the then-existing Federal Rules of Civil Procedure and the
then-existing Federal Rules of Civil Procedure and the then-existing Rules 46
and 47 of the Civil Rules for the United States District Court for the Southern
District of New York shall apply to any arbitration hereunder. Any controversy
concerning whether an Agreement Dispute is an arbitrable Agreement Dispute,
whether arbitration has been waived, whether an assignee of this IP Agreement
is bound to
9
<PAGE> 10
(1)
arbitrate, or as to the interpretation of enforceability of this Article shall
be determined by the arbitrator. The arbitrator shall be a retired or former
judge of any United States District Court or Court of Appeals or such other
qualified person as the relevant parties may agree to designate, provided such
individual has had substantial professional experience with regard to settling
sophisticated commercial disputes. The parties intent that the provisions to
arbitrate set forth herein be valid, enforceable and irrevocable. The
designation of a situs or a governing law for this IP Agreement or the
arbitration shall not be deemed an election to preclude application of the
Federal Arbitration Act, if it would be applicable. In his award the
arbitrator shall allocate, in his discretion, among the parties to the
arbitration all costs of the arbitration, including, without limitation, the
fees and expenses of the arbitrator and reasonable attorneys' fees, costs and
expert witness expenses of the parties. The undersigned agree to comply with
any award made in any such arbitration proceedings that has become final in
accordance with the Rules and agree to the entry of a judgment in any
jurisdiction upon any award rendered in such proceedings becoming final under
the Rules. The arbitrator shall be entitled, if appropriate, to award any
remedy in such proceedings, including, without limitation, monetary damages,
specific performance and all other forms of legal and equitable relief;
provided, however, the arbitrator shall not be entitled to award punitive
damages.
ARTICLE VI. MISCELLANEOUS
Section 6.01 Complete Agreement; Construction. This IP Agreement,
including the Exhibits, together with the Distribution Agreement and the other
Ancillary Agreements (as defined in the Distribution Agreement), shall
constitute the entire agreement between the Parties with respect to the subject
matter hereof and shall supersede all previous negotiations, commitments and
writings with respect to such subject matter. Notwithstanding any other
provisions in this IP Agreement to the contrary, in the event and to the extent
that there shall be a conflict between the provisions of this IP Agreement as it
relates to Intellectual Property rights and obligations and the provisions of
the Distribution Agreement or any other Ancillary Agreement, this IP Agreement
shall control.
10
<PAGE> 11
(1)
Section 6.02 Counterparts. This IP Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement,
and shall become effective when one or more such counterparts have been signed
by each of the parties and delivered to the other parties.
Section 6.03 Survival of Agreements. Except as otherwise contemplated
by this IP Agreement, all covenants and agreements of the Parties contained in
this IP Agreement shall survive the Distribution Date.
Section 6.04 Notices. All notices and other communications hereunder
shall be in writing and hand delivered or mailed by registered or certified mail
(return receipt requested) or sent by any means of electronic message
transmission with delivery confirmed (by voice or otherwise) to the Parties at
the following addresses (or at such other addresses for a party as shall be
specified by like notice) and will be deemed given on the date on which such
notice is received:
To ITT Destinations, Inc. (ITT Corporation after the
Distribution):
ITT Corporation
1330 Avenue of the Americas
New York, NY 10019
Attn: General Counsel
To ITT Corporation (ITT Industries, Inc. after the
Distribution):
ITT Industries, Inc.
4 West Red Oak Lane
White Plains, NY 10604
Attn: General Counsel
11
<PAGE> 12
(1)
To ITT Hartford Group, Inc.:
ITT Hartford Group, Inc.
Hartford Plaza
Hartford, CT 06115
Attn: General Counsel
Section 6.05 Waivers. The failure of any Party to require strict
performance by any other Party of any provision in this IP Agreement will not
waive or diminish the first Party's right to demand strict performance
thereafter of that or any other provision hereof.
Section 6.06 Amendments. This IP Agreement may not be modified or
amended except by an agreement in writing signed by the Parties.
Section 6.07 Assignment. This IP Agreement shall be assignable in whole
in connection with a merger or consolidation or the sale of all or substantially
all the assets of a Party hereto or in part in connection with a Party's sale or
other divestiture of a Subsidiary whose field of activity is within the scope of
rights granted to such Party by this IP Agreement. Otherwise this IP Agreement
shall not be assignable, in whole or in part, directly or indirectly, by any
Party hereto without the prior written consent of the others, and any attempt to
assign any rights or obligations arising under this IP Agreement without such
consent shall be void.
Section 6.08 Successors and Assigns. The provisions of this IP
Agreement shall be binding upon, inure to the benefit of and be enforceable by
the Parties and their respective successors and permitted assigns.
Section 6.09 Termination. This IP Agreement may be terminated at any
time prior to the Distribution by and in the sole discretion of ITT Corporation
without the approval of ITT Destinations or ITT Hartford or the shareholders of
ITT Corporation. In the event of such termination, no party shall have any
liability of any kind to any other party or any other person.
12
<PAGE> 13
(1)
After the Distribution Date, this IP Agreement may not be terminated except by
an agreement in writing signed by the Parties.
Section 6.10 Subsidiaries. Each of the Parties hereto shall cause to be
performed, and hereby guarantees the performance of, all actions, agreements and
obligations set forth herein to be performed by any Subsidiary of such Party or
by any entity that becomes a Subsidiary of such Party on and after the
Distribution Date.
Section 6.11 Third Party Beneficiaries. This IP Agreement is solely for
the benefit of the Parties hereto and their respective Subsidiaries and should
not be deemed to confer upon third parties any remedy, claim, liability,
reimbursement, claim of action or other right in excess of those existing
without reference to this IP Agreement.
Section 6.12 Title and Headings. Titles and headings to sections herein
are inserted for the convenience of reference only and are not intended to be a
part of or to affect the meaning or interpretation of this Agreement.
Section 6.13 Specific Performance. Each of the Parties hereto
acknowledges that there is no adequate remedy at law for failure by such Parties
to comply with the provisions of this Agreement and that such failure would
cause immediate harm that would not be adequately compensable in damages, and
therefore agree that their agreements contained herein may be specifically
enforced without the requirement of posting a bond or other security, in
addition to all other remedies available to the Parties hereto under this IP
Agreement.
Section 6.14 Governing Law. This IP Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
contracts executed in and to be performed in that State.
Section 6.15 Consent to Jurisdiction. Without limiting the provisions
of Article V hereof, each of the Parties irrevocably submits to the exclusive
jurisdiction of (a) the Supreme Court of the State of New York, New York
13
<PAGE> 14
(1)
County, and (b) the United States District Court for the Southern District of
New York, for the purposes of any suit, action or other proceeding arising out
of this IP Agreement or any transaction contemplated hereby. Each of the
Parties agrees to commence any action, suit or proceeding relating hereto
either in the United States District Court for the Southern District of New
York or if such suit, action or other proceeding may not be brought in such
court for jurisdictional reasons, in the Supreme Court of the State of New
York, New York County. Each of the Parties further agrees that service of any
process, summons, notice or document by U.S. registered mail to such Party's
respective address set forth above shall be effective service of process for
any action, suit or proceeding in New York with respect to any matters to which
it has submitted to jurisdiction in this Section 6.15. Each of the Parties
irrevocably and unconditionally waives any objection to the laying of venue of
any action, suit or proceeding arising out of this IP Agreement or the
transactions contemplated hereby in (i) the Supreme Court of the State of New
York, New York County, or (ii) or the United States District Court for the
Southern District of New York, and hereby further irrevocably and
unconditionally waives and agrees not to plead or claim in any such court that
any such action, suit or proceeding brought in any such court has been brought
in an inconvenient forum.
Section 6.16 Severability. In the event any one or more of the
provisions contained in this IP Agreement should be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected or
impaired thereby. The Parties shall endeavor in good-faith negotiations to
replace the invalid, illegal or unenforceable provisions with valid provisions,
the economic effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.
14
<PAGE> 15
(1)
IN WITNESS WHEREOF, the Parties have caused this IP Agreement to be
duly executed as of the day and year first above written.
ITT CORPORATION
By: /s/ Vincent A. Maffeo
-----------------------------------
Name: Vincent A. Maffeo
Title: Attorney-in-fact
ITT DESTINATIONS, INC.
By: /s/ Richard S. Ward
-----------------------------------
Name: Richard S. Ward
Title: Executive Vice President
and General Counsel
ITT HARTFORD GROUP, INC.
By /s/ Michael S.Wilder
-----------------------------------
Name: Michael S. Wilder
Title: Senior Vice President
and General Counsel
15
<PAGE> 16
EXHIBIT A1
ITT DESTINATIONS BUSINESS
I. Hospitality, Entertainment and Gaming
A. Scope of Business:
Hospitality, entertainment and gaming services, facilities,
and content of all types including, sports teams and
franchises, television, theatrical studios, networks,
broadcasting, arenas, theaters and other performance
facilities, television programs, resort and destination
facilities, hotels, gaming operations, lodging,
transportation, and related marketing, distribution,
promotion, advertising and licensing.
B. Major Businesses and Service Groupings
1. ITT Sheraton and Ciga S.p.A. Hotels
a. Hotel operations
(1) reservation services
(2) national marketing
(3) promotional services
b. Hotel management
c. Hotel ownership
2. Caesars World, Inc.
a. resorts/hotels
b. casinos/gaming operations
<PAGE> 17
c. merchandising of Caesars branded products
(fragrances, clothing, accessories, gift
items w/Caesars' name)
3. Madison Square Garden
a. New York Knicks
(1) ticket revenues
(2) merchandising
b. New York Rangers
(1) ticket revenues
(2) merchandising
c. Madison Square Garden Arena
(1) sports events
(2) concerts
(3) family shows
(4) trade shows - conventions
d. The Paramount Theater
e. WNYC-TV (Nationally broadcast business and
sports TV station in a joint venture with Dow
Jones)
f. Supply and distribution of television
programming for cable
g. Rights to New York Yankees' games
h. MSG Network-Advertiser supported cable
television entertainment program service
<PAGE> 18
II. Information Services
A. Scope of Business
Information services, facilities, and content, in connection
with information training and educational services, electronic
and print publication of informational and educational
materials, collection, creation, production, compilation,
storage and translation of informational and educational
materials.
B. Major Businesses and Services Groupings
1. ITT World Directories, Inc.
a. publishing traditional telephone directories
internationally
b. contracts for the publication of telephone
directories with monopoly providers of
telecommunications services
2. ITT Educational Services, Inc.
a. ITT Technical Institutes
III. Closely Related Businesses:
A. Acquisition, management, ownership and operation of:
1. Entertainment services, facilities and content of all
types, including, without limitation: sports teams
and franchises, television, theatrical studios,
networks, broadcasting, theme parks, arenas, theaters
and other performance facilities, musical recordings,
merchandizing, movies, television programs,
magazines,
<PAGE> 19
electronic entertainment, interactive media and
related marketing, distribution, promotion,
advertising and licensing;
2. Hospitality, tourism, recreation and gaming services,
including, without limitation, resort and destination
facilities, services, hotels, gaming operations,
lodging and transportation; and
3. Information services facility and content, including,
without limitation
(a) training and educational services, electronic
and print publication of informational and
educational materials;
(b) collection, creation, production,
compilation, storage and transmission,
including interactive services, of
informational and educational materials;
(c) commercial communication equipment, services
and facilities including, without limitation,
telecommunications, satellites, cable and all
other storage, access and transmission means.
<PAGE> 20
EXHIBIT A2
ITT HARTFORD BUSINESS
A. ITT Hartford is engaged in:
1. All lines of property and casualty insurance
2. All lines of life company business, including without
limitation all lines of life, disability, health, stop-loss
and special risk (accidental death and dismemberment, blanket
lines, and Medicare Supplements) insurance and annuities (the
"Life Company Business")
3. Ceded and assumed reinsurance in all lines of
property and casualty insurance and life Company
Business
4. The following services related to property and
casualty insurance and Life Company Business and reinsurance:
a. Underwriting
b. Loss control
c. Premium collection, audit and financing
d. Actuarial
e. Administrative (including without limitation,
benefit plan administration and consulting)
f. Claim administration (including without
limitation, processing)
g. Reinsurance consulting
h. Catastrophe evaluation
i. Reinsurance and insurance market research and
assistance
j. Runoff of liabilities for discontinued
insurance operations
<PAGE> 21
k. Servicing or administration of voluntary and
residual market plans, pools and other
residual market mechanisms
l. Establishing and maintaining risk retention
and purchasing group
m. Insurance-related information management
5. Surety and fidelity/burglary bonds including, but not
limited to, contract, miscellaneous and financial guarantee
bonds and credit insurance.
6. The providing of investment advisory services to
mutual funds and/or the operation of mutual funds and/or any
other pooled investment vehicles and/or the distribution of
interests in such funds or other vehicles
B. Closely Related Businesses:
1. Any insurance-related business permitted to be
conducted by a company under applicable regulatory authority
and any other business which may only be conducted by
companies regulated by the applicable insurance regulatory
authorities
2. Investment banking activities, including but not
limited to the underwriting of securities and stock brokerage
activities
<PAGE> 22
EXHIBIT A3
ITT INDUSTRIES BUSINESS
I. Automotive Group
A. Scope of Business: Supplier of systems and components to
automotive vehicle manufacturers worldwide and related
automotive aftermarket products
B. Major Automotive Product/Service Groupings:
1. Brake and Chassis Systems
(a) antilock brake systems and components
(b) traction control system and components
(c) chassis systems and components
(d) foundation brake system and components
(e) fluid handling systems and components
(f) shock absorbers
(g) brake activation systems and components
(h) friction products
2. Body and Electrical Systems
(a) electric motors and motor controllers
(b) wiper system and components
(c) activator systems and components
(d) switches and lamps
(e) body hardware
(f) seat sub-systems
(g) precision die cast products
(h) structural stampings
(i) door systems and components
(j) air management systems and components
(k) modular chassis systems
<PAGE> 23
3. Front and Rear Corner Modules
(a) brake sub-systems and components
(b) suspension sub-systems and components
(c) bearings
(d) complete axle assemblies and sub-assemblies
(e) vehicle stability management systems and
components
(f) steering systems and components
II. Defense & Electronics Group
A. Scope of Business: Develop, manufacture and support high
technology electronic systems and components specifically
designed for military and defense application on a worldwide
basis.
B. Major Products/Service Groupings for Military and Defense
Application:
1. communications systems, equipment, and components:
(a) military communications equipment;
(b) tactical radios and components;
(c) air traffic control radio equipment;
(d) networking equipment;
(e) air traffic control radio equipment;
(f) switches;
(g) military Private Mobile Radio equipment;
(h) communications software;
(i) wireless LANS;
(j) tactical data systems and components;
(k) communications security devices and software;
(l) computer security products;
(m) INFOSEC products;
<PAGE> 24
(n) biometric authentication products;
(o) speech and speaker recognition, identification
and verification systems and components;
(p) communication intelligence workstation
components and subsystems;
(q) language and dialect identification products;
(r) Communications-Navigation-Identification
systems and components;
(s) secure voice/data communications systems and
components;
(t) command and control systems and components;
(u) communications and signal intelligence systems
and components;
(v) satellite payload systems and components;
(w) military Personal Communications Services
radios
2. electronic warfare systems including:
(a) Advanced Threat Radar Jammar and components;
(b) Airborne Self-Protection Jammer and
components;
(c) electronic countermeasures and
counter-countermeasures systems and
components;
(d) decoy systems and components;
(e) electro-optical and infrared systems and
components;
3. night vision devices incorporating image intensifiers
including:
(a) infantrymen's night vision devices and
components;
(b) aviator's night vision devices and components;
(c) image intensifier tubes;
(d) night vision weapon sights and components;
(e) special purpose photosensitive devices;
<PAGE> 25
(f) vehicle mounted night vision devices and
components;
4. radar systems including:
(a) shipboard radars and components;
(b) air-traffic radars and components;
(c) coastal defense radars and components;
(d) transmit/receive modules;
(e) bistatic radar systems and components;
5. space payload products including:
(a) navigation payloads;
(b) meteorological instruments;
(c) suites of meteorological and navigation
instruments;
(d) RF/microware/millimeter wave sensor systems
and components;
(e) control segment integration software;
6. navigation systems including:
(a) global positioning satellite systems and
components;
(b) TACAN systems and components;
(c) tactical navigation systems and components;
7. semiconductor IC devices:
(a) Gallium Arsenide integrated circuits;
(b) MMIC products;
(c) RF products;
(d) Silicon based integrated circuit semiconductor
devices;
<PAGE> 26
8. connectors and cable assemblies
C. Defense and Electronics Products for Commercial Application
1. night vision devices incorporating image
intensifiers:
(a) personal image identifier night vision devices
and components;
(b) commercial image intensifier tubes;
(c) vehicle-mounted image identifier night vision
devices and components;
(d) Retinitis Pigmentosa image intensifier night
vision devices and components;
2. Manufacture of Gallium Arsenide semiconductor IC
devices and circuits
3. biometric authentication products
4. speech and speaker recognition, identification and
verification systems and devices
5. language and dialect identification products
6. Security Access Control Systems for accessing
computer systems having application in computer and
financial networks
7. global positioning satellite products
8. connectors and cable assemblies
9. integrated circuit cards and components
10. switches
<PAGE> 27
D. Services:
1. Gallium Arsenide discrete and integrated circuit
design and foundry services.
2. System integration, engineering, maintenance and
repair of radar systems, military and government
communications and information systems, and
electronic warfare systems.
3. Current principal business lines* of ITT Defense,
Inc. and ITT Federal Services Corporation, including,
but not limited to, management and operation of:
a. military base operations support, equipment
and maintenance and training services;
b. U.S. Government Job Corps Program Centers,
including administration, placement,
recruiting and training;
c. space and missile support operations and
facilities;
d. system integration engineering and management
of satellite payloads;
e. commercial satellite launch facilities;
f. government and semi-government sponsored
training services; and
g. other current businesses of ITT Federal
Services Corporation.
*Any overlap or commonality with the businesses in ITT
Destinations Business will coexist.
<PAGE> 28
III. Fluid Technology Group
A. Business: Engaged in the design, development, production,
marketing and sale of products, systems and services used to
move, handle, transfer, control and contain fluids. The
principal markets are water and wastewater treatment,
industrial and process, and construction. The other markets
consist of chemical processing, pharmaceutical and biotech
sectors, selected segments of oil and gas and mining markets,
HVAC, commercial and leisure marine aerospace and power
industry markets.
B. Major Product/Service Products:
1. Pump products including drivers, controllers,
accessories and components thereof for use in the
markets specified in IIIA above.
2. Mixer products including drivers, controllers,
accessories and components thereof for use in the
markets specified in IIIA above.
3. Valve products including drivers, actuators and
components thereof for use in the markets specified
in IIIA above.
4. Instrument and control products including drivers,
actuators, sensors, microprocessors, accessories and
components thereof for use in the markets specified
in IIIA above.
5. Regulators, transducers, seals including drivers,
actuators, sensors, microprocessors, accessories and
components thereof for use in the markets specified
in IIIA above.
<PAGE> 29
6. Boiler and condensate equipment and products
including drivers, controllers, accessories and
components thereof for use in the markets specified
in IIIA above.
7. Switches including actuators, sensors, controllers,
and components thereof for use in the markets
specified in IIIA above.
8. Heat transfer products and components thereof for use
in the markets specified in IIIA above.
9. Lighting and sanitary products and components thereof
for use in markets specified in IIIA above.
10. Software programs for the selection and design of
above specified products.
IV. Closely Related Businesses:
A. Transportation Products: The design, manufacture, sale,
marketing and servicing of OEM and aftermarket automotive,
truck, train and other such transportation products.
B. Fluid Products: The design, manufacture, sale, marketing and
servicing of fluid handling products related to the types of
products/service products set out in III B above.
C. Military and Defense Products/Services: The design,
manufacture, sale, marketing and servicing of products,
systems and operations specially designed for the military and
defense application.
D. Components: The design, manufacture, sale, marketing and
servicing of components consisting of connectors, cable
assemblies, integrated circuit cards and components thereof,
and switches.
<PAGE> 1
TRADEMARK ASSIGNMENT AGREEMENT
TRADEMARK ASSIGNMENT AGREEMENT ("Assignment") effective as of November
2, 1995 between ITT CORPORATION, a Delaware corporation ("ITT Corporation") and
ITT DESTINATIONS, INC., a Nevada corporation ("ITT Destinations") (collectively
the "Parties").
RECITALS
WHEREAS, the Board of Directors of ITT Corporation has decided to carry
out the Distribution (as hereinafter defined) whereby the holders of shares of
Common Stock of ITT Corporation will receive all the outstanding shares of
Common Stock of ITT Destinations and all the outstanding shares of Common Stock
of ITT Hartford Group, Inc. (as hereinafter defined);
WHEREAS, the shareholders of ITT Corporation have approved the aforesaid
Distribution and certain other related transactions considered necessary by ITT
Corporation to carry out the Distribution;
WHEREAS, as part of carrying out the Distribution, ITT Corporation has
entered into Trade Name and Trademark License Agreements each effective as of
November 1, 1995 with ITT Manufacturing Enterprises, Inc. ("Enterprises License
Agreement") and with ITT Hartford Group, Inc. ("Hartford License Agreement")
granting them and certain of their Sublicensees the continued right and license
to use the ITT Name and the ITT Marks (each as hereinafter defined);
WHEREAS, ITT Corporation owns and is assigning to ITT Destinations
effective simultaneously with this Assignment, the Enterprises License
Agreement and the Hartford License Agreement;
WHEREAS, ITT Corporation is the owner of the worldwide right, title and
interest in and to the ITT Name and the ITT Marks and the goodwill associated
therewith; and
WHEREAS, it is the present intention of ITT Destinations not to use the
ITT Name and the ITT Marks in a manner which would materially be detrimental to
the goodwill of such ITT Name and ITT Marks.
NOW, THEREFORE, in connection with and to carry out the Distribution and
in consideration of the premises and mutual agreements and covenants herein,
the Parties agree as follows:
1
<PAGE> 2
(4)
1. DEFINITIONS. As used in this Assignment, the following terms
shall have the following meanings (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):
(a) "Distribution" shall mean the distribution on the
Distribution Date to holders of record of shares of ITT Corporation Common
Stock as of the Distribution Record Date of (i) the ITT Destinations Common
Shares owned by ITT Corporation on the basis of one ITT Destinations Common
Share for each outstanding share of ITT Corporation Common Stock and (ii) the
ITT Hartford Group, Inc. Common Shares owned by ITT Corporation on the basis of
one ITT Hartford Group, Inc. Common Share for each outstanding share of ITT
Corporation Common Stock.
(b) "Distribution Agreement" shall mean the Distribution
Agreement entered into by ITT Corporation, ITT Destinations, and ITT Hartford
Group, Inc. relating to the distribution of the shares of ITT Destinations and
ITT Hartford Group, Inc. to the holders of ITT Corporation Common Stock.
(c) "Distribution Date" shall mean such date as may hereafter
be determined by ITT Corporation's Board of Directors as the date on which the
Distribution shall be effected.
(d) "Effective Time" shall mean 11:59 p.m., New York time, on
the Distribution Date.
(e) "ITT Corporation" shall mean (i) ITT Corporation, a
Delaware corporation and its predecessor Maryland corporation up to the
Effective Time to be merged thereafter into ITT Indiana, Inc., an Indiana
corporation, and renamed "ITT Industries, Inc." in connection with the
Distribution.
(f) "ITT Destinations" shall mean ITT Destinations, Inc., a
Nevada corporation, to be renamed "ITT Corporation" immediately prior to the
Effective Time.
(g) "ITT Industries" shall mean ITT Industries, Inc., an
Indiana corporation and the legal successor after the Distribution to ITT
Corporation.
(h) "ITT Hartford Group, Inc." shall mean ITT Hartford Group,
Inc., a Delaware corporation.
(i) "ITT Manufacturing Enterprises, Inc." shall mean ITT
Manufacturing Enterprises, Inc., a Delaware corporation.
(j) "ITT Logo" shall mean the worldwide rights including
License Rights in and to the stylized trademark and service mark shown in
Exhibit A annexed hereto together with all registrations thereof and all
applications therefor, now or hereinafter
2
<PAGE> 3
(4)
obtained or filed, including those registrations and applications set forth in
Exhibit A, and the goodwill associated therewith.
(k) "ITT Marks" shall mean the worldwide rights including
License Rights in and to (i) the ITT Logo, and (ii) all other trademarks and
service marks consisting of the letters "ITT", together with all registrations
thereof and all applications therefor now or hereinafter filed or obtained, and
the goodwill associated therewith, including those registrations and
applications set forth in Exhibit A hereto.
(l) "ITT Name" shall mean the worldwide rights including
License Rights in and to that portion of any company or trade name consisting
of the letters "ITT", and the goodwill associated therewith.
(m) "License Rights" shall mean any and all rights in and to
licenses and other grants received from or licensed to third parties under any
contracts, memoranda or other understandings relating to the ITT Logo, the ITT
Marks and/or the ITT Name.
2. REPRESENTATIONS. ITT Corporation represents and warrants that it
is the owner of the ITT Name and the ITT Marks.
3. ASSIGNMENT. ITT Corporation hereby transfers and assigns to ITT
Destinations, without charge to ITT Destinations, effective as of November 2,
1995, all of its worldwide right, title and interest in and to the ITT Name and
the ITT Marks, including the right to sue and recover for past infringements
thereof.
4. ACCEPTANCE. ITT Destinations hereby accepts the aforesaid
transfer and assignment of the ITT Name and the ITT Marks, including the right
to sue and recover for past infringements thereof.
5. DOCUMENTS. To the extent the assignments pursuant to paragraph 3
herein may be incomplete or ineffective for any reason including errors or
omissions in Exhibits A hereto, then ITT Corporation or, after the Distribution
Date its successor ITT Industries, shall execute and deliver to ITT
Destinations, upon ITT Destinations' request, any and all documents and take
other reasonable actions which may be necessary to make such assignment
complete and effective.
IN WITNESS WHEREOF, the Parties have caused this Assignment to be duly
executed by their respective authorized officers as of the day and year first
written above.
3
<PAGE> 4
(4)
ITT CORPORATION
By: /s/ Richard S. Ward
----------------------------
Name: Richard S. Ward
Title: Executive Vice President and
General Counsel
ITT DESTINATIONS, INC.
By: /s/ Peter A. Abruzzese
----------------------------
Name: Peter A. Abruzzese
Title: Vice President and Associate
General Counsel
4
<PAGE> 5
(4)
STATE OF NEW YORK )
ss.:
COUNTY OF NEW YORK )
On this 27th day of November, 1995, before me appeared Richard S. Ward,
to me personally known and known to me the person who executed the foregoing
Assignment; and who being by me duly sworn, did depose and say that he is
Executive Vice President of ITT CORPORATION, that he is authorized to sign this
Assignment on behalf of said corporation, and that said assignment was signed
on behalf of the corporation by authority of its Board of Directors, and unto
me acknowledged said Assignment to be the free act and deed of said
corporation.
[Notary Seal of Sonja Esposito] /s/ Sonja Esposito
-----------------------
Notary Public
STATE OF NEW YORK )
ss.:
COUNTY OF NEW YORK )
On this 27th day of November,1995, before me appeared Peter A. Abruzzese
to me personally known and known to me the person who executed the foregoing
Assignment; and who being by me duly sworn, did depose and say that he is Vice
President of ITT DESTINATIONS, INC., that he is authorized to sign this
Assignment on behalf of said corporation, and that said Assignment was signed
on behalf of the corporation by authority of its Board of Directors, and unto
me acknowledged said Assignment to be the free act and deed of said
corporation.
[Notary Seal of Sonja Esposito] /s/ Sonja Esposito
-----------------------
Notary Public
5
<PAGE> 1
LICENSE ASSIGNMENT AGREEMENT
LICENSE ASSIGNMENT AGREEMENT ("License Assignment") effective as of
November 2, 1995 between ITT CORPORATION, a Delaware corporation ("ITT
Corporation") and ITT DESTINATIONS, INC., a Nevada corporation ("ITT
Destinations") (the "Parties").
RECITALS
WHEREAS, the Board of Directors of ITT Corporation (as hereinafter
defined) has decided to carry out the Distribution (as hereinafter defined)
whereby the holders of shares of Common Stock of ITT Corporation will receive
all the outstanding shares of Common Stock of ITT Destinations and all the
outstanding shares of Common Stock of ITT Hartford Group, Inc. (as hereinafter
defined);
WHEREAS, the shareholders of ITT Corporation have approved the aforesaid
Distribution and certain other related transactions considered necessary by ITT
Corporation to carry out the Distribution;
WHEREAS, as part of carrying out the Distribution, ITT Corporation has
entered into Trade Name and Trademark License Agreements each effective
November 1, 1995 with ITT Manufacturing Enterprises, Inc. ("Enterprises License
Agreement") and with ITT Hartford Group, Inc. ("Hartford License Agreement")
granting them and certain of their Sublicensees the continued right and license
to use the ITT Name and the ITT Marks (each as hereinafter defined); and
WHEREAS, ITT Corporation owns and is assigning to ITT Destinations
effective simultaneous with this License Assignment, all worldwide right,
title, and interest in and to the ITT Name and the ITT Marks.
NOW, THEREFORE, in connection with and to carry out the Distribution and
in consideration of the premises and mutual agreements and covenants herein,
the Parties hereby agree as follows:
1. DEFINITIONS. As used in this License Assignment, the following
terms shall have the following meanings (such meanings to be equally applicable
to both the singular and plural forms of the terms defined):
(a) "Distribution" shall mean the distribution on the
Distribution Date to holders of record of shares of ITT Corporation Common
Stock as of the Distribution Record Date of (i) the ITT Destinations Common
Shares owned by ITT Corporation on the basis of one ITT Destinations Common
Share for each outstanding share of ITT
1
<PAGE> 2
(5)
Corporation Common Stock and (ii) the ITT Hartford Common Shares owned by ITT
Corporation on the basis of one ITT Hartford Common Share for each outstanding
share of ITT Corporation Common Stock.
(b) "Distribution Agreement" shall mean the Distribution
Agreement entered into by ITT Corporation, ITT Destinations, and ITT Hartford
relating to the distribution of the shares of ITT Destinations and ITT Hartford
to the holders of ITT Corporation Common Stock.
(c) "Distribution Date" shall mean such date as may hereafter
be determined by ITT Corporation's Board of Directors as the date on which the
Distribution shall be effected.
(d) "Effective Time" shall mean 11:59 p.m., New York time, on
the Distribution Date.
(e) "ITT Corporation" shall mean ITT Corporation, a Delaware
corporation and its predecessor Maryland corporation, up to the Effective Time
to be merged thereafter into ITT Indiana, Inc., an Indiana corporation, which
will be renamed "ITT Industries, Inc." in connection with the Distribution.
(f) "ITT Destinations" shall mean ITT Destinations, Inc., a
Nevada corporation, to be renamed "ITT Corporation" immediately prior to the
Effective Time.
(g) "ITT Hartford" or "ITT Hartford Group, Inc." shall mean ITT
Hartford Group, Inc., a Delaware corporation.
(h) "ITT Manufacturing Enterprises, Inc." or "ITT Enterprises"
shall mean ITT Manufacturing Enterprises, Inc., a Delaware corporation and a
wholly owned subsidiary of ITT Corporation.
(i) "ITT Logo" shall mean the worldwide rights to the stylized
trademark and service mark shown in Exhibit B annexed to the Enterprises
License Agreement and the Hartford License Agreement together with all
registrations thereof and all applications thereof now or hereinafter obtained
or filed, and the goodwill associated therewith.
(j) "ITT Marks" shall mean the worldwide rights to (i) the ITT
Logo, and (ii) all other trademarks and service marks consisting of the letters
"ITT", together with all registrations thereof and all applications therefor
now or hereinafter filed or obtained, and the goodwill associated therewith.
2
<PAGE> 3
(5)
(k) "ITT Name" shall mean the worldwide rights to that portion
of any company or trade name consisting of the letters "ITT", and the goodwill
associated therewith.
2. ASSIGNMENT. ITT Corporation hereby transfers and assigns to ITT
Destinations, without charge to ITT Destinations, effective as of November 2,
1995, the Enterprises License Agreement and the Hartford License Agreement and
all rights and obligations thereunder.
3. ACCEPTANCE. ITT Destinations hereby accepts the transfer and
assignment of the Enterprises License Agreement and the Hartford License
Agreement and all rights and obligations thereunder.
4. GUARANTEE. ITT Corporation acknowledges the obligations imposed
upon its subsidiary ITT Manufacturing Enterprises, Inc. and upon any ITT
Enterprises Sublicensees (as the term is defined in the Enterprises License
Agreement) to comply with the terms and conditions of the Enterprises License
Agreement and hereby guarantees to ITT Destinations the performance of ITT
Enterprises and the ITT Enterprises Licensees of those terms and conditions.
IN WITNESS WHEREOF, the Parties have caused this License Assignment to
be duly executed by their respective authorized officers as of the day and year
first written above.
ITT CORPORATION
By: /s/ Richard S. Ward
----------------------------
Name: Richard S. Ward
Title: Executive Vice President and
General Counsel
ITT DESTINATIONS, INC.
By: /s/ Peter A. Abruzzese
----------------------------
Name: Peter A. Abruzzese
Title: Vice President and Associate
General Counsel
3
<PAGE> 1
LICENSE ASSIGNMENT AGREEMENT
LICENSE ASSIGNMENT AGREEMENT ("License Assignment") effective as of
December 19, 1995 among ITT DESTINATIONS, INC., a Nevada corporation ("ITT
Destinations"), ITT HARTFORD GROUP, INC., a Delaware corporation ("ITT
Hartford"), and NUTMEG INSURANCE COMPANY, a Connecticut corporation ("Nutmeg")
(the "Parties").
RECITALS
WHEREAS, the Board of Directors of ITT Corporation (as hereinafter
defined) has decided to carry out the Distribution (as hereinafter defined)
whereby the holders of shares of Common Stock of ITT Corporation will receive
all the outstanding shares of Common Stock of ITT Destinations and all the
outstanding shares of Common Stock of ITT Hartford Group, Inc.;
WHEREAS, the shareholders of ITT Corporation have approved the aforesaid
Distribution and certain other related transactions considered necessary by ITT
Corporation to carry out the Distribution;
WHEREAS, as part of carrying out the Distribution, ITT Corporation has
entered into Trade Name and Trademark License Agreements each effective
November 1, 1995 with ITT Manufacturing Enterprises, Inc. ("Enterprises License
Agreement") and with ITT Hartford ("Hartford License Agreement") concerning
their and their Sublicensees' continued right and license to use the ITT Name
and the ITT Marks (each as hereinafter defined); and
WHEREAS, ITT Destinations owns all worldwide right, title, and interest
in and to the ITT Name and the ITT Marks.
NOW, THEREFORE, in connection with and to carry out the Distribution and
in consideration of the premises and mutual agreements and covenants herein,
the Parties hereby agree as follows:
1. DEFINITIONS. As used in this License Assignment, the following
terms shall have the following meanings (such meanings to be equally applicable
to both the singular and plural forms of the terms defined):
(a) "Distribution" shall mean the distribution on the
Distribution Date to holders of record of shares of ITT Corporation Common
Stock as of the Distribution Record Date of (i) the ITT Destinations Common
Shares owned by ITT Corporation on the basis of one ITT Destinations Common
Share for each outstanding share of ITT
1
<PAGE> 2
(7)
Corporation Common Stock and (ii) the ITT Hartford Common Shares owned by ITT
Corporation on the basis of one ITT Hartford Common Share for each outstanding
share of ITT Corporation Common Stock.
(b) "Distribution Agreement" shall mean the Distribution
Agreement entered into by ITT Corporation, ITT Destinations, and ITT Hartford
relating to the distribution of the shares of ITT Destinations and ITT Hartford
to the holders of ITT Corporation Common Stock.
(c) "Distribution Date" shall mean such date as may hereafter
be determined by ITT Corporation's Board of Directors as the date on which the
Distribution shall be effected.
(d) "Effective Time" shall mean 11:59 p.m., New York time, on
the Distribution Date.
(e) "ITT Corporation" shall mean ITT Corporation, a Delaware
corporation and its predecessor Maryland corporation, up to the Effective Time
to be merged thereafter into ITT Indiana, Inc., an Indiana corporation, which
will be renamed "ITT Industries, Inc." in connection with the Distribution.
(f) "ITT Destinations" shall mean ITT Destinations, Inc., a
Nevada corporation, to be renamed "ITT Corporation" immediately prior to the
Effective Time.
(g) "ITT Hartford" shall mean ITT Hartford Group, Inc., a
Delaware corporation.
(h) "Nutmeg" shall mean Nutmeg Insurance Company, a Connecticut
corporation and a wholly owned subsidiary of ITT Hartford Group, Inc.
(i) "ITT Manufacturing Enterprises, Inc." shall mean ITT
Manufacturing Enterprises, Inc., a Delaware corporation and a wholly-owned
subsidiary of ITT Corporation.
(j) "ITT Logo" shall mean the worldwide rights to the stylized
trademark and service mark shown in Exhibit B annexed to the Hartford License
Agreement together with all registrations thereof and all applications thereof
now or hereinafter obtained or filed, and the goodwill associated therewith.
(k) "ITT Marks" shall mean the worldwide rights to (i) the ITT
Logo, and (ii) all other trademarks and service marks consisting of the letters
"ITT", together with all registrations thereof and all applications therefor
now or hereinafter filed or obtained, and the goodwill associated therewith.
2
<PAGE> 3
(7)
(l) "ITT Name" shall mean that portion of any company or trade
name consisting of the letters "ITT", and the goodwill associated therewith.
2. ASSIGNMENT. ITT Hartford hereby transfers and assigns to Nutmeg,
without charge to Nutmeg, effective as of 11:57 p.m., New York time of the
Distribution Date, the Hartford License Agreement and all rights and
obligations thereunder.
3. ACCEPTANCE. Nutmeg hereby accepts the transfer and assignment of
the Hartford License Agreement and all rights and obligations thereunder.
4. GUARANTEE. ITT Hartford acknowledges the obligations imposed
upon its subsidiary Nutmeg and upon any Nutmeg Sublicensees (as that term is
defined in the Hartford License Agreement) to comply with the terms and
conditions of the Hartford License Agreement and hereby guarantees to ITT
Destinations the performance of Nutmeg and the Nutmeg Sublicensees of those
terms and conditions.
5. CONSENT. ITT Destinations hereby consents to the assignment of
the Hartford License Agreement from ITT Hartford to Nutmeg as set forth herein
and further grants to Nutmeg the right to grant sublicenses in accordance with
the provisions of Sections 2.01 and 2.02 of the Hartford License Agreement to
ITT Hartford and ITT Hartford Subsidiaries.
IN WITNESS WHEREOF, the Parties have caused this License Assignment to
be duly executed by their respective authorized officers as of the day and year
first written above.
3
<PAGE> 4
(7)
ITT DESTINATIONS, INC.
By: /s/ Peter A. Abruzzese
--------------------------
Name: Peter A. Abruzzese
Title: Vice President and
Associate General Counsel
ITT HARTFORD GROUP, INC.
By: /s/ Michael S. Wilder
--------------------------
Name: Michael S. Wilder
Title: Senior Vice President and
General Counsel
NUTMEG INSURANCE COMPANY
By: /s/ William B. Malchodi
--------------------------
Name: William B. Malchodi
Title: Vice President
4
<PAGE> 1
LICENSE ASSIGNMENT AGREEMENT
LICENSE ASSIGNMENT AGREEMENT ("License Assignment") effective as of
December 19, 1995 among ITT DESTINATIONS, INC., a Nevada corporation ("ITT
Destinations"), NUTMEG INSURANCE COMPANY, a Connecticut corporation ("Nutmeg"),
and HARTFORD FIRE INSURANCE COMPANY, a Connecticut corporation ("Hartford
Fire").
RECITALS
WHEREAS, the Board of Directors of ITT Corporation (as hereinafter
defined) has decided to carry out the Distribution (as hereinafter defined)
whereby the holders of shares of Common Stock of ITT Corporation will receive
all the outstanding shares of Common Stock of ITT Destinations and all the
outstanding shares of Common Stock of ITT Hartford Group, Inc. (as hereinafter
defined);
WHEREAS, the shareholders of ITT Corporation have approved the aforesaid
Distribution and certain other related transactions considered necessary by ITT
Corporation to carry out the Distribution;
WHEREAS, as part of carrying out the Distribution, ITT Corporation has
entered into Trade Name and Trademark License Agreements each effective
November 1, 1995 with ITT Manufacturing Enterprises, Inc. ("Enterprises License
Agreement") and with ITT Hartford Group, Inc. ("Hartford License Agreement")
concerning their and certain of their Sublicensees' continued right and license
to use the ITT Name and the ITT Marks (each as hereinafter defined);
WHEREAS, ITT Hartford Group, Inc. has entered into a License Assignment
Agreement effective as of 11:57 p.m., New York time, of the Distribution Date
with Nutmeg Insurance Company (as hereinafter defined) assigning to it all its
rights and obligations in the Hartford License Agreement; and
WHEREAS, ITT Destinations owns all worldwide right, title, and interest
in and to the ITT Name and the ITT Marks.
NOW, THEREFORE, in connection with and to carry out the Distribution and
in consideration of the premises and mutual agreements herein, the Parties
hereto hereby agree as follows:
1. DEFINITIONS. As used in this License Assignment, the following
terms shall have the following meanings (such meanings to be equally applicable
to both the singular and plural forms of the terms defined):
1
<PAGE> 2
(8)
(a) "Distribution" shall mean the distribution on the
Distribution Date to holders of record of shares of ITT Corporation Common
Stock as of the Distribution Record Date of (i) the ITT Destinations Common
Shares owned by ITT Corporation on the basis of one ITT Destinations Common
Share for each outstanding share of ITT Corporation Common Stock and (ii) the
ITT Hartford Common Shares owned by ITT Corporation on the basis of one ITT
Hartford Common Share for each outstanding share of ITT Corporation Common
Stock.
(b) "Distribution Agreement" shall mean the Distribution
Agreement entered into by ITT Corporation, ITT Destinations, and ITT Hartford
relating to the distribution of the shares of ITT Destinations and ITT Hartford
to the holders of ITT Corporation Common Stock.
(c) "Distribution Date" shall mean such date as may hereafter
be determined by ITT Corporation's Board of Directors as the date on which the
Distribution shall be effected.
(d) "Effective Time" shall mean 11:59 p.m., New York time, on
the Distribution Date.
(e) "ITT Corporation" shall mean ITT Corporation, a Delaware
corporation and its predecessor Maryland corporation, up to the Effective Time
to be merged thereafter into ITT Indiana, Inc., an Indiana corporation, which
will be renamed "ITT Industries, Inc." in connection with the Distribution.
(f) "ITT Destinations" shall mean ITT Destinations, Inc., a
Nevada corporation, to be renamed "ITT Corporation" immediately prior to the
Effective Time.
(g) "ITT Hartford Group, Inc." or "ITT Hartford" shall mean ITT
Hartford Group, Inc., a Delaware corporation.
(h) "Nutmeg" or "Nutmeg Insurance Company" shall mean Nutmeg
Insurance Company, a Connecticut corporation and a wholly owned subsidiary of
ITT Hartford Group, Inc.
(i) "Hartford Fire" shall mean Hartford Fire Insurance Company,
a Connecticut corporation and a wholly owned subsidiary of ITT Hartford Group,
Inc.
(j) "ITT Manufacturing Enterprises, Inc." shall mean ITT
Manufacturing Enterprises, Inc., a Delaware corporation and a wholly-owned
subsidiary of ITT Corporation.
2
<PAGE> 3
(8)
(k) "ITT Logo" shall mean the worldwide rights to the stylized
trademark and service mark shown in Exhibit B annexed to the Hartford License
Agreement together with all registrations thereof and all applications therefor
now or hereinafter obtained or filed, and the goodwill associated therewith.
(l) "ITT Marks" shall mean the worldwide rights to (i) the ITT
Logo, and (ii) all other trademarks and service marks consisting of the letters
"ITT", together with all registrations thereof and all applications therefor
now or hereinafter filed or obtained, and the goodwill associated therewith.
(m) "ITT Name" shall mean that portion of any company or trade
name consisting of the letters "ITT" and the goodwill associated therewith.
2. ASSIGNMENT. Nutmeg hereby transfers and assigns to Hartford
Fire, without charge to Hartford Fire, effective as of 11:58 p.m., New York
time of the Distribution Date, the Hartford License Agreement and all rights
and obligations thereunder.
3. ACCEPTANCE. Hartford Fire hereby accepts the transfer and
assignment of the Hartford License Agreement and all rights and obligations
thereunder.
4. GUARANTEE. ITT Hartford acknowledges the obligations imposed
upon its subsidiary Hartford Fire and upon any Hartford Fire Sublicensees (as
that term is defined in the Hartford License Agreement) to comply with the
terms and conditions of the Hartford License Agreement and hereby guarantees to
ITT Destinations the performance of Hartford Fire and Hartford Fire
Sublicensees of those terms and conditions.
5. CONSENT. ITT Destinations hereby consents to the assignment of
the Hartford License Agreement from Nutmeg to Hartford Fire as set forth herein
and further grants to Hartford Fire the right to grant sublicenses in
accordance with the provisions of Sections 2.01 and 2.02 of the Hartford
License Agreement to ITT Hartford and the ITT Hartford Subsidiaries.
IN WITNESS WHEREOF, the Parties have caused this License Assignment to
be duly executed by their respective authorized officers as of the day and year
first written above.
3
<PAGE> 4
(8)
ITT DESTINATIONS, INC.
By: /s/ Peter A. Abruzzese
---------------------------------
Name: Peter A. Abruzzese
Title: Vice President and
Associate General Counsel
HARTFORD FIRE
INSURANCE COMPANY
By: /s/ Michael S. Wilder
---------------------------------
Name: Michael S. Wilder
Title: Senior Vice President and General
Counsel
NUTMEG INSURANCE COMPANY
By: /s/ William B. Malchodi
---------------------------------
Name: William B. Malchodi
Title: Vice President
4
<PAGE> 1
TAX ALLOCATION AGREEMENT
TAX ALLOCATION AGREEMENT, dated as of November 1, 1995,
among ITT Corporation, a Delaware corporation (which will be
reincorporated in Indiana and renamed ITT Industries, Inc.; "ITT
INDUSTRIES"), ITT Destinations, Inc., a Nevada corporation (which
will be renamed ITT Corporation; "ITT DESTINATIONS"), and ITT
Hartford Group, Inc., a Delaware corporation ("ITT HARTFORD").
ITT Industries, ITT Destinations and ITT Hartford are hereinafter
jointly referred to as the "COMPANIES".
WHEREAS, as of the date hereof, ITT Industries is the common parent of
an affiliated group of domestic corporations, including ITT Destinations and ITT
Hartford, which has elected to file consolidated Federal income tax returns;
WHEREAS, ITT Industries proposes to distribute all of the stock it owns
in ITT Destinations and ITT Hartford to its shareholders (the "DISTRIBUTION")
and, as a result of the Distribution, ITT Destinations and ITT Hartford will not
be included in the consolidated Federal income tax return of ITT Industries for
the portion of the year following the Distribution or in future years;
WHEREAS, the Companies have entered into an agreement (the
"DISTRIBUTION AGREEMENT") to, among other things, allocate and assign
responsibility for certain liabilities of the present ITT Corporation and its
former subsidiaries; and
WHEREAS, the Companies desire to allocate the tax burdens and benefits
of transactions which occurred on or prior to the Distribution Date and to
provide for certain other tax matters, including the assignment of
responsibility for the preparation and filing of tax returns and the prosecution
and defense of any tax controversies;
NOW, THEREFORE, in consideration of the mutual agreements contained
herein, the Companies (each on its own behalf and on behalf of each of its
subsidiaries as of the Distribution Date) hereby agree as follows:
1
<PAGE> 2
1. Definitions. As used in this Agreement, the following terms shall
have the following meaning:
"ADJUSTED ALLOCABLE FEDERAL INCOME TAX LIABILITY" shall mean the
Allocable Federal Income Tax Liability, adjusted as provided in
paragraphs 8(c), 8(d), 16 and 20 hereof.
"AGREEMENT" shall mean this Tax Allocation Agreement.
"ALLOCABLE FEDERAL INCOME TAX LIABILITY" shall mean the Separate
Consolidated Federal Income Tax Liability, but including the AMT and
adjusted as provided in paragraphs 8(a), 8(e) and 15(b) hereof.
"AMT" shall mean the alternative minimum tax imposed by Section
55 of the Code.
"CONSOLIDATED RETURN" shall mean the consolidated federal income
tax return of ITT Industries for the period commencing on January 1,
1995; or, if the Distribution occurs after December 31, 1995, the
consolidated federal income tax return of ITT Industries for the period
commencing on January 1, 1996; and including the ITT Destinations Group
and the ITT Hartford Group through the Distribution Date.
"CODE" shall mean the Internal Revenue Code of 1986, as amended,
or any successor statute.
"DISTRIBUTION" shall have the meaning assigned to such term in
the recitals to this Agreement.
"DISTRIBUTION AGREEMENT" shall have the meaning assigned to such
term in the recitals to this Agreement.
2
<PAGE> 3
"DISTRIBUTION DATE" shall mean the date on which ITT Industries
distributes to its shareholders all of the stock it owns in ITT
Destinations and ITT Hartford.
"FEDERAL TAX ADMINISTRATOR" shall mean James P. Whitson, the
Director of Taxes of ITT Destinations, or such other person as ITT
Destinations shall appoint with the consent of each of ITT Industries
and ITT Hartford, which consent shall not be unreasonably withheld or
delayed.
"FINAL DETERMINATION" shall mean the final resolution of
liability for any tax for any taxable period, including any related
interest or penalties, by or as a result of: (i) a final and
unappealable decision, judgment, decree or other order of a court of
competent jurisdiction; (ii) a closing agreement or accepted offer in
compromise under Section 7121 or 7122 of the Code, or comparable
agreement under the laws of other jurisdictions, which resolves the
entire tax liability for any tax period; (iii) any allowance of a
refund or credit in respect of an overpayment of tax, but only after
the expiration of all periods during which such refund may be recovered
(including by way of offset) by the tax imposing jurisdiction; or (iv)
any other final disposition, including by reason of the expiration of
the applicable statute of limitations.
"FTC" shall mean the foreign tax credit pursuant to Section 27 of
the Code.
"GROUP" shall mean the ITT Industries Group, the ITT Destinations
Group and/or the ITT Hartford Group, as the context may require.
"IRS" shall mean the United States Internal Revenue Service.
"ITT DESTINATIONS" shall have the meaning assigned to such term
in the preamble to this Agreement.
"ITT DESTINATIONS GROUP" shall mean ITT Destinations and each ITT
Destinations Subsidiary.
3
<PAGE> 4
"ITT DESTINATIONS SUBSIDIARY" shall mean all of the direct or
indirect subsidiaries of ITT Destinations as of the Distribution Date
which have joined or are eligible to join the Consolidated Return or
any Prior Period Consolidated Return.
"ITT FINANCIAL OPERATIONS" shall have the meaning assigned to
such term in paragraph 8(e).
"ITT HARTFORD" shall have the meaning assigned to such term in
the preamble to this Agreement.
"ITT HARTFORD GROUP" shall mean ITT Hartford and each ITT
Hartford Subsidiary.
"ITT HARTFORD SUBSIDIARY" shall mean all of the direct or
indirect subsidiaries of ITT Hartford as of the Distribution Date which
have joined or are eligible to join the Consolidated Return or any
Prior Period Consolidated Return.
"ITT INDUSTRIES" shall have the meaning assigned to such term in
the preamble to this Agreement.
"ITT INDUSTRIES GROUP" shall mean ITT Industries and each ITT
Industries Subsidiary.
"ITT INDUSTRIES SUBSIDIARY" shall mean all of the direct or
indirect subsidiaries of ITT Industries as of the Distribution Date
which have joined or are eligible to join the Consolidated Return or
any Prior Period Consolidated Return, other than subsidiaries which are
members of the ITT Destinations Group or the ITT Hartford Group.
4
<PAGE> 5
"NET REVERSAL BENEFIT" shall have the meaning assigned to such
term in paragraph 8(a).
"PRIME RATE" shall mean the "prime rate" charged by Citibank,
N.A., New York, New York, as such rate shall be changed from time to
time, compounded daily on the basis of a year of 365/366 days and
actual days elapsed.
"PRIOR PERIOD CONSOLIDATED RETURN" shall mean any consolidated
tax return of the present ITT Corporation filed, or to be filed, for
years prior to the Consolidated Return year.
"SEPARATE CONSOLIDATED FEDERAL INCOME TAX LIABILITY" shall mean,
with respect to any year or portion thereof, the tax liability which a
Group would have incurred if such Group, on a stand alone basis, had
been an affiliated group eligible to file a consolidated return for any
portion of such taxable year during which it is included in the
Consolidated Return or any Prior Period Consolidated Return and had
filed a return for such period, computed without regard to AMT.
"STATE TAX ADMINISTRATOR" shall mean Richard W. Powers, the
Director of Taxes of ITT Industries, or such other person as ITT
Industries shall appoint with the consent of each of ITT Destinations
and ITT Hartford, which consent shall not be unreasonably withheld or
delayed.
"TAX CREDITS" shall include all credits against tax pursuant to
Subtitle A, Chapter 1, Part IV of the Code..
"TAX ITEM" shall have the meaning specified in paragraph 8(a).
2. Consolidated Return to be Filed. Each of the Companies will join,
and will cause each of their subsidiaries to join, in the Consolidated Return to
the extent each is eligible to join in such return under the provisions of the
Code and the regulations thereunder.
5
<PAGE> 6
3. Documentation. The Companies hereby agree to execute and deliver all
documentation reasonably required (including powers of attorney, if requested)
to enable the Federal Tax Administrator to file, and to take all actions
necessary or incidental to the filing of, the Consolidated Return (including,
without limitation, the execution of Treasury Form 1122), or, with the consent
of each of the Companies, which consent shall not be unreasonably withheld or
delayed, any amendment of the Consolidated Return or any Prior Period
Consolidated Return. No consent of any Company shall be required for the filing
of an amended return pursuant to Section 905(c) of the Code.
4. Tax Return Preparation and Audits. (a) The Federal Tax Administrator
will cause the Consolidated Return to be timely prepared and filed. The Federal
Tax Administrator shall be responsible for the preparation and filing of any
consents and requests for extension of time within which to file the
Consolidated Return or any related information or similar returns. The Federal
Tax Administrator shall make the Consolidated Return available to the Directors
of Taxes of ITT Industries and ITT Hartford for their review prior to filing and
shall furnish them a copy of the return promptly after it is filed.
(b) ITT Industries and ITT Hartford agree that each will cause their
respective Director of Taxes to furnish to the Federal Tax Administrator on a
timely basis such information, schedules, analyses and any other items as may be
necessary to prepare the Consolidated Return. Such information, schedules,
analyses and other items will be prepared in a manner consistent with existing
practice and in accordance with a work plan and schedule to be agreed upon among
the Directors of Taxes of each of the Companies, acting reasonably, no later
than the Distribution Date.
(c) In preparing the Consolidated Return, the Federal Tax Administrator
shall retain Arthur Andersen LLP to review the Consolidated Return (with a scope
to be agreed upon among the Directors of Taxes of each of the Companies and the
cost of such review to be shared equally among the Companies) and may retain
other advisors and charge the cost of their services to the appropriate Group or
Groups; provided that, without the consent of the affected Group, the cost to
any Group of such services in any calendar year shall not exceed $25,000.
(d) The Federal Tax Administrator shall have overall responsibility for
obtaining and coordinating all responses in connection with any audit of the
Consolidated Return and all Prior Period Consolidated Returns. Such responses
shall be prepared by the affected Group in a manner consistent with prior
practice. IRS adjustments affecting the taxable income, loss or deductions of,
or tax credits generated by, any Group may be agreed upon or settled only upon
approval of that Group, which approval shall not be unreasonably withheld or
delayed. In connection with the defense of any audit of the Consolidated Return
or any Prior Period Consolidated Return, the
6
<PAGE> 7
Federal Tax Administrator may retain advisors and charge the cost of their
services to the appropriate Group or Groups; provided that, without the consent
of the affected Group, the cost to any Group of such services in any calendar
year shall not exceed $50,000.
5. Consolidated Return Computations of Tax and Payments. (a) On or
before December 14, 1995, the ITT Destinations Group and the ITT Hartford Group
each agree to make payments to ITT Industries equal to the excess of their
estimated Consolidated Return year Separate Consolidated Federal Income Tax
Liability over their prior payments with respect to estimated taxes for the
Consolidated Return year, and ITT Industries agrees to make payments to the ITT
Destinations Group and the ITT Hartford Group equal to the excess of their prior
payments with respect to estimated taxes for the Consolidated Return year over
their Consolidated Return year Separate Consolidated Federal Income Tax
Liability. For purposes of this paragraph 5(a), the computation of Separate
Consolidated Federal Income Tax Liability shall take into account the benefit of
any net capital loss, net operating loss, credit or deduction of the ITT
Destinations Group or the ITT Hartford Group if the Federal Tax Administrator
reasonably determines that such item will produce a benefit in the Consolidated
Return.
(b) On or before March 14, 1996, an interim tax settlement payment
shall be made to or by ITT Industries by or to the ITT Destinations Group and
the ITT Hartford Group, as the case may be, equal to the difference between the
Separate Consolidated Federal Income Tax Liability, modified as described in
paragraph 5(a), and the net amounts previously paid with respect to estimated
taxes for the Consolidated Return year.
(c) Based on computations to be prepared by the affected Group and
approved by the Federal Tax Administrator, an adjusting payment equal to the
difference between the Allocable Federal Income Tax Liability and the net
amounts previously paid with respect to estimated taxes for the Consolidated
Return year shall be made to or by ITT Industries by or to the ITT Destinations
Group and the ITT Hartford Group, as the case may be, on or before October 15,
1996 based on the Consolidated Return as filed, together with interest thereon
at the Prime Rate from December 14, 1995 or March 14, 1996, as the case may be.
Each of the ITT Destinations Group and the ITT Hartford Group shall increase
their liability for such adjusting payment by the amount of any AMT credit
carryforward allocated to them under the consolidated return regulations which
exceeds the AMT calculated on a separate consolidated basis.
6. Recomputations of Tax and Payments. (a) The Adjusted Allocable
Federal Income Tax Liability of the ITT Destinations Group and the ITT Hartford
Group for the Consolidated Return or any Prior Period Consolidated Return shall
be adjusted in computations to be prepared by the affected Group and approved by
the Federal Tax Administrator with respect to changes in the
7
<PAGE> 8
taxable income, loss, deduction or tax credits of the ITT Destinations Group or
the ITT Hartford Group:
(i) in each instance when payments are to be made to, or refunds
are received from, the IRS;
(ii) when no payment is to be made or refund is to be received
due to offsetting adjustments, upon filing of an amended return,
completion of an IRS audit and completion of an IRS appellate review;
and
(iii) to reflect the results of any Final Determination.
ITT Destinations and ITT Hartford each agree to pay to ITT Industries
additional amounts (plus penalties and additions to tax, if any) equal to any
increases in the Adjusted Allocable Federal Income Tax Liability of the ITT
Destinations Group or the ITT Hartford Group resulting from any such changes,
and ITT Industries agrees to pay ITT Destinations and ITT Hartford amounts equal
to any decreases in the Adjusted Allocable Federal Income Tax Liability of the
ITT Destinations Group or the ITT Hartford Group resulting from any such
changes, in each case together with any interest relating thereto. For purposes
of this agreement, unless specifically provided otherwise, interest shall be
computed at the Federal statutory rate used, pursuant to Section 6621(a) of the
Code, by the IRS in computing the interest payable to or by it on the net
balance due to or from the IRS. Any interest under Section 6621(c) of the Code
shall be charged to the Group whose separate deficiencies gave rise to such
interest. If the separate deficiencies of more than one Group gave rise to such
interest, then such interest shall be allocated between or among such Groups.
Penalties levied in respect of the Consolidated Return or any Prior Period
Consolidated Return shall be charged to the Group whose separate computations
gave rise to the penalty. If the separate computations of more than one Group
gave rise to the penalty, then such penalty shall be allocated between or among
such Groups. If a penalty does not arise from the separate computations of the
Groups, it shall be allocated in proportion to the tax in the separate tax
computations of the Groups.
(b) Amounts payable to or by ITT Industries by or to ITT Destinations
or ITT Hartford under paragraph 6(a) shall be paid upon written request therefor
approved by the Federal Tax Administrator, together with interest thereon from
the original due date or such other date as may be appropriate under the
circumstances. Any amounts due to or from ITT Industries from or to ITT
Destinations or ITT Hartford as a result of a payment to the IRS or the receipt
of a refund shall be paid within five working days after such payment or
receipt, together with appropriate interest
8
<PAGE> 9
thereon. If no payment is to be made or refund is to be received due to
offsetting items among the various Groups, then tax and interest (computed at
the IRS overpayment rates) shall be paid within 30 calendar days after the
completion of each of the IRS audit and appellate review of the tax period in
question and a Final Determination. After expiration of the five day period (or,
if applicable, 30 day period) any amounts unpaid shall bear interest computed
from the date of payment or receipt (or, if applicable, completion or Final
Determination) at the Prime Rate.
(c) No payment relating to a change in Adjusted Allocable Federal
Income Tax Liability shall be made by or to any Group with respect to the IRS
audit of the Consolidated Return or a Prior Period Consolidated Return until the
audit has been completed with respect to all Groups, unless such advance payment
has been approved by ITT Industries and such Group.
7. Special Rules. (a) If the Consolidated Return or any Prior Period
Consolidated Return tax liability (including any interest relating thereto)
exceeds or is less than the total of the three Groups' Allocable Federal Income
Tax Liability or Adjusted Allocable Federal Income Tax Liability, as appropriate
(including any interest relating thereto), the cost or benefit of any net
difference shall be allocated equally to ITT Industries and ITT Destinations,
provided, that AMT in an amount equal to any AMT credit carryforward from the
Consolidated Return allocated to a Group shall be borne by such Group.
(b) The liability for any environmental tax shall be apportioned among
the ITT Industries Group, the ITT Destinations Group and the ITT Hartford Group
in proportion to their separate Group liability therefor, computed without the
benefit of the amount referred to in Section 59A(a)(2) of the Code.
(c) Each of the Companies agrees that, unless it obtains consent of
each of the other Companies, all members of its Group will waive the carryback
of any net operating loss from a tax period beginning on or after January 1,
1996 to the Consolidated Return or Prior Period Consolidated Return.
8. Treatment of Various Items. (a) In computing Allocable Federal
Income Tax Liability for the purposes of this Agreement, each Group shall take
into account an amount equal to any benefit resulting from any net operating
loss, net capital loss, deduction or credit or any adjustment arising from an
IRS audit, amended return or otherwise (each, a "TAX ITEM") attributable to it,
or any carryback of a Tax Item attributable to it, which produces a benefit in
the Consolidated Return or any Prior Period Consolidated Return. In determining
whether a Tax Item or carryback of a Tax
9
<PAGE> 10
Item produces such a benefit, no Group shall take into account any Tax Item
which is a carryforward into a taxable year which begins after the Distribution
Date. If the Tax Item or carryback of a Tax Item results in a carryforward into
a taxable year of another Group which begins after the Distribution Date and
such carryforward produces a realized benefit (including a realized benefit as
the result of a tax basis increase), or other use, in such year or any
subsequent year after considering all other items of taxable income or credits
otherwise available to such other Group (a "NET REVERSAL BENEFIT"), then an
amount equal to such Net Reversal Benefit, when realized, shall be paid by such
other Group directly to the Group generating, or otherwise bearing the cost of,
such Tax Item or carryback of a Tax Item. For purposes of this Agreement, a Net
Reversal Benefit shall be deemed to be realized when included in a filed tax
return or otherwise allowed and shall be recomputed if adjusted upon audit by
the IRS, by amended return or otherwise. Payments with respect to the
realization or adjustment of a Net Reversal Benefit, together with interest
thereon (computed at the IRS overpayment rate) from the original due date of the
return in which the Tax Item arose or such other date as may be appropriate in
the case of an adjustment, shall be made within 30 days. The benefit of any
carryback of a Tax Item to the Consolidated Return or any Prior Period
Consolidated Return shall be taken into account only as and to the extent that
such carryback reduces the Consolidated Return or Prior Period Consolidated
Return tax or produces a Net Reversal Benefit. If no AMT is payable in the
Consolidated Return or any Prior Period Consolidated Return, no Group shall
include AMT in its Allocable Federal Income Tax Liability for such year. To the
extent that AMT results from a carryback from a year beginning after the end of
the Consolidated Return year, then such AMT shall be allocated to the Group
giving rise to the carryback and such Group shall be entitled to recover any Net
Reversal Benefit resulting from any AMT credit carryforwards associated with
such AMT.
(b) In the event that two or more carrybacks of Tax Items are available
for use in the Consolidated Return or in any Prior Period Consolidated Return,
their order of use will be determined by the Code and the regulations
thereunder. Where two or more carrybacks of Tax Items have equal priority and
can not be used in full, each such carryback shall be used by the affected
Groups in proportion to the total of such carrybacks.
(c) Amounts equal to research credits allowed upon any audit of the
Consolidated Return or any Prior Period Consolidated Return which are
attributable to the activities of the ITT Destinations Group or the ITT Hartford
Group prior to the Distribution Date shall be allocated to such Group. However,
if no credit is allowed, no allocation will be made. If a portion of the total
credit claimed on the Consolidated Return or any Prior Period Consolidated
Return is not allowed, only a portion of the credit as finally allowed (computed
in proportion to qualified expenditures as finally allowed) will be allocated to
the ITT Destinations Group or the ITT Hartford Group.
(d) Adjustments to the Federal tax liability (including interest and
penalties) of or with respect to any business listed on Schedule 1.01(d) of the
Distribution Agreement for any taxable
10
<PAGE> 11
year before or including the Distribution Date, shall be apportioned among the
Groups in the same manner as the other liabilities with respect to such business
are apportioned in the Distribution Agreement; provided, that any adjustment
with respect to any issue in the Consolidated Return which has not been cleared
with the Federal Tax Administrator, or for which a "more likely than not"
opinion from tax advisors reasonably acceptable to the Federal Tax Administrator
has not been received by him prior to the filing of the Consolidated Return,
shall be charged to the Group in whose separate tax computations the adjustment
arose, with the balance being apportioned. Any benefit (including any Net
Reversal Benefit) arising as a result of an adjustment pursuant to this
paragraph 8(d) or paragraph 8(e) below shall be similarly allocated and
apportioned. In computing the effect of adjustments with respect to companies
listed on Schedule 1.01(d) of the Distribution Agreement, all such adjustments
shall be combined and treated as if they were deemed to be a separate fourth
Group. Notwithstanding the foregoing, changes in direct FTC's generated by a
company listed on Schedule 1.01(d) of the Distribution Agreement and changes in
indirect FTC's generated by any foreign company together with any related
gross-up pursuant to Section 78 of the Code shall be allocated to the Group
owning such company on the Distribution Date (or, if such company has been
disposed of prior to the Distribution Date, the Group owning such company prior
to its disposition) and no FTC benefits or FTC carryforwards shall be computed
for such deemed fourth Group.
(e) If United States Federal income taxes with respect to the
operations or sale of the businesses of or assets of ITT Financial Corporation,
and the legal entities which were direct or indirect subsidiaries of ITT
Financial Corporation prior to its liquidation (such operations or sale,
collectively "ITT FINANCIAL Operations"), differ from the amounts reflected in
any Prior Period Consolidated Return or in the Consolidated Return, when filed,
then such difference in tax liability shall be apportioned equally among the
three Groups. To the extent that the statutory tax rate on capital gains with
respect to ITT Financial Operations is less than 35%, the difference, when
realized, shall be apportioned equally among the three Groups. In addition,
state, local and foreign taxes with respect to ITT Financial Operations which
differ from the amounts in the returns as originally filed (including the
returns to be filed with respect to 1995), shall be similarly apportioned.
Treatment of items in the Consolidated Return and in state, local and foreign
tax returns for the 1995 year are subject to the proviso in paragraph 8(d)
above.
(f) If actions taken on or before the Distribution Date cause any of
the Companies to be liable under the tax indemnities contained in the covenants,
loan agreements or offering memoranda of any debt instruments of a company
included in the Consolidated Return and listed on Schedule 1.01(d) of the
Distribution Agreement, with respect to obligations which remain outstanding at
the Distribution Date, then the cost of such tax indemnity shall be shared
equally among the Groups.
11
<PAGE> 12
(g) The intention of paragraphs 8(d), 8(e) and 8(f) above and of
paragraphs 9(b) and 15 below is that the items which are to be shared equally
pursuant to the Distribution Agreement or this Agreement shall be shared equally
on an after-tax basis.
9. Taxes Other Than Federal Taxes. (a) The Companies and their
subsidiaries shall file income and franchise tax returns in those jurisdictions
in which they are required to do so. Consistent with prior practice, the
Companies and their subsidiaries shall file combined tax returns in certain
jurisdictions. If any state or local income or franchise tax audit adjustment
attributable to any of the Companies, or any subsidiary of any of the Companies,
increases or decreases such combined tax liability for a taxable period
beginning before the Distribution Date, then an amount in respect of that
adjustment shall be paid as provided in paragraph 9(c) hereof. The State Tax
Administrator shall have the power and responsibility to act in a manner
substantially identical to the Federal Tax Administrator in connection with all
combined state and local tax returns and settlements with respect thereto;
provided that, without the consent of any affected Group, the cost to any Group
of outside services in any calendar year shall not exceed $5,000. In connection
with any Connecticut Combined Group Return, the Director of Taxes of ITT
Hartford shall act for the State Tax Administrator with respect to the ITT
Hartford Group.
(b) Tax liabilities incurred and refunds received by any of the
Companies or by a subsidiary of any of the Companies (other than those relating
to Federal, state and local income or franchise taxes computed on a combined or
consolidated basis) and all taxes not measured by income, including, but not
limited to, premium, ad valorem, capital stock, sales, use, real and personal
property, special assessment, franchise, automobile registration, employment,
earnings, duty and import taxes (plus interest) shall be for the account of ITT
Industries, ITT Destinations or ITT Hartford, as the case may be. All foreign
taxes shall be allocated to the Group which has legal ownership of the taxpayer
as of the Distribution Date, except that foreign taxes incurred with respect to
transactions undertaken in order to arrange the ownership of foreign companies
or assets to conform with management responsibility for such companies or assets
shall be apportioned equally among the Groups and that foreign taxes with
respect to operations of divisions of or subsidiaries of a foreign company which
are managed by a Group other than the Group having legal ownership shall be
allocated to such other Group. If, as a result of changes in foreign taxes which
are allocated or apportioned to one or more Groups under this paragraph 9(b) or
under paragraph 8(e) or of adjustments to FTC's under paragraph 8(d), another
Group realizes a benefit in its separate tax computations relating to the
Consolidated Return or any Prior Period Consolidated Return, after considering
all other credits otherwise available to such other Group except credit
carrybacks from a taxable year beginning after the Distribution, or a Net
Reversal Benefit, then such other Group shall pay the amount of such benefit or
Net Reversal Benefit to the Group or Groups to which the foreign taxes were
allocated or apportioned.
12
<PAGE> 13
(c) Consistent with prior practice, the Companies will reimburse each
other for any payment by one of them to a state or local tax authority which is
determined to be for the account of another Company, provided however that such
matter is timely referred to the State Tax Administrator. The rules contained in
paragraph 6(b) will apply to amounts any party must pay.
10. Tax Deficiencies and Claims. (a) The Federal Tax Administrator
shall defend or prosecute proposed or actual income tax deficiencies or refund
claims with respect to the Consolidated Return or any Prior Period Consolidated
Return where that deficiency or claim relates to the businesses of all of the
Groups or with respect to any businesses listed on Schedule 1.01(d) of the
Distribution Agreement. In connection with such defense or prosecution, the
Federal Tax Administrator may retain such accountants and counsel as required
and charge their costs ratably to each Group with the prior approval of each
Group, which approval shall not be unreasonably withheld or delayed. Similarly,
any compromise or settlement of such a claim or deficiency may be made by the
Federal Tax Administrator only after receipt of the approval of each Group,
which shall not be unreasonably withheld or delayed. The Federal Tax
Administrator will keep all Groups timely advised of all matters relating to
such defense or prosecution.
(b) Any proposed or actual income tax deficiencies or refund claims
with respect to the Consolidated Return or any Prior Period Consolidated Return
which arise from the business activities of only one Group may be defended or
prosecuted by that interested Group at its own cost and expense and with counsel
and accountants of its own selection. Either of the remaining Groups may
participate in any such prosecution or defense at its own cost and expense (in
either event such cost or expense is not to include the amount of any payment of
any tax claim, interest or penalties, or of any compromise settlement or other
disposition thereof). The interested Group may control the proceedings, but it
may not compromise or settle any deficiency of tax or refund claim for the
Consolidated Return year or any Prior Period Consolidated Return year without
the prior written consent of the other Groups, which shall not be unreasonably
withheld. Notwithstanding the foregoing, no Group shall have a right to an
extension of the statute of limitations beyond the time reasonably necessary to
complete review at the Appeals Division of the IRS or to any waiver of any other
procedural safeguard without the prior written consent of the other Groups. The
limitation expressed in the preceding sentence applies, but is not limited to,
the filing of a petition with the United States Tax Court. If any Group defends
or prosecutes an action, it shall keep each other Group informed of matters
relating to such defense or prosecution.
(c) Where proposed or actual income tax deficiencies or refund claims
of the type described in paragraph 10(b) above arise from the business
activities of two Groups, those Groups may jointly participate in the
prosecution or defense of such claims or deficiencies on the basis of and
subject to the limitations of paragraph 10(b) above.
13
<PAGE> 14
11. Dispute Resolution. In the event of a disagreement between the
Federal Tax Administrator (or, if with respect to state or local taxes, the
State Tax Administrator) and another party hereto, all computations or
recomputations of Federal or state and local income and franchise tax liability,
and all computations or recomputations of any amount or any payment (including,
but not limited to, computations of the amount of the tax liability, any loss or
credit or deduction, Federal statutory tax rate change for a year, utilization
of carryback items, interest, penalties, and adjustments) and all determinations
of the amount of payments or repayments, or determinations of any other nature
necessary to carry out the terms of this Agreement will be reviewed by Arthur
Andersen LLP or another mutually satisfactory third party, with the costs of
such review to be shared equally by the disputing parties. If any disagreement
remains after any such review, including any disagreement as to the
construction, applicability or binding nature of this Agreement, that
disagreement will be resolved as provided by Article VI of the Distribution
Agreement. In such case, the arbitrator shall be a retired or former judge of
the United States Tax Court or such other qualified person as the relevant
parties may agree to designate, provided that such individual has had
substantial experience with regard to settling complex tax disputes.
12. Tax Benefit Transfer Leases. (a) In computing any ITT Destinations
and ITT Hartford payment to ITT Industries under this Agreement, ITT
Destinations and ITT Hartford, and their respective subsidiaries and Groups,
will determine their tax liability as if their tax benefit transfer leases were
not in effect.
(b) ITT Destinations and ITT Hartford will indemnify ITT Industries if
ITT Industries is required to make any termination payments or other payments,
including interest and penalties, resulting from their failure to perform under
a tax benefit transfer lease.
(c) ITT Industries agrees to continue to provide assistance to ITT
Destinations and ITT Hartford in connection with their tax benefit transfer
leases.
13. Survival of Terms. The provisions of this Agreement shall survive
the Distribution and remain in full force until all periods of limitations,
including any extensions or waiver periods, as well as the ten-year statute of
limitations with respect to foreign tax credit redeterminations, for the
Consolidated Return period and Prior Period Consolidated Return periods have
expired and no further carrybacks to such periods are possible. At that time all
remaining payments required under this Agreement shall become immediately due
and payable.
14
<PAGE> 15
14. Parties to Cooperate. Each of the Companies and their subsidiaries
shall cooperate fully and to the extent reasonably requested by the other party
in connection with the preparation and filing of any return or the conduct of
any audit, dispute, proceeding, suit or action concerning any issues or any
other matter contemplated hereunder. Such cooperation shall include, without
limitation, (i) the retention and provision on demand of books, records,
documentation or other information relating to any tax matter until the later of
(x) the expiration of the applicable statute of limitation (giving effect to any
extension, waiver, or mitigation thereof) and (y) in the event any claim has
been made under this Agreement for which such information is relevant, until a
Final Determination with respect to such claim; (ii) the provision of additional
information with respect to and explanation of tax practices (elections,
accounting methods, conventions and principles of taxation) and material
provided under clause (i) of this paragraph 14; (iii) the execution of any
document that may be necessary or reasonably helpful in connection with the
filing of any tax return by any member of one of the Groups, or in connection
with any audit, proceeding, suit or action addressed in the preceding sentence;
and (iv) the use by each of the Companies of its reasonable efforts to obtain
any documentation from a governmental authority or a third party that may be
necessary or helpful in connection with the foregoing. Each of the companies
shall make its employees and facilities available on a mutually convenient basis
to facilitate such cooperation and shall retain as permanent records all
documentation necessary to enable it to determine any obligation under this
Agreement. The records described above will be made available to representatives
of any of the Companies within a reasonable time upon request and may be
photocopied on an as needed basis.
15. Distribution Taxes. (a) If the Distribution is ultimately held to
be a taxable transaction and there has been no material breach of the covenants
contained in Section 2.10 of the Distribution Agreement, then any tax liability
incurred by ITT Industries (as well as any payments which ITT Industries makes
with respect to the cost of additional taxes paid by its shareholders receiving
ITT Destinations and ITT Hartford stock in the Distribution, whether or not ITT
Industries is legally obligated to make such payments) shall be divided equally
among the Companies. If any of the Companies (or any subsidiary thereof) takes
or omits any action after the Distribution which materially contributes to a
Final Determination that the Distribution is a taxable event, then such Company
will indemnify ITT Industries for the resulting tax liability which would not
otherwise have been incurred (including interest and penalties) and any
resulting payments (computed after any available tax benefit) which ITT
Industries makes to its shareholders with respect to the cost of additional
taxes, whether or not ITT Industries is legally obligated to make such payments.
No settlement with respect to the matters referred to in this paragraph 15(a)
shall be entered into without the agreement of each Group having liability with
respect thereto under the terms of this Agreement.
(b) Taxes which are triggered in the Consolidated Return and which
relate to the intercompany sale or distribution of stock of a subsidiary or of
other property by one Group to
15
<PAGE> 16
another Group (but not those which relate to the intercompany sale or
distribution of assets within a Group) shall be shared equally by the three
Groups.
16. Gain Recognition Agreements. Adjustments to the tax liability
(including interest and penalties) of ITT Industries which result because of
actions taken by either ITT Destinations or ITT Hartford after the Distribution
Date which trigger any gain recognition agreements entered into in a Prior
Period Consolidated Return year by ITT Industries pursuant to Section 367 of the
Code shall be charged to the ITT Destinations Group or to the ITT Hartford
Group, as the case may be. ITT Industries shall make available to ITT
Destinations and ITT Hartford copies of such gain recognition agreements
immediately after the Distribution.
17. No Self-Approval. Any computation or issue of the ITT Destinations
Group which is to be approved by or cleared with the Federal Tax Administrator
shall also be approved by or cleared with the Director of Taxes of ITT
Industries and any computation or issue of the ITT Industries Group which is to
be approved by or cleared with the State Tax Administrator shall also be
approved by or cleared with the Director of Taxes of ITT Destinations.
18. Notices. Any notices, payments or other communications required by
this Agreement shall be made as provided in the Distribution Agreement with a
copy to the attention of the Director of Taxes of the appropriate Company.
19. Indemnification. ITT Industries shall indemnify ITT Destinations
and ITT Hartford for any Federal or state income or franchise taxes for any
taxable period (or portion of a taxable period) ending before or including the
Distribution Date for which the ITT Destinations Group or the ITT Hartford Group
or any ITT Destinations Subsidiary or ITT Hartford Subsidiary may be liable
solely as a result of the operation of Treasury Regulation Sections 1.1502-6 and
1.1502-77 or any state counterpart statute or regulation.
20. Certain Pending Claims. The tax and after-tax interest effects of
the tax refund litigation covering the period 1970 through 1980 (with possible
rollover effects on subsequent years) shall be allocated 50% to the ITT
Industries Group and 50% to the ITT Destinations Group. The tax and after-tax
interest effects of the tax refund claim with respect to the 1987 reserve
strengthening issue shall be allocated solely to the ITT Hartford Group.
16
<PAGE> 17
21. Choice of Law; Successors and Assigns. This Agreement shall be
governed and construed in accordance with the laws of the State of New York
applicable to contracts executed in and to be performed in that state. This
Agreement shall be binding on the successors and assignees of the Companies.
22. Entire Agreement. This Agreement contains the entire agreement
among the Companies with respect to the subject matter hereof and supersedes all
prior written tax sharing or tax allocation agreements, memoranda, negotiations
and oral understandings, if any, and may not be amended, supplemented or
discharged except by performance or by an instrument in writing signed by all of
the Companies. However, this Agreement does not supersede the certain Agreement
and Plan of Merger identified in the first footnote on page 3 of Schedule
1.01(c) of the Distribution Agreement, provided, however, that the liabilities
of ITT Corporation with respect to tax matters under such Agreement and Plan of
Merger shall be apportioned as provided in the Distribution Agreement for
liabilities of ITT Financial Corporation and its subsidiaries.
23. Counterparts. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original, but which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the Companies have duly executed this Agreement as
of the date first above written.
ITT CORPORATION
By: /s/ Richard W. Powers
-----------------------------------------
Name: Richard W. Powers
Title: Vice President
ITT DESTINATIONS, INC.
By: /s/ Richard S. Ward
-----------------------------------------
Name: Richard S. Ward
Title: Executive Vice President
17
<PAGE> 18
ITT HARTFORD GROUP, INC.
By: /s/ Michael S. Wilder
-----------------------------------------
Name: Michael S. Wilder
Title: Senior Vice President
18
<PAGE> 1
CONFORMED COPY
EMPLOYEE BENEFIT SERVICES AND LIABILITY AGREEMENT dated as of
November 1, 1995, among ITT CORPORATION, a Delaware corporation (which,
together with its subsidiaries, is herein referred to as "ITT"), ITT
DESTINATIONS, INC., a Nevada corporation, (which, together with its
subsidiaries, is herein referred to as "ITT Destinations"), and ITT
HARTFORD GROUP, INC., a Delaware corporation (which, together with its
subsidiaries, is herein referred to as "ITT Hartford").
WHEREAS, the Board of Directors of ITT has determined that it is
appropriate and desirable to distribute to the holders of shares of common
stock, par value $1.00 per share, of ITT (the "ITT Common Stock") all the
outstanding shares of common stock of ITT Destinations (the "ITT Destinations
Common Stock") and all the outstanding shares of common stock of ITT Hartford
(the "ITT Hartford Common Stock"); and
WHEREAS, each of ITT, ITT Destinations and ITT Hartford has determined
that it is necessary and desirable to allocate and assign responsibility for
certain employee benefit liabilities in respect of the activities of the
businesses of such entities on the Distribution Date (as defined herein) and
those liabilities in respect of other businesses and activities of ITT and its
former subsidiaries and certain other matters.
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, ITT, ITT Destinations and ITT Hartford agree as follows:
1. RETIREMENT PLANS. (a) Continuation of Retirement Plans. (i)
Following the Distribution, (x) ITT Industries shall continue to sponsor the ITT
Salaried Retirement Plan, which shall be renamed as the "ITT Industries Salaried
Retirement Plan", (y) ITT Hartford shall continue to sponsor the ITT Hartford
Retirement Plan and (z) ITT Destinations shall adopt the Sheraton Salaried
Retirement Plan as the ITT Destinations Salaried Retirement Plan.
(ii) Amendment of Retirement Plans. Effective as of the Distribution
Date, (x) ITT Industries shall cause the
<PAGE> 2
2
ITT Salaried Retirement Plan to be amended as provided pursuant to Section 1 of
this Agreement; (y) ITT Destinations shall cause the ITT Destinations Salaried
Retirement Plan to be amended as provided pursuant to Section 1 of this
Agreement; and (z) ITT Hartford shall cause the ITT Hartford Retirement Plan to
be amended as provided pursuant to Section 1 of this Agreement.
(b) Recognition of Service Rendered Prior to the Distribution Date.
This paragraph (b) is intended to set forth the steps to be taken to provide for
recognition of service rendered prior to the Distribution Date by ITT Employees
who, immediately prior to the Distribution Date, (x) have an accrued benefit
under more than one of the ITT Salaried Retirement Plan, the Sheraton Salaried
Retirement Plan and the ITT Hartford Retirement Plan or (y) have an accrued
benefit under any such plan and, on the Distribution Date, will be a participant
in any other such plan.
(i) This clause (i) applies solely to ITT Employees who, immediately
prior to the Distribution Date, have an accrued benefit under the ITT Salaried
Retirement Plan and who, on such date, are employed by either ITT Destinations
or ITT Hartford.
Each of the ITT Destinations Salaried Retirement Plan and the ITT
Hartford Retirement Plan shall be amended to recognize all service rendered by
such ITT Employees prior to the Distribution Date which is recognized as
Eligibility Service (as defined in the ITT Salaried Retirement Plan, as in
effect immediately prior to the Distribution Date) under the terms of the ITT
Salaried Retirement Plan for purposes of determining eligibility and vesting,
including, without limitation, eligibility service for purposes of determining
eligibility for plan membership, preretirement survivor benefits, early
retirement benefits and normal retirement benefits. Each of the ITT Destinations
Salaried Retirement Plan and the ITT Hartford Retirement Plan shall further be
amended to (A) recognize as service for benefit accrual purposes all service
rendered by such ITT Employees prior to the Distribution Date which is
recognized as Benefit Service (as defined in the ITT Salaried Retirement Plan,
as in effect immediately prior to the Distribution Date) under the terms of the
ITT Salaried Retirement Plan and (B) provide for an offset of any benefit
payable with respect to service recognized under the ITT Salaried Retirement
Plan or any other defined benefit
<PAGE> 3
3
retirement plan maintained by ITT or its Affiliates covering the same period of
service.
(ii) This clause (ii) applies solely to ITT Employees who, immediately
prior to the Distribution Date, have an accrued benefit under the Sheraton
Salaried Retirement Plan and who, on such date, are employed by either ITT
Industries or ITT Hartford.
Each of the ITT Salaried Retirement Plan and the ITT Hartford
Retirement Plan shall be amended to recognize all service rendered by such ITT
Employees prior to the Distribution Date which is recognized as Eligibility
Service (as defined in the Sheraton Salaried Retirement Plan, as in effect
immediately prior to the Distribution Date) under the terms of the Sheraton
Salaried Retirement Plan for purposes of determining eligibility and vesting,
including, without limitation, eligibility service for purposes of determining
eligibility for plan membership, preretirement survivor benefits, early
retirement benefits and normal retirement benefits. Each of the ITT Salaried
Retirement Plan and the ITT Hartford Retirement Plan shall further be amended to
(A) recognize as service for benefit accrual purposes all service rendered by
such ITT Employees prior to the Distribution Date which is recognized as Benefit
Service (as defined in the Sheraton Salaried Retirement Plan, as in effect
immediately prior to the Distribution Date) under the terms of the Sheraton
Salaried Retirement Plan and (B) provide for an offset of any benefit payable
with respect to service recognized under the Sheraton Salaried Retirement Plan
or any other defined benefit retirement plan maintained by ITT or its Affiliates
covering the same period of service.
(iii) This clause (iii) applies solely to ITT Employees who,
immediately prior to the Distribution Date, have an accrued benefit under the
ITT Hartford Retirement Plan and who, on such date, are employed by either ITT
Industries or ITT Destinations.
Each of the ITT Salaried Retirement Plan and the ITT Destinations
Salaried Retirement Plan shall be amended to recognize all service rendered by
such ITT Employees prior to the Distribution Date which is recognized as
Eligibility Service (as defined in the ITT Hartford Retirement Plan, as in
effect immediately prior to the Distribution Date) under the terms of the ITT
Hartford Retirement Plan for purposes of determining eligibility and
<PAGE> 4
4
vesting, including, without limitation, eligibility service for purposes of
determining eligibility for plan membership, preretirement survivor benefits,
early retirement benefits and normal retirement benefits. Each of the ITT
Salaried Retirement Plan and the ITT Destinations Salaried Retirement Plan shall
further be amended to (A) recognize as service for benefit accrual purposes all
service rendered by such ITT Employees prior to the Distribution Date which is
recognized as Benefit Service (as defined in the ITT Hartford Retirement Plan,
as in effect immediately prior to the Distribution Date) under the terms of the
ITT Hartford Retirement Plan and (B) provide for an offset of any benefit
payable with respect to service recognized under the ITT Hartford Retirement
Plan or any other defined benefit retirement plan maintained by ITT or its
Affiliates covering the same period of service.
(iv) For purposes of determining the offset to be provided pursuant to
subclause (B) of each of clauses (i), (ii) and (iii) of this paragraph (b), the
benefits payable under each plan shall be determined as a straight life annuity
payable at normal or postponed retirement age, and the offset shall be applied
to reduce the benefit payable under the appropriate plan. The offset shall be
taken as of the date benefits commence under the plan against which the offset
is applied, and the offset shall be computed as if the benefit being offset
commenced as of the same date.
(c) Recognition of Service Rendered On and After the Distribution Date.
This paragraph (c) is intended to set forth the steps to be taken to provide for
recognition of service rendered on and after the Distribution Date by ITT
Employees who, immediately prior to the Distribution Date (x) have an accrued
benefit under more than one of the ITT Salaried Retirement Plan, the Sheraton
Salaried Retirement Plan and the ITT Hartford Retirement Plan or (y) have an
accrued benefit under any such plan and, on the Distribution Date, will be a
participant in any other such plan.
(i) This clause (i) applies solely to ITT Employees who, on the
Distribution Date, are employed by ITT Industries and have an accrued benefit
under either the Sheraton Salaried Retirement Plan or the ITT Hartford
Retirement Plan.
Subject to Section 1(e) hereof and to the extent permitted by
applicable law, each of the ITT Destinations Salaried Retirement Plan and the
ITT Hartford Retirement
<PAGE> 5
5
Plan shall be amended to recognize service rendered on and after the
Distribution Date with ITT Industries for each such ITT Employee for purposes of
eligibility and vesting, including, without limitation, eligibility service for
purposes of preretirement death benefits, early retirement benefits and normal
retirement benefits. For purposes of the ITT Destinations Salaried Retirement
Plan and the ITT Hartford Retirement Plan, the final average pay of such ITT
Employees shall be determined immediately prior to the Distribution Date.
(ii) This clause (ii) applies solely to ITT Employees who, on the
Distribution Date, are employed by ITT Destinations and have an accrued benefit
under either the ITT Salaried Retirement Plan or the ITT Hartford Retirement
Plan.
Subject to Section 1(e) hereof and to the extent permitted by
applicable law, each of the ITT Salaried Retirement Plan and the ITT Hartford
Retirement Plan shall be amended to recognize service rendered on and after the
Distribution Date with ITT Destinations for each such ITT Employee for purposes
of eligibility and vesting, including, without limitation, eligibility service
for purposes of preretirement death benefits, early retirement benefits and
normal retirement benefits. For purposes of the ITT Salaried Retirement Plan and
the ITT Hartford Retirement Plan, the final average pay of such ITT Employees
shall be determined immediately prior to the Distribution Date.
(iii) This clause (iii) applies solely to ITT Employees who, on the
Distribution Date, are employed by ITT Hartford and have an accrued benefit
under either the ITT Salaried Retirement Plan or the Sheraton Salaried
Retirement Plan.
Subject to Section 1(e) hereof and to the extent permitted by
applicable law, each of the ITT Salaried Retirement Plan and the ITT
Destinations Salaried Retirement Plan shall be amended to recognize service
rendered on and after the Distribution Date with ITT Hartford for each such ITT
Employee for purposes of eligibility and vesting, including, without limitation,
eligibility service for purposes of preretirement death benefits, early
retirement benefits and normal retirement benefits. For purposes of the ITT
Salaried Retirement Plan and the ITT Destinations Salaried Retirement Plan, the
final average pay of such ITT
<PAGE> 6
6
Employees shall be determined immediately prior to the Distribution Date.
(d) Effect of Employment On and After the Distribution Date with ITT
Industries, ITT Destinations or ITT Hartford. (i) Any ITT Employee who, on the
Distribution Date, is employed by ITT Industries and for whom service rendered
on and after the Distribution Date is recognized pursuant to Section 1(c) under
the ITT Destinations Salaried Retirement Plan or the ITT Hartford Retirement
Plan while such person is employed with ITT Industries (including periods after
re-employment following a termination of employment occurring after the
Distribution Date), (I) shall not be deemed either to have terminated employment
or to be in retirement status under the ITT Destinations Salaried Retirement
Plan or the ITT Hartford Retirement Plan and (II) except to the extent required
by law, shall not be eligible to receive payment of his or her vested benefit or
retirement allowance under the ITT Destinations Salaried Retirement Plan or the
ITT Hartford Retirement Plan.
(ii) Any ITT Employee who, on the Distribution Date, is employed by ITT
Destinations and for whom service rendered on and after the Distribution Date is
recognized pursuant to Section 1(c) under the ITT Salaried Retirement Plan or
the ITT Hartford Retirement Plan while such person is employed with ITT
Destinations (including periods after re-employment following a termination of
employment occurring after the Distribution Date) (I) shall not be deemed either
to have terminated employment or to be in retirement status under the ITT
Salaried Retirement Plan or the ITT Hartford Retirement Plan and (II) except to
the extent required by law, shall not be eligible to receive payment of his or
her vested benefit or retirement allowance under the ITT Salaried Retirement
Plan or the ITT Hartford Retirement Plan.
(iii) Any ITT Employee who, on the Distribution Date, is employed by
ITT Hartford and for whom service rendered on and after the Distribution Date is
recognized pursuant to Section 1(c) under the ITT Salaried Retirement Plan or
the ITT Destinations Salaried Retirement Plan while such person is employed with
ITT Hartford (including periods after re-employment following a termination of
employment occurring after the Distribution Date) (I) shall not be deemed either
to have terminated employment or to be in retirement status under the ITT
Salaried Retirement Plan or
<PAGE> 7
7
the ITT Destinations Salaried Retirement Plan and (II) except to the extent
required by law, shall not be eligible to receive payment of his or her vested
benefit or retirement allowance under the ITT Salaried Retirement Plan or the
ITT Destinations Salaried Retirement Plan.
(e) Limited Obligation To Recognize Service Rendered On and After the
Distribution Date. (i) With respect to any ITT Employee, service rendered on and
after the Distribution Date that is required to be recognized by ITT Industries
under the ITT Salaried Retirement Plan pursuant to Section 1(c) hereof shall be
the same years and portions thereof of service recognized for similar purposes
under the ITT Hartford Retirement Plan, as in effect immediately prior to the
Distribution Date, with respect to ITT Hartford Employees, and under the ITT
Destinations Salaried Retirement Plan, as in effect immediately prior to the
Distribution Date, with respect to ITT Destinations Salaried Employees. In no
event shall the ITT Salaried Retirement Plan be required to recognize any
enhanced service benefits that might be provided on and after the Distribution
Date under the ITT Destinations Salaried Retirement Plan or the ITT Hartford
Retirement Plan.
(ii) With respect to any ITT Employee, service rendered on and after
the Distribution Date that is required to be recognized by ITT Destinations
under the ITT Destinations Salaried Retirement Plan pursuant to Section 1(c)
hereof shall be the same years and portions thereof of service recognized for
similar purposes under the ITT Salaried Retirement Plan, as in effect
immediately prior to the Distribution Date, with respect to ITT Industries
Salaried Employees, and under the ITT Hartford Retirement Plan, as in effect
immediately prior to the Distribution Date, with respect to ITT Hartford
Employees. In no event shall the ITT Destinations Salaried Retirement Plan be
required to recognize any enhanced service benefits that might be provided on
and after the Distribution Date under the ITT Salaried Retirement Plan or the
ITT Hartford Retirement Plan.
(iii) With respect to any ITT Employee, service rendered on and after
the Distribution Date that is required to be recognized by ITT Hartford under
the ITT Hartford Retirement Plan pursuant to Section 1(c) hereof shall be the
same years and portions thereof of service recognized for similar purposes under
the ITT Salaried Retirement Plan, as in effect immediately prior to the
Distribution Date, with
<PAGE> 8
8
respect to ITT Industries Salaried Employees, and under the ITT Destinations
Salaried Retirement Plan, as in effect immediately prior to the Distribution
Date, with respect to ITT Destinations Salaried Employees. In no event shall the
ITT Hartford Retirement Plan be required to recognize any enhanced service
benefits that might be provided on and after the Distribution Date under the ITT
Salaried Retirement Plan or the ITT Destinations Salaried Retirement Plan.
(f) Plan Asset Transfers. It is intended that, at any time or from time
to time following the Distribution, ITT Industries, ITT Destinations and ITT
Hartford may cause to occur transfers of assets from the ITT Salaried Retirement
Plan, the ITT Destinations Salaried Retirement Plan and/or the ITT Hartford
Retirement Plan, to any other such plan, subject to agreement by the sponsor of
the transferor plan and the sponsor of the transferee plan, with respect to
benefits that have accrued as of the Distribution Date and that are attributable
to a person no longer employed by the sponsor of the transferor plan or its
affiliates.
2. INVESTMENT AND SAVINGS PROGRAMS.
(a) Effective as of the Distribution Date, ITT Destinations shall adopt
the ITT Destinations Savings Plan, which shall have terms similar in all
material respects to the ITT Savings Plan. ITT Industries shall cause the
transfer, as soon as practicable on or after the Distribution Date, of the
accounts of all ITT Destinations Salaried Employees from the ITT Savings Plan to
the ITT Destinations Savings Plan. Such assets will be transferred in kind to
the maximum extent practicable.
(b) Effective as of the Distribution Date, ITT Hartford shall adopt the
ITT Hartford Savings Plan, which shall have terms similar in all material
respects to the ITT Savings Plan. ITT Industries shall cause the transfer, as
soon as practicable on or after the Distribution Date, of the accounts of all
ITT Hartford Employees from the ITT Savings Plan to the ITT Hartford Savings
Plan. Such assets will be transferred in kind to the maximum extent practicable.
(c) With respect to any former ITT employee who is entitled to a
benefit as of the Distribution Date under the ITT Destinations Salaried
Retirement Plan or any other
<PAGE> 9
9
defined benefit retirement plan to be maintained by ITT Destinations following
the Distribution or who was a participant in any such plan on such employee's
last day of service with ITT, ITT Industries shall cause the account of such
former employee under the ITT Savings Plan to be transferred in the manner
described in Section 2(a) hereof.
(d) With respect to any former ITT employee entitled to a benefit as of
the Distribution Date under the ITT Hartford Retirement Plan or any other
defined benefit retirement plan to be maintained by ITT Hartford following the
Distribution or who was a participant in any such plan on such employee's last
day of service with ITT, ITT Industries shall cause the account of such former
employee under the ITT Savings Plan to be transferred in the manner described in
Section 2(b) hereof.
(e) The account of any other current or former ITT employee shall
remain in the ITT Savings Plan, which shall continue to be sponsored by ITT
Industries and shall be renamed as the "ITT Industries Investment and Savings
Plan."
3. EXCESS NON-QUALIFIED SUPPLEMENTAL BENEFIT PLANS. (a) Excess Pension
Plans. (i) Effective as of the Distribution Date, ITT Industries shall continue
to sponsor the ITT Excess Pension Plan and ITT Excess Pension Plan Trust.
Effective as of the Distribution Date, ITT Destinations shall adopt the Sheraton
Excess Pension Plan as the ITT Destinations Excess Pension Plan and shall adopt
the ITT Destinations Excess Pension Plan Trust under which excess pension
benefits for certain officers will be funded. Effective as of the Distribution
Date, ITT Hartford shall continue to sponsor the ITT Hartford Excess Pension
Plan and the ITT Hartford Excess Pension Plan Trust.
(ii) ITT Industries does hereby assume all liability for benefits
(whether funded or unfunded) that have accrued prior to the Distribution Date
under the Sheraton Excess Pension Plan and the ITT Hartford Excess Pension Plan
with respect to ITT Industries Salaried Employees, except that, to the extent
such benefits are funded under the ITT Hartford Excess Pension Plan Trust, ITT
Industries' assumption of liability for benefits to any ITT Industries Salaried
Employee shall be effective only if and to the extent that such employee waives
his or her right to receive such benefits under the ITT Hartford Excess Pension
Plan and ITT Hartford Excess Pension Plan Trust. ITT
<PAGE> 10
10
Industries and ITT Hartford shall each use its commercially reasonable efforts
to obtain such waivers from ITT Industries Salaried Employees, and ITT Hartford
shall notify ITT Industries upon receipt of any such waiver.
(iii) ITT Destinations does hereby assume all liability for benefits
(whether funded or unfunded) that have accrued prior to the Distribution Date
under the ITT Excess Pension Plan and the ITT Hartford Excess Pension Plan with
respect to ITT Destinations Salaried Employees, except that, to the extent such
benefits are funded under the ITT Excess Pension Plan Trust or the ITT Hartford
Excess Plan Trust, ITT Destinations' assumption of liability for benefits to any
ITT Destinations Salaried Employee shall be effective only if and to the extent
that such employee waives his or her right to receive such benefits under the
ITT Excess Pension Plan and ITT Excess Pension Plan Trust or the ITT Hartford
Excess Pension Plan and ITT Hartford Excess Pension Plan Trust, as the case may
be. ITT Industries, ITT Destinations and ITT Hartford shall each use its
commercially reasonable efforts to obtain such waivers from ITT Destinations
Salaried Employees, and ITT Industries and ITT Hartford shall notify ITT
Destinations upon receipt of any such waiver.
(iv) ITT Hartford does hereby assume all liability for benefits
(whether funded or unfunded) that have accrued prior to the Distribution Date
under the ITT Excess Pension Plan and the Sheraton Excess Pension Plan with
respect to ITT Hartford Employees, except that, to the extent such benefits are
funded under the ITT Excess Pension Plan Trust, ITT Hartford's assumption of
liability for benefits to any ITT Hartford Employee shall be effective only if
and to the extent that such employee waives his or her right to receive such
benefits under the ITT Excess Pension Plan and ITT Excess Pension Plan Trust.
ITT Industries and ITT Hartford shall each use its commercially reasonable
efforts to obtain such waivers from ITT Hartford Employees, and ITT Industries
shall notify ITT Hartford upon receipt of any such waiver.
(b) Excess Savings Plans. Effective as of the Distribution Date, ITT
Industries shall remain liable for benefits accrued under the ITT Excess Savings
Plan prior to the Distribution Date with respect to ITT Industries Salaried
Employees. Effective as of the Distribution Date, ITT Destinations shall adopt
the ITT Destinations Excess Savings Plan, which shall be identical in all
material respects to the ITT Excess Savings Plan as in effect
<PAGE> 11
11
immediately prior to the Distribution Date. Effective as of the Distribution
Date, ITT Hartford shall continue to sponsor the ITT Hartford Excess Savings
Plan. ITT Destinations does hereby assume liability for benefits accrued prior
to the Distribution Date under the ITT Excess Savings Plan with respect to ITT
Destinations Salaried Employees, and ITT Hartford does hereby assume liability
for benefits accrued prior to the Distribution Date under the ITT Excess Savings
Plan with respect to ITT Hartford Employees.
(c) Guarantee. (i) ITT Destinations and ITT Hartford jointly and
severally guarantee and agree, in the event ITT Industries fails to satisfy its
obligations in respect of benefits that have accrued prior to the Distribution
Date under the ITT Excess Pension Plan (including, without limitation, to the
extent that ITT Industries has assumed any such liability pursuant to an
employee's waiver of benefits under the ITT Hartford Excess Pension Plan Trust,
as contemplated by Section 3(a) above) or benefits that have accrued prior to
the Distribution Date under the ITT Excess Savings Plan, to make payment when
due in respect of all such obligations of ITT Industries in respect of the ITT
Excess Pension Plan or the ITT Excess Savings Plan, as applicable. To the extent
ITT Destinations or ITT Hartford makes payment in respect of this guarantee, it
will have a right of contribution from the nonpaying guarantor of 50% of the
payment made.
(ii) ITT Industries and ITT Hartford jointly and severally guarantee
and agree, in the event ITT Destinations fails to satisfy its obligations in
respect of benefits under the ITT Destinations Excess Pension Plan that have
accrued prior to the Distribution Date (including, without limitation, to the
extent that ITT Destinations has assumed any such liability pursuant to an
employee's waiver of benefits under the ITT Excess Pension Plan Trust or the ITT
Hartford Excess Pension Plan Trust, as contemplated by Section 3(a) above) or
benefits that have accrued prior to the Distribution Date under the ITT
Destinations Excess Savings Plan with respect to ITT Destinations Salaried
Employees (including, without limitation, by reason of the assumption by ITT
Destinations of liability for such benefits under Section 3(b) above), to make
payment when due in respect of all such obligations of ITT Destinations in
respect of the ITT Destinations Excess Pension Plan or the ITT Destinations
Excess Savings Plan, as applicable. To the extent ITT Industries or ITT Hartford
makes payment in
<PAGE> 12
12
respect of this guarantee, it will have a right of contribution from the
nonpaying guarantor of 50% of the payment made.
(iii) ITT Destinations and ITT Industries jointly and severally
guarantee and agree, in the event ITT Hartford fails to satisfy its obligations
in respect of benefits under the ITT Hartford Excess Plan that have accrued
prior to the Distribution Date (including, without limitation, to the extent
that ITT Hartford has assumed any such liability pursuant to an employee's
waiver of benefits under the ITT Excess Pension Plan Trust, as contemplated by
Section 3(a) above) or benefits that have accrued prior to the Distribution Date
under the ITT Hartford Excess Savings Plan with respect to ITT Hartford
Employees (including, without limitation, by reason of the assumption by ITT
Hartford of liability for such benefits under Section 3(b) above), to make
payment when due in respect of all such obligations of ITT Hartford in respect
of the ITT Hartford Excess Pension Plan or the ITT Hartford Excess Savings Plan,
as applicable. To the extent ITT Destinations or ITT Industries makes payment in
respect of this guarantee, it will have a right of contribution from the
nonpaying guarantor of 50% of the payment made.
(iv) This Section 3(c) is not intended to modify the allocation and
assumption of liabilities in respect of the excess pension plans and excess
savings plans contemplated by Section 3(a) and Section 3(b) hereof.
(v) It is the intention of the parties to this Agreement that the
provisions of this Section 3(c) shall be enforceable by any ITT Employee or ITT
retiree or their respective surviving beneficiaries.
4. ITT EMPLOYEE WELFARE BENEFIT PLANS. (a) Establishment of Plans. (i)
Subject to Section 10(c), effective as of the Distribution Date, ITT Industries
shall continue to sponsor the employee welfare benefit plans of ITT for ITT
Industries Salaried Employees. Such employee welfare benefit plans shall include
coverage for life insurance, disability, health, accident and post-retirement
health and life insurance.
(ii) Subject to Section 10(c), effective as of the Distribution Date,
ITT Destinations shall adopt the broad-based employee welfare benefit plans of
ITT Sheraton as the ITT Destinations salaried employee welfare benefit program.
<PAGE> 13
13
Such employee welfare benefit plans shall include coverage for life insurance,
health, accident and post-retirement health and life insurance. ITT Destinations
shall also adopt a long-term disability insurance plan and an excess long-term
disability plan, as provided in Section 4(d) hereof. Subject to Section 10(c),
ITT Destinations shall further cause CWI, ITT Educational Services and ITT
Intermedia, and use its commercially reasonable efforts to cause MSG, to
continue their respective separate employee welfare benefit plans covering their
respective employees.
(iii) Subject to Section 10(c), effective as of the Distribution Date,
ITT Hartford shall continue its broad-based employee welfare benefit plans. Such
employee welfare benefit plans shall include coverage for life insurance,
disability, health, accident and post-retirement health and life insurance.
(b) Post-Retirement Benefits. (i) ITT Sheraton and ITT Hartford each
maintains separate employee welfare benefit programs that include retiree
medical and health benefits for certain of their respective salaried employees.
ITT Destinations acknowledges that, following the Distribution, it will retain
all liability with respect to such plans maintained by ITT Sheraton. ITT
Hartford acknowledges that, following the Distribution, it will retain all
liability with respect to such plans maintained by ITT Hartford.
ITT Industries shall retain all liability with respect to, and all Code
Section 501(c)(9) assets attributable to, retiree life insurance and medical
benefits under the ITT employee welfare benefit plans, except that (i) ITT
Industries shall transfer to ITT Destinations the liability of ITT with respect
to, and any assets attributable to, certain ITT Destinations Salaried Employees
whose employment is transferred to ITT Destinations in connection with the
Distribution, and ITT Destinations does hereby assume such liability and (ii)
ITT Industries shall transfer to ITT Hartford the liability with respect to, and
assets attributable to, certain ITT Employees whose employment is transferred to
ITT Hartford in connection with the Distribution, and ITT Hartford does hereby
assume such liability.
(ii) If there is a Change in Control of ITT Industries, ITT
Destinations or ITT Hartford during the ten-year period following the
Distribution, then the company in
<PAGE> 14
14
which such Change in Control occurred shall not, during the balance of such
ten-year period, reduce or eliminate health benefits in effect immediately prior
to such Change in Control provided to former employees who retired from ITT or
any of its Affiliates on or prior to the Distribution Date (or as set forth in
the next succeeding sentence), or increase associated retiree contributions,
unless the other companies consent in writing to such a reduction, elimination
or cost increase; provided, however, that the company in which the Change in
Control occurred may, in its sole discretion, modify such benefits in accordance
with the changes contemplated in the assumptions in effect immediately prior to
the Change in Control that are used to establish such company's Accumulated
Postretirement Benefit Obligation (as defined in Statement of Financial
Accounting Standard No. 106). Persons who are receiving severance payments in
connection with the Distribution and who are or become eligible to retire on or
before the end of such severance period shall be afforded the treatment of this
Section 4(b)(ii).
(iii) Indemnity. In the event that any of ITT Industries, ITT
Destinations or ITT Hartford is asked to consent to a reduction, elimination or
cost increase with respect to retiree health benefits after a Change in Control
as described in clause (ii) above, each such company shall determine whether to
provide such consent in its sole and absolute discretion. Each of ITT
Industries, ITT Destinations and ITT Hartford does hereby agree to indemnify any
other company asked by it to provide such consent against any and all liability
that might arise with respect to the granting or withholding of such consent.
(c) Severance. As of the Distribution Date, each of ITT Industries, ITT
Destinations and ITT Hartford shall provide severance plans for all ITT
Employees which are substantially equivalent to those ITT severance plans
covering such employees immediately prior to the Distribution Date. Such
severance plans shall be maintained without modification for a minimum of one
year.
(d) Long-Term Disability Insurance. (i) As of the Distribution Date,
ITT Destinations shall adopt a long-term disability plan, identical in all
material respects to the ITT Long-Term Disability Plan, as in effect on the
Distribution Date, covering eligible ITT Destinations Salaried Employees. ITT
Destinations shall be allocated a proportionate share of any assets attributable
thereto,
<PAGE> 15
15
including any assets (and any related liability) for incurred but unreported
claims. ITT Hartford shall be allocated a proportionate share of any assets
attributable thereto, including any assets (and any related liability) for
incurred but unreported claims. The reasonable determination of Metropolitan
Life Insurance Company with respect to the allocation of such assets among ITT
Industries, ITT Destinations and ITT Hartford shall be binding on the parties
hereto.
(ii) Effective as of the Distribution Date, ITT Destinations shall
adopt an excess long-term disability plan, identical in all material respects to
the ITT Excess Long-Term Disability Plan, as in effect on the Distribution Date,
covering those eligible ITT Destinations employees. ITT Destinations does hereby
assume all liabilities to ITT Destinations Salaried Employees under the ITT
Excess Long-Term Disability Plan.
5. BONUS PLAN; LONG-TERM PERFORMANCE PLAN. ITT currently maintains
certain bonus plans and the ITT Long-Term Performance Plan, pursuant to which
certain ITT Employees employed by ITT World Headquarters might become entitled
to payments after the Distribution Date with respect to their performance with
ITT prior to the Distribution Date. With respect to such ITT Employees who
continue in employment on the Distribution Date, ITT Industries shall remain
liable for such payments, including any such payments to be made following the
Distribution Date, except that any such payments deferred by any such ITT
Employee pursuant to the ITT Deferred Compensation Plan shall be the liability
of the company employing such ITT Employee on the Distribution Date. With
respect to such ITT Employees who do not continue in employment immediately
following the Distribution Date, ITT Industries shall remain liable for (i) the
payments described in the first sentence of this Section 5 and for any payments
under applicable severance arrangements, including any such payments to be made
following the Distribution Date, and (ii) any of the payments referred to in (i)
above deferred by any such ITT Employee pursuant to the ITT Deferred
Compensation Plan. ITT Industries, ITT Destinations and ITT Hartford shall cause
any such payments under the bonus plans to be recognized as compensation for
purposes of their respective retirement plans without regard to the source of
such payments, provided that all other terms and conditions of such retirement
plans shall apply to the determination of whether such payments are recognized
as compensation.
<PAGE> 16
16
6. COLI. (i) Effective as of the Distribution Date, a portion of the
COLI policy underwritten by Penn Insurance and Annuity Company covering ITT
Destinations Salaried Employees shall be allocated to ITT Destinations.
(ii) Effective as of the Distribution Date, the COLI policy
underwritten by Hartford Life Insurance Company covering certain ITT Employees
and directors of ITT, ITT Destinations and ITT Hartford who are eligible for
participation in the ITT Deferred Compensation Plan shall be allocated among the
three companies based on the employment of each such ITT Employee or service of
such director immediately following the Distribution Date.
7. STOCK OPTIONS AND OTHER AWARDS. (a) Effective as of the Distribution
Date, outstanding stock options, stock appreciation rights and restricted stock
awards ("ITT stock awards") under the ITT 1977 Stock Option Incentive Plan, the
ITT 1986 Incentive Stock Plan, and the ITT 1994 Incentive Stock Plan, as each
such plan may have been amended from time to time (the "ITT Stock Plans"), shall
be treated as follows:
(i) ITT Industries Salaried Employees. ITT stock awards held by ITT
Industries Salaried Employees shall be adjusted to reflect the
Distribution, as provided pursuant to the terms of the ITT Stock Plans.
(ii) ITT Destinations Salaried Employees. ITT Destinations Salaried
Employees holding ITT stock awards shall receive substitute stock awards in
respect of ITT Destinations Common Stock pursuant to the terms of the ITT
Destinations Stock Plan, to be adopted by ITT Destinations as of the
Distribution Date, provided that such ITT Destinations Salaried Employees
surrender their ITT stock awards for cancellation. Any such ITT stock
awards not so surrendered and cancelled shall be adjusted to reflect the
Distribution, as provided pursuant to the terms of the ITT Stock Plans and
as described in Section 7(a)(i).
(iii) ITT Hartford Employees. ITT Hartford Employees holding ITT stock
awards shall receive substitute stock awards in respect of ITT Hartford
Common Stock pursuant to the terms of the ITT Hartford Stock Plan, to be
adopted by ITT Hartford as of the Distribution Date, provided that such ITT
Hartford Employees surrender their ITT stock awards for
<PAGE> 17
17
cancellation. Any such ITT stock awards not so surrendered and cancelled
shall be adjusted to reflect the Distribution, as provided pursuant to the
terms of the ITT Stock Plans and as described in Section 7(a)(i).
(iv) Other Persons. Prior to the Distribution Date, the Compensation
and Personnel Committee of the Board of Directors of ITT shall be asked to
waive any remaining restrictions on the exercisability and vesting of ITT
stock awards held by other individuals, including retirees and former
employees of ITT. The Compensation and Personnel Committee shall be asked
to cause such waiver to occur beginning on October 1, 1995 (or such earlier
date as it may determine). Any ITT stock awards held by such individuals
that have not been exercised as of the Distribution Date shall be adjusted
to reflect the Distribution, as provided pursuant to the terms of the ITT
Stock Plans and as described in Section 7(a)(i).
(b) Manner of Substitution. With respect to each cancelled ITT stock
award, the number and exercise price of substitute stock awards granted under
the ITT Destinations Stock Plan or the ITT Hartford Stock Plan with respect
thereto, and the other terms and conditions of the substitute stock awards,
shall be equitably determined to preserve the economic value of the cancelled
ITT stock award.
8. FOREIGN BENEFIT PLANS. Certain current and former employees of ITT
Industries, ITT Destinations and ITT Hartford participate in (i) ITT Group
pension plans and savings plans made available for ITT Group employees in
Canada, the United Kingdom, Belgium and Ireland or (ii) expatriate pension
plans. The plan actuary for each such plan shall be responsible for determining
the appropriate amount of assets to be allocated to comparable plans to be
established and adopted by the companies as required, in each case in accordance
with applicable local law.
9. DIRECTOR PLANS. (a) Effective as of the Distribution Date, ITT
Industries shall continue the ITT Deferred Compensation Plan, the ITT Directors
Retirement Plan (which was suspended as of October 1, 1995), the group life
insurance program of ITT and the ITT Group Accident Program. With respect to any
non-employee director of ITT Industries immediately following the Distribution
who is not
<PAGE> 18
18
also a director of ITT Destinations at such time and who has an accrued benefit
under the suspended ITT Directors Retirement Plan, ITT Industries shall provide
such accrued benefit in accordance with the terms of such plan, but only to the
extent such accrued benefit is not duplicated under a plan maintained by ITT
Destinations or ITT Hartford.
(b) Effective as of the Distribution Date, ITT Destinations shall adopt
plans and programs for non-employee directors that are identical in all material
respects to the ITT Deferred Compensation Plan, the ITT Directors Retirement
Plan (which was suspended as of October 1, 1995), the group life insurance
program of ITT and the ITT Group Accident Program. With respect to any
non-employee director of ITT Destinations immediately following the Distribution
who has an accrued benefit under the suspended ITT Directors Retirement Plan,
ITT Destinations shall provide such accrued benefit in accordance with the terms
of such plan, but only to the extent such accrued benefit is not duplicated
under a plan maintained by ITT Industries or ITT Hartford.
(c) Effective as of the Distribution Date, ITT Hartford intends to
adopt plans and programs for non-employee directors that are identical in all
material respects to the group life insurance program of ITT and the ITT Group
Accident Program. With respect to any non-employee director of ITT Hartford who
has an accrued benefit under the suspended retirement plan covering ITT Hartford
non-employee directors, ITT Hartford shall provide such accrued benefit in
accordance with the terms of such plan, but only to the extent such accrued
benefit is not duplicated under a plan maintained by ITT Industries or ITT
Destinations.
10. BENEFIT PROGRAM PARTICIPATION. (a) Except as specifically provided
herein, all ITT Destinations and ITT Hartford employees (including ITT
Destinations Salaried Employees and ITT Hartford Employees) will cease
participation in all ITT benefit plans and programs immediately prior to the
Distribution Date. As soon as reasonably practicable, ITT Industries will
provide an accounting of the 1995 claims experience for ITT Destinations
employees and ITT Hartford Employees who participate in the ITT welfare benefit
plans and programs and reasonably determine any reconciliation payment
necessary.
<PAGE> 19
19
(b) ITT Destinations shall cause to be recognized each ITT Destinations
Salaried Employee's service with ITT for purposes of determining (i) eligibility
for vacation benefits, short-term disability and severance benefits and (ii)
eligibility for vesting under all other employee benefit plans and policies of
ITT Destinations applicable to such ITT Destinations Salaried Employees, to the
extent such service was recognized by ITT for such purposes. ITT Hartford shall
cause to be recognized each ITT Hartford Employee's service with ITT for
purposes of determining (i) eligibility for vacation benefits, short-term
disability and severance benefits and (ii) eligibility for vesting under all
other employee benefit plans and policies of ITT Hartford applicable to such ITT
Hartford Employees, to the extent such service was recognized by ITT for such
purposes.
(c) Nothing in this Agreement shall be construed or interpreted to
restrict ITT Industries', ITT Destinations' or ITT Hartford's right or authority
to amend or terminate any of its employee benefit plans, policies or programs
effective as of a date following the Distribution Date, except as explicitly
stated in Section 4(b) hereof.
11. ALLOCATION OF BALANCE SHEET ACCOUNTS. Effective as of the
Distribution Date, certain balance sheet accounts attributable to employee
benefit plans for which responsibility is being transferred from ITT to ITT
Destinations and/or ITT Hartford shall be allocated to the balance sheets of ITT
Destinations or ITT Hartford, as appropriate, on the following basis:
(a) All accruals on the balance sheets of ITT Destinations (including
accruals on the balance sheet of ITT Sheraton) and ITT Hartford which relate to
benefit plans sponsored by the respective companies shall be unaffected by the
provisions of this Section 11.
(b)(i) With respect to the unfunded pension plan liabilities assumed by
ITT Destinations (excluding all liabilities assumed pursuant to a waiver
described in Section 3 of this Agreement), the then current balance sheet
accrual shall be transferred.
(ii) With respect to the unfunded pension plan liabilities assumed by
ITT Destinations pursuant to a waiver described in Section 3 of this Agreement,
the then current balance sheet accrual for the ITT Excess Pension Plan shall be
allocated between ITT Industries and ITT Destinations in
<PAGE> 20
20
proportion to the Accumulated Benefit Obligation (as that term is defined in
Statement of Financial Accounting Standard No. 87) assumed by such companies.
(c) With regard to the ITT Directors Retirement Plan, there shall be
allocated to the responsible party, determined in accordance with Section 9 of
this Agreement, the present value of the accrued pension benefit as of the
Distribution Date for those eligible directors for whom the liability is being
assumed by either ITT Destinations or ITT Hartford using the discount rate last
adopted by ITT for purposes of Statement of Financial Accounting Standard No.
87.
(d) With respect to the liabilities being assumed by ITT Destinations
and ITT Hartford in connection with the provisions of Section 4(b) of this
Agreement, ITT shall allocate to the respective parties the "Accumulated
Postretirement Benefit Obligation" (as that term is defined in Statement of
Financial Accounting Standard No. 106), using the assumptions in effect as of
the Distribution Date, for ITT Employees who, immediately after the
Distribution, are employed by ITT Destinations or ITT Hartford.
(e) In connection with the book reserves maintained by ITT with respect
to the liabilities for Other Postemployment Benefits, as that term is described
in Statement of Financial Accounting Standard No. 112, ITT shall allocate to ITT
Destinations and ITT Hartford, respectively, the amounts previously provided by
operations which, after the Distribution Date, shall be part of ITT Destinations
and ITT Hartford, adjusted to reflect the gain recognized by ITT in connection
with the 1993 changes to Medicare.
(f) With regard to the liabilities recorded by ITT with respect to the
ITT Excess Savings Plan that will, in accordance with Section 3(b), be assumed
by ITT Destinations and ITT Hartford, respectively, ITT shall allocate to the
respective new employing entity an amount equal to the sum of the plan balances
for such affected employees.
(g) With respect to the liabilities accrued by ITT in connection with
the ITT Excess Long-Term Disability Plan, ITT shall allocate to ITT Destinations
a share of such book reserves based on the proportion of the exposure
<PAGE> 21
21
assumed by ITT Destinations to the total exposure under the plan as determined
by Metropolitan Life Insurance Company.
(h) In connection with the assumption by ITT Destinations of a portion
of the responsibility for the ITT Third Country National Pension Plan, with an
appropriate transfer of assets, as provided in Section 8 of this Agreement, ITT
shall allocate to ITT Destinations a portion of the prepaid pension expense in
the same proportion that the assets transferred relate to the total assets of
the plan.
(i) For each category of balance sheet account enumerated in this
Section 11, there has been recorded a corresponding deferred tax debit or
credit, as the case may be, which shall also be allocated to the respective
companies based on the amount allocated for the stated reason above.
(j) To the extent that a balance sheet account requiring allocation
among the companies exists that is not specifically included in this Section 11,
ITT shall make the allocation on a reasonable basis, subject to the agreement of
the party in whose favor the allocation is being made.
12. ACCESS TO INFORMATION AND DATA EXCHANGE. (a) Provision of Corporate
Records. (i) Unless otherwise specified in the procedures set forth in Schedule
12(c)(ii) hereto, after the Distribution Date, upon the prior written request by
ITT Destinations or ITT Hartford for specific and identified agreements,
documents, books, records or files including, without limitation, computer
files, microfiche, tape recordings and photographs (collectively, "Records"),
relating to or affecting ITT Destinations or ITT Hartford, as applicable, ITT
Industries shall arrange, as soon as reasonably practicable following the
receipt of such request, for the provision of appropriate copies of such Records
(or the originals thereof if the party making the request has a reasonable need
for such originals) in the possession of ITT Industries or any of its
Subsidiaries, but only to the extent such items are not already in the
possession of the requesting party.
(ii) Unless otherwise specified in the procedures set forth in Schedule
12(c)(ii) hereto, after the Distribution Date, upon the prior written request by
ITT Industries or ITT Hartford for specific and identified Records relating to
or affecting ITT Industries or ITT
<PAGE> 22
22
Hartford, as applicable, ITT Destinations shall arrange, as soon as reasonably
practicable following the receipt of such request, for the provision of
appropriate copies of such Records (or the originals thereof if the party making
the request has a need for such originals) in the possession of ITT Destinations
or any of its Subsidiaries, but only to the extent such items are not already in
the possession of the requesting party.
(iii) Unless otherwise specified in the procedures set forth in
Schedule 12(c)(ii) hereto, after the Distribution Date, upon the prior written
request by ITT Industries or ITT Destinations for specific and identified
Records relating to or affecting ITT Industries or ITT Destinations, as
applicable, ITT Hartford shall arrange, as soon as reasonably practicable
following the receipt of such request, for the provision of appropriate copies
of such Records (or the originals thereof if the party making the request has a
need for such originals) in the possession of ITT Hartford or any of its
Subsidiaries, but only to the extent such items are not already in the
possession of the requesting party.
(b) Access to Information. (i) Unless otherwise specified in the
procedures set forth in Schedule 12(c)(ii) hereto, from and after the
Distribution Date, each of ITT Industries, ITT Destinations and ITT Hartford
shall afford to the other and its authorized accountants, counsel and other
designated representatives reasonable access during normal business hours,
subject to appropriate restrictions for classified, privileged or confidential
information, to the personnel, properties, books and Records of such party and
its Subsidiaries insofar as such access is reasonably required by the other
party.
(ii) Without limiting the generality of the foregoing clause (i),
except as otherwise provided by law, each party hereto shall furnish, or shall
cause to be furnished to the other parties, a list of all benefit plan
participants and employee data or information in its possession which is
necessary for such other parties to maintain and implement any benefit plan or
arrangement covered by this Agreement, or to comply with the provisions of this
Agreement, and which is not otherwise readily available to such other party.
(c) Reimbursement; Other Matters. (i) Except to the extent otherwise
contemplated by the Distribution
<PAGE> 23
23
Agreement or any Ancillary Agreement or Schedule 12(c)(ii) hereto, a party
providing Records or access to information to the other party under this Section
12 shall be entitled to receive from the recipient, upon the presentation of
invoices therefor, payments for such amounts, relating to supplies,
disbursements and other out-of-pocket expenses, as may be reasonably incurred in
providing such Records or access to information.
(ii) The parties hereto shall comply with those document retention
policies, cost sharing arrangements, expense reimbursement procedures and
request procedures as shall be set forth in Schedule 12(c)(ii) hereto or
established and agreed to in writing by their respective authorized officers on
or prior to the Distribution Date in respect of Records and related matters.
(d) Confidentiality. Each of (i) ITT Industries and its Subsidiaries,
(ii) ITT Destinations and its Subsidiaries and (iii) ITT Hartford and its
Subsidiaries shall not use or permit the use of (without the prior written
consent of the other) and shall hold, and shall cause its consultants and
advisors to hold, in strict confidence, all information concerning the other
parties in its possession, its custody or under its control (except to the
extent that (A) such information has been in the public domain through no fault
of such party or (B) such information has been later lawfully acquired from
other sources by such party or (C) the Distribution Agreement, this Agreement or
any other Ancillary Agreement or any other agreement entered into pursuant
hereto permits the use or disclosure of such information) to the extent such
information (x) relates to the period up to the Effective Time, (y) relates to
the Distribution Agreement or any Ancillary Agreement or (z) is obtained in the
course of performing services for the other party pursuant to the Distribution
Agreement or any Ancillary Agreement, and each party shall not (without the
prior written consent of the other) otherwise release or disclose such
information to any other person, except such party's auditors and attorneys,
unless compelled to disclose such information by judicial or administrative
process or unless such disclosure is required by law and such party has used
commercially reasonable efforts to consult with the other affected party or
parties prior to such disclosure. To the extent that a party hereto is compelled
by judicial or administrative process to disclose such information under
circumstances in which any evidentiary privilege would be available, such party
agrees
<PAGE> 24
24
to assert such privilege in good faith prior to making such disclosure. Each of
the parties hereto agrees to consult with each relevant other party in
connection with any such judicial or administrative process, including, without
limitation, in determining whether any privilege is available, and further
agrees to allow each such relevant party and its counsel to participate in any
hearing or other proceeding (including, without limitation, any appeal of an
initial order to disclose) in respect of such disclosure and assertion of
privilege. Notwithstanding anything to the contrary contained herein, each party
shall be entitled to use information disclosed pursuant to this Agreement to the
extent reasonably necessary for the administration of its employee benefit plans
in accordance with applicable law.
13. NOTICES; COOPERATION. Notwithstanding anything in this Agreement to
the contrary, all actions contemplated herein with respect to benefit plans
which are to be consummated pursuant to this Agreement shall be subject to such
notices to, and/or approvals by, the Internal Revenue Service (or other
governmental agency or entity) as are required or deemed appropriate by such
benefit plan's sponsor. Each of ITT Industries, ITT Destinations and ITT
Hartford agrees to use its commercially reasonable efforts to cause all such
notices and/or approvals to be filed or obtained, as the case may be. Each party
hereto shall reasonably cooperate with the other parties with respect to any
government filings, employee notices or any other actions reasonably necessary
to maintain and implement the employee benefit arrangements covered by this
Agreement.
14. FURTHER ASSURANCES. From time to time, as and when reasonably
requested by any other party hereto, each party hereto shall execute and
deliver, or cause to be executed and delivered, all such documents and
instruments and shall take, or cause to be taken, all such further or other
actions as such other party may reasonably deem necessary or desirable to effect
the purposes of this Agreement and the transactions contemplated hereunder.
15. INDEMNIFICATION. (a) Indemnification by ITT Industries. Except as
otherwise specifically set forth in this Agreement or the Distribution
Agreement, ITT Industries shall indemnify, defend and hold harmless the ITT
Destinations Indemnitees and the ITT Hartford Indemnitees from and against any
and all Indemnifiable Losses of the ITT Destinations Indemnitees and the ITT
Hartford Indemnitees,
<PAGE> 25
25
respectively, arising out of, by reason of or otherwise in connection with (i)
any employee benefit plan, policy, program or arrangement established or adopted
by ITT Industries effective on or after the Distribution Date, (ii) any
liability assumed or retained by ITT Industries pursuant to the terms and
conditions set forth in this Agreement or (iii) the breach by ITT Industries of
any provision of this Agreement.
(b) Indemnification by ITT Destinations. Except as otherwise
specifically set forth in this Agreement or the Distribution Agreement, ITT
Destinations shall indemnify, defend and hold harmless the ITT Industries
Indemnitees and the ITT Hartford Indemnitees from and against any and all
Indemnifiable Losses of the ITT Industries Indemnitees and the ITT Hartford
Indemnitees, respectively, arising out of, by reason of or otherwise in
connection with (i) any employee benefit plan, policy, program or arrangement
established or adopted by ITT Destinations effective on or after the
Distribution Date, (ii) any liability assumed or retained by ITT Destinations
pursuant to the terms and conditions set forth in this Agreement or (iii) the
breach by ITT Destinations of any provision of this Agreement.
(c) Indemnification by ITT Hartford. Except as otherwise specifically
set forth in this Agreement or the Distribution Agreement, ITT Hartford shall
indemnify, defend and hold harmless the ITT Industries Indemnitees and the ITT
Destinations Indemnitees from and against any and all Indemnifiable Losses of
the ITT Industries Indemnitees and the ITT Destinations Indemnitees,
respectively, arising out of, by reason of or otherwise in connection with (i)
any employee benefit plan, policy, program or arrangement established or adopted
by ITT Hartford effective on or after the Distribution Date, (ii) any liability
assumed or retained by ITT Hartford pursuant to the terms and conditions set
forth in this Agreement and (iii) the breach by ITT Hartford of any provision of
this Agreement.
(d) Limitations on Indemnification Obligations. (i) The amount that any
party (an "Indemnifying Party") is or may be required to pay to any other person
(an "Indemnitee") pursuant to paragraphs (a), (b) or (c) of this Section 15, as
applicable, shall be reduced (retroactively or prospectively) by any Insurance
Proceeds or other amounts actually recovered by or on behalf of such Indemnitee
in respect of the related Indemnifiable Loss. If an Indemnitee shall have
received the payment required by this Agreement
<PAGE> 26
26
from an Indemnifying Party in respect of an Indemnifiable Loss and shall
subsequently actually receive Insurance Proceeds or other amounts in respect of
such Indemnifiable Loss, then such Indemnitee shall pay to such Indemnifying
Party a sum equal to the amount of such Insurance Proceeds or other amounts
actually received, up to the aggregate amount of any payments received from such
Indemnifying Party pursuant to this Agreement in respect of such Indemnifiable
Loss.
(ii) An Indemnifying Party shall not be required to indemnify or pay an
Indemnitee pursuant to paragraphs (a), (b) or (c) of this Section 15, as
applicable, for any Indemnifiable Losses relating to or associated with any
employee benefit plan, policy, program or arrangement of the Indemnifying Party
arising out of, by reason of or otherwise in connection with any act or failure
to act on the part of such Indemnitee (including for this purpose any
subsidiaries, businesses or operations which become associated with the
Indemnitee by virtue of or in connection with the Distribution) with respect to
or in connection with such employee benefit plan, policy, program or
arrangement, including, without limitation, any such act or failure to act in
connection with the administration by the Indemnitee of such employee benefit
plan, policy, program or arrangement.
(e) Procedures for Indemnification (Third Party Claims). If a claim or
demand is made against an Indemnitee by any person who is not a party to this
Agreement (a "Third Party Claim") as to which such Indemnitee is entitled to
indemnification pursuant to this Agreement, such Indemnitee shall notify the
Indemnifying Party in writing, and in reasonable detail, of the Third Party
Claim promptly (and in any event within 15 business days) after receipt by such
Indemnitee of written notice of the Third Party Claim; provided, however, that
failure to give such notification shall not affect the indemnification provided
hereunder except to the extent the Indemnifying Party shall have been actually
prejudiced as a result of such failure (except that the Indemnifying Party shall
not be liable for any expenses incurred during the period in which the
Indemnitee failed to give such notice). Thereafter, the Indemnitee shall deliver
to the Indemnifying Party, promptly (and in any event within 15 business days)
after the Indemnitee's receipt thereof, copies of all notices and documents
(including court papers) received by the Indemnitee relating to the Third Party
Claim.
<PAGE> 27
27
If a Third Party Claim is made against an Indemnitee, the Indemnifying
Party shall be entitled to participate in the defense thereof and, if it so
chooses and acknowledges in writing its obligation to indemnify the Indemnitee
therefor, to assume the defense thereof with counsel selected by the
Indemnifying Party; provided that such counsel is not reasonably objected to by
the Indemnitee. Should the Indemnifying Party so elect to assume the defense of
a Third Party Claim, the Indemnifying Party shall not be liable to the
Indemnitee for legal or other expenses subsequently incurred by the Indemnitee
in connection with the defense thereof. If the Indemnifying Party assumes such
defense, the Indemnitee shall have the right to participate in the defense
thereof and to employ counsel, at its own expense, separate from the counsel
employed by the Indemnifying Party, it being understood that the Indemnifying
Party shall control such defense. The Indemnifying Party shall be liable for the
fees and expenses of counsel employed by the Indemnitee for any period during
which the Indemnifying Party has failed to assume the defense thereof (other
than during the period prior to the time the Indemnitee shall have given notice
of the Third Party Claim as provided above). If the Indemnifying Party so elects
to assume the defense of any Third Party Claim, all of the Indemnitees shall
cooperate with the Indemnifying Party in the defense or prosecution thereof.
If the Indemnifying Party acknowledges in writing liability for a Third
Party Claim, then in no event will the Indemnitee admit any liability with
respect to, or settle, compromise or discharge, any Third Party Claim without
the Indemnifying Party's prior written consent; provided, however, that the
Indemnitee shall have the right to settle, compromise or discharge such Third
Party Claim without the consent of the Indemnifying Party if the Indemnitee
releases the Indemnifying Party from its indemnification obligation hereunder
with respect to such Third Party Claim and such settlement, compromise or
discharge would not otherwise significantly adversely affect the Indemnifying
Party. If the Indemnifying Party acknowledges in writing liability for a Third
Party Claim, the Indemnitee will agree to any settlement, compromise or
discharge of a Third Party Claim that the Indemnifying Party may recommend and
that by its terms obligates the Indemnifying Party to pay the full amount of the
liability in connection with such Third Party Claim and releases the Indemnitee
completely in connection with such Third Party Claim and that would not
otherwise adversely affect the Indemnitee; provided, however, that the
<PAGE> 28
28
Indemnitee may refuse to agree to any such settlement, compromise or discharge
if the Indemnitee agrees that the Indemnifying Party's indemnification
obligation with respect to such Third Party Claim shall not exceed the amount
that would be required to be paid by or on behalf of the Indemnifying Party in
connection with such settlement, compromise or discharge.
Notwithstanding the foregoing, the Indemnifying Party shall not be
entitled to assume the defense of any Third Party Claim (and shall be liable for
the fees and expenses of counsel incurred by the Indemnitee in defending such
Third Party Claim) if the Third Party Claim seeks an order, injunction or other
equitable relief or relief for other than money damages against the Indemnitee
which the Indemnitee reasonably determines, after conferring with its counsel,
cannot be separated from any related claim for money damages. If such equitable
relief or other relief portion of the Third Party Claim can be so separated from
that for money damages, the Indemnifying Party shall be entitled to assume the
defense of the portion relating to money damages.
Indemnification required by this Section 15 shall be made by periodic
payments of the amount thereof during the course of the investigation or
defense, as and when bills are received or loss, liability, claim, damage or
expense is incurred.
All claims under Section 15 that are Third Party Claims shall be
governed by this Section 15(e).
(f) Other Adjustments. (i) The amount of any Indemnifiable Loss shall
be (x) increased to take into account any net Tax cost actually incurred by the
Indemnitee arising from any payments received from the Indemnifying Party
(grossed up for such increase) and (y) reduced to take account of any net Tax
benefit actually realized by the Indemnitee arising from the incurrence or
payment of any such Indemnifiable Loss. In computing the amount of any such Tax
cost or Tax benefit, the Indemnitee shall be deemed to recognize all other items
of income, gain, loss, deduction or credit before recognizing any item arising
from the receipt of any payment with respect to an Indemnifiable Loss or the
incurrence or payment of any Indemnifiable Loss.
(ii) In addition to any adjustments required pursuant to Section 15(d)
hereof or clause (i) of this
<PAGE> 29
29
Section 15(f), if the amount of any Indemnifiable Loss shall, at any time
subsequent to the payment required by this Agreement, be reduced by recovery,
settlement or otherwise, the amount of such reduction, less any expenses
incurred in connection therewith, shall promptly be repaid by the Indemnitee to
the Indemnifying Party, up to the aggregate amount of any payments received from
such Indemnifying Party pursuant to this Agreement in respect of such
Indemnifiable Loss.
(g) Survival of Indemnities. The obligations of ITT Industries, ITT
Destinations and ITT Hartford under this Section 15 shall survive the sale or
other transfer by any of them of any assets or businesses or the assignment by
any of them of any Liabilities, with respect to any Indemnifiable Loss of the
other related to such assets, businesses or Liabilities.
16. DISPUTE RESOLUTION. In the event of a controversy, dispute or claim
arising out of, in connection with, or in relation to the interpretation,
performance, nonperformance, validity or breach of this Agreement or otherwise
arising out of, or in any way related to this Agreement, including, without
limitation, any claim based on contract, tort, statute or constitution
(collectively, "Agreement Disputes"), the general counsels of the relevant
parties shall negotiate in good faith for a reasonable period of time to settle
such Agreement Dispute.
If after such reasonable period such general counsels are unable to
settle such Agreement Dispute (and in any event after 60 days have elapsed from
the time the relevant parties began such negotiations), such Agreement Dispute
shall be determined, at the request of any relevant party, by arbitration
conducted in New York City, before and in accordance with the then-existing
Rules for Commercial Arbitration of the American Arbitration Association (the
"Rules"), and any judgment or award rendered by the arbitrator shall be final,
binding and nonappealable (except upon grounds specified in 9 U.S.C. Section
10(a) as in effect on the date hereof), and judgment may be entered by any state
or Federal court having jurisdiction thereof in accordance with Section 17(q)
hereof. Unless the arbitrator otherwise determines, the pre-trial discovery of
the then-existing Federal Rules of Civil Procedure and the then-existing Rules
46 and 47 of the Civil Rules for the United States District Court for the
Southern District of New York shall apply to any arbitration hereunder. Any
controversy
<PAGE> 30
30
concerning whether an Agreement Dispute is an arbitrable Agreement Dispute,
whether arbitration has been waived, whether an assignee of this Agreement is
bound to arbitrate, or as to the interpretation of enforceability of this
Section 15 shall be determined by the arbitrator. The arbitrator shall be a
retired or former judge of any United States District Court or Court of Appeals
or such other qualified person as the relevant parties may agree to designate,
provided such individual has had substantial professional experience with regard
to settling sophisticated commercial disputes. The parties intend that the
provisions to arbitrate set forth herein be valid, enforceable and irrevocable.
The designation of a situs or a governing law for this Agreement or the
arbitration shall not be deemed an election to preclude application of the
Federal Arbitration Act, if it would be applicable. In his award the arbitrator
shall allocate, in his discretion, among the parties to the arbitration all
costs of the arbitration, including, without limitation, the fees and expenses
of the arbitrator and reasonable attorneys' fees, costs and expert witness
expenses of the parties. The undersigned agree to comply with any award made in
any such arbitration proceedings that has become final in accordance with the
Rules and agree to the entry of a judgment in any jurisdiction upon any award
rendered in such proceedings becoming final under the Rules. The arbitrator
shall be entitled, if appropriate, to award any remedy in such proceedings,
including, without limitation, monetary damages, specific performance and all
other forms of legal and equitable relief; provided, however, the arbitrator
shall not be entitled to award punitive damages.
17. MISCELLANEOUS. (a) Complete Agreement; Construction. This
Agreement, including the Schedule, shall constitute the entire agreement between
the parties with respect to the subject matter hereof and shall supersede all
previous negotiations, commitments and writings with respect to such subject
matter. The Schedule shall be construed with and as an integral part of this
Agreement to the same extent as if the same had been set forth verbatim herein.
(b) Ancillary Agreements. This Agreement is not intended to address,
and should not be interpreted to address, the matters explicitly and expressly
covered by the Distribution Agreement or the Ancillary Agreements.
(c) Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be
<PAGE> 31
31
considered one and the same agreement, and shall become effective when one or
more such counterparts have been signed by each of the parties and delivered to
the other parties.
(d) Survival of Agreements. Except as otherwise contemplated by this
Agreement, all covenants and agreements of the parties contained in this
Agreement shall survive the Distribution Date.
(e) Notices. All notices and other communications hereunder shall be in
writing and hand delivered or mailed by registered or certified mail (return
receipt requested) or sent by any means of electronic message transmission with
delivery confirmed (by voice or otherwise) to the parties at the following
addresses (or at such other addresses for a party as shall be specified by like
notice) and will be deemed given on the date on which such notice is received:
To ITT Corporation (ITT Industries, Inc.
after the Distribution):
4 West Red Oak Lane
White Plains, NY 10604
Attn: General Counsel
To ITT Destinations, Inc. (ITT Corporation
after the Distribution):
1330 Avenue of the Americas
New York, NY 10019
Attn: Executive Vice President and
General Counsel
To ITT Hartford Group, Inc.:
Hartford Plaza
Hartford, CT 06115
Attn: General Counsel
(f) Waivers. The failure of either party to require strict performance
by the other party of any
<PAGE> 32
32
provision in this Agreement will not waive or diminish that party's right to
demand strict performance thereafter of that or any other provision thereof.
(g) Amendments. Subject to the terms of Section 17(j), this Agreement
may not be modified or amended except by an agreement in writing signed by the
parties.
(h) Assignment. This Agreement shall be assignable in whole in
connection with a merger or consolidation or the sale of all or substantially
all the assets of a party hereto so long as the resulting, surviving or
transferee entity assumes all the obligations of the relevant party hereto by
operation of law or pursuant to an agreement in form and substance reasonably
satisfactory to the other parties to this Agreement. Otherwise this Agreement
shall not be assignable, in whole or in part, directly or indirectly, by any
party hereto without the prior written consent of the others, and any attempt to
assign any rights or obligations arising under this Agreement without such
consent shall be void.
(i) Successors and Assigns. The provisions of this Agreement shall be
binding upon, inure to the benefit of and be enforceable by the parties and
their respective permitted successors and permitted assigns.
(j) Termination. This Agreement (including, without limitation, Section
3(c) and Section 15 hereof) may be terminated, amended, modified or abandoned at
any time prior to the Distribution by and in the sole discretion of ITT without
the approval of ITT Destinations or ITT Hartford or the shareholders of ITT. In
the event of such termination, no party shall have any liability of any kind to
any other party or any other person. After the Distribution, this Agreement may
not be terminated except by an agreement in writing signed by the parties;
provided, however, that Section 3(c) and Section 15 shall not be terminated or
amended after the Distribution in respect of the third party beneficiaries
thereto without the consent of such persons.
(k) Subsidiaries. Each of the parties hereto shall cause to be
performed, and hereby guarantees the performance of, all actions, agreements and
obligations set forth herein to be performed by any Subsidiary of such party or
by any entity that is contemplated to be a Subsidiary of such party on and after
the Distribution Date.
<PAGE> 33
33
(l) Third Party Beneficiaries. Except as provided in Section 3(c)
hereof relating to excess pension plan guarantees and excess savings plan
guarantees and in Section 15 hereof relating to Indemnitees, this Agreement is
solely for the benefit of the parties hereto and their respective Subsidiaries
and Affiliates and should not be deemed to confer upon third parties any remedy,
claim, liability, reimbursement, claim of action or other right in excess of
those existing without reference to this Agreement.
(m) Attorney Fees. Except as contemplated by the third to the last
sentence of Section 16 hereof, a party in breach of this Agreement shall, on
demand, indemnify and hold harmless the other parties hereto for and against all
out-of-pocket expenses, including, without limitation, legal fees, incurred by
such other party by reason of the enforcement and protection of its rights under
this Agreement. The payment of such expenses is in addition to any other relief
to which such party may be entitled hereunder or otherwise.
(n) Titles and Headings. Titles and headings to sections herein are
inserted for the convenience of reference only and are not intended to be a part
of or to affect the meaning or interpretation of this Agreement.
(o) Specific Performance. Each of the parties hereto acknowledges that
there is no adequate remedy at law for failure by such parties to comply with
the provisions of this Agreement and that such failure would cause immediate
harm that would not be adequately compensable in damages, and therefore agree
that their agreements contained herein may be specifically enforced without the
requirement of posting a bond or other security, in addition to all other
remedies available to the parties hereto under this Agreement.
(p) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS
EXECUTED IN AND TO BE PERFORMED IN THAT STATE.
(q) Consent to Jurisdiction. Without limiting the provisions of Section
16 hereof, each of the parties irrevocably submits to the exclusive jurisdiction
of (a) the Supreme Court of the State of New York, New York County, and (b) the
United States District Court for the Southern
<PAGE> 34
34
District of New York, for the purposes of any suit, action or other proceeding
arising out of this Agreement or any transaction contemplated hereby. Each of
the parties agrees to commence any action, suit or proceeding relating hereto
either in the United States District Court for the Southern District of New York
or if such suit, action or other proceeding may not be brought in such court for
jurisdictional reasons, in the Supreme Court of the State of New York, New York
County. Each of the parties further agrees that service of any process, summons,
notice or document by U.S. registered mail to such party's respective address
set forth above shall be effective service of process for any action, suit or
proceeding in New York with respect to any matters to which it has submitted to
jurisdiction in this Section 17(q). Each of the parties irrevocably and
unconditionally waives any objection to the laying of venue of any action, suit
or proceeding arising out of this Agreement or the transactions contemplated
herein in (i) the Supreme Court of the State of New York, New York County, or
(ii) the United States District Court for the Southern District of New York, and
hereby further irrevocably and unconditionally waives and agrees not to plead or
claim in any such court that any such action, suit or proceeding brought in any
such court has been brought in an inconvenient form.
(r) Severability. In the event any one or more of the provisions
contained in this Agreement should be held invalid, illegal or unenforceable in
any respect, the validity, legality and enforceability of the remaining
provisions contained herein and therein shall not in any way be affected or
impaired thereby. The parties shall endeavor in good-faith negotiations to
replace the invalid, illegal or unenforceable provisions with valid provisions,
the economic effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.
<PAGE> 35
35
(s) Effectiveness. This Agreement shall be effective as of the
Distribution Date, subject to the consummation of the Distribution.
(t) Definitions. Capitalized terms used herein shall have the
respective meanings specified in the Appendix attached hereto unless otherwise
herein defined or the context hereof shall otherwise require.
IN WITNESS WHEREOF, the parties have duly executed and entered into
this Agreement, as of the date first above written.
ITT Corporation,
By: /s/ Robert W. Brokaw
----------------------------------
Name: Robert W. Brokaw
Title: VP, Director-Employee
Benefits & HQ Personnel
ITT Destinations, Inc.,
By: /s/ Richard S. Ward
----------------------------------
Name: Richard S. Ward
Title: Executive Vice President
ITT Hartford Group, Inc.,
By: /s/ Donald R. Frahm
----------------------------------
Name: Donald R. Frahm
Title: Executive Vice President
<PAGE> 36
Appendix
As used in the Agreement, the following terms have the following
meanings:
"Action" means any action, suit, arbitration, inquiry, proceeding or
investigation by or before any court, any governmental or other regulatory or
administrative agency, body or commission or any arbitration tribunal.
"Affiliate" means, when used with respect to a specified person,
another person that directly, or indirectly through one or more intermediaries,
controls or is controlled by or is under common control with the person
specified.
"Agreement Disputes" has the meaning set forth in Section 16 of this
Agreement.
"Ancillary Agreements" means all of the written agreements,
instruments, understandings, assignments or other written arrangements (other
than this Agreement and the Distribution Agreement) entered into in connection
with the transactions contemplated hereby, including, without limitation, the
Conveyancing and Assumption Instruments, the Tax Allocation Agreement and the
Intellectual Property Agreements.
"CWI" means Caesars World, Inc.
"Change in Control" means the occurrence of any of the following events
with respect to the relevant corporation: (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 "Exchange Act") or any successor
provision disclosing that any person (within the meaning of Section 13(d) of the
Exchange Act), other than the relevant corporation or a subsidiary thereof, or
any employee benefit plan maintained by the relevant corporation or a subsidiary
thereof, is the beneficial owner directly or indirectly of 20% or more of the
outstanding common stock of the relevant corporation; (ii) any person (within
the meaning of Section 13(d) of the Exchange Act), other than the relevant
corporation or a subsidiary thereof, or any employee benefit plan maintained by
the relevant corporation or a subsidiary thereof, shall purchase shares pursuant
to a tender offer or exchange offer
<PAGE> 37
2
to acquire any of the common stock of such relevant corporation (or securities
convertible into such common stock) for cash, securities or any other
consideration, provided that after the consummation of the offer, the person in
question is the beneficial owner (as defined in Rule 13d-3 of the Exchange Act)
directly or indirectly of 15% or more of the outstanding common stock of the
relevant corporation (calculated as provided in paragraph (d) of Rule 13d-3
under the Exchange Act in the case of rights to acquire common stock); (iii) the
shareholders of the relevant corporation shall approve (A) any consolidation or
merger of the relevant corporation in which such corporation is not the
continuing or surviving corporation or pursuant to which shares of the common
stock of the relevant corporation would be converted into cash, securities or
other property, other than a merger of the relevant corporation in which holders
of the common stock thereof 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 relevant corporation; or (iv) there shall
have been a change in majority of the members of the board of directors of the
relevant corporation within a 12-month period unless the election or nomination
for election by the shareholders of the relevant corporation 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.
"Code" means the Internal Revenue Code of 1986, as amended, and the
Treasury regulations promulgated thereunder, including any successor
legislation.
"Conveyancing and Assumption Instruments" means, collectively, the
various agreements, instruments and other documents to be entered into to effect
the transfer of assets and the assumption of Liabilities in the manner
contemplated by the Distribution Agreement, this Agreement and the Ancillary
Agreements.
"Distribution" means the distribution on the Distribution Date to
holders of record of shares of ITT Common Stock as of the Distribution Record
Date of (i) the ITT Destinations Common Stock owned by ITT on the basis of one
share of ITT Destinations Common Stock for each
<PAGE> 38
3
outstanding share of ITT Common Stock and (ii) the ITT Hartford Common Stock
owned by ITT on the basis of one share of ITT Hartford Common Stock for each
outstanding share of ITT Common Stock.
"Distribution Agreement" means the Distribution Agreement dated as of
November 1, 1995, among ITT, ITT Destinations and ITT Hartford.
"Distribution Date" means such date as may hereafter be determined by
ITT's Board of Directors as the date as of which the Distribution shall be
effected.
"Distribution Record Date" means such date as may hereafter be
determined by ITT's Board of Directors as the record date for the Distribution.
"Effective Time" means 11:59 p.m., New York time, on the Distribution
Date.
"Indemnifiable Losses" means any and all losses, liabilities, claims,
damages, demands, costs or expenses (including, without limitation, reasonable
attorneys' fees and any and all out-of-pocket expenses) whatsoever reasonably
incurred in investigating, preparing for or defending against any Actions or
potential Actions.
"Indemnifying Party" has the meaning set forth in Section 15(d).
"Indemnitee" has the meaning set forth in Section 15(d).
"Insurance Proceeds" means those monies (i) received by an insured from
an insurance carrier or (ii) paid by an insurance carrier on behalf of the
insured, in either case net of any applicable premium adjustment,
retroactively-rated premium, deductible, retention, cost of reserve paid or held
by or for the benefit of such insured.
"Intellectual Property Agreements" means the various intellectual
property and licensing agreements entered into in connection with the
Distribution.
"ITT" means ITT Corporation, a Delaware corporation and its predecessor
Maryland corporation, together with its Subsidiaries, to be renamed "ITT
<PAGE> 39
4
Industries, Inc." and reincorporated under Indiana law in connection with the
Distribution.
"ITT Bonus Plan" means the ITT Annual Incentive Bonus Plan maintained
by ITT.
"ITT Common Stock" has the meaning set forth in the preamble to this
Agreement.
"ITT Deferred Compensation Plan" means (i) the 1995 ITT Deferred
Compensation Plan or (ii) the 1995 ITT Industries Deferred Compensation Plan,
after giving effect to the Distribution, in each case as the context requires.
"ITT Destinations" means ITT Destinations, Inc., a Nevada corporation,
together with its Subsidiaries, to be renamed "ITT Corporation" in connection
with the Distribution, and referred to in the Proxy Statement as "New ITT".
"ITT Destinations Common Stock" has the meaning set forth in the
preamble to this Agreement.
"ITT Destinations Excess Pension Plan" means the excess pension plan to
be adopted by ITT Destinations effective as of the Distribution Date, to be
known after the Distribution as the "ITT Excess Pension Plan" and referred to in
the Proxy Statement as the "New ITT Excess Plan".
"ITT Destinations Excess Pension Plan Trust" means the excess pension
plan trust to be adopted by ITT Destinations effective as of the Distribution
Date.
"ITT Destinations Excess Savings Plan" means the excess investment and
savings plan to be adopted by ITT Destinations effective as of the Distribution
Date, to be known after the Distribution as the "ITT Excess Savings Plan" and
referred to in the Proxy Statement as the "New ITT Excess Savings Plan".
"ITT Destinations Indemnitees" means ITT Destinations, each Affiliate
of ITT Destinations, each of their respective directors, officers, employees and
agents and each of the heirs, executors, successors and assigns of any of the
foregoing.
"ITT Destinations Salaried Employees" means persons who, immediately
after the Distribution, are
<PAGE> 40
5
employed on a salaried basis by ITT Destinations, including such persons absent
from work at ITT Destinations by reason of layoff, leave of absence or
disability.
"ITT Destinations Salaried Retirement Plan" means the Sheraton Salaried
Retirement Plan, as adopted by ITT Destinations effective as of the Distribution
Date, to be known as the "ITT Salaried Retirement Plan" and referred to in the
Proxy Statement as the "New ITT Salaried Retirement Plan".
"ITT Destinations Savings Plan" means the defined contribution
investment and savings plan to be adopted by ITT Destinations effective as of
the Distribution Date, to be known after the Distribution as the "ITT Investment
and Savings Plan" and referred to in the Proxy Statement as the "New ITT Savings
Plan".
"ITT Destinations Stock Plan" means the ITT 1995 Incentive Stock Plan
to be adopted by ITT Destinations effective as of the Distribution.
"ITT Directors Retirement Plan" means (i) the Retirement Plan for
Non-Management Directors of ITT Corporation or (ii) the ITT Industries Directors
Retirement Plan, after giving effect to the Distribution, in each case as the
context requires.
"ITT Employees" means (i) persons employed in the United States on a
salaried basis by the ITT Group immediately prior to the Distribution, except
those persons who are employed by CWI and MSG as of such time; (ii) persons
employed in the United States by ITT Hartford immediately prior to the
Distribution; (iii) persons employed on an hourly basis by the ITT Group
immediately prior to the Distribution who have accrued benefits under the ITT
Salaried Retirement Plan, the Sheraton Salaried Retirement Plan or the ITT
Hartford Retirement Plan and (iv) persons included in clauses (i), (ii) and
(iii) above who are absent from work immediately prior to the Distribution by
reason of layoff, leave of absence or disability.
"ITT Excess Long-Term Disability Plan" means (i) the ITT Excess
Long-Term Disability Plan or (ii) the excess long-term disability plan
maintained by ITT Industries, after giving effect to the Distribution, in each
case as the context requires.
<PAGE> 41
6
"ITT Excess Pension Plan" means (i) the ITT Excess Plan or (ii) the
excess pension plan maintained by ITT Industries, after giving effect to the
Distribution, in each case as the context requires.
"ITT Excess Pension Plan Trust" means (i) the excess pension plan trust
maintained by ITT or (ii) the excess pension plan trust maintained by ITT
Industries, after giving effect to the Distribution, in each case as the context
requires.
"ITT Excess Savings Plan" means (i) the ITT Excess Savings Plan or (ii)
the excess savings plan maintained by ITT Industries, after giving effect to the
Distribution, in each case as the context requires.
"ITT Group" means ITT and its affiliates prior to the Distribution.
"ITT Group Accident Program" means (i) the ITT Group Accident Program
for Officers and Directors or (ii) the ITT Industries Group Accident Program for
Officers and Directors, after giving effect to the Distribution, in each case as
the context requires.
"ITT Hartford" has the meaning set forth in the preamble to this
Agreement.
"ITT Hartford Common Stock" has the meaning set forth in the preamble
to this Agreement.
"ITT Hartford Employees" means persons who, immediately after the
Distribution, are employed by ITT Hartford or absent from work by reason of
layoff, leave of absence or disability.
"ITT Hartford Excess Pension Plan" means the excess pension plan
maintained by ITT Hartford.
"ITT Hartford Excess Pension Plan Trust" means the excess pension plan
trust maintained by ITT Hartford.
"ITT Hartford Excess Savings Plan" has the meaning set forth in Section
3(b) of this Agreement.
"ITT Hartford Indemnitees" means ITT Hartford, each Affiliate of ITT
Hartford, each of their respective directors, officers, employees and agents and
each of the
<PAGE> 42
7
heirs, executors, successors and assigns of any of the foregoing.
"ITT Hartford Retirement Plan" means the Hartford Fire Insurance
Company Retirement Plan.
"ITT Hartford Savings Plan" means the defined contribution investment
and savings plan to be adopted by ITT Hartford effective as of the Distribution
Date.
"ITT Hartford Stock Plan" means the ITT Hartford 1995 Incentive Stock
Plan to be adopted by ITT Hartford effective as of the Distribution.
"ITT Industries" means (i) ITT Industries, Inc., an Indiana corporation
and the legal successor to ITT, together with its Subsidiaries, or (ii) ITT,
together with its Subsidiaries, after giving effect to the Distribution or as if
such transaction had occurred, in each case as the context requires.
"ITT Industries Indemnitees" means ITT Industries, each Affiliate of
ITT Industries, each of their respective directors, officers, employees and
agents and each of the heirs, executors, successors and assigns of any of the
foregoing.
"ITT Industries Salaried Employees" means persons who, immediately
after the Distribution, are employed on a salaried basis by ITT Industries,
including such persons absent from work at ITT Industries by reason of layoff,
leave of absence or disability.
"ITT Long-Term Disability Plan" means (i) the ITT Long-Term Disability
Plan or (ii) the long-term disability plan maintained by ITT Industries, after
giving effect to the Distribution, in each case as the context requires.
"ITT Long-Term Performance Plan" means the ITT Long-Term Performance
Plan maintained by ITT.
"ITT Salaried Retirement Plan" means (i) the Retirement Plan for
Salaried Employees of ITT Corporation or (ii) the ITT Industries Salaried
Retirement Plan, after giving effect to the Distribution, in each case as the
context requires.
<PAGE> 43
8
"ITT Savings Plan" means (i) the ITT Investment and Savings Plan for
Salaried Employees or (ii) the ITT Industries Investment and Savings Plan, after
giving effect to the Distribution, in each case as the context requires.
"ITT Sheraton" means ITT Sheraton Corporation.
"ITT Stock Awards" has the meaning set forth in Section 7 of this
Agreement.
"ITT Stock Plans" has the meaning set forth in Section 7 of this
Agreement.
"Liabilities" means any and all debts, liabilities and obligations,
absolute and contingent, matured or unmatured, liquidated or unliquidated,
accrued or unaccrued, known or unknown, whenever arising, including, without
limitation, those debts, liabilities and obligations arising under any law,
rule, regulation, Action, threatened Action, order or consent decree of any
court, any governmental or other regulatory or administrative agency or
commission or any award of any arbitration tribunal, and those arising under any
contract, guarantee, commitment or undertaking.
"MSG" means Madison Square Garden, L.P.
"person" means any natural person, corporation, business trust, joint
venture, association, company, partnership or government, or any agency or
political subdivision thereof.
"Proxy Statement" means the proxy statement sent to the holders of
shares of ITT Common Stock in connection with the Distribution, including any
amendment or supplement thereto.
"Records" has the meaning set forth in Section 12 of this Agreement.
"Rules" has the meaning set forth in Section 16 of this Agreement.
"Sheraton Excess Pension Plan" means the excess pension plan maintained
by ITT Sheraton prior to the Distribution.
<PAGE> 44
9
"Sheraton Salaried Retirement Plan" means the Sheraton Corporation Retirement
Plan for Salaried Employees.
"Subsidiary" means any corporation, partnership or other entity of
which another entity (i) owns, directly or indirectly, ownership interests
sufficient to elect a majority of the Board of Directors (or persons performing
similar functions) (irrespective of whether at the time any other class or
classes of ownership interests of such corporation, partnership or other entity
shall or might have such voting power upon the occurrence of any contingency) or
(ii) is a general partner or an entity performing similar functions (e.g., a
trustee). For purposes of this Agreement, MSG and ITT-Dow Jones Television and
their respective Subsidiaries are Subsidiaries of ITT Destinations.
"Tax" means all Federal, state, local and foreign taxes and
assessments, including all interest, penalties and additions imposed with
respect to such amounts.
"Tax Allocation Agreement" means the Tax Allocation Agreement dated as
of November 1, 1995, among ITT, ITT Destinations and ITT Hartford.
"Third Party Claim" has the meaning set forth in Section 15(e) of this
Agreement.
<PAGE> 1
================================================================================
364-DAY COMPETITIVE ADVANCE AND
REVOLVING CREDIT FACILITY AGREEMENT
Dated as of November 10, 1995
among
ITT CORPORATION
THE LENDERS NAMED HEREIN
and
CHEMICAL BANK, as Administrative Agent
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
I. DEFINITIONS
1.01. Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.02. Terms Generally . . . . . . . . . . . . . . . . . . . . . . . . . 11
II. THE CREDITS
2.01. Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.02. Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.03. Competitive Bid Procedure . . . . . . . . . . . . . . . . . . . . 13
2.04. Standby Borrowing Procedure . . . . . . . . . . . . . . . . . . . 15
2.05. Conversion and Continuation of Standby Loans . . . . . . . . . . . 15
2.06. Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.07. Repayment of Loans; Evidence of Debt . . . . . . . . . . . . . . . 17
2.08. Interest on Loans . . . . . . . . . . . . . . . . . . . . . . . . 17
2.09. Default Interest . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.10. Alternate Rate of Interest . . . . . . . . . . . . . . . . . . . . 18
2.11. Termination and Reduction of Commitments . . . . . . . . . . . . . 18
2.12. Prepayment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.13. Reserve Requirements; Change in Circumstances . . . . . . . . . . . 19
2.14. Change in Legality . . . . . . . . . . . . . . . . . . . . . . . . 20
2.15. Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.16. Pro Rata Treatment . . . . . . . . . . . . . . . . . . . . . . . . 21
2.17. Sharing of Setoffs . . . . . . . . . . . . . . . . . . . . . . . . 21
2.18. Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.19. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.20. Duty to Mitigate; Assignment of Commitments
Under Certain Circumstances . . . . . . . . . . . . . . . . . 24
III. REPRESENTATIONS AND WARRANTIES
3.01. Organization; Powers . . . . . . . . . . . . . . . . . . . . . . . 25
3.02. Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.03. Enforceability . . . . . . . . . . . . . . . . . . . . . . . . . . 26
3.04. Governmental Approvals . . . . . . . . . . . . . . . . . . . . . . 26
3.05. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . 26
3.06. Litigation; Compliance with Laws . . . . . . . . . . . . . . . . . 26
3.07. Federal Reserve Regulations . . . . . . . . . . . . . . . . . . . . 26
3.08. Investment Company Act; Public Utility Holding
Company Act . . . . . . . . . . . . . . . . . . . . . . . . . 27
3.09. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . 27
3.10. Full Disclosure; No Material Misstatements . . . . . . . . . . . . 27
3.11. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
3.12. Employee Pension Benefit Plans . . . . . . . . . . . . . . . . . . 27
</TABLE>
<PAGE> 3
Contents, p. 2
<TABLE>
<S> <C> <C>
3.13. Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
IV. CONDITIONS OF LENDING
4.01. All Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.02. Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.03. First Borrowing by Each Borrowing Subsidiary . . . . . . . . . . . 29
V. COVENANTS
5.01. Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.02. Business and Properties . . . . . . . . . . . . . . . . . . . . . 29
5.03. Financial Statements, Reports, Etc. . . . . . . . . . . . . . . . . 29
5.04. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.05. Obligations and Taxes . . . . . . . . . . . . . . . . . . . . . . 30
5.06. Litigation and Other Notices . . . . . . . . . . . . . . . . . . . 30
5.07. Maintaining Records; Access to Properties
and Inspections . . . . . . . . . . . . . . . . . . . . . . . . 31
5.08. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.09. Consolidations, Mergers, and Sales of Assets . . . . . . . . . . . 31
5.10. Limitations on Liens . . . . . . . . . . . . . . . . . . . . . . . 31
5.11. Limitations on Sale and Leaseback Transactions . . . . . . . . . . 33
5.12. Consolidated Total Debt to Consolidated EBITDA . . . . . . . . . . 34
VI. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
VII. GUARANTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
VIII. THE ADMINISTRATIVE AGENT . . . . . . . . . . . . . . . . . . . . . . . . 37
IX. MISCELLANEOUS
9.01. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
9.02. Survival of Agreement . . . . . . . . . . . . . . . . . . . . . . 39
9.03. Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . 40
9.04. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . 40
9.05. Expenses; Indemnity . . . . . . . . . . . . . . . . . . . . . . . 42
9.06. Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . . 42
9.07. Waivers; Amendment . . . . . . . . . . . . . . . . . . . . . . . . 42
9.08. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 43
9.09. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
9.10. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
9.11. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
9.12. Right of Setoff . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.13. Jurisdiction; Consent to Service of Process . . . . . . . . . . . . 44
9.14. Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . . . 44
9.15. Addition of Borrowing Subsidiaries . . . . . . . . . . . . . . . . 45
9.16. Execution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
</TABLE>
<PAGE> 4
Contents, p. 3
EXHIBITS AND SCHEDULES
Exhibit A-1 Form of Competitive Bid Request
Exhibit A-2 Form of Notice of Competitive Bid Request
Exhibit A-3 Form of Competitive Bid
Exhibit A-4 Form of Competitive Bid Accept/Reject
Exhibit A-5 Form of Standby Borrowing Request
Exhibit B Administrative Questionnaire
Exhibit C Form of Assignment and Acceptance
Exhibit D Form of Opinion of Counsel for ITT Corporation
Exhibit E Form of Borrowing Subsidiary Agreement
Exhibit F Form of Letter Agreement
Schedule 2.01 Commitments
Schedule 3.13 Assumptions
Schedule 5.10 Existing Liens
<PAGE> 5
364-DAY COMPETITIVE ADVANCE AND REVOLVING
CREDIT FACILITY AGREEMENT (as it may be amended,
supplemented or otherwise modified, the "Agreement")
dated as of November 10, 1995, among ITT CORPORATION,
a Nevada corporation (the "Company"), each Borrowing
Subsidiary party hereto, the lenders listed in
Schedule 2.01 (together with their permitted assigns,
the "Lenders") and CHEMICAL BANK, a New York banking
corporation, as administrative agent for the Lenders
(in such capacity, the "Administrative Agent").
The Lenders have been requested to extend credit to the
Borrowers (such term and each other capitalized term used but not defined
herein having the meaning assigned to it in Article I) to enable them to borrow
on a standby revolving credit basis on and after the date hereof and at any
time and from time to time prior to the Maturity Date a principal amount not in
excess of $1,000,000,000 at any time outstanding. The Lenders have also been
requested to provide a procedure pursuant to which the Borrowers may invite the
Lenders to bid on an uncommitted basis on short-term borrowings by the
Borrowers. The proceeds of such borrowings are to be used for working capital
and other general corporate purposes. The Lenders are willing to extend
credit on the terms and subject to the conditions herein set forth.
Accordingly, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Defined Terms. As used in this Agreement, the
following terms shall have the meanings specified below:
"ABR Borrowing" shall mean a Borrowing comprised of ABR Loans.
"ABR Loan" shall mean any Standby Loan bearing interest at a
rate determined by reference to the Alternate Base Rate in accordance with the
provisions of Article II.
"Administrative Fees" shall have the meaning assigned to such
term in Section 2.06(b).
"Administrative Questionnaire" shall mean an Administrative
Questionnaire in the form of Exhibit B hereto.
"Affiliate" shall mean, when used with respect to a specified
person, another person that directly or indirectly controls or is controlled by
or is under common control with the person specified.
"Alternate Base Rate" shall mean, for any day, a rate per
annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to the
greater of (a) the Prime Rate in effect on such day and (b) the Federal Funds
Effective Rate in effect on such day plus 1/2 of 1%. For purposes hereof,
<PAGE> 6
"Prime Rate" shall mean the rate of interest per annum publicly announced from
time to time by the Administrative Agent as its prime rate in effect at its
principal office in New York City; each change in the Prime Rate shall be
effective on the date such change is publicly announced as effective. "Federal
Funds Effective Rate" shall mean, for any day, the weighted average of the
rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as released on the next
succeeding Business Day by the Federal Reserve Bank of New York, or, if such
rate is not so released for any day which is a Business Day, the arithmetic
average (rounded upwards to the next 1/100th of 1%), as determined by the
Administrative Agent, of the quotations for the day of such transactions
received by the Administrative Agent from three Federal funds brokers of
recognized standing selected by it. If for any reason the Administrative Agent
shall have determined (which determination shall be conclusive absent manifest
error) that it is unable to ascertain the Federal Funds Effective Rate for any
reason, including the inability or failure of the Administrative Agent to
obtain sufficient quotations in accordance with the terms thereof, the
Alternate Base Rate shall be determined without regard to clause (b) of the
first sentence of this definition until the circumstances giving rise to such
inability no longer exist. Any change in the Alternate Base Rate due to a
change in the Prime Rate or the Federal Funds Effective Rate shall be effective
on the effective date of such change in the Prime Rate or the Federal Funds
Effective Rate, respectively.
"Applicable Percentage" shall mean on any date, with respect
to Eurodollar Loans or with respect to the Facility Fee, as the case may be,
the applicable percentage set forth below under the caption "Eurodollar Spread"
or "Facility Fee Percentage", as the case may be, based upon the Ratings in
effect on such date:
<TABLE>
<CAPTION>
Category 1 Eurodollar Spread Facility Fee Percentage
- - ---------- ----------------- -----------------------
<S> <C> <C>
AA- or higher by D&P; .130% .045%
AA- or higher by Fitch;
Aa3 or higher by Moody's;
AA- or higher by S&P
Category 2
- - ----------
A+ or A by D&P; .150% .050%
A+ or A by Fitch;
A1 or A2 by Moody's;
A+ or A by S&P
Category 3
- - ----------
A- by D&P; .195% .055%
A- by Fitch;
A3 by Moody's;
A- by S&P
Category 4
- - ----------
BBB+ by D&P; .225% .075%
BBB+ by Fitch;
Baa1 by Moody's;
BBB+ by S&P
</TABLE>
<PAGE> 7
3
<TABLE>
<CAPTION>
Category 5 Eurodollar Spread Facility Fee Percentage
- - ---------- ----------------- -----------------------
<S> <C> <C>
BBB by D&P; .250% .100%
BBB by Fitch;
Baa2 by Moody's;
BBB by S&P
Category 6
- - ----------
BBB- or lower by D&P; .275% .125%
BBB- or lower by Fitch;
Baa3 or lower by Moody's;
BBB- or lower by S&P
</TABLE>
For purposes of the foregoing, (i) if the Ratings shall fall within different
Categories, then (A) if all the Ratings fall within two adjacent Categories,
the Applicable Percentage will be determined by reference to the superior (or
numerically lower) of such Categories unless one or more of the Ratings shall
fall within Category 6, in which case the Applicable Percentage shall be
determined by reference to Category 6, and (B) if the Ratings fall within more
than two Categories or within two Categories that are not adjacent, then one
Rating from each of the highest Category and the lowest Category in which
Ratings shall fall shall be excluded and the Applicable Percentage shall be
determined by reference to the superior (or numerically lower) of the remaining
Ratings unless one or both of such Ratings shall fall within Category 6, in
which case the Applicable Percentage shall be determined by reference to
Category 6, (ii) if only two Ratings exist, the Applicable Percentage shall be
based upon the lower (numerically higher) of the available Ratings, (iii) if
only one Rating exists, the Applicable Percentage will be based upon the lower
(numerically higher) of Category 5 and the Category corresponding to the
available Rating, (iv) if no Ratings exist, the Applicable Percentage shall be
based upon Category 6, and (v) if any Rating shall be changed (other than as a
result of a change in the rating system of the applicable Rating Agency), such
change shall be effective as of the date on which it is first announced by the
Rating Agency making such change. Each such change in the Applicable
Percentage shall apply to all outstanding Eurodollar Loans and to Facility Fees
accruing during the period commencing on the effective date of such change and
ending on the date immediately preceding the effective date of the next such
change. If the rating system of any Rating Agency shall change, the parties
hereto shall negotiate in good faith to amend the references to specific
ratings in this definition to reflect such changed rating system.
"Assignment and Acceptance" shall mean an assignment and
acceptance entered into by a Lender and an assignee in the form of Exhibit C.
"Board" shall mean the Board of Governors of the Federal
Reserve System of the United States.
"Board of Directors" shall mean the Board of Directors of a
Borrower or any duly authorized committee thereof.
"Borrower" shall mean any of the Company and the Borrowing
Subsidiaries.
"Borrowing" shall mean a group of Loans of a single Type made
by the Lenders (or, in the case of a Competitive Borrowing, by the Lender or
Lenders whose Competitive Bids have been accepted pursuant to Section 2.03) on
a single date and as to which a single Interest Period is in effect.
<PAGE> 8
4
"Borrowing Subsidiary" shall mean any Restricted Subsidiary
which shall have executed and delivered to the Administrative Agent for
distribution to each Lender a Borrowing Subsidiary Agreement.
"Borrowing Subsidiary Agreement" shall mean an agreement, in
the form of Exhibit E hereto, duly executed by the Company and a Subsidiary.
"Business Day" shall mean any day (other than a day which is a
Saturday, Sunday or legal holiday in the State of New York) on which banks are
open for business in New York City; provided, however, that, when used in
connection with a Eurodollar Loan, the term "Business Day" shall also exclude
any day on which banks are not open for dealings in dollar deposits in the
London interbank market.
"Capitalized Lease-Back Obligation" shall mean with respect to
a Principal Property, at any date as of which the same is to be determined, the
total net rental obligations of the Company or a Restricted Subsidiary under a
lease of such Principal Property, entered into as part of an arrangement to
which the provisions of Section 5.11 are applicable (or would have been
applicable had such Restricted Subsidiary been a Restricted Subsidiary at the
time it entered into such lease), discounted to the date of computation at the
rate of interest per annum implicit in the lease (determined in accordance with
GAAP). The amount of the net rental obligation for any calendar year under any
lease shall be the sum of the rental and other payments required to be paid in
such calendar year by the lessee thereunder, not including, however, any
amounts required to be paid by such lessee (whether or not therein designated
as rental or additional rental) on account of maintenance and repairs,
insurance, taxes, assessments, water rates and similar charges.
A "Change in Control" shall be deemed to have occurred if (a)
any person or group of persons shall have acquired beneficial ownership of more
than 30% of the outstanding Voting Shares of the Company (within the meaning of
Section 13(d) or 14(d) of the Exchange Act and the applicable rules and
regulations thereunder), or (b) during any period of 12 consecutive months,
commencing after the Effective Date, individuals who on the first day of such
period were directors of the Company (together with any replacement or
additional directors who were nominated or elected by a majority of directors
then in office) cease to constitute a majority of the Board of Directors of the
Company.
"Code" shall mean the Internal Revenue Code of 1986, as the
same may be amended from time to time.
"Commitment" shall mean, with respect to each Lender, the
commitment of such Lender hereunder as set forth as of the Effective Date in
Schedule 2.01 hereto as such Lender's Commitment may be permanently terminated
or reduced from time to time pursuant to Section 2.11. The Commitment of each
Lender shall automatically and permanently terminate on the Maturity Date if
not terminated earlier pursuant to the terms hereof.
"Competitive Bid" shall mean an offer by a Lender to make a
Competitive Loan pursuant to Section 2.03.
"Competitive Bid Accept/Reject Letter" shall mean a
notification made by a Borrower pursuant to Section 2.03(d) in the form of
Exhibit A-4.
"Competitive Bid Rate" shall mean, as to any Competitive Bid,
(i) in the case of a Eurodollar Loan, the Margin, and (ii) in the case of a
Fixed Rate Loan, the fixed rate of interest offered by the Lender making such
Competitive Bid.
<PAGE> 9
5
"Competitive Bid Request" shall mean a request made pursuant
to Section 2.03(a) in the form of Exhibit A-1.
"Competitive Borrowing" shall mean a Borrowing consisting of a
Competitive Loan or concurrent Competitive Loans from the Lender or Lenders
whose Competitive Bids for such Borrowing have been accepted under the bidding
procedure described in Section 2.03.
"Competitive Loan" shall mean a Loan made pursuant to the
bidding procedure described in Section 2.03. Each Competitive Loan shall be a
Eurodollar Competitive Loan or a Fixed Rate Loan.
"Consolidated EBITDA" shall mean, for any period, the sum of
(a) Consolidated Net Income, (b) provisions for taxes based on income, (c)
Consolidated Interest Expense, (d) total depreciation expense and (e) total
amortization expense, all of the foregoing as determined on a consolidated
basis for the Company and the Subsidiaries in accordance with GAAP.
"Consolidated Interest Expense" shall mean, for any period,
the gross interest expense of the Company and the Subsidiaries for such period
determined on a consolidated basis in accordance with GAAP.
"Consolidated Net Income" shall mean, for any period, net
income or loss of the Company and the Subsidiaries for such period determined
on a consolidated basis in accordance with GAAP.
"Consolidated Net Tangible Assets" shall mean the total of all
assets appearing on a consolidated balance sheet of the Company and its
Restricted Subsidiaries, prepared in accordance with GAAP (and as of a date not
more than 90 days prior to the date as of which Consolidated Net Tangible
Assets are to be determined), less the sum of the following items as shown on
said consolidated balance sheet:
(i) the book amount of all segregated intangible assets,
including such items as good will, trademarks, trademark rights, trade
names, trade name rights, copyrights, patents, patent rights and
licenses and unamortized debt discount and expense less unamortized
debt premium;
(ii) all depreciation, valuation and other reserves;
(iii) current liabilities;
(iv) any minority interest in the shares of stock (other than
Preferred Stock) and surplus of Restricted Subsidiaries of the
Company;
(v) the investment of the Company and its Restricted
Subsidiaries in any Unrestricted Subsidiary of the Company;
(vi) the total indebtedness of the Company and its Restricted
Subsidiaries incurred in any manner to finance or recover the cost to
the Company or any Restricted Subsidiary of any physical property,
real or personal, which prior to or simultaneously with the creation
of such indebtedness shall have been leased by the Company or a
Restricted Subsidiary to the United States of America or a department
or agency thereof at an aggregate rental, payable during that portion
of the initial term of such lease (without giving effect to any
options of renewal or extension) which shall be unexpired at the date
of the creation of such indebtedness, sufficient
<PAGE> 10
6
(taken together with any amounts required to be paid by the lessee to
the lessor upon any termination of such lease) to pay in full at the
stated maturity date or dates thereof the principal of and the
interest on such indebtedness;
(vii) deferred income and deferred liabilities; and
(viii) other items deductible under GAAP.
"Consolidated Total Debt" shall mean, as at any date of
determination, all Indebtedness of the Company and the Subsidiaries determined
on a consolidated basis in accordance with GAAP.
"D&P" shall mean Duff & Phelps Credit Rating Co. or any of its
successors.
"Default" shall mean any event or condition which upon notice,
lapse of time or both would constitute an Event of Default.
"Distribution" shall mean the consummation of the transactions
described in the Proxy Statement.
"Dollars" or "$" shall mean lawful money of the United States
of America.
"Effective Date" shall mean the first date on or after
November 2, 1995, on which the conditions set forth in Section 4.02 are
satisfied.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as the same may be amended from time to time.
"ERISA Affiliate" shall mean any trade or business (whether or
not incorporated) that, together with the Company, is treated as a single
employer under Section 414(b) or (c) of the Code, or, solely for purposes of
Section 302 of ERISA and Section 412 of the Code, is treated as a single
employer under Section 414 of the Code.
"ERISA Event" shall mean (a) any "reportable event", as
defined in Section 4043 of ERISA or the regulations issued thereunder, with
respect to a Plan; (b) the adoption of any amendment to a Plan that would
require the provision of security pursuant to Section 401(a)(29) of the Code or
Section 307 of ERISA; (c) the existence with respect to any Plan of an
"accumulated funding deficiency" (as defined in Section 412 of the Code or
Section 302 of ERISA), whether or not waived; (d) the filing pursuant to
Section 412(d) of the Code or Section 303(d) of ERISA of an application for a
waiver of the minimum funding standard with respect to any Plan; (e) the
incurrence of any liability under Title IV of ERISA with respect to the
termination of any Plan or the withdrawal or partial withdrawal of the Company
or any of its ERISA Affiliates from any Plan or Multiemployer Plan; (f) the
receipt by the Company or any ERISA Affiliate from the PBGC or a plan
administrator of any notice relating to the intention to terminate any Plan or
Plans or to appoint a trustee to administer any Plan; (g) the receipt by the
Company or any ERISA Affiliate of any notice that Withdrawal Liability is being
imposed or a determination that a Multiemployer Plan is, or is expected to be,
insolvent or in reorganization, within the meaning of Title IV of ERISA; and
(h) the occurrence of a "prohibited transaction" with respect to which the
Company or any of its Subsidiaries is a "disqualified person" (within the
meaning of Section 4975) of the Code, or with respect to which the Company or
any such Subsidiary could otherwise be liable.
<PAGE> 11
7
"Eurodollar Borrowing" shall mean a Borrowing comprised of
Eurodollar Loans.
"Eurodollar Competitive Loan" shall mean any Competitive Loan
bearing interest at a rate determined by reference to the LIBO Rate in
accordance with the provisions of Article II.
"Eurodollar Loan" shall mean any Eurodollar Competitive Loan
or Eurodollar Standby Loan.
"Eurodollar Standby Loan" shall mean any Standby Loan bearing
interest at a rate determined by reference to the LIBO Rate in accordance with
the provisions of Article II.
"Event of Default" shall have the meaning assigned to such
term in Article VI.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
"Existing Credit Facilities" shall mean the 364-Day
Competitive Advance and Revolving Credit Facility Agreement dated as of
February 24, 1995 and the Five-Year Competitive Advance and Revolving Credit
Facility Agreement dated as of February 24, 1995, among Old ITT, certain
lenders and Chemical Bank, as administrative agent.
"Facility B Credit Agreement" shall mean the $2,000,000,000
Five-Year Competitive Advance and Revolving Credit Facility Agreement dated the
date hereof among the parties hereto, as such agreement may be amended,
supplemented or modified from time to time.
"Facility Fee" shall have the meaning assigned to such term in
Section 2.06(a).
"Fair Value", when used with respect to property, shall mean
the fair value as determined in good faith by the board of directors of the
Company.
"Fees" shall mean the Facility Fee and the Administrative
Fees.
"Financial Officer" of any corporation shall mean the chief
financial officer, principal accounting officer, treasurer, associate or
assistant treasurer or director of treasury services of such corporation.
"Fitch" shall mean Fitch Investors Service, Inc. or any of its
successors.
"Fixed Rate Borrowing" shall mean a Borrowing comprised of
Fixed Rate Loans.
"Fixed Rate Loan" shall mean any Competitive Loan bearing
interest at a fixed percentage rate per annum (the "Fixed Rate") (expressed in
the form of a decimal to no more than four decimal places) specified by the
Lender making such Loan in its Competitive Bid.
"GAAP" shall mean generally accepted accounting principles,
applied on a consistent basis.
"Governmental Authority" shall mean any Federal, state, local
or foreign court or governmental agency, authority, instrumentality or
regulatory body .
<PAGE> 12
8
"Guaranteed Obligations" shall mean the principal of and
interest on the Loans made to, and the other obligations, monetary or
otherwise, of, the Borrowing Subsidiaries hereunder.
"Indebtedness" of any person shall mean all indebtedness
representing money borrowed or the deferred purchase price of property (other
than trade accounts payable) or any capitalized lease obligation, which in any
case is created, assumed, incurred or guaranteed in any manner by such
corporation or for which such corporation is responsible or liable (whether by
agreement to purchase indebtedness of, or to supply funds to or invest in,
others or otherwise).
"Interest Payment Date" shall mean, with respect to any Loan,
the last day of each Interest Period applicable thereto and, in the case of a
Eurodollar Loan with an Interest Period of more than three months' duration or
a Fixed Rate Loan with an Interest Period of more than 90 days' duration, each
day that would have been an Interest Payment Date for such Loan had successive
Interest Periods of three months' duration or 90 days' duration, as the case
may be, been applicable to such Loan and, in addition, the date of any
prepayment of each Loan or conversion of such Loan to a Loan of a different
Type.
"Interest Period" shall mean (a) as to any Eurodollar
Borrowing, the period commencing on the date of such Borrowing or on the last
day of the immediately preceding Interest Period applicable to such Borrowing,
as the case may be, and ending on the numerically corresponding day (or, if
there is no numerically corresponding day, on the last day) in the calendar
month that is 1, 2, 3 or 6 months thereafter, as the Borrower may elect, (b) as
to any ABR Borrowing, the period commencing on the date of such Borrowing or on
the last day of the immediately preceding Interest Period applicable to such
Borrowing, as the case may be, and ending on the earliest of (i) the next
succeeding March 31, June 30, September 30 or December 31, (ii) the Maturity
Date, and (iii) the date such Borrowing is converted to a Borrowing of a
different Type in accordance with Section 2.05 or repaid or prepaid in
accordance with Section 2.07 or Section 2.12 and (c) as to any Fixed Rate
Borrowing, the period commencing on the date of such Borrowing and ending on
the date specified in the Competitive Bids in which the offers to make the
Fixed Rate Loans comprising such Borrowing were extended, which shall not be
earlier than seven days after the date of such Borrowing or later than 360 days
after the date of such Borrowing; provided, however, that if any Interest
Period would end on a day other than a Business Day, such Interest Period shall
be extended to the next succeeding Business Day unless, in the case of
Eurodollar Loans only, such next succeeding Business Day would fall in the next
calendar month, in which case such Interest Period shall end on the next
preceding Business Day. Interest shall accrue from and including the first day
of an Interest Period to but excluding the last day of such Interest Period.
"LIBO Rate" shall mean, with respect to any Eurodollar
Borrowing for any Interest Period, an interest rate per annum (rounded upwards,
if necessary, to the next 1/16 of 1%) equal to the rate at which dollar
deposits approximately equal in principal amount to (i) in the case of a
Standby Borrowing, the Administrative Agent's portion of such Eurodollar
Borrowing and (ii) in the case of a Competitive Borrowing, a principal amount
that would have been the Administrative Agent's portion of such Competitive
Borrowing had such Competitive Borrowing been a Standby Borrowing, and for a
maturity comparable to such Interest Period as are offered to the principal
London offices of the Administrative Agent in immediately available funds in
the London interbank market at approximately 11:00 a.m., London time, two
Business Days prior to the commencement of such Interest Period.
"Lien" shall mean, with respect to any property or asset, any
mortgage, deed of trust, lien, pledge, security interest, charge or other
encumbrance on, of or in such property or asset.
<PAGE> 13
9
"Loan" shall mean a Competitive Loan or a Standby Loan,
whether made as a Eurodollar Loan, an ABR Loan or a Fixed Rate Loan, as
permitted hereby.
"Loan Documents" shall mean this Agreement, the Borrowing
Subsidiary Agreements and promissory notes, if any, issued pursuant to Section
9.04(i).
"Margin" shall mean, as to any Eurodollar Competitive Loan,
the margin (expressed as a percentage rate per annum in the form of a decimal
to no more than four decimal places) to be added to or subtracted from the LIBO
Rate in order to determine the interest rate applicable to such Loan, as
specified in the Competitive Bid relating to such Loan.
"Margin Regulations" shall mean Regulations G, T, U and X of
the Board as from time to time in effect, and all official rulings and
interpretations thereunder or thereof.
"Margin Stock" shall have the meaning given such term under
Regulation U of the Board.
"Material Adverse Effect" shall mean a materially adverse
effect on the business, assets, operations or condition, financial or
otherwise, of the Company and its subsidiaries taken as a whole.
"Maturity Date" shall mean the date 364 days after the date
hereof.
"Moody's" shall mean Moody's Investors Service, Inc. or any of
its successors.
"Multiemployer Plan" shall mean a multiemployer plan as
defined in Section 4001(a)(3) of ERISA to which the Company or any ERISA
Affiliate (other than one considered an ERISA Affiliate only pursuant to
subsection (m) or (o) of Code Section 414) is making or accruing an obligation
to make contributions, or has within any of the preceding five plan years made
or accrued an obligation to make contributions.
"Notice of Competitive Bid Request" shall mean a notification
made pursuant to Section 2.03(a) in the form of Exhibit A-2.
"Old ITT" shall mean ITT Corporation, a Delaware Corporation.
"PBGC" shall mean the Pension Benefit Guaranty Corporation
referred to and defined in ERISA.
"person" shall mean any natural person, corporation, limited
liability company, business trust, joint venture, association, company,
partnership or government, or any agency or political subdivision thereof.
"Plan" shall mean any employee pension benefit plan (other
than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or
Section 412 of the Code or Section 307 of ERISA, and in respect of which any
Borrower or any ERISA Affiliate is (or, if such plan were terminated, would
under Section 4069 of ERISA be deemed to be) an "employer" as defined in
Section 3(5) of ERISA.
"Principal Property" shall mean any single facility or other
property owned by the Company or any Restricted Subsidiary having a gross book
value in excess of 2% of Consolidated Net
<PAGE> 14
10
Tangible Assets, except any such property or portion thereof which the board of
directors of the Company by resolution declares is not of material importance
to the total business conducted by the Company and its Restricted Subsidiaries
as an entirety.
"Proxy Statement" shall mean the Proxy Statement of Old ITT
dated August 30, 1995, and filed with the SEC under the Exchange Act.
"Rating Agencies" shall mean D&P, Fitch, Moody's and S&P.
"Ratings" shall mean the ratings from time to time established
by the Rating Agencies for senior, unsecured, non- credit-enhanced long-term
debt of the Company.
"Register" shall have the meaning given such term in Section
9.04(d).
"Regulation D" shall mean Regulation D of the Board as from
time to time in effect and all official rulings and interpretations thereunder
or thereof.
"Reportable Event" shall mean any reportable event as defined
in Section 4043 of ERISA or the regulations issued thereunder with respect to a
Plan (other than a Plan maintained by an ERISA Affiliate that is considered an
ERISA Affiliate only pursuant to subsection (m) or (o) of Code Section 414).
"Required Lenders" shall mean, at any time, Lenders having
Commitments representing at least 66-2/3% of the Total Commitment or, for
purposes of acceleration pursuant to clause (ii) of Article VI, Lenders holding
Loans representing at least 66- 2/3% of the aggregate principal amount of the
Loans outstanding.
"Responsible Officer" of any corporation shall mean any
executive officer or Financial Officer of such corporation and any other
officer or similar official thereof responsible for the administration of the
obligations of such corporation in respect of this Agreement.
"Restricted Subsidiary" shall mean any Subsidiary other than
an Unrestricted Subsidiary.
"S&P" shall mean Standard and Poor's Ratings Services, a
division of The McGraw-Hill Companies, Inc. or any of its successors.
"SEC" shall mean the Securities and Exchange Commission.
"Standby Borrowing" shall mean a Borrowing consisting of
simultaneous Standby Loans from each of the Lenders.
"Standby Borrowing Request" shall mean a request made pursuant
to Section 2.04 in the form of Exhibit A-5.
"Standby Loans" shall mean the revolving loans made pursuant
to Section 2.04. Each Standby Loan shall be a Eurodollar Standby Loan or an
ABR Loan.
"Statutory Reserves" shall mean a fraction (expressed as a
decimal), the numerator of which is the number one and the denominator of which
is the number one minus the aggregate of the maximum reserve percentages
(including any marginal, special, emergency or supplemental reserves)
<PAGE> 15
11
expressed as a decimal established by the Board and any other banking authority
to which the Administrative Agent is subject for new negotiable nonpersonal
time deposits in dollars of over $100,000 with maturities approximately equal
to three months. Statutory Reserves shall be adjusted automatically on and as
of the effective date of any change in any reserve percentage.
"subsidiary" shall mean, with respect to any person (the
"parent"), any corporation, association or other business entity of which
securities or other ownership interests representing more than 50% of the
ordinary voting power are, at the time as of which any determination is being
made, owned or controlled by the parent or one or more subsidiaries of the
parent or by the parent and one or more subsidiaries of the parent.
"Subsidiary" shall mean a subsidiary of the Company.
"Total Commitment" shall mean, at any time, the aggregate
amount of Commitments of all the Lenders, as in effect at such time.
"Transactions" shall have the meaning assigned to such term in
Section 3.02.
"Type", when used in respect of any Loan or Borrowing, shall
refer to the Rate by reference to which interest on such Loan or on the Loans
comprising such Borrowing is determined. For purposes hereof, "Rate" shall
include the LIBO Rate, the Alternate Base Rate and the Fixed Rate.
"Unrestricted Subsidiary" shall mean (a) any Subsidiary which
has been designated an Unrestricted Subsidiary by resolution of the board of
directors of the Company (which resolution has been communicated in a notice
delivered by the Company to the Administrative Agent for distribution to the
Lenders) as an Unrestricted Subsidiary, other than any such Subsidiary as to
which such a designation has been rescinded by resolution of said board of
directors and not thereafter, or after some subsequent such rescission,
restored by resolution of said board, or (b) any Subsidiary 50% or less of the
Voting Shares of which is owned directly by the Company and/or one or more
Restricted Subsidiaries. A Subsidiary may not be designated as (or otherwise
permitted to become) an Unrestricted Subsidiary unless, immediately after such
Subsidiary becomes an Unrestricted Subsidiary, such Subsidiary would not own
any capital stock of, or hold any indebtedness of, any Restricted Subsidiary.
A designation as an Unrestricted Subsidiary may not be rescinded (or an
Unrestricted Subsidiary otherwise permitted to become a Restricted Subsidiary)
unless such Subsidiary (i) is not a party to any lease which it would have been
prohibited by this Agreement from entering into had it been a Restricted
Subsidiary at the time it entered into such lease, unless (x) such Subsidiary
had not been a Restricted Subsidiary prior to its entering into such lease, or
(y) the property subject to such lease shall be owned by the Company and/or one
or more Subsidiaries, or (z) such Subsidiary would not be prohibited by this
Agreement from entering into such lease immediately after it becomes a
Restricted Subsidiary, and (ii) does not have outstanding upon any of its
property any mortgage, pledge or other lien which it would be prohibited by
this Agreement from creating, suffering to be created, or assuming, immediately
after it becomes a Restricted Subsidiary.
"Voting Shares" shall mean, as to a particular corporation or
other person, outstanding shares of stock or other equity interests of any
class of such person entitled to vote in the election of directors, or
otherwise to participate in the direction of the management and policies, of
such person, excluding shares or interests entitled so to vote or participate
only upon the happening of some contingency.
SECTION 1.02. Terms Generally. The definitions in Section
1.01 shall apply equally to both the singular and plural forms of the terms
defined. Whenever the context may require,
<PAGE> 16
12
any pronoun shall include the corresponding masculine, feminine and neuter
forms. The words "include," "includes" and "including" shall be deemed to be
followed by the phrase "without limitation." All references herein to
Articles, Sections, Exhibits and Schedules shall be deemed references to
Articles and Sections of, and Exhibits and Schedules to, this Agreement unless
the context shall otherwise require. Except as otherwise expressly provided
herein, all terms of an accounting or financial nature shall be construed in
accordance with GAAP, as in effect from time to time; provided, however, that
for purposes of determining compliance with any covenant set forth in Article
V, such terms shall be construed in accordance with GAAP as in effect on the
date hereof applied on a basis consistent with the application used in
preparing the Company's audited financial statements referred to in Section
3.05.
ARTICLE II
THE CREDITS
SECTION 2.01. Commitments. Subject to the terms and
conditions and relying upon the representations and warranties herein set
forth, each Lender agrees, severally and not jointly, to make Standby Loans to
the Borrowers, at any time and from time to time on and after the date hereof
and until the earlier of the Maturity Date and the termination of the
Commitment of such Lender, in an aggregate principal amount at any time
outstanding not to exceed such Lender's Commitment minus the amount by which
the Competitive Loans outstanding at such time shall be deemed to have used
such Commitment pursuant to Section 2.16, subject, however, to the conditions
that (i) at no time shall (A) the sum of (x) the outstanding aggregate
principal amount of all Standby Loans made by all Lenders plus (y) the
outstanding aggregate principal amount of all Competitive Loans made by all
Lenders exceed (B) the Total Commitment and (ii) at all times, the outstanding
aggregate principal amount of all Standby Loans made by each Lender shall equal
the product of (A) the percentage which its Commitment represents of the Total
Commitment times (B) the outstanding aggregate principal amount of all Standby
Loans.
Within the foregoing limits, the Borrowers may borrow, pay or
prepay and reborrow Standby Loans hereunder, on and after the Effective Date
and prior to the Maturity Date, subject to the terms, conditions and
limitations set forth herein.
SECTION 2.02. Loans. (a) Each Standby Loan shall be made as
part of a Borrowing consisting of Loans made by the Lenders ratably in
accordance with their respective Commitments; provided, however, that the
failure of any Lender to make any Standby Loan shall not in itself relieve any
other Lender of its obligation to lend hereunder (it being understood, however,
that no Lender shall be responsible for the failure of any other Lender to make
any Loan required to be made by such other Lender). Each Competitive Loan
shall be made in accordance with the procedures set forth in Section 2.03. The
Standby Loans or Competitive Loans comprising any Borrowing shall be (i) in the
case of Competitive Loans, in an aggregate principal amount which is an
integral multiple of $1,000,000 and not less than $5,000,000 and (ii) in the
case of Standby Loans, in an aggregate principal amount which is an integral
multiple of $5,000,000 and not less than $20,000,000 (or an aggregate principal
amount equal to the remaining balance of the available Commitments).
(b) Each Competitive Borrowing shall be comprised entirely of
Eurodollar Competitive Loans or Fixed Rate Loans, and each Standby Borrowing
shall be comprised entirely of Eurodollar Standby Loans or ABR Loans, as the
Borrower may request pursuant to Section 2.03 or 2.04, as applicable. Each
Lender may at its option make any Eurodollar Loan by causing any domestic or
foreign branch, agency or Affiliate of such Lender to make such Loan; provided
that any
<PAGE> 17
13
exercise of such option shall not affect the obligation of the Borrower to
repay such Loan in accordance with the terms of this Agreement. Borrowings of
more than one Type may be outstanding at the same time. For purposes of the
foregoing, Loans having different Interest Periods, regardless of whether they
commence on the same date, shall be considered separate Loans.
(c) Subject to Section 2.05, each Lender shall make each Loan
to be made by it hereunder on the proposed date thereof by wire transfer of
immediately available funds to the Administrative Agent in New York, New York,
not later than 12:00 noon, New York City time, and the Administrative Agent
shall by 3:00 p.m., New York City time, credit the amounts so received to the
account or accounts specified from time to time in one or more notices
delivered by the Company to the Administrative Agent or, if a Borrowing shall
not occur on such date because any condition precedent herein specified shall
not have been met, return the amounts so received to the respective Lenders.
Competitive Loans shall be made by the Lender or Lenders whose Competitive Bids
therefor are accepted pursuant to Section 2.03 in the amounts so accepted.
Standby Loans shall be made by the Lenders pro rata in accordance with Section
2.16. Unless the Administrative Agent shall have received notice from a Lender
prior to the date (or, in the case of ABR Borrowings, on the date) of any
Borrowing that such Lender will not make available to the Administrative Agent
such Lender's portion of such Borrowing, the Administrative Agent may assume
that such Lender has made such portion available to the Administrative Agent on
the date of such Borrowing in accordance with this paragraph (c) and the
Administrative Agent may, in reliance upon such assumption, make available to
the Borrower on such date a corresponding amount. If and to the extent that
such Lender shall not have made such portion available to the Administrative
Agent, such Lender and the Borrower severally agree to repay to the
Administrative Agent forthwith on demand such corresponding amount together
with interest thereon, for each day from the date such amount is made available
to the Borrower until the date such amount is repaid to the Administrative
Agent at (i) in the case of the Borrower, the interest rate applicable at the
time to the Loans comprising such Borrowing and (ii) in the case of such
Lender, the Federal Funds Effective Rate. If such Lender shall repay to the
Administrative Agent such corresponding amount, such amount shall constitute
such Lender's Loan as part of such Borrowing for purposes of this Agreement.
SECTION 2.03. Competitive Bid Procedure. (a) In order to
request Competitive Bids, a Borrower (the "Applicable Borrower") shall hand
deliver or telecopy to the Administrative Agent a duly completed Competitive
Bid Request in the form of Exhibit A-1 hereto, to be received by the
Administrative Agent (i) in the case of a Eurodollar Competitive Loan, not
later than 10:00 a.m., New York City time, four Business Days before a proposed
Competitive Borrowing and (ii) in the case of a Fixed Rate Borrowing, not later
than 10:00 a.m., New York City time, one Business Day before a proposed
Competitive Borrowing. No ABR Loan shall be requested in, or made pursuant to,
a Competitive Bid Request. A Competitive Bid Request that does not conform
substantially to the format of Exhibit A-1 may be rejected in the
Administrative Agent's sole discretion, and the Administrative Agent shall
promptly notify the Borrower of such rejection by telecopy. Each Competitive
Bid Request shall refer to this Agreement and specify (w) whether the Borrowing
then being requested is to be a Eurodollar Borrowing or a Fixed Rate Borrowing,
(x) the date of such Borrowing (which shall be a Business Day) and the
aggregate principal amount thereof, which shall be in a minimum principal
amount of $10,000,000 and in an integral multiple of $5,000,000, and (y) the
Interest Period with respect thereto (which may not end after the Maturity
Date). Promptly after its receipt of a Competitive Bid Request that is not
rejected as aforesaid, the Administrative Agent shall telecopy to the Lenders
a Notice of Competitive Bid Request inviting the Lenders to bid, on the terms
and conditions of this Agreement, to make Competitive Loans.
(b) Each Lender invited to bid may, in its sole discretion,
make one or more Competitive Bids to the Applicable Borrower responsive to such
Borrower's Competitive Bid Request.
<PAGE> 18
14
Each Competitive Bid by a Lender must be received by the Administrative Agent
by telecopy, in the form of Exhibit A-3 hereto, (i) in the case of a Eurodollar
Competitive Loan, not later than 9:30 a.m., New York City time, three Business
Days before a proposed Competitive Borrowing and (ii) in the case of a Fixed
Rate Borrowing, not later than 9:30 a.m., New York City time, on the day of a
proposed Competitive Borrowing. A Lender may submit multiple bids to the
Administrative Agent. Competitive Bids that do not conform substantially to
the format of Exhibit A-3 may be rejected by the Administrative Agent, and the
Administrative Agent shall notify the Lender making such nonconforming bid of
such rejection as soon as practicable. Each Competitive Bid shall refer to
this Agreement and specify (x) the principal amount (which shall be in a
minimum principal amount of $5,000,000 and in an integral multiple of
$1,000,000 and which may equal the entire principal amount of the Competitive
Borrowing requested) of the Competitive Loan or Loans that the Lender is
willing to make, (y) the Competitive Bid Rate or Rates at which the Lender is
prepared to make the Competitive Loan or Loans and (z) the Interest Period and
the last day thereof. If any Lender invited to bid shall elect not to make a
Competitive Bid, such Lender shall so notify the Administrative Agent by
telecopy (I) in the case of Eurodollar Competitive Loans, not later than 9:30
a.m., New York City time, three Business Days before a proposed Competitive
Borrowing, and (II) in the case of Fixed Rate Loans, not later than 9:30 a.m.,
New York City time, on the day of a proposed Competitive Borrowing; provided,
however, that failure by any Lender to give such notice shall not cause such
Lender to be obligated to make any Competitive Loan as part of such Competitive
Borrowing. A Competitive Bid submitted by a Lender pursuant to this paragraph
(b) shall be irrevocable.
(c) The Administrative Agent shall as promptly as practicable
notify the Borrower, by telecopy, of all the Competitive Bids made, the
Competitive Bid Rate and the principal amount of each Competitive Loan in
respect of which a Competitive Bid was made and the identity of the Lender that
made each bid. The Administrative Agent shall send a copy of all Competitive
Bids to the Borrower for its records as soon as practicable after completion of
the bidding process set forth in this Section 2.03.
(d) The Borrower may in its sole and absolute discretion,
subject only to the provisions of this paragraph (d), accept or reject any
Competitive Bid referred to in paragraph (c) above. The Borrower shall notify
the Administrative Agent by telephone, confirmed by telecopy in the form of a
Competitive Bid Accept/Reject Letter, whether and to what extent it has decided
to accept or reject any of or all the bids referred to in paragraph (c) above
not more than one hour after it shall have been notified of such bids by the
Administrative Agent pursuant to such paragraph (c); provided, however, that
(i) the failure of the Borrower to give such notice shall be deemed to be a
rejection of all the bids referred to in paragraph (c) above, (ii) the Borrower
shall not accept a bid made at a particular Competitive Bid Rate if it has
decided to reject a bid made at a lower Competitive Bid Rate, (iii) the
aggregate amount of the Competitive Bids accepted by the Borrower shall not
exceed the principal amount specified in the Competitive Bid Request, (iv) if
the Borrower shall accept a bid or bids made at a particular Competitive Bid
Rate but the amount of such bid or bids shall cause the total amount of bids to
be accepted to exceed the amount specified in the Competitive Bid Request, then
the Borrower shall accept a portion of such bid or bids in an amount equal to
the amount specified in the Competitive Bid Request less the amount of all
other Competitive Bids accepted with respect to such Competitive Bid Request,
which acceptance, in the case of multiple bids at such Competitive Bid Rate,
shall be made pro rata in accordance with the amount of each such bid at such
Competitive Bid Rate, and (v) except pursuant to clause (iv) above, no bid
shall be accepted for a Competitive Loan unless such Competitive Loan is in a
minimum principal amount of $5,000,000 and an integral multiple of $1,000,000;
provided further, however, that if a Competitive Loan must be in an amount less
than $5,000,000 because of the provisions of clause (iv) above, such
Competitive Loan may be for a minimum of $1,000,000 or any integral multiple
thereof, and in calculating the pro rata allocation of acceptances of portions
of multiple bids at a particular Competitive Bid Rate pursuant to clause (iv)
the
<PAGE> 19
15
amounts shall be rounded to integral multiples of $1,000,000 in a manner which
shall be in the discretion of the Borrower. A notice given pursuant to this
paragraph (d) shall be irrevocable.
(e) The Administrative Agent shall promptly notify each
bidding Lender whether or not its Competitive Bid has been accepted (and if so,
in what amount and at what Competitive Bid Rate) by telecopy, and each
successful bidder will thereupon become bound, subject to the other applicable
conditions hereof, to make the Competitive Loan in respect of which its bid has
been accepted.
(f) No Competitive Borrowing shall be requested or made
hereunder if after giving effect thereto any of the conditions set forth in
paragraphs (i) or (ii) of Section 2.01 would not be met.
(g) If the Administrative Agent shall elect to submit a
Competitive Bid in its capacity as a Lender, it shall submit such bid directly
to the Applicable Borrower one quarter of an hour earlier than the latest time
at which the other Lenders are required to submit their bids to the
Administrative Agent pursuant to paragraph (b) above.
(h) All notices required by this Section 2.03 shall be given
in accordance with Section 9.01.
SECTION 2.04. Standby Borrowing Procedure. In order to
request a Standby Borrowing, a Borrower shall hand deliver or telecopy to the
Administrative Agent a duly completed Standby Borrowing Request in the form of
Exhibit A-5 (a) in the case of a Eurodollar Standby Loan, not later than 10:30
a.m., New York City time, three Business Days before such Borrowing, and (b) in
the case of an ABR Borrowing, not later than 10:30 a.m., New York City time, on
the day of such Borrowing. No Fixed Rate Loan shall be requested or made
pursuant to a Standby Borrowing Request. Such notice shall be irrevocable and
shall in each case specify (i) whether the Borrowing then being requested is to
be a Eurodollar Standby Loan or an ABR Borrowing; (ii) the date of such Standby
Borrowing (which shall be a Business Day) and the amount thereof; and (iii) if
such Borrowing is to be a Eurodollar Standby Loan, the Interest Period with
respect thereto, which shall not end after the Maturity Date. If no election
as to the Type of Standby Borrowing is specified in any such notice, then the
requested Standby Borrowing shall be an ABR Borrowing. If no Interest Period
with respect to any Eurodollar Standby Loan is specified in any such notice,
then the Borrower shall be deemed to have selected an Interest Period of one
month's duration, in the case of a Eurodollar Borrowing. Notwithstanding any
other provision of this Agreement to the contrary, no Standby Borrowing shall
be requested if the Interest Period with respect thereto would end after the
Maturity Date. The Administrative Agent shall promptly advise each of the
Lenders of any notice given pursuant to this Section 2.04 and of each Lender's
portion of the requested Borrowing.
SECTION 2.05. Conversion and Continuation of Standby Loans.
Each Borrower shall have the right at any time upon prior irrevocable notice to
the Administrative Agent (i) not later than 10:30 a.m., New York City time, on
the day of the conversion, to convert all or any part of any Eurodollar Standby
Loan into an ABR Borrowing, and (ii) not later than 10:30 a.m., New York City
time, three Business Days prior to conversion or continuation, to convert any
ABR Borrowing into a Eurodollar Standby Loan or to continue any Eurodollar
Standby Loan as a Eurodollar Standby Loan for an additional Interest Period,
subject in each case to the following:
(a) if less than all the outstanding principal amount of any
Standby Borrowing shall be converted or continued, the aggregate
principal amount of the Standby Borrowing converted or continued shall
be an integral multiple of $5,000,000 and not less than $20,000,000;
<PAGE> 20
16
(b) accrued interest on a Standby Borrowing (or portion
thereof) being converted shall be paid by the Borrower at the time of
conversion;
(c) if any Eurodollar Standby Loan is converted at a time
other than the end of the Interest Period applicable thereto, the
Borrower shall pay, upon demand, any amounts due to the Lenders
pursuant to Section 2.15;
(d) any portion of a Standby Borrowing maturing or required to
be repaid in less than one month may not be converted into or
continued as a Eurodollar Standby Loan;
(e) any portion of a Eurodollar Standby Loan which cannot be
continued as a Eurodollar Standby Loan by reason of clause (d) above
shall be automatically converted at the end of the Interest Period in
effect for such Eurodollar Standby Borrowing into an ABR Borrowing;
(f) no Interest Period may be selected for any Eurodollar
Standby Loan that would end later than the Maturity Date; and
(g) at any time when there shall have occurred and be
continuing any Default or Event of Default, no Borrowing may be
converted into or continued as a Eurodollar Standby Loan.
Each notice pursuant to this Section 2.05 shall be irrevocable
and shall refer to this Agreement and specify (i) the identity and amount of
the Standby Borrowing to be converted or continued, (ii) whether such Standby
Borrowing is to be converted to or continued as a Eurodollar Standby Loan or an
ABR Borrowing, (iii) if such notice requests a conversion, the date of such
conversion (which shall be a Business Day) and (iv) if such Standby Borrowing
is to be converted to or continued as a Eurodollar Standby Loan, the Interest
Period with respect thereto. If no Interest Period is specified in any such
notice with respect to any conversion to or continuation as a Eurodollar
Standby Loan, the Borrower shall be deemed to have selected an Interest Period
of one month's duration. If no notice shall have been given in accordance with
this Section 2.05 to convert or continue any Standby Borrowing, such Standby
Borrowing shall, at the end of the Interest Period applicable thereto (unless
repaid pursuant to the terms hereof), automatically be continued into a new
Interest Period as an ABR Borrowing.
SECTION 2.06. Fees. (a) The Company agrees to pay to each
Lender, through the Administrative Agent, on each March 31, June 30, September
30 and December 31 (with the first payment being due on December 31, 1995) and
on each date on which the Commitment of such Lender shall be terminated as
provided herein, a facility fee (a "Facility Fee"), at a rate per annum equal
to the Applicable Percentage from time to time in effect on the amount of the
Commitment of such Lender, whether used or unused, during the preceding quarter
(or other period commencing on the Effective Date, or ending with the Maturity
Date or any date on which the Commitment of such Lender shall be terminated).
All Facility Fees shall be computed on the basis of the actual number of days
elapsed in a year of 365 or 366 days, as the case may be. The Facility Fee due
to each Lender shall commence to accrue on the Effective Date, and shall cease
to accrue on the earlier of the Maturity Date and the termination of the
Commitment of such Lender as provided herein.
(b) The Company agrees to pay the Administrative Agent, for
its own account, the administrative and other fees separately agreed to by the
Company and the Administrative Agent (the "Administrative Fees").
<PAGE> 21
17
(c) All Fees shall be paid on the dates due, in immediately
available funds, to the Administrative Agent for distribution, if and as
appropriate, among the Lenders except that the Administrative Fee shall be paid
pursuant to paragraph (b) above. Once paid, none of the Fees shall be
refundable under any circumstances.
SECTION 2.07. Repayment of Loans; Evidence of Debt. (a)
Each Borrower hereby agrees that the outstanding principal balance of each
Standby Loan shall be payable on the Maturity Date and that the outstanding
principal balance of each Competitive Loan shall be payable on the last day of
the Interest Period applicable thereto. Each Loan shall bear interest on the
outstanding principal balance thereof as set forth in Section 2.08.
(b) Each Lender shall maintain in accordance with its usual
practice an account or accounts evidencing the indebtedness to such Lender
resulting from each Loan made by such Lender from time to time, including the
amounts of principal and interest payable and paid to such Lender from time to
time under this Agreement.
(c) The Administrative Agent shall maintain accounts in which
it will record (i) the amount of each Loan made hereunder, the Type of each
Loan made and the Interest Period applicable thereto, (ii) the amount of any
principal or interest due and payable or to become due and payable from each
Borrower to each Lender hereunder and (iii) the amount of any sum received by
the Administrative Agent hereunder from each Borrower and each Lender's share
thereof.
(d) The entries made in the accounts maintained pursuant to
paragraphs (b) and (c) of this Section 2.07 shall, to the extent permitted by
applicable law, be prima facie evidence of the existence and amounts of the
obligations therein recorded; provided, however, that the failure of any Lender
or the Administrative Agent to maintain such accounts or any error therein
shall not in any manner affect the obligations of the Borrowers to repay the
Loans in accordance with their terms.
SECTION 2.08. Interest on Loans. (a) Subject to the
provisions of Section 2.09, the Loans comprising each Eurodollar Borrowing
shall bear interest (computed on the basis of the actual number of days elapsed
over a year of 360 days) at a rate per annum equal to (i) in the case of each
Eurodollar Standby Loan, the LIBO Rate for the Interest Period in effect for
such Borrowing plus the Applicable Percentage from time to time in effect and
(ii) in the case of each Eurodollar Competitive Loan, the LIBO Rate for the
Interest Period in effect for such Borrowing plus the Margin offered by the
Lender making such Loan and accepted by the Borrower pursuant to Section 2.03.
(b) Subject to the provisions of Section 2.09, the Loans
comprising each ABR Borrowing shall bear interest (computed on the basis of the
actual number of days elapsed over a year of 365 or 366 days, as the case may
be, for periods during which the Alternate Base Rate is determined by reference
to the Prime Rate and 360 days for other periods) at a rate per annum equal to
the Alternate Base Rate.
(c) Subject to the provisions of Section 2.09, each Fixed
Rate Loan shall bear interest at a rate per annum (computed on the basis of the
actual number of days elapsed over a year of 360 days) equal to the fixed rate
of interest offered by the Lender making such Loan and accepted by the Borrower
pursuant to Section 2.03.
(d) Interest on each Loan shall be payable on each Interest
Payment Date applicable to such Loan except as otherwise provided in this
Agreement. The applicable LIBO Rate or Alternate Base Rate for each Interest
Period or day within an Interest Period, as the case may be, shall be
<PAGE> 22
18
determined by the Administrative Agent, and such determination shall be
conclusive absent manifest error.
SECTION 2.09. Default Interest. If a Borrower shall default
in the payment of the principal of or interest on any Loan or any other amount
becoming due hereunder, whether by scheduled maturity, notice of prepayment,
acceleration or otherwise, such Borrower shall on demand from time to time from
the Administrative Agent pay interest, to the extent permitted by law, on such
defaulted amount up to (but not including) the date of actual payment (after as
well as before judgment) at a rate per annum (computed as provided in Section
2.08(b)) equal to the Alternate Base Rate plus 2%.
SECTION 2.10. Alternate Rate of Interest. In the event, and
on each occasion, that on the day two Business Days prior to the commencement
of any Interest Period for a Eurodollar Borrowing, the Administrative Agent
shall have determined (i) that dollar deposits in the principal amounts of the
Eurodollar Loans comprising such Borrowing are not generally available in the
London interbank market or (ii) that reasonable means do not exist for
ascertaining the LIBO Rate, the Administrative Agent shall, as soon as
practicable thereafter, give telecopy notice of such determination to the
Borrower and the Lenders. In the event of any such determination under clauses
(i) or (ii) above, until the Administrative Agent shall have advised the
Borrower and the Lenders that the circumstances giving rise to such notice no
longer exist, (x) any request by a Borrower for a Eurodollar Competitive Loan
pursuant to Section 2.03 shall be of no force and effect and shall be denied by
the Administrative Agent and (y) any request by a Borrower for a Eurodollar
Standby Loan pursuant to Section 2.04 shall be deemed to be a request for an
ABR Borrowing. In the event the Required Lenders notify the Administrative
Agent that the rates at which dollar deposits are being offered will not
adequately and fairly reflect the cost to such Lenders of making or maintaining
Eurodollar Loans during such Interest Period, the Administrative Agent shall
notify the applicable Borrower of such notice and until the Required Lenders
shall have advised the Administrative Agent that the circumstances giving rise
to such notice no longer exist, any request by such Borrower for a Eurodollar
Standby Loan shall be deemed a request for an ABR Borrowing. Each
determination by the Administrative Agent hereunder shall be made in good faith
and shall be conclusive absent manifest error.
SECTION 2.11. Termination and Reduction of Commitments. (a)
The Commitments shall be automatically terminated on the Maturity Date.
(b) Upon at least three Business Days' prior irrevocable
telecopy notice to the Administrative Agent, the Company may at any time in
whole permanently terminate, or from time to time in part permanently reduce,
the Total Commitment; provided, however, that (i) each partial reduction of the
Total Commitment shall be in an integral multiple of $10,000,000 and in a
minimum principal amount of $50,000,000 and (ii) no such termination or
reduction shall be made which would reduce the Total Commitment to an amount
less than the aggregate outstanding principal amount of the Competitive Loans.
(c) Each reduction in the Total Commitment hereunder shall be
made ratably among the Lenders in accordance with their respective Commitments.
The Borrowers shall pay to the Administrative Agent for the account of the
Lenders, on the date of each termination of the Total Commitment, the Facility
Fees on the amount of the Commitments so terminated accrued through the date of
such termination or reduction.
SECTION 2.12. Prepayment. (a) Each Borrower shall have the
right at any time and from time to time to prepay any Standby Borrowing, in
whole or in part, upon giving telecopy
<PAGE> 23
19
notice (or telephone notice promptly confirmed by telecopy) to the
Administrative Agent: (i) before 10:00 a.m., New York City time, three
Business Days prior to prepayment, in the case of Eurodollar Loans, and (ii)
before 10:00 a.m., New York City time, one Business Day prior to prepayment, in
the case of ABR Loans; provided, however, that each partial prepayment shall be
in an amount which is an integral multiple of $10,000,000 and not less than
$50,000,000. No prepayment may be made in respect of any Competitive
Borrowing.
(b) On the date of any termination or reduction of the
Commitments pursuant to Section 2.11, the Borrowers shall pay or prepay so much
of the Standby Borrowings as shall be necessary in order that the sum of the
aggregate Competitive Loan Exposures and Standby Loan Exposures will not exceed
the Total Commitment, after giving effect to such termination or reduction.
(c) Each notice of prepayment shall specify the prepayment
date and the principal amount of each Borrowing (or portion thereof) to be
prepaid, shall be irrevocable and shall commit the applicable Borrower to
prepay such Borrowing (or portion thereof) by the amount stated therein on the
date stated therein. All prepayments under this Section 2.12 shall be subject
to Section 2.15 but otherwise without premium or penalty. All prepayments
under this Section 2.12 shall be accompanied by accrued interest on the
principal amount being prepaid to the date of payment.
SECTION 2.13. Reserve Requirements; Change in Circumstances.
(a) Notwithstanding any other provision herein, if after the date of this
Agreement any change in applicable law or regulation or in the interpretation
or administration thereof by any Governmental Authority charged with the
interpretation or administration thereof (whether or not having the force of
law) shall result in the imposition, modification or applicability of any
reserve, special deposit or similar requirement against assets of, deposits
with or for the account of or credit extended by any Lender, or shall result in
the imposition on any Lender or the London interbank market of any other
condition affecting this Agreement, such Lender's Commitment or any Eurodollar
Loan or Fixed Rate Loan made by such Lender, and the result of any of the
foregoing shall be to increase the cost to such Lender of making or maintaining
any Eurodollar Loan or Fixed Rate Loan or to reduce the amount of any sum
received or receivable by such Lender hereunder (whether of principal, interest
or otherwise) by an amount deemed by such Lender to be material, then such
additional amount or amounts as will compensate such Lender for such additional
costs or reduction will be paid by the Borrowers to such Lender upon demand.
Notwithstanding the foregoing, no Lender shall be entitled to request
compensation under this paragraph with respect to any Competitive Loan if the
change giving rise to such request was applicable to such Lender at the time of
submission of the Competitive Bid pursuant to which such Competitive Loan was
made.
(b) If any Lender shall have determined that the adoption of
any law, rule, regulation or guideline arising out of the July 1988 report of
the Basle Committee on Banking Regulations and Supervisory Practices entitled
"International Convergence of Capital Measurement and Capital Standards", or
the adoption after the date hereof of any other law, rule, regulation or
guideline regarding capital adequacy, or any change in any of the foregoing or
in the interpretation or administration of any of the foregoing by any
Governmental Authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by any Lender (or any
lending office of such Lender or any Lender's holding company with any request
or directive regarding capital adequacy (whether or not having the force of
law) of any such authority, central bank or comparable agency, has or would
have the effect of reducing the rate of return on such Lender's capital or on
the capital of such Lender's holding company, if any, as a consequence of this
Agreement, such Lender's Commitment or the Loans made by such Lender pursuant
hereto to a level below that which such Lender or such Lender's holding
company could have achieved but for such adoption, change or compliance (taking
into consideration such Lender's policies and the policies of
<PAGE> 24
20
such Lender's holding company with respect to capital adequacy) by an amount
deemed by such Lender to be material, then from time to time such additional
amount or amounts as will compensate such Lender for such reduction will be
paid by the Borrowers to such Lender. It is acknowledged that this Agreement
is being entered into by the Lenders on the understanding that the Lenders will
not be required to maintain capital against their Commitments under currently
applicable laws, regulations and regulatory guidelines. In the event the
Lenders shall be advised by any Governmental Authority or shall otherwise
determine on the basis of pronouncements of any Governmental Authority that
such understanding is incorrect, it is agreed that the Lenders will be entitled
to make claims under this paragraph (b) based upon market requirements
prevailing on the date hereof for commitments under comparable credit
facilities against which capital is required to be maintained.
(c) A certificate of any Lender setting forth such amount or
amounts as shall be necessary to compensate such Lender or its holding company
as specified in paragraph (a) or (b) above, as the case may be, shall be
delivered to the Company and shall be conclusive absent manifest error. The
Borrowers shall pay such Lender the amount shown as due on any such certificate
delivered by it within 10 days after its receipt of the same.
(d) Failure on the part of any Lender to demand compensation
for any increased costs or reduction in amounts received or receivable or
reduction in return on capital with respect to any period shall not constitute
a waiver of such Lender's right to demand compensation with respect to such
period or any other period; provided, however, that no Lender shall be entitled
to compensation under this Section 2.13 for any costs incurred or reductions
suffered with respect to any date unless it shall have notified the Company
that it will demand compensation for such costs or reductions under paragraph
(c) above not more than 90 days after the later of (i) such date and (ii) the
date on which it shall have become aware of such costs or reductions. The
protection of this Section shall be available to each Lender regardless of any
possible contention of the invalidity or inapplicability of the law, rule,
regulation, guideline or other change or condition which shall have occurred or
been imposed.
SECTION 2.14. Change in Legality. (a) Notwithstanding any
other provision herein, if any change in any law or regulation or in the
interpretation thereof by any Governmental Authority charged with the
administration or interpretation thereof shall make it unlawful for any Lender
to make or maintain any Eurodollar Loan or to give effect to its obligations as
contemplated hereby with respect to any Eurodollar Loan, then, by written
notice to the Company and to the Administrative Agent, such Lender may:
(i) declare that Eurodollar Loans will not thereafter be made
by such Lender hereunder, whereupon such Lender shall not submit a
Competitive Bid in response to a request for a Eurodollar Competitive
Loan and any request for a Eurodollar Standby Loan shall, as to such
Lender only, be deemed a request for an ABR Loan, unless such
declaration shall be subsequently withdrawn; and
(ii) require that all outstanding Eurodollar Loans, made by it
be converted to ABR Loans, in which event all such Eurodollar Loans,
shall be automatically converted to ABR Loans, as of the effective
date of such notice as provided in paragraph (b) below.
In the event any Lender shall exercise its rights under (i) or (ii) above, all
payments and prepayments of principal which would otherwise have been applied
to repay the Eurodollar Loans, that would have been made by such Lender or the
converted Eurodollar Loans, of such Lender shall instead be applied to repay
the ABR Loans, made by such Lender in lieu of, or resulting from the conversion
of, such Eurodollar Loans.
<PAGE> 25
21
(b) For purposes of this Section 2.14, a notice by any Lender
shall be effective as to each Eurodollar Loan, if lawful, on the last day of
the Interest Period currently applicable to such Eurodollar Loan; in all other
cases such notice shall be effective on the date of receipt.
SECTION 2.15. Indemnity. The Borrowers shall indemnify each
Lender against any out-of-pocket loss or expense which such Lender may sustain
or incur as a consequence of (a) any failure to borrow or to refinance, convert
or continue any Loan hereunder after irrevocable notice of such borrowing,
refinancing, conversion or continuation has been given pursuant to Section
2.03, 2.04 or 2.05, (b) any payment, prepayment or conversion, or assignment
required under Section 2.20, of a Eurodollar Loan required by any other
provision of this Agreement or otherwise made or deemed made on a date other
than the last day of the Interest Period, if any, applicable thereto, (c) any
default in payment or prepayment of the principal amount of any Loan or any
part thereof or interest accrued thereon, as and when due and payable (at the
due date thereof, whether by scheduled maturity, acceleration, irrevocable
notice of prepayment or otherwise) or (d) the occurrence of any Event of
Default, including, in each such case, any loss or reasonable expense sustained
or incurred or to be sustained or incurred in liquidating or employing deposits
from third parties acquired to effect or maintain such Loan or any part thereof
as a Eurodollar Loan. Such loss or reasonable expense shall include an amount
equal to the excess, if any, as reasonably determined by such Lender, of (i)
its cost of obtaining the funds for the Loan being paid, prepaid, refinanced or
not borrowed (assumed to be the LIBO Rate applicable thereto) for the period
from the date of such payment, prepayment, refinancing or failure to borrow or
refinance to the last day of the Interest Period for such Loan (or, in the case
of a failure to borrow or refinance the Interest Period for such Loan which
would have commenced on the date of such failure) over (ii) the amount of
interest (as reasonably determined by such Lender) that would be realized by
such Lender in reemploying the funds so paid, prepaid or not borrowed or
refinanced for such period or Interest Period, as the case may be. A
certificate of any Lender setting forth any amount or amounts which such Lender
is entitled to receive pursuant to this Section shall be delivered to such
Borrower and shall be conclusive absent manifest error.
SECTION 2.16. Pro Rata Treatment. Except as required under
Sections 2.14 and 2.20, each payment or prepayment of principal of any Standby
Borrowing, each payment of interest on the Standby Loans, each payment of the
Facility Fees, each reduction of the Commitments and each refinancing or
conversion of any Borrowing with a Standby Borrowing of any Type, shall be
allocated pro rata among the Lenders in accordance with their respective
Commitments (or, if such Commitments shall have expired or been terminated, in
accordance with the respective principal amounts of their outstanding Standby
Loans). Each payment of principal of any Competitive Borrowing shall be
allocated pro rata among the Lenders participating in such Borrowing in
accordance with the respective principal amounts of their outstanding
Competitive Loans comprising such Borrowing. Each payment of interest on any
Competitive Borrowing shall be allocated pro rata among the Lenders
participating in such Borrowing in accordance with the respective amounts of
accrued and unpaid interest on their outstanding Competitive Loans comprising
such Borrowing. For purposes of determining the available Commitments of the
Lenders at any time, each outstanding Competitive Borrowing shall be deemed to
have utilized the Commitments of the Lenders (including those Lenders which
shall not have made Loans as part of such Competitive Borrowing) pro rata in
accordance with such respective Commitments. Each Lender agrees that in
computing such Lender's portion of any Borrowing to be made hereunder, the
Administrative Agent may, in its discretion, round each Lender's percentage of
such Borrowing to the next higher or lower whole dollar amount.
SECTION 2.17. Sharing of Setoffs. Each Lender agrees that if
it shall, through the exercise of a right of banker's lien, setoff or
counterclaim, or pursuant to a secured claim under Section 506 of Title 11 of
the United States Code or other security or interest arising from, or in lieu
of, such secured claim, received by such Lender under any applicable
bankruptcy, insolvency or other
<PAGE> 26
22
similar law or otherwise, or by any other means, obtain payment (voluntary or
involuntary) in respect of any Standby Loan or Loans as a result of which the
unpaid principal portion of its Standby Loans shall be proportionately less
than the unpaid principal portion of the Standby Loans of any other Lender, it
shall be deemed simultaneously to have purchased from such other Lender at face
value, and shall promptly pay to such other Lender the purchase price for, a
participation in the Standby Loans of such other Lender, so that the aggregate
unpaid principal amount of the Standby Loans and participations in the Standby
Loans held by each Lender shall be in the same proportion to the aggregate
unpaid principal amount of all Standby Loans then outstanding as the principal
amount of its Standby Loans prior to such exercise of banker's lien, setoff or
counterclaim or other event was to the principal amount of all Standby Loans
outstanding prior to such exercise of banker's lien, setoff or counterclaim or
other event; provided, however, that, if any such purchase or purchases or
adjustments shall be made pursuant to this Section 2.17 and the payment giving
rise thereto shall thereafter be recovered, such purchase or purchases or
adjustments shall be rescinded to the extent of such recovery and the purchase
price or prices or adjustment restored without interest. Any Lender holding a
participation in a Standby Loan deemed to have been so purchased may exercise
any and all rights of banker's lien, setoff or counterclaim with respect to any
and all moneys owing to such Lender by reason thereof as fully as if such
Lender had made a Standby Loan in the amount of such participation.
SECTION 2.18. Payments. (a) The Borrowers shall make each
payment (including principal of or interest on any Borrowing and any Fees or
other amounts) hereunder from an account in the United States not later than
12:00 noon, local time at the place of payment, on the date when due in funds
to the Administrative Agent at its offices at 270 Park Avenue, New York, New
York, in immediately available funds. Each such payment shall be made in
dollars.
(b) Whenever any payment (including principal of or interest
on any Borrowing or any Fees or other amounts) hereunder shall become due, or
otherwise would occur, on a day that is not a Business Day, such payment may be
made on the next succeeding Business Day, and such extension of time shall in
such case be included in the computation of interest or Fees, if applicable.
SECTION 2.19. Taxes. (a) Any and all payments to the
Lenders hereunder shall be made, in accordance with Section 2.18, free and
clear of and without deduction for any and all current or future taxes, levies,
imposts, deductions, charges or withholdings, and all liabilities with respect
thereto, excluding (i) income taxes imposed on the income of the Administrative
Agent or any Lender (or any transferee or assignee thereof, including a
participation holder (any such entity a "Transferee")) and (ii) franchise taxes
imposed on the income, assets or net worth of the Administrative Agent or any
Lender (or Transferee), in each case by the jurisdiction under the laws of
which the Administrative Agent or such Lender (or Transferee) is organized or
doing business (other than as a result of entering into this Agreement,
performing any obligations hereunder, receiving any payments hereunder or
enforcing any rights hereunder), or any political subdivision thereof (all such
nonexcluded taxes, levies, imposts, deductions, charges, withholdings and
liabilities, collectively or individually, "Taxes"). If any Borrower shall be
required to deduct any Taxes from or in respect of any sum payable hereunder to
any Lender (or any Transferee) or the Administrative Agent, (i) the sum payable
shall be increased by the amount (an "additional amount") necessary so that
after making all required deductions (including deductions applicable to
additional sums payable under this Section 2.19) such Lender (or Transferee)
other Administrative Agent (as the case may be) shall receive an amount equal
to the sum it would have received had no such deductions been made, (ii) such
Borrower shall make such deductions and (iii) such Borrower shall pay the full
amount deducted to the relevant Governmental Authority in accordance with
applicable law.
<PAGE> 27
23
(b) In addition, the Borrowers shall pay to the relevant
Governmental Authority in accordance with applicable law any current or future
stamp or documentary taxes or any other excise or property taxes, charges or
similar levies that arise from any payment made hereunder or from the
execution, delivery or registration of, or otherwise with respect to, this
Agreement or any other Loan Document ("Other Taxes").
(c) The Borrowers shall indemnify each Lender (or Transferee)
and the Administrative Agent for the full amount of Taxes and Other Taxes paid
by such Lender (or Transferee) or the Administrative Agent, as the case may be,
and any liability (including penalties, interest and expenses (including
reasonable attorney's fees and expenses)) arising therefrom or with respect
thereto, whether or not such Taxes or Other Taxes were correctly or legally
asserted by the relevant Governmental Authority. A certificate as to the
amount of such payment or liability prepared by a Lender (or Transferee) or the
Administrative Agent on its behalf, absent manifest error, shall be final,
conclusive and binding for all purposes. Such indemnification shall be made
within 30 days after the date any Lender (or Transferee) or the Administrative
Agent, as the case may be, makes written demand therefor, which written demand
shall be made within 60 days of the date such Lender (or Transferee) or the
Administrative Agent receives written demand for payment of such Taxes or Other
Taxes from the relevant Governmental Authority.
(d) If a Lender (or Transferee) or the Administrative Agent
shall become aware that it is entitled to claim a refund from a Governmental
Authority in respect of Taxes or Other Taxes as to which it has been
indemnified by the Borrowers, or with respect to which the Borrowers have paid
additional amounts, pursuant to this Section 2.19, it shall promptly notify the
Borrowers of the availability of such refund claim and shall, within 30 days
after receipt of a request by the Borrowers, make a claim to such Governmental
Authority for such refund at the Borrowers' expense. If a Lender (or
Transferee) or the Administrative Agent receives a refund (including pursuant
to a claim for refund made pursuant to the preceding sentence) in respect of
any Taxes or Other Taxes as to which it has been indemnified by the Borrowers
or with respect to which the Borrowers have paid additional amounts pursuant to
this Section 2.19, it shall within 30 days from the date of such receipt pay
over such refund to the Borrowers (but only to the extent of indemnity payments
made, or additional amounts paid, by the Borrowers under this Section 2.19 with
respect to the Taxes or Other Taxes giving rise to such refund), net of all
out-of-pocket expenses of such Lender (or Transferee) or the Administrative
Agent and without interest (other than interest paid by the relevant
Governmental Authority with respect to such refund); provided, however, that
the Borrowers, upon the request of such Lender (or Transferee) or the
Administrative Agent, agree to repay the amount paid over to the Borrowers
(plus penalties, interest or other charges) to such Lender (or Transferee) or
the Administrative Agent in the event such Lender (or Transferee) or the
Administrative Agent is required to repay such refund to such Governmental
Authority.
(e) As soon as practicable after the date of any payment of
Taxes or Other Taxes by the Borrowers to the relevant Governmental Authority,
the Borrowers will deliver to the Administrative Agent, at its address referred
to in Section 9.01, the original or a certified copy of a receipt issued by
such Governmental Authority evidencing payment thereof.
(f) Without prejudice to the survival of any other agreement
contained herein, the agreements and obligations contained in this Section 2.19
shall survive the payment in full of the principal of and interest on all Loans
made hereunder.
(g) Each Lender (or Transferee) that is organized under the
laws of a jurisdiction other than the United States, any State thereof or the
District of Columbia (a "Non-U.S. Lender") shall deliver to the Company and the
Administrative Agent two copies of either United States Internal
<PAGE> 28
24
Revenue Service Form 1001 or Form 4224, or, in the case of a Non-U.S. Lender
claiming exemption from U.S. Federal withholding tax under Section 871(h) or
881(c) of the Code with respect to payments of "portfolio interest", a Form
W-8, or any subsequent versions thereof or successors thereto (and, if such
Non-U.S. Lender delivers a Form W-8, a certificate representing that such
Non-U.S. Lender is not a bank for purposes of Section 881(c) of the Code, is
not a 10 percent shareholder (within the meaning of Section 871(h)(3)(B) of the
Code) of the Company and is not a controlled foreign corporation related to the
Company (within the meaning of Section 864(d)(4) of the Code)), properly
completed and duly executed by such Non-U.S. Lender claiming complete exemption
from, or reduced rate of, U.S. Federal withholding tax on payments by the
Company under this Agreement. Such forms shall be delivered by each Non-U.S.
Lender on or before the date it becomes a party to this Agreement (or, in the
case of a Transferee that is a participation holder, on or before the date such
participation holder becomes a Transferee hereunder) and on or before the date,
if any, such Non-U.S. Lender changes its applicable lending office by
designating a different lending office (a "New Lending Office"). In addition,
each Non-U.S. Lender shall deliver such forms promptly upon the obsolescence or
invalidity of any form previously delivered by such Non-U.S. Lender.
Notwithstanding any other provision of this Section 2.19(g), a Non-U.S. Lender
shall not be required to deliver any form pursuant to this Section 2.19(g) that
such Non-U.S. Lender is not legally able to deliver.
(h) The Company shall not be required to indemnify any
Non-U.S. Lender, or to pay any additional amounts to any Non-U.S. Lender, in
respect of United States Federal withholding tax pursuant to paragraph (a) or
(c) above to the extent that (i) the obligation to withhold amounts with
respect to United States Federal withholding tax existed on the date such
Non-U.S. Lender became a party to this Agreement (or, in the case of a
Transferee that is a participation holder, on the date such participation
holder became a Transferee hereunder) or, with respect to payments to a New
Lending Office, the date such Non-U.S. Lender designated such New Lending
Office with respect to a Loan; provided, however, that this clause (i) shall
not apply to any Transferee or New Lending Office that becomes a Transferee or
New Lending Office as a result of an assignment, participation, transfer or
designation made at the request of the Company; and provided further, however,
that this clause (i) shall not apply to the extent the indemnity payment or
additional amounts any Transferee, or Lender (or Transferee) through a New
Lending Office, would be entitled to receive (without regard to this clause
(i)) do not exceed the indemnity payment or additional amounts that the person
making the assignment, participation or transfer to such Transferee, or Lender
(or Transferee) making the designation of such New Lending Office, would have
been entitled to receive in the absence of such assignment, participation,
transfer or designation or (ii) the obligation to pay such additional amounts
would not have arisen but for a failure by such Non-U.S. Lender to comply with
the provisions of paragraph (g) above.
(i) Any Lender (or Transferee)claiming any indemnity payment
or additional amounts payable pursuant to this Section 2.19 shall use
reasonable efforts (consistent with legal and regulatory restrictions) to file
any certificate or document reasonably requested in writing by the Company or
to change the jurisdiction of its applicable lending office if the making of
such a filing or change would avoid the need for or reduce the amount of any
such indemnity payment or additional amounts that may thereafter accrue and
would not, in the sole determination of such Lender (or Transferee), be
otherwise disadvantageous to such Lender (or Transferee).
(j) Nothing contained in this Section 2.19 shall require any
Lender (or Transferee) or the Administrative Agent to make available any of its
tax returns (or any other information that it deems to be confidential or
proprietary).
SECTION 2.20. Duty to Mitigate; Assignment of Commitments
Under Certain Circumstances. (a) Any Lender (or Transferee) claiming any
additional amounts payable pursuant to
<PAGE> 29
25
Section 2.13 or Section 2.19 or exercising its rights under Section 2.14 shall
use reasonable efforts (consistent with legal and regulatory restrictions) to
file any certificate or document requested by the Company or to change the
jurisdiction of its applicable lending office if the making of such a filing or
change would avoid the need for or reduce the amount of any such additional
amounts which may thereafter accrue or avoid the circumstances giving rise to
such exercise and would not, in the sole determination of such Lender (or
Transferee), be otherwise disadvantageous to such Lender (or Transferee).
(b) In the event that any Lender shall have delivered a
notice or certificate pursuant to Section 2.13 or 2.14, or the Company shall be
required to make additional payments to any Lender under Section 2.19, the
Company shall have the right, at its own expense, upon notice to such Lender
and the Administrative Agent, to require such Lender to transfer and assign
without recourse, representation or warranty (in accordance with and subject to
the restrictions contained in Section 9.04) all interests, rights and
obligations contained hereunder to another financial institution approved by
the Administrative Agent (which approval shall not be unreasonably withheld)
which shall assume such obligations; provided that (i) no such assignment shall
conflict with any law, rule or regulation or order of any Governmental
Authority and (ii) the assignee or the Company, as the case may be, shall pay
to the affected Lender in immediately available funds on the date of such
assignment the principal of and interest accrued to the date of payment on the
Loans made by it hereunder and all other amounts accrued for its account or
owed to it hereunder.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Each Borrower represents and warrants to each of the Lenders
that:
SECTION 3.01. Organization; Powers. Each Borrower and each
of the Subsidiaries (a) is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction of its organization, (b)
has all requisite power and authority to own its property and assets and to
carry on its business as now conducted and as proposed to be conducted, (c) is
qualified to do business in every jurisdiction where such qualification is
required, except where the failure so to qualify would not result in a Material
Adverse Effect, and (d) in the case of each Borrower, has the corporate power
and authority to execute, deliver and perform its obligations under the Loan
Documents and to borrow hereunder and thereunder.
SECTION 3.02. Authorization. The execution, delivery and
performance by the Borrowers of this Agreement, the promissory notes, if any,
issued pursuant to Section 9.04(i) (and by the Borrowing Subsidiaries of each
Borrowing Subsidiary Agreement), the Borrowings hereunder and the completion of
the Distribution (collectively, the "Transactions") (a) have been duly
authorized by all requisite corporate action and (b) will not (i) violate (A)
any provision of any law, statute, rule or regulation (including the Margin
Regulations) or of the certificate of incorporation or other constitutive
documents or by-laws of the Borrowers, (B) any order of any Governmental
Authority or (C) any provision of any indenture, agreement or other instrument
to which any Borrower is a party or by which it or any of its property is or
may be bound, (ii) be in conflict with, result in a breach of or constitute
(alone or with notice or lapse of time or both) a default under any such
indenture, agreement or other instrument or (iii) result in the creation or
imposition of any lien upon any property or assets of any Borrower.
<PAGE> 30
26
SECTION 3.03. Enforceability. This Agreement and each Loan
Document to which a Borrower is a party constitutes a legal, valid and binding
obligation of each Borrower enforceable in accordance with its terms.
SECTION 3.04. Governmental Approvals. No action, consent or
approval of, registration or filing with or other action by any Governmental
Authority, other than those which have been taken, given or made, as the case
may be, is or will be required with respect to any Borrower in connection with
the Transactions.
SECTION 3.05. Financial Statements. (a) The Company has
heretofore furnished to the Administrative Agent and the Lenders copies of its
combined balance sheet and statements of income and cash flow as of and for the
year ended December 31, 1994, and the six months ended June 30, 1995, as
included in the Proxy Statement. Such financial statements present fairly, in
all material respects, the consolidated combined financial condition and the
results of operations of the Company and the Subsidiaries as of such dates and
for such periods in accordance with GAAP.
(b) The Company has heretofore furnished to the
Administrative Agent and the Lenders copies of its pro forma combined balance
sheet and statements of income as of June 30, 1995, and for the year and the
six months ended December 31, 1994, and June 30, 1995, respectively, giving
effect to the Distribution and certain related transactions. Such financial
statements present fairly, in all material respects, the consolidated combined
financial condition and the results of operations of the Company and the
Subsidiaries on a pro forma basis as of such dates and for such periods in
accordance with GAAP.
(c) As of the Effective Date, there has been no material
adverse change in the consolidated financial condition of the Company and the
Subsidiaries taken as a whole from the financial condition reported in the
financial statements referenced in paragraph (a) of this Section 3.05.
SECTION 3.06. Litigation; Compliance with Laws. (a) As of
the Effective Date, there are no actions, proceedings or investigations filed
or (to the knowledge of the Borrowers) threatened affecting any Borrower or any
Subsidiary in any court or before any Governmental Authority or arbitration
board or tribunal which question the validity or legality of this Agreement,
the Transactions or any action taken or to be taken pursuant to this Agreement
and no order or judgment has been issued or entered restraining or enjoining
any Borrower or any Subsidiary from the execution, delivery or performance of
this Agreement nor is there any other action, proceeding or investigation filed
or (to the knowledge of any Borrower or any Subsidiary) threatened against any
Borrower or any Subsidiary in any court or before any Governmental Authority or
arbitration board or tribunal which would be reasonably likely to result in a
Material Adverse Effect or materially restrict the ability of any Borrower to
comply with its obligations under the Loan Documents.
(b) Neither any Borrower nor any Subsidiary is in violation
of any law, rule or regulation (including any law, rule or regulation relating
to the protection of the environment or to employee health or safety), or in
default with respect to any judgment, writ, injunction or decree of any
Governmental Authority, where such violation or default would be reasonably
likely to result in a Material Adverse Effect.
SECTION 3.07. Federal Reserve Regulations. (a) Neither any
Borrower nor any Subsidiary that will receive proceeds of the Loans hereunder
is engaged principally, or as one of its important activities, in the business
of extending credit for the purpose of purchasing or carrying Margin Stock.
<PAGE> 31
27
(b) No part of the proceeds of any Loan will be used, whether
directly or indirectly, and whether immediately, incidentally or ultimately, to
purchase or carry Margin Stock or to refund indebtedness originally incurred
for such purpose, or for any other purpose which entails a violation of, or
which is inconsistent with, the provisions of the Margin Regulations.
SECTION 3.08. Investment Company Act; Public Utility Holding
Company Act. No Borrower is (a) an "investment company" as defined in, or
subject to regulation under, the Investment Company Act of 1940 (the "1940
Act") or (b) a "holding company" as defined in, or subject to regulation under,
the Public Utility Holding Company Act of 1935.
SECTION 3.09. Use of Proceeds. All proceeds of the Loans
shall be used for the purposes referred to in the recitals to this Agreement.
SECTION 3.10. Full Disclosure; No Material Misstatements.
None of the representations or warranties made by any Borrower in connection
with this Agreement as of the date such representations and warranties are made
or deemed made, and no report, financial statement or other information
furnished by or on behalf of any Borrower to the Administrative Agent or any
Lender pursuant to or in connection with this Agreement or the credit
facilities established hereby contains or will contain any material
misstatement of fact or omits or will omit to state any material fact necessary
to make the statements therein, in the light of the circumstances under which
they were or will be made, not misleading.
SECTION 3.11. Taxes. Each Borrower and each of the material
Subsidiaries have filed or caused to be filed all Federal, state and local tax
returns which are required to be filed by them, and have paid or caused to be
paid all taxes shown to be due and payable on such returns or on any
assessments received by any of them, other than any taxes or assessments the
validity of which is being contested in good faith by appropriate proceedings,
and with respect to which appropriate accounting reserves have to the extent
required by GAAP been set aside.
SECTION 3.12. Employee Pension Benefit Plans. The present
aggregate value of accumulated benefit obligations of all unfunded and
underfunded pension plans of the Company and its Subsidiaries (based on those
assumptions used for disclosure in corporate financial statements in accordance
with GAAP) did not, as of December 31, 1994, exceed by more than $8,923,000 the
value of the assets of all such plans. Of such $8,923,000, $2,019,000 is
attributable to employee pension plans in countries where the funding of such
obligations is not required or customary and $3,076,000 relates to domestic
pension plans where funding is not permitted under current tax regulations. In
these cases the Company has recorded book reserves to meet the obligations.
SECTION 3.13. Distribution. At or prior to the Effective
Date, the Distribution will have been duly completed in accordance with
applicable law and as described in the Proxy Statement, and the assets,
liabilities and capitalization of the Company will have been consistent at the
time of and after giving effect to the Distribution in all material respects
with the forecasted capitalization table of the Company set forth in the Proxy
Statement and the pro forma financial statements referred to in Section
3.05(b), except that in the event the Distribution shall occur prior to
December 31, 1995, the transactions set forth in Schedule 3.13 which are
reflected as having occurred in such capitalization table and such pro forma
financial statements might not yet have occurred.
<PAGE> 32
28
ARTICLE IV
CONDITIONS OF LENDING
The obligations of the Lenders to make Loans hereunder are
subject to the satisfaction of the following conditions:
SECTION 4.01. All Borrowings. On the date of each Borrowing:
(a) The Administrative Agent shall have received a notice of
such Borrowing as required by Section 2.03 or Section 2.04, as
applicable.
(b) The representations and warranties set forth in Article
III hereof shall be true and correct in all material respects on and
as of the date of such Borrowing with the same effect as though made
on and as of such date, except to the extent such representations and
warranties expressly relate to an earlier date.
(c) At the time of and immediately after such Borrowing no
Event of Default or Default shall have occurred and be continuing.
Each Borrowing shall be deemed to constitute a representation and warranty by
each Borrower on the date of such Borrowing as to the matters specified in
paragraphs (b) and (c) of this Section 4.01.
SECTION 4.02. Effective Date. On the Effective Date:
(a) The Administrative Agent shall have received a favorable
written opinion of Walter Diehl, Esq., dated the Effective Date and addressed
to the Lenders and satisfactory to the Lenders, Administrative Agent and
Cravath, Swaine & Moore, counsel for the Administrative Agent, to the effect
set forth in Exhibit D hereto.
(b) The Administrative Agent shall have received (i) a copy
of the certificate of incorporation, including all amendments thereto, of the
Company, certified as of a recent date by the Secretary of State of its state
of incorporation, and a certificate as to the good standing of the Company as
of a recent date from such Secretary of State; (ii) a certificate of the
Secretary or an Assistant Secretary of the Company dated the Effective Date and
certifying (A) that attached thereto is a true and complete copy of the by-laws
of the Company as in effect on the Effective Date and at all times since a date
prior to the date of the resolutions described in clause (B) below, (B) that
attached thereto is a true and complete copy of resolutions duly adopted by the
Board of Directors of the Company authorizing the execution, delivery and
performance of this Agreement and the Borrowings hereunder, and that such
resolutions have not been modified, rescinded or amended and are in full force
and effect, (C) that the certificate of incorporation referred to in clause (i)
above has not been amended since the date of the last amendment thereto shown
on the certificate of good standing furnished pursuant to such clause (i) and
(D) as to the incumbency and specimen signature of each officer executing this
Agreement or any other document delivered in connection herewith on behalf of
the Company; and (iii) a certificate of another officer of the Company as to
the incumbency and specimen signature of the Secretary or Assistant Secretary
executing the certificate pursuant to (ii) above.
(c) The Administrative Agent shall have received a
certificate, dated the Effective Date and signed by a Financial Officer of the
Company, confirming compliance with the conditions precedent set forth in
paragraphs (b) and (c) of Section 4.01.
<PAGE> 33
29
(d) The principal of and accrued and unpaid interest on any
loans outstanding under the Existing Credit Facilities shall have been paid in
full, all other amounts due in respect of the Existing Credit Facilities shall
have been paid in full and the commitments to lend under the Existing Credit
Facilities shall have been permanently terminated.
(e) The Administrative Agent shall have received any Fees or
other amounts due and payable on or prior to the Effective Date.
SECTION 4.03. First Borrowing by Each Borrowing Subsidiary.
On or prior to the first date on which Loans are made to any Borrowing
Subsidiary:
(a) The Lenders shall have received the favorable written
opinion of counsel satisfactory to the Administrative Agent, addressed
to the Lenders and satisfactory to the Lenders, the Administrative
Agent and Cravath, Swaine & Moore, counsel for the Administrative
Agent, to the effect set forth in Exhibit D hereto.
(b) Each Lender shall have received a copy of the Borrowing
Subsidiary Agreement executed by such Borrowing Subsidiary.
ARTICLE V
COVENANTS
A. Affirmative Covenants. Each Borrower covenants and agrees
with each Lender and the Administrative Agent that so long as this Agreement
shall remain in effect or the principal of or interest on any Loan, any Fees or
any other amounts payable hereunder shall be unpaid, unless the Required
Lenders shall otherwise consent in writing, it will, and will cause each of the
Subsidiaries to:
SECTION 5.01. Existence. Do or cause to be done all things
necessary to preserve and keep in full force and effect its corporate
existence, rights and franchises, except as expressly permitted under Section
5.09; provided, however, that nothing in this Section shall prevent the
abandonment or termination of the existence, rights or franchises of any
Subsidiary or any rights or franchises of any Borrower if such abandonment or
termination is in the best interests of the Borrowers and is not
disadvantageous in any material respect to the Lenders.
SECTION 5.02. Business and Properties. Comply in all
material respects with all applicable laws, rules, regulations and orders of
any Governmental Authority (including any of the foregoing relating to the
protection of the environment or to employee health and safety), whether now in
effect or hereafter enacted; and at all times maintain and preserve all
property material to the conduct of its business and keep such property in good
repair, working order and condition and from time to time make, or cause to be
made, all needful and proper repairs, renewals, additions, improvements and
replacements thereto necessary in order that the business carried on in
connection therewith may be properly conducted at all times.
<PAGE> 34
30
SECTION 5.03. Financial Statements, Reports, Etc. In the case
of the Company, furnish to the Administrative Agent for distribution to each
Lender:
(a) within 120 days after the end of each fiscal year, its
consolidated balance sheet and the related consolidated statements of
income and cash flows showing its consolidated financial condition as
of the close of such fiscal year and the consolidated results of its
operations during such year, all audited by Arthur Andersen LLP or
other independent certified public accountants of recognized national
standing selected by the Company and accompanied by an opinion of such
accountants to the effect that such consolidated financial statements
fairly present its financial condition and results of operations on a
consolidated basis in accordance with GAAP (it being agreed that the
requirements of this paragraph may be satisfied by the delivery
pursuant to paragraph (d) below of an annual report on Form 10-K
containing the foregoing);
(b) within 90 days after the end of each of the first three
fiscal quarters of each fiscal year, its consolidated balance sheet
and related consolidated statements of income and cash flow, showing
its consolidated financial condition as of the close of such fiscal
quarter and the consolidated results of its operations during such
fiscal quarter and the then elapsed portion of the fiscal year, all
certified by one of its Financial Officers as fairly presenting its
financial condition and results of operations on a consolidated basis
in accordance with GAAP, subject to normal year-end audit adjustments
(it being agreed that the requirements of this paragraph may be
satisfied by the delivery pursuant to paragraph (d) below of a
quarterly report on Form 10-Q containing the foregoing);
(c) concurrently with any delivery of financial statements
under paragraph (a) or (b) above, a certificate of a Financial Officer
certifying that, to the best of such Financial Officer's knowledge, no
Event of Default or Default has occurred or, if such an Event of
Default or Default has occurred, specifying the nature and extent
thereof and any corrective action taken or proposed to be taken with
respect thereto;
(d) promptly after the same become publicly available, copies
of all reports on forms 10-K, 10-Q and 8-K filed by it with the SEC,
or any Governmental Authority succeeding to any of or all the
functions of the SEC, or, in the case of the Company, copies of all
reports distributed to its shareholders, as the case may be;
(e) promptly, from time to time, such other information as
any Lender shall reasonably request through the Administrative Agent;
and
(f) concurrently with any delivery of financial statements
under paragraph (a) or (b) above, calculations of the financial test
referred to in Section 5.12.
SECTION 5.04. Insurance. Keep its insurable properties
adequately insured at all times by financially sound and reputable insurers,
and maintain such other insurance, to such extent and against such risks,
including fire and other risks insured against by extended coverage, as is
customary with companies similarly situated and in the same or similar
businesses (it being understood that the Borrowers and their Subsidiaries may
self-insure to the extent customary with companies similarly situated and in
the same or similar businesses).
SECTION 5.05. Obligations and Taxes. Pay and discharge
promptly when due all taxes, assessments and governmental charges imposed upon
it or upon its income or profits or in respect of its property, as well as all
other material liabilities, in each case before the same shall
<PAGE> 35
31
become delinquent or in default and before penalties accrue thereon, unless and
to the extent that the same are being contested in good faith by appropriate
proceedings and adequate reserves with respect thereto shall, to the extent
required by GAAP, have been set aside.
SECTION 5.06. Litigation and Other Notices. Give the
Administrative Agent prompt written notice of the following (which the
Administrative Agent shall promptly provide to the Lenders):
(a) the filing or commencement of, or any written threat or
written notice of intention of any person to file or commence, any
action, suit or proceeding which could reasonably be expected to
result in a Material Adverse Effect;
(b) any Event of Default or Default, specifying the nature
and extent thereof and the action (if any) which is proposed to be
taken with respect thereto; and
(c) any change in any of the Ratings.
SECTION 5.07. Maintaining Records; Access to Properties and
Inspections. Maintain financial records in accordance with GAAP and, upon
reasonable notice, at all reasonable times, permit any authorized
representative designated by the Administrative Agent to visit and inspect the
properties of the Company and of any material Subsidiary and to discuss the
affairs, finances and condition of the Company and any material Subsidiary with
a Financial Officer of the Company and such other officers as the Company shall
deem appropriate.
SECTION 5.08. Use of Proceeds. Use the proceeds of the Loans
only for the purposes set forth in the recitals to this Agreement.
B. Negative Covenants. Each Borrower covenants and agrees
with each Lender and the Administrative Agent that so long as this Agreement
shall remain in effect or the principal of or interest on any Loan, any Fees or
any other amounts payable hereunder shall be unpaid, unless the Required
Lenders shall otherwise consent in writing, it will not, and will not cause or
permit any of the Subsidiaries to:
SECTION 5.09. Consolidations, Mergers, and Sales of Assets.
Consolidate or merge with or into any other person or sell, lease or transfer
all or substantially all of its property and assets, or agree to do any of the
foregoing, unless (a) no Default or Event of Default has occurred and is
continuing or would have occurred immediately after giving effect thereto, and
(b) in the case of a consolidation or merger or transfer of assets involving
the Company and in which the Company is not the surviving corporation or sells,
leases or transfers all or substantially all of its property and assets, the
surviving corporation or person purchasing, leasing or receiving such property
and assets is organized in the United States of America or a state thereof and
agrees to be bound by the terms and provisions applicable to the Company
hereunder.
SECTION 5.10. Limitations on Liens. In the case of the
Company, create, suffer to be created, or assume (directly or indirectly) any
mortgage, pledge or other lien upon any Principal Property, or permit any
Restricted Subsidiary to create, suffer to be created, or assume (directly or
indirectly) any mortgage, pledge or other lien upon any Principal Property;
provided, however, that this covenant shall not apply to any of the following:
(a) any mortgage, pledge or other lien on any Principal
Property hereafter acquired, constructed or improved by the Company or
any Restricted Subsidiary which is created or
<PAGE> 36
32
assumed to secure or provide for the payment of any part of the
purchase price of such property or the cost of such construction or
improvement, or any mortgage, pledge or other lien on any Principal
Property existing at the time of acquisition thereof, provided,
however, that the mortgage, pledge or other lien shall not extend to
any Principal Property theretofore owned by the Company or any
Restricted Subsidiary;
(b) any mortgage, pledge or other lien on any Principal
Property existing on the date of this Agreement as described in
Schedule 5.10;
(c) any mortgage, pledge or other lien existing upon any
property of a company which is merged with or into or is consolidated
into, or substantially all the assets or shares of capital stock of
which are acquired by, the Company or a Restricted Subsidiary, at the
time of such merger, consolidation or acquisition, provided that such
mortgage, pledge or other lien does not extend to any other Principal
Property, other than improvements to the property subject to such
mortgage, pledge or other lien;
(d) any pledge or deposit to secure payment of workers'
compensation or insurance premiums, or in connection with tenders,
bids, contracts (other than contracts for the payment of money) or
leases;
(e) any pledge of, or other lien upon, any assets as security
for the payment of any tax, assessment or other similar charge by any
Governmental Authority or public body, or as security required by law
or governmental regulation as a condition to the transaction of any
business or the exercise of any privilege or right;
(f) any pledge or lien necessary to secure a stay of any legal
or equitable process in a proceeding to enforce a liability or
obligation contested in good faith by the Company or a Restricted
Subsidiary or required in connection with the institution by the
Company or a Restricted Subsidiary of any legal or equitable
proceeding to enforce a right or to obtain a remedy claimed in good
faith by the Company or a Restricted Subsidiary, or required in
connection with any order or decree in any such proceeding or in
connection with any contest of any tax or other governmental charge;
or the making of any deposit with or the giving of any form of
security to any governmental agency or any body created or approved by
law or governmental regulation in order to entitle the Company or a
Restricted Subsidiary to maintain self-insurance or to participate in
any fund in connection with workers' compensation, unemployment
insurance, old age pensions or other social security or to share in
any provisions or other benefits provided for companies participating
in any such arrangement or for liability on insurance of credits or
other risks;
(g) any mechanics', carriers', workmen's, repairmen's, or
other like liens, if arising in the ordinary course of business, in
respect of obligations which are not overdue or liability for which is
being contested in good faith by appropriate proceedings;
(h) any lien or encumbrance on property in favor of the United
States of America, or of any agency, department or other
instrumentality thereof, to secure partial, progress or advance
payments pursuant to the provisions of any contract;
(i) any mortgage, pledge or other lien securing any
indebtedness incurred in any manner to finance or recover the cost to
the Company or any Restricted Subsidiary of any physical property,
real or personal, which prior to or simultaneously with the creation
of such indebtedness shall have been leased by the Company or a
Restricted Subsidiary to the United
<PAGE> 37
33
States of America or a department or agency thereof at an aggregate
rental, payable during that portion of the initial term of such lease
(without giving effect to any options of renewal or extension) which
shall be unexpired at the date of the creation of such indebtedness,
sufficient (taken together with any amounts required to be paid by the
lessee to the lessor upon any termination of such lease) to pay in
full at the stated maturity date or dates thereof the principal of and
the interest on such indebtedness;
(j) any mortgage, pledge or other lien securing indebtedness
of a Restricted Subsidiary to the Company or a Restricted Subsidiary,
provided that in the case of any sale or other disposition of such
indebtedness by the Company or such Restricted Subsidiary, such sale
or other disposition shall be deemed to constitute the creation of
another mortgage, pledge or other lien not permitted by this clause
(j);
(k) any mortgage, pledge or other lien affecting property of
the Company or any Restricted Subsidiary securing indebtedness of the
United States of America or a State thereof (or any instrumentality or
agency of either thereof) issued in connection with a pollution
control or abatement program required in the opinion of the Company to
meet environmental criteria of the Company or any Restricted
Subsidiary and the proceeds of which indebtedness have financed the
cost of acquisition of such program;
(l) the renewal, extension, replacement or refunding of any
mortgage, pledge, lien, deposit, charge or other encumbrance permitted
by the foregoing provisions of this covenant upon the same property
theretofore subject thereto, or the renewal, extension, replacement or
refunding of the amount secured thereby, provided that in each case
such amount outstanding at that time shall not be increased; or
(m) any other mortgage, pledge or other lien, provided that
immediately after the creation or assumption of such mortgage, pledge
or other lien, the total of (x) the aggregate principal amount of
indebtedness of the Company and all Restricted Subsidiaries secured by
all mortgages, pledges and other liens created or assumed under the
provisions of this clause (m), plus (y) the aggregate amount of
Capitalized Lease-Back Obligations of the Company and Restricted
Subsidiaries under the entire unexpired terms of all leases entered
into in connection with sale and lease-back transactions which would
have been precluded by the provisions of Section 5.11 but for the
satisfaction of the condition set forth in clause (b) thereof, shall
not exceed an amount equal to 10% of Consolidated Net Tangible Assets.
The lease of any property by the Company or a Restricted Subsidiary and rental
obligations with respect thereto (whether or not arising out of a sale and
lease-back of properties and whether or not in accordance with GAAP such
property is carried as an asset and such rental obligations are carried as
indebtedness on the Company's or a Restricted Subsidiary's balance sheet) shall
not in any event be deemed to be the creation of a mortgage, pledge or other
lien.
SECTION 5.11. Limitations on Sale and Leaseback Transactions.
In the case of the Company or any Restricted Subsidiary, enter into any
arrangement with any person providing for the leasing by the Company or any
Restricted Subsidiary of any Principal Property (except for temporary leases
for a term of not more than three years and except for leases between the
Company and a Restricted Subsidiary or between Restricted Subsidiaries), which
property has been or is to be sold or transferred by the Company or such
Restricted Subsidiary to such person more than 120 days after the acquisition
thereof or the completion of construction and commencement of full operation
thereof, unless either (a) the Company shall apply an amount equal to the
greater of the Fair Value of such property or the net proceeds of such sale,
within 120 days of the effective date of any such
<PAGE> 38
34
arrangement, to the retirement (other than any mandatory retirement or by way
of payment at maturity) of Indebtedness or to the acquisition, construction,
development or improvement of properties, facilities or equipment used for
operating purposes which are, or upon such acquisition, construction,
development or improvement will be, a Principal Property or a part thereof; or
(b) at the time of entering into such arrangement, such Principal Property
could have been subjected to a mortgage, pledge or other lien securing
indebtedness of the Company or a Restricted Subsidiary in a principal amount
equal to the Capitalized Lease-Back Obligations with respect to such Principal
Property under paragraph (m) of Section 5.10.
SECTION 5.12. Consolidated Total Debt to Consolidated EBITDA.
Permit the ratio of (a) Consolidated Total Debt to (b) Consolidated EBITDA at
the end of and for any period of four consecutive fiscal quarters to exceed 5.0
to 1.0.
ARTICLE VI
EVENTS OF DEFAULT
In case of the happening of any of the following events (each
an "Event of Default"):
(a) any representation or warranty made or deemed made in or
in connection with the execution and delivery of this Agreement or the
Borrowings hereunder shall prove to have been false or misleading in
any material respect when so made, deemed made or furnished;
(b) default shall be made in the payment of any principal of
any Loan when and as the same shall become due and payable, whether at
the due date thereof or at a date fixed for prepayment thereof or by
acceleration thereof or otherwise;
(c) default shall be made in the payment of any interest on
any Loan or any Fee or any other amount (other than an amount referred
to in paragraph (b) above) due hereunder, when and as the same shall
become due and payable, and such default shall continue unremedied for
a period of ten days;
(d) default shall be made in the due observance or performance
of any covenant, condition or agreement contained in Section 5.01,
5.09, 5.10, 5.11 or 5.12 and, in the case of any default under Section
5.10, such default shall continue for 30 days;
(e) default shall be made in the due observance or performance
of any covenant, condition or agreement contained herein (other than
those specified in clauses (b), (c) or (d) above) and such default
shall continue unremedied for a period of 30 days after notice thereof
from the Administrative Agent or any Lender to the Company;
(f) the Company or any Subsidiary shall (i) fail to pay any
principal or interest, regardless of amount, due in respect of any
Indebtedness in a principal amount in excess of $20,000,000, beyond
the period of grace, if any, provided in the agreement or instrument
under which such Indebtedness was created, or (ii) fail to observe or
perform any other term, covenant, condition or agreement contained in
any agreement or instrument evidencing or governing any such
Indebtedness, or any other event shall occur or condition shall exist,
beyond the period of grace, if any, provided in such agreement or
instrument, if the effect of any failure referred to in this clause
(ii) is to cause, or to permit the holder or holders of such
<PAGE> 39
35
Indebtedness or a trustee on its or their behalf (with or without the
giving of notice) to cause, such Indebtedness to become due prior to
its stated maturity;
(g) an involuntary proceeding shall be commenced or an
involuntary petition shall be filed in a court of competent
jurisdiction seeking (i) relief in respect of the Company, or of a
substantial part of the property or assets of the Company or any
Subsidiary with assets having a gross book value in excess of
$25,000,000, under Title 11 of the United States Code, as now
constituted or hereafter amended, or any other Federal or state
bankruptcy, insolvency, receivership or similar law, (ii) the
appointment of a receiver, trustee, custodian, sequestrator,
conservator or similar official for the Company or for a substantial
part of the property or assets of the Company or any Subsidiary with
assets having a gross book value in excess of $25,000,000 or (iii) the
winding up or liquidation of the Company; and such proceeding or
petition shall continue undismissed for 60 days or an order or decree
approving or ordering any of the foregoing shall be entered;
(h) the Company or any Subsidiary with assets having a gross
book value in excess of $25,000,000 shall (i) voluntarily commence any
proceeding or file any petition seeking relief under Title 11 of the
United States Code, as now constituted or hereafter amended, or any
other Federal or state bankruptcy, insolvency, receivership or similar
law, (ii) consent to the institution of, or fail to contest in a
timely and appropriate manner, any proceeding or the filing of any
petition described in (g) above, (iii) apply for or consent to the
appointment of a receiver, trustee, custodian, sequestrator,
conservator or similar official for the Company or for a substantial
part of the property or assets of the Company, (iv) file an answer
admitting the material allegations of a petition filed against it in
any such proceeding, (v) make a general assignment for the benefit of
creditors, (vi) become unable, admit in writing its inability or fail
generally to pay its debts as they become due or (vii) take any action
for the purpose of effecting any of the foregoing;
(i) one or more final judgments shall be entered by any court
against the Company or any of the Subsidiaries for the payment of
money in an aggregate amount in excess of $100,000,000, and such
judgment or judgments shall not have been paid, covered by insurance,
discharged or stayed for a period of 60 days, or a warrant of
attachment or execution or similar process shall have been issued or
levied against property of the Company or any of the Subsidiaries to
enforce any such judgment or judgments;
(j) an ERISA Event shall have occurred that, in the opinion of
the Required Lenders, when taken together with all other such ERISA
Events, could reasonably be expected to result in a Material Adverse
Effect; or
(k) a Change in Control shall occur;
then, and in every such event (other than an event with respect to the Company
or any Subsidiary with assets having a gross book value in excess of
$25,000,000 described in paragraph (g) or (h) above), and at any time
thereafter during the continuance of such event, the Administrative Agent, at
the request of the Required Lenders, shall, by notice to the Company, take
either or both of the following actions, at the same or different times: (i)
terminate forthwith the Commitments and (ii) declare the Loans then
outstanding to be forthwith due and payable in whole or in part, whereupon the
principal of the Loans so declared to be due and payable, together with accrued
interest thereon and any unpaid accrued Fees and all other liabilities of the
Borrowers accrued hereunder, without presentment, demand, protest or any other
notice of any kind, all of which are hereby expressly waived anything contained
herein to the contrary notwithstanding; and, in the case of any event with
respect to the
<PAGE> 40
36
Company or any Subsidiary with assets having a gross book value in excess of
$25,000,000 described in paragraph (g) or (h) above, the Commitments shall
automatically terminate and the principal of the Loans then outstanding,
together with accrued interest thereon and any unpaid accrued Fees and all
other liabilities of the Borrowers accrued hereunder shall automatically become
due and payable, without presentment, demand, protest or any other notice of
any kind, all of which are hereby expressly waived anything contained herein to
the contrary notwithstanding.
ARTICLE VII
GUARANTEE
The Company unconditionally and irrevocably guarantees the due
and punctual payment and performance, when and as due, whether at maturity, by
acceleration, upon one or more dates set for prepayment or otherwise, of the
Guaranteed Obligations. The Company further agrees that the Guaranteed
Obligations may be extended or renewed, in whole or in part, without notice or
further assent from it and that it will remain bound upon its guarantee
notwithstanding any extension or renewal of any Guaranteed Obligations.
The Company waives presentment to, demand of payment from and
protest to the Borrowing Subsidiaries of any of the Guaranteed Obligations, and
also waives notice of acceptance of its guarantee and notice of protest for
nonpayment. The obligations of the Company hereunder shall not be affected by
(a) the failure of any Lender to assert any claim or demand or to enforce any
right or remedy against the Borrowing Subsidiaries under the provisions of this
Agreement or otherwise; (b) any rescission, waiver, amendment or modification
of any of the terms or provisions of this Agreement, any guarantee or any other
agreement; or (c) the failure of any Lender to exercise any right or remedy
against any other guarantor of the Guaranteed Obligations.
The Company further agrees that its guarantee constitutes a
guarantee of payment when due and not of collection, and waives any right to
require that any resort be had by the Administrative Agent or any Lender to any
security, if any, held for payment of the Guaranteed Obligations or to any
balance of any deposit account or credit on its books, in favor of the
Borrowing Subsidiaries or any other person.
The obligations of the Company hereunder shall not be subject
to any reduction, limitation, impairment or termination for any reason,
including any claim of waiver, release, surrender, alteration or compromise,
and shall not be subject to any defense or setoff, counterclaim, recoupment or
termination whatsoever by reason of the invalidity, illegality or
unenforceability of the Guaranteed Obligations or otherwise. Without limiting
the generality of the foregoing, the obligations of the Company hereunder shall
not be discharged or impaired or otherwise affected by the failure of the
Administrative Agent or any Lender to assert any claim or demand or to enforce
any remedy under this Agreement, any guarantee or any other agreement, by any
waiver or modification of any provision thereof, by any default, failure or
delay, wilful or otherwise, in the performance of the Guaranteed Obligations,
or by any other act or omission which may or might in any manner or to any
extent vary the risk of the Company or otherwise operate as a discharge of the
Company as a matter of law or equity.
To the extent permitted by applicable law, the Company waives
any defense based on or arising out of any defense available to the Borrowing
Subsidiaries, including any defense based on or arising out of any disability
of the Borrowing Subsidiaries, or the unenforceability of the Guaranteed
Obligations or any part thereof from any cause, or the cessation from any cause
of the liability of the
<PAGE> 41
37
Borrowing Subsidiaries, other than final payment in full of the Guaranteed
Obligations. The Administrative Agent and the Lenders may, at their election,
foreclose on any security held by one or more of them by one or more judicial
or non-judicial sales, or exercise any other right or remedy available to them
against the Borrowing Subsidiaries, or any security without affecting or
impairing in any way the liability of the Company hereunder except to the
extent the Guaranteed Obligations have been fully and finally paid. The
Company waives any defense arising out of any such election even though such
election operates to impair or to extinguish any right of reimbursement or
subrogation or other right or remedy of the Company against the Borrowing
Subsidiaries or any security.
The Company further agrees that its guarantee shall continue
to be effective or be reinstated, as the case may be, if at any time payment,
or any part thereof, of principal of or interest on any Guaranteed Obligation
is rescinded or must otherwise be restored by any Lender upon the bankruptcy or
reorganization of any Borrowing Subsidiary or otherwise.
In furtherance of the foregoing and not in limitation of any
other right which the Administrative Agent or any Lender may have at law or in
equity against the Company by virtue hereof, upon the failure of any Borrowing
Subsidiary to pay any Guaranteed Obligation when and as the same shall become
due, whether at maturity, by acceleration, after notice of prepayment or
otherwise, the Company hereby promises to and will, upon receipt of written
demand by the Administrative Agent or any Lender, forthwith pay or cause to be
paid to the Administrative Agent or such Lender in cash the amount of such
unpaid Guaranteed Obligation.
The Company hereby irrevocably waives and releases any and all
rights of subrogation, indemnification, reimbursement and similar rights which
it may have against or in respect of the Borrowing Subsidiaries at any time
relating to the Guaranteed Obligations, including all rights that would result
in its being deemed a "creditor" of the Borrowing Subsidiaries under the United
States Code as now in effect or hereafter amended, or any comparable provision
of any successor statute.
ARTICLE VIII
THE ADMINISTRATIVE AGENT
In order to expedite the transactions contemplated by this
Agreement, Chemical Bank is hereby appointed to act as Administrative Agent on
behalf of the Lenders. Each of the Lenders hereby irrevocably authorizes the
Administrative Agent to take such actions on behalf of such Lender and to
exercise such powers as are specifically delegated to the Administrative Agent
by the terms and provisions hereof, together with such actions and powers as
are reasonably incidental thereto. The Administrative Agent is hereby
expressly authorized by the Lenders, without hereby limiting any implied
authority, (a) to receive on behalf of the Lenders all payments of principal of
and interest on the Loans and all other amounts due to the Lenders hereunder,
and promptly to distribute to each Lender its proper share of each payment so
received; (b) to give notice on behalf of each of the Lenders to the Borrowers
of any Event of Default of which the Administrative Agent has actual knowledge
acquired in connection with its agency hereunder; and (c) to distribute to each
Lender copies of all notices, financial statements and other materials
delivered by the Borrowers pursuant to this Agreement as received by the
Administrative Agent.
Neither the Administrative Agent nor any of its directors,
officers, employees or agents shall be liable as such for any action taken or
omitted by any of them except for its or his or her own gross negligence or
willful misconduct, or be responsible for any statement, warranty or
<PAGE> 42
38
representation herein or the contents of any document delivered in connection
herewith, or be required to ascertain or to make any inquiry concerning the
performance or observance by the Borrowers of any of the terms, conditions,
covenants or agreements contained in this Agreement. The Administrative Agent
shall not be responsible to the Lenders for the due execution, genuineness,
validity, enforceability or effectiveness of this Agreement or other
instruments or agreements. The Administrative Agent may deem and treat the
Lender which makes any Loan as the holder of the indebtedness resulting
therefrom for all purposes hereof until it shall have received notice from such
Lender, given as provided herein, of the transfer thereof. The Administrative
Agent shall in all cases be fully protected in acting, or refraining from
acting, in accordance with written instructions signed by the Required Lenders
and, except as otherwise specifically provided herein, such instructions and
any action or inaction pursuant thereto shall be binding on all the Lenders.
The Administrative Agent shall, in the absence of knowledge to the contrary, be
entitled to rely on any instrument or document believed by it in good faith to
be genuine and correct and to have been signed or sent by the proper person or
persons. Neither the Administrative Agent nor any of its directors, officers,
employees or agents shall have any responsibility to the Borrowers on account
of the failure of or delay in performance or breach by any Lender of any of its
obligations hereunder or to any Lender on account of the failure of or delay
in performance or breach by any other Lender or the Borrowers of any of their
respective obligations hereunder or in connection herewith. The Administrative
Agent may execute any and all duties hereunder by or through agents or
employees and shall be entitled to rely upon the advice of legal counsel
selected by it with respect to all matters arising hereunder and shall not be
liable for any action taken or suffered in good faith by it in accordance with
the advice of such counsel.
The Lenders hereby acknowledge that the Administrative Agent
shall be under no duty to take any discretionary action permitted to be taken
by it pursuant to the provisions of this Agreement unless it shall be requested
in writing to do so by the Required Lenders.
Subject to the appointment and acceptance of a successor
Administrative Agent as provided below, the Administrative Agent may resign at
any time by notifying the Lenders and the Company. Upon any such resignation,
the Required Lenders shall have the right to appoint a successor Administrative
Agent acceptable to the Company. If no successor shall have been so appointed
by the Required Lenders and shall have accepted such appointment within 30 days
after the retiring Administrative Agent gives notice of its resignation, then
the retiring Administrative Agent may, on behalf of the Lenders, appoint a
successor Administrative Agent which shall be a bank with an office in New
York, New York, having a combined capital and surplus of at least $500,000,000
or an Affiliate of any such bank. Upon the acceptance of any appointment as
Administrative Agent hereunder by a successor bank, such successor shall
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring Administrative Agent and the retiring Administrative Agent
shall be discharged from its duties and obligations hereunder. After the
Administrative Agent's resignation hereunder, the provisions of this Article
and Section 9.05 shall continue in effect for its benefit in respect of any
actions taken or omitted to be taken by it while it was acting as
Administrative Agent.
With respect to the Loans made by it hereunder, the
Administrative Agent in its individual capacity and not as Administrative Agent
shall have the same rights and powers as any other Lender and may exercise the
same as though it were not the Administrative Agent, and the Administrative
Agent and its Affiliates may accept deposits from, lend money to and generally
engage in any kind of business with the Borrowers or any Subsidiary or other
Affiliate thereof as if it were not the Administrative Agent.
Each Lender agrees (i) to reimburse the Administrative Agent,
on demand, in the amount of its pro rata share (based on its Commitment
hereunder or, if the Commitments shall have been terminated, the amount of its
outstanding Loans) of any expenses incurred for the benefit of the
<PAGE> 43
39
Lenders by the Administrative Agent, including counsel fees and compensation of
agents and employees paid for services rendered on behalf of the Lenders, which
shall not have been reimbursed by the Borrowers and (ii) to indemnify and hold
harmless the Administrative Agent and any of its directors, officers, employees
or agents, on demand, in the amount of such pro rata share, from and against
any and all liabilities, taxes, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever which may be imposed on, incurred by or asserted against it
in its capacity as the Administrative Agent in any way relating to or arising
out of this Agreement or any action taken or omitted by it under this Agreement
to the extent the same shall not have been reimbursed by the Borrowers;
provided that no Lender shall be liable to the Administrative Agent for any
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from the gross
negligence or willful misconduct of the Administrative Agent or any of its
directors, officers, employees or agents. Each Lender agrees that any
allocation made in good faith by the Administrative Agent of expenses or other
amounts referred to in this paragraph between this Agreement and the Facility B
Credit Agreement shall be conclusive and binding for all purposes.
Each Lender acknowledges that it has, independently and
without reliance upon the Administrative Agent or any other Lender and based on
such documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement. Each Lender also
acknowledges that it will, independently and without reliance upon the
Administrative Agent or any other Lender and based on such documents and
information as it shall from time to time deem appropriate, continue to make
its own decisions in taking or not taking action under or based upon this
Agreement or any related agreement or any document furnished hereunder or
thereunder.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Notices. Notices and other communications
provided for herein shall be in writing and shall be delivered by hand or
overnight courier service, mailed or sent by telecopy, as follows:
(a) if to any Borrower, to ITT Corporation, 1330 Avenue of the
Americas, New York, New York 10019-5490, Attention of Ms. Elizabeth A.
Tuttle (Telecopy No. 212-489-3995);
(b) if to the Administrative Agent, to Chemical Bank Agency
Services Corp., 140 East 45th Street, 29th Floor, New York, New York
10017, Attention of Mr. Chris Moriarty, (Telecopy No. 212-622-0002),
with a copy to Chemical Bank at 270 Park Avenue, New York, New York
10017, Re: ITT Corporation; and
(c) if to a Lender, to it at its address (or telecopy number)
set forth in Schedule 2.01 or in the Assignment and Acceptance
pursuant to which such Lender became a party hereto.
All notices and other communications given to any party hereto in accordance
with the provisions of this Agreement shall be deemed to have been given on the
date of receipt if delivered by hand or overnight courier service or sent by
telecopy to such party as provided in this Section or in accordance with the
latest unrevoked direction from such party given in accordance with this
Section.
<PAGE> 44
40
SECTION 9.02. Survival of Agreement. All covenants,
agreements, representations and warranties made by the Borrowers herein and in
the certificates or other instruments prepared or delivered in connection with
or pursuant to this Agreement shall be considered to have been relied upon by
the Lenders and shall survive the making by the Lenders of the Loans regardless
of any investigation made by the Lenders or on their behalf, and shall continue
in full force and effect as long as the principal of or any accrued interest on
any Loan or any Fee or any other amount payable under this Agreement is
outstanding and unpaid or the Commitments have not been terminated. The
provisions of Sections 2.13, 2.15, 2.19 and 9.05 shall remain operative and in
full force and effect regardless of the expiration of the term of this
Agreement, the consummation of the transactions contemplated hereby, the
repayment of any of the Loans, the expiration of the Commitments, the
invalidity or unenforceability of any term or provision of this Agreement, or
any investigation made by or on behalf of the Administrative Agent or any
Lender.
SECTION 9.03. Binding Effect. This Agreement shall become
effective on the Effective Date and when it shall have been executed by the
Company and the Administrative Agent and when the Administrative Agent shall
have received copies hereof (telecopied or otherwise) which, when taken
together, bear the signature of each Lender, and thereafter shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns, except that the Borrowers shall not have the right to
assign any rights hereunder or any interest herein without the prior consent of
all the Lenders.
SECTION 9.04. Successors and Assigns. (a) Whenever in this
Agreement any of the parties hereto is referred to, such reference shall be
deemed to include the successors and assigns of such party; and all covenants,
promises and agreements by or on behalf of any party that are contained in this
Agreement shall bind and inure to the benefit of its successors and assigns.
(b) Each Lender may assign to one or more assignees all or a
portion of its interests, rights and obligations under this Agreement
(including all or a portion of its Commitment and the Loans at the time owing
to it); provided, however, that (i) except in the case of an assignment to a
Lender or an Affiliate of a Lender, the Company must give its prior written
consent to such assignment (which consent, if required, shall not be
unreasonably withheld in the event an Event of Default has occurred and is
continuing), (ii) the parties to each such assignment shall execute and deliver
to the Administrative Agent an Assignment and Acceptance, and a processing and
recordation fee of $3,000 (provided that, in the case of simultaneous
assignment of interests under this Agreement and the Facility B Credit
Agreement, the aggregate fee shall be $3,000), (iii) the assignee, if it shall
not be a Lender, shall deliver to the Administrative Agent an Administrative
Questionnaire, and (iv) the amount of the Commitment of the assigning Lender
subject to each such assignment (determined as of the date the Assignment and
Acceptance with respect to such assignment is delivered to the Administrative
Agent) shall not be less than $5,000,000 and the amount of the Commitment of
such Lender remaining after such assignment shall not be less than $5,000,000
or shall be zero. Upon acceptance and recording pursuant to paragraph (e) of
this Section, from and after the effective date specified in each Assignment
and Acceptance, which effective date shall be at least five Business Days after
the execution thereof, (A) the assignee thereunder shall be a party hereto and,
to the extent of the interest assigned by such Assignment and Acceptance, have
the rights and obligations of a Lender under this Agreement and (B) the
assigning Lender thereunder shall, to the extent of the interest assigned by
such Assignment and Acceptance, be released from its obligations under this
Agreement (and, in the case of an Assignment and Acceptance covering all or the
remaining portion of an assigning Lender's rights and obligations under this
Agreement, such Lender shall cease to be a party hereto (but shall continue to
be entitled to the benefits of Sections 2.13, 2.15, 2.19 and 9.05, as well as
to any Fees accrued for its account hereunder and not yet paid)).
Notwithstanding the foregoing, any Lender assigning its rights and obligations
under this Agreement may retain any Competitive Loans made by it outstanding at
such
<PAGE> 45
41
time, and in such case shall retain its rights hereunder in respect of any
Loans so retained until such Loans have been repaid in full in accordance with
this Agreement.
(c) By executing and delivering an Assignment and Acceptance,
the assigning Lender thereunder and the assignee thereunder shall be deemed to
confirm to and agree with each other and the other parties hereto as follows:
(i) such assigning Lender warrants that it is the legal and beneficial owner of
the interest being assigned thereby free and clear of any adverse claim, (ii)
except as set forth in (i) above, such assigning Lender makes no representation
or warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement, or
the execution, legality, validity, enforceability, genuineness, sufficiency or
value of this Agreement or any other instrument or document furnished pursuant
hereto or the financial condition of the Borrowers or the performance or
observance by the Borrowers of any obligations under this Agreement or any
other instrument or document furnished pursuant hereto; (iii) such assignee
represents and warrants that it is legally authorized to enter into such
Assignment and Acceptance; (iv) such assignee confirms that it has received a
copy of this Agreement, together with copies of the most recent financial
statements delivered pursuant to Section 5.03 and such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into such Assignment and Acceptance; (v) such assignee will
independently and without reliance upon the Administrative Agent, such
assigning Lender or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement; (vi) such
assignee appoints and authorizes the Administrative Agent to take such action
as agent on its behalf and to exercise such powers under this Agreement as are
delegated to the Administrative Agent by the terms hereof, together with such
powers as are reasonably incidental thereto; and (vii) such assignee agrees
that it will perform in accordance with their terms all the obligations which
by the terms of this Agreement are required to be performed by it as a Lender.
(d) The Administrative Agent shall maintain at one of its
offices in The City of New York a copy of each Assignment and Acceptance
delivered to it and a register for the recordation of the names and addresses
of the Lenders, and the Commitment of, and the principal amount of the Loans
owing to, each Lender pursuant to the terms hereof from time to time (the
"Register"). The entries in the Register shall be conclusive in the absence of
manifest error and the Borrowers, the Administrative Agent and the Lenders may
treat each person whose name is recorded in the Register pursuant to the terms
hereof as a Lender hereunder for all purposes of this Agreement. The Register
shall be available for inspection by each party hereto, at any reasonable time
and from time to time upon reasonable prior notice.
(e) Upon its receipt of a duly completed Assignment and
Acceptance executed by an assigning Lender and an assignee together with an
Administrative Questionnaire completed in respect of the assignee (unless the
assignee shall already be a Lender hereunder), the processing and recordation
fee referred to in paragraph (b) above and the written consent of the Company
to such assignment, the Administrative Agent shall (i) accept such Assignment
and Acceptance and (ii) record the information contained therein in the
Register.
(f) Each Lender may sell participations to one or more banks
or other entities in all or a portion of its rights and obligations under this
Agreement (including all or a portion of its Commitment and the Loans owing to
it); provided, however, that (i) such Lender's obligations under this Agreement
shall remain unchanged, (ii) such Lender shall remain solely responsible to the
other parties hereto for the performance of such obligations, (iii) each
participating bank or other entity shall be entitled to the benefit of the cost
protection provisions contained in Sections 2.13, 2.15 and 2.19 to the same
extent as if it were the selling Lender (and limited to the amount that could
have been claimed
<PAGE> 46
42
by the selling Lender had it continued to hold the interest of such
participating bank or other entity), except that all claims made pursuant to
such Sections shall be made through such selling Lender, and (iv) the
Borrowers, the Administrative Agent and the other Lenders shall continue to
deal solely and directly with such selling Lender in connection with such
Lender's rights and obligations under this Agreement.
(g) Any Lender or participant may, in connection with any
assignment or participation or proposed assignment or participation pursuant to
this Section, disclose to the assignee or participant or proposed assignee or
participant any information relating to the Borrowers furnished to such Lender;
provided that, prior to any such disclosure, each such assignee or participant
or proposed assignee or participant shall execute an agreement for the benefit
of the Company whereby such assignee or participant shall agree (subject to
customary exceptions) to preserve the confidentiality of any such information.
(h) The Borrowers shall not assign or delegate any rights and
duties hereunder without the prior written consent of all Lenders.
(i) Any Lender may at any time pledge all or any portion of
its rights under this Agreement to a Federal Reserve Bank; provided that no
such pledge shall release any Lender from its obligations hereunder or
substitute any such Bank for such Lender as a party hereto. In order to
facilitate such an assignment to a Federal Reserve Bank, each Borrower shall,
at the request of the assigning Lender, duly execute and deliver to the
assigning Lender a promissory note or notes evidencing the Loans made to such
Borrower by the assigning Lender hereunder.
SECTION 9.05. Expenses; Indemnity. (a) The Borrowers agree
to pay all reasonable out-of-pocket expenses incurred by the Administrative
Agent in connection with entering into this Agreement or in connection with any
amendments, modifications or waivers of the provisions hereof, or incurred by
the Administrative Agent or any Lender in connection with the enforcement or
protection of their rights in connection with this Agreement or in connection
with the Loans made hereunder, including the fees and disbursements of counsel
for the Administrative Agent or, in the case of enforcement, the Lenders.
(b) The Borrowers agree to indemnify the Administrative
Agent, each Lender, each of their Affiliates and the directors, officers,
employees and agents of the foregoing (each such person being called an
"Indemnitee") against, and to hold each Indemnitee harmless from, any and all
losses, claims, damages, liabilities and related expenses, including reasonable
counsel fees and expenses, incurred by or asserted against any Indemnitee
arising out of (i) the consummation of the transactions contemplated by this
Agreement, (ii) the use of the proceeds of the Loans or (iii) any claim,
litigation, investigation or proceeding relating to any of the foregoing,
whether or not any Indemnitee is a party thereto; provided that such indemnity
shall not, as to any Indemnitee, be available to the extent that such losses,
claims, damages, liabilities or related expenses are determined by a final
judgment of a court of competent jurisdiction to have resulted from the gross
negligence or willful misconduct of such Indemnitee.
(c) The provisions of this Section shall remain operative and
in full force and effect regardless of the expiration of the term of this
Agreement, the consummation of the transactions contemplated hereby, the
repayment of any of the Loans, the invalidity or unenforceability of any term
or provision of this Agreement or any investigation made by or on behalf of the
Administrative Agent or any Lender. All amounts due under this Section shall
be payable on written demand therefor.
<PAGE> 47
43
SECTION 9.06. APPLICABLE LAW. THIS AGREEMENT SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
SECTION 9.07. Waivers; Amendment. (a) No failure or delay
of the Administrative Agent or any Lender in exercising any power or right
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right or power, or any abandonment or discontinuance of
steps to enforce such a right or power, preclude any other or further exercise
thereof or the exercise of any other right or power. The rights and remedies
of the Administrative Agent and the Lenders hereunder are cumulative and are
not exclusive of any rights or remedies which they would otherwise have. No
waiver of any provision of this Agreement or consent to any departure therefrom
shall in any event be effective unless the same shall be permitted by paragraph
(b) below, and then such waiver or consent shall be effective only in the
specific instance and for the purpose for which given. No notice or demand on
any Borrower or any Subsidiary in any case shall entitle such party to any
other or further notice or demand in similar or other circumstances.
(b) Neither this Agreement nor any provision hereof may be
waived, amended or modified except pursuant to an agreement or agreements in
writing entered into by the Borrowers and the Required Lenders; provided,
however, that no such agreement shall (i) decrease the principal amount of, or
extend the maturity of or any scheduled principal payment date or date for the
payment of any interest or fees on any Loan, or waive or excuse any such
payment or any part thereof, or decrease the rate of interest on any Loan,
without the prior written consent of each Lender affected thereby, (ii)
increase the Commitment or decrease the Facility Fee of any Lender or other
amounts due to any Lender without the prior written consent of such Lender,
(iii) limit or release the guarantee set forth in Article VII, or (iv) amend or
modify the provisions of Section 2.16 or Section 9.04(h), the provisions of
this Section or the definition of the "Required Lenders", without the prior
written consent of each Lender; provided further, however, that no such
agreement shall amend, modify or otherwise affect the rights or duties of the
Administrative Agent hereunder without the prior written consent of the
Administrative Agent. Each Lender shall be bound by any waiver, amendment or
modification authorized by this Section and any consent by any Lender pursuant
to this Section shall bind any assignee of its rights and interests hereunder.
SECTION 9.08. Entire Agreement. This Agreement, the
agreements referred in Section 2.06(b) and the letter agreement attached as
Exhibit F constitute the entire contract among the parties relative to the
subject matter hereof. Any previous agreement among the parties with respect
to the subject matter hereof is superseded by this Agreement. Nothing in this
Agreement, expressed or implied, is intended to confer upon any party other
than the parties hereto any rights, remedies, obligations or liabilities under
or by reason of this Agreement.
SECTION 9.09. Severability. In the event any one or more of
the provisions contained in this Agreement should be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected or
impaired thereby. The parties shall endeavor in good-faith negotiations to
replace the invalid, illegal or unenforceable provisions with valid provisions
the economic effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.
SECTION 9.10. Counterparts. This Agreement may be executed
in two or more counterparts, each of which shall constitute an original but all
of which when taken together shall constitute but one contract, and shall
become effective as provided in Section 9.03.
<PAGE> 48
44
SECTION 9.11. Headings. Article and Section headings and the
Table of Contents used herein are for convenience of reference only, are not
part of this Agreement and are not to affect the construction of, or to be
taken into consideration in interpreting, this Agreement.
SECTION 9.12. Right of Setoff. If an Event of Default shall
have occurred and be continuing, each Lender is hereby authorized at any time
and from time to time, to the fullest extent permitted by law, to set off and
apply any and all deposits (general or special, time or demand, provisional or
final) at any time held and other indebtedness at any time owing by such Lender
to or for the credit or obligations of the Company and any Borrowing Subsidiary
now or hereafter existing under this Agreement held by such Lender,
irrespective of whether or not such Lender shall have made any demand under
this Agreement and although such obligations may be unmatured. Each Lender
agrees promptly to notify the Company and the Administrative Agent after such
setoff and application made by such Lender, but the failure to give such notice
shall not affect the validity of such setoff and application. The rights of
each Lender under this Section are in addition to other rights and remedies
(including other rights of setoff) which such Lender may have.
SECTION 9.13. JURISDICTION; CONSENT TO SERVICE OF PROCESS.
(A) EACH BORROWER HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF
AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF ANY NEW YORK STATE COURT
OR FEDERAL COURT OF THE UNITED STATES OF AMERICA SITTING IN NEW YORK CITY, AND
ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT
OF OR RELATING TO THIS AGREEMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY
JUDGMENT, AND EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY
AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD
AND DETERMINED IN SUCH NEW YORK STATE OR, TO THE EXTENT PERMITTED BY LAW, IN
SUCH FEDERAL COURT. EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN
ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER
JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.
SUBJECT TO THE FOREGOING AND TO PARAGRAPH (B) BELOW, NOTHING IN THIS AGREEMENT
SHALL AFFECT ANY RIGHT THAT ANY PARTY HERETO MAY OTHERWISE HAVE TO BRING ANY
ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AGAINST ANY OTHER PARTY HERETO
IN THE COURTS OF ANY JURISDICTION.
(B) EACH BORROWER HEREBY IRREVOCABLY AND UNCONDITIONALLY
WAIVES, TO THE FULLEST EXTENT IT MAY LEGALLY AND EFFECTIVELY DO SO, ANY
OBJECTION WHICH IT MAY NOW OR THEREAFTER HAVE TO THE LAYING OF VENUE OF ANY
SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT IN ANY
NEW YORK STATE OR FEDERAL COURT. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, THE DEFENSE OF AN INCONVENIENT
FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.
(C) EACH PARTY TO THIS AGREEMENT IRREVOCABLY CONSENTS TO
SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 9.01. NOTHING
IN THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY TO THIS AGREEMENT TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
<PAGE> 49
45
SECTION 9.14. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY
HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY
ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT. EACH PARTY HERETO
(A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES
THAT IT AND OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT
BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATION IN THIS SECTION.
SECTION 9.15. Addition of Borrowing Subsidiaries. Each
Borrowing Subsidiary which shall deliver to the Administrative Agent a
Borrowing Subsidiary Agreement executed by such Subsidiary and the Company
shall, upon such delivery and without further act, become a party hereto and a
Borrower hereunder with the same effect as if it had been an original party to
this Agreement.
SECTION 9.16. Execution. Upon execution by the Lenders, this
Agreement will be executed with Old ITT as "the Company" all as contemplated by
the letter agreement attached as Exhibit F, and upon execution of this
Agreement by the Company, the Company shall succeed to the rights and
obligations of Old ITT as contemplated in this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized officers as of the
day and year first above written.
ITT CORPORATION, as Borrower,
by
/s/ Elizabeth A. Tuttle
----------------------------------------------
Name: Elizabeth A. Tuttle
Title: Vice President and Assistant Treasurer
CHEMICAL BANK, individually and as
Administrative Agent,
by
/s Robert K. Gaynor
----------------------------------------------
Name: Robert K. Gaynor
Title: Vice President
<PAGE> 50
46
ABN AMRO BANK N.V., NEW YORK
BRANCH,
by
/s/ Frances O'R. Logan
----------------------------------------------
Name: Frances O'R. Logan
Title: Vice President
by
/s/ William J. Van Nostrand
----------------------------------------------
Name: William J. Van Nostrand
Title: Vice President
ARAB BANK PLC,
by
/s/ Nofal S. Barbar
----------------------------------------------
Name: Nofal S. Barbar
Title: Executive Vice President and
Branch Manager
BANCA COMMERCIALE ITALIANA,
NEW YORK BRANCH,
by
/s/ Charles Dougherty
----------------------------------------------
Name: Charles Dougherty
Title: Vice President
by
/s/ J. M. Welch
----------------------------------------------
Name: J. M. Wlech
Title: Assistant Vice President
BANCA DI ROMA, NEW YORK BRANCH,
by
/s/ Ralph L. Riehle
----------------------------------------------
Name: Ralph L. Riehle
Title: First Vice President
by
/s/ Luca Balestra
----------------------------------------------
Name: Luca Balestra
Title: Assistant Vice President
<PAGE> 51
47
BANCA NAZIONALE DEL LAVORO S.P.A.,
NEW YORK BRANCH,
by
/s/ Giuliano Violetta
--------------------------------------
Name: Giuliano Violetta
Title: First Vice President
by
/s/ Giulio Giovine
--------------------------------------
Name: Giulio Giovine
Title: Vice President
<PAGE> 52
48
BANCA POPOLARE DI MILANO,
by
/s/ Anthony Franco
----------------------------------------------
Name: Anthony Franco
Title: Executive Vice President/General
Manager
by
/s/ Nicholas Cinosi
----------------------------------------------
Name: Nicholas Cinosi
Title: Vice President
BANK OF AMERICA ILLINOIS,
by
/s/ Donald J. Chin
----------------------------------------------
Name: Donald J. Chin
Title: Authorized Officer
BANK OF HAWAII,
by
/s/ John R. Landgraf
----------------------------------------------
Name: John R. Landgraf
Title: Officer
THE BANK OF NEW YORK,
by
/s/ Mary Anne Zagroba
----------------------------------------------
Name: Mary Anne Zagroba
Title: Vice President
<PAGE> 53
49
THE BANK OF NOVA SCOTIA,
by
/s/ J. Alan Edwards
----------------------------------------------
Name: J. Alan Edwards
Title: Authorized Signatory
THE BANK OF TOKYO TRUST COMPANY,
by
/s/ Paul P. Malecki
----------------------------------------------
Name: Paul P. Malecki
Title: Vice President
BANKERS TRUST COMPANY,
by
/s/ Katherine A. Judge
----------------------------------------------
Name: Katherine A. Judge
Title: Vice President
BARCLAYS BANK PLC,
by
/s/ John C. Livingston
----------------------------------------------
Name: John C. Livingston
Title: Associate Director
BAYERISCHE LANDESBANK
GIROZENTRALE, CAYMAN ISLANDS
BRANCH,
by
/s/ Wilfried Freudenberger
----------------------------------------------
Name: Wilfried Fruedenberger
Title: Executive Vice President and
General Manager
by
/s/ Peter Obermann
----------------------------------------------
Name: Peter Obermann
Title: Senior Vice President
Manager Lending Division
CIBC, INC.,
by
/s/ J. Domkowski
----------------------------------------------
Name: J. Domkowski
Title: Vice President
<PAGE> 54
50
THE CHASE MANHATTAN BANK, N.A.,
by
/s/ David B. Townsend
----------------------------------------------
Name: David B. Townsend
Title: Managing Director
CITIBANK, N.A.,
by
/s/ Elizabeth A. Palermo
----------------------------------------------
Name: Elizabeth A. Palermo
Title: Attorney-in-fact
COMERICA BANK,
by
/s/ Tamara J. Gurne
----------------------------------------------
Name: Tamara J. Gurne
Title: Account Officer
COMMERZBANK AKTIENGESELLSCHAFT,
GRAND CAYMAN BRANCH,
by
/s/ Thomas Ausfahl
----------------------------------------------
Name: Thomas Ausfahl
Title: Assistant Vice President
by
/s/ Robert Donohue
----------------------------------------------
Name: Robert Donohue
Title: Vice President
COMPAGNIE FINANCIERE DE CIC ET DE
L'UNION EUROPEENNE,
by
/s/ Eric Longuet
----------------------------------------------
Name: Eric Longuet
Title: Vice President
by
/s/ Albert M. Calo
----------------------------------------------
Name: Albert M. Calo
Title: Vice President
<PAGE> 55
51
CREDIT LYONNAIS, NEW YORK BRANCH,
by
/s/ Robert Ivosevich
----------------------------------------------
Name: Robert Ivosevich
Title: Senior Vice President
CREDIT SUISSE,
by
/s/ Robert B. Potter
----------------------------------------------
Name: Robert B. Potter
Title: Member of Senior Management
by
/s/ Chris T. Horgan
----------------------------------------------
Name: Chris T. Horgan
Title: Associate
CREDITO ITALIANO, S.P.A.,
by
/s/ Harmon P. Butler
----------------------------------------------
Name: Harmon P. Butler
Title: First Vice President and Deputy
Manager
by
/s/ Saiyed A. Abbas
----------------------------------------------
Name: Saiyed A. Abbas
Title: Assistant Vice President
THE DAI-ICHI KANGYO BANK, LTD., NEW
YORK BRANCH,
by
/s/ Timothy White
----------------------------------------------
Name: Timothy White
Title: Vice President
DEN DANSKE BANK, AKTIESELSKAB
CAYMAN ISLANDS BRANCH,
by
/s/ Bent V. Christensen
----------------------------------------------
Name: Bent V. Christensen
Title: Vice President
by
/s/ Mogens Sendergaard
----------------------------------------------
Name: Mogens Sendergaard
Title: Vice President
<PAGE> 56
52
DEUTSCHE BANK AG, NEW YORK BRANCH,
AND/OR CAYMAN ISLANDS BRANCH,
by
/s/ Hans-Josef Thiele
----------------------------------------------
Name: Hans-Josef Thiele
Title: Vice President
by
/s/ Stephan A. Wiedemann
----------------------------------------------
Name: Stephan A. Wiedemann
Title: Vice President
DG BANK DEUTSCHE
GENOSSENSCHAFTSBANK,
by
/s/ Mark K. Connelly
----------------------------------------------
Name: Mark K. Connelly
Title: Vice President
by
/s/ Karen A. Brinkman
----------------------------------------------
Name: Karen A. Brinkman
Title: Vice President
DRESDNER BANK AG, NEW YORK BRANCH,
AND GRAND CAYMAN BRANCH,
by
/s/ J. Michael Leffler
----------------------------------------------
Name: J. Michael Leffler
Title: Senior Vice President
by
/s/ Ernest C. Fung
----------------------------------------------
Name: Ernest C. Fung
Title: Vice President
FIRST INTERSTATE BANK OF CALIFORNIA,
by
/s/ William J. Baird
----------------------------------------------
Name: William J. Baird
Title: Senior Vice President
by
/s/ Judy A. Maahs
----------------------------------------------
Name: Judy A. Maahs
Title: Assistant Vice President
<PAGE> 57
53
THE FIRST NATIONAL BANK OF BOSTON,
by
/s/ Paul P. Sassieni
----------------------------------------------
Name: Paul P. Sassieni
Title: Vice President
THE FIRST NATIONAL BANK OF CHICAGO,
by
/s/ Rebecca McCloskey
----------------------------------------------
Name: Rebecca McCloskey
Title: Vice President
FIRST UNION NATIONAL BANK OF NORTH
CAROLINA,
by
/s/ Mark M. Harden
----------------------------------------------
Name: Mark M. Harden
Title: Vice President
THE FUJI BANK, LIMITED, NEW YORK
BRANCH,
by
/s/ Gina M. Kearns
----------------------------------------------
Name: Gina M. Kearns
Title: Vice President and Manager
THE INDUSTRIAL BANK OF JAPAN,
LIMITED, NEW YORK BRANCH,
by
/s/ John V. Veltri
----------------------------------------------
Name: John V. Veltri
Title: Senior Vice President
ISTITUTO BANCARIO SAN PAOLO DI
TORINO SPA,
by
/s/ Wendell Jones
----------------------------------------------
Name: Wendell Jones
Title: Vice President
by
/s/ Ettore Viazzo
----------------------------------------------
Name: Ettore Viazzo
Title: Vice President
<PAGE> 58
54
KREDIETBANK N.V.,
by
/s/ Armen Karozichian
----------------------------------------------
Name: Armen Karozichian
Title: Vice President
by
/s/ Robert Snauffer
----------------------------------------------
Name: Robert Snauffer
Title: Vice President
LLOYDS BANK PLC,
by
/s/ Paul D. Briamonte
----------------------------------------------
Name: Paul D. Briamonte
Title: Vice President
by
/s/ Stephen J. Attree
----------------------------------------------
Name: Stephen J. Attree
Title: Assistant Vice President
LTCB TRUST COMPANY,
by
/s/ Rene O. LeBlanc
----------------------------------------------
Name: Rene O. LeBlanc
Title: Senior Vice President
THE MITSUBISHI BANK, LIMITED,
by
/s/ Paula Mueller
----------------------------------------------
Name: Paula Mueller
Title: Vice President
THE MITSUBISHI TRUST AND BANKING
CORPORATION,
by
/s/ Patricia Loret de Mola
----------------------------------------------
Name: Patricia Loret de Mola
Title: Senior Vice President
<PAGE> 59
55
MORGAN GUARANTY TRUST COMPANY OF NEW
YORK,
by
/s/ George J. Stapleton
----------------------------------------------
Name: George J. Stapleton
Title: Vice President
NATIONAL WESTMINSTER BANK PLC,
NASSAU BRANCH,
by
/s/ Anne Marie Torre
----------------------------------------------
Name: Anne Marie Torre
Title: Vice President
NATIONSBANK, N.A.,
by
/s/ James T. Gilland
----------------------------------------------
Name: James T. Gilland
Title: Senior Vice President
THE NIPPON CREDIT BANK LTD.,
by
/s/ Barry S. Fein
----------------------------------------------
Name: Barry S. Fein
Title: Assistant Vice President
THE NORTHERN TRUST COMPANY,
by
/s/ Daryl M. Robicsek
----------------------------------------------
Name: Daryl M. Robicsek
Title: Vice President
PNC BANK, NATIONAL ASSOCIATION,
by
/s/ Tom Partridge
----------------------------------------------
Name: Tom Partridge
Title: Commercial Banking Officer
ROYAL BANK OF CANADA,
by
/s/ Rainer R. Kraft
----------------------------------------------
Name: Rainer R. Kraft
Title: Manager
<PAGE> 60
56
THE SAKURA BANK, LIMITED, NEW YORK
BRANCH,
by
/s/ Masahiro Nakajo
----------------------------------------------
Name: Masahiro Nakajo
Title: Senior Vice President and Manager
THE SANWA BANK LIMITED, NEW YORK
BRANCH,
by
/s/ Stephen C. Small
----------------------------------------------
Name: Stephen C. Small
Title: Vice President and Area Manager
SOCIETE GENERALE,
by
/s/ Sedare Coradin
----------------------------------------------
Name: Sedare Coradin
Title: Vice President
THE SUMITOMO BANK, LIMITED, NEW
YORK BRANCH,
by
/s/ Yoshinori Kawamura
----------------------------------------------
Name: Yoshinori Kawamura
Title: Joint General Manager
SUNTRUST BANK, ATLANTA,
by
/s/ May M. Smith
----------------------------------------------
Name: May M. Smith
Title: Banking Officer
by
/s/Craig W. Farnsworth
----------------------------------------------
Name: Craig W. Farnsworth
Title: Vice President
<PAGE> 61
57
SWISS BANK CORPORATION, NEW YORK
BRANCH,
by
/s/ Susan N. Isquith
----------------------------------------------
Name: Susan N. Isquith
Title: Director
by
/s/ Edward J. McDonnell III
----------------------------------------------
Name: Edward J. McDonnell III
Title: Associate Director
THE TOKAI BANK, LIMITED,
by
/s/ Stuart Schulman
----------------------------------------------
Name: Stuart Schulman
Title: Senior Vice President
TORONTO DOMINION (NEW YORK),
by
/s/ Randall Bingham
----------------------------------------------
Name: Randall Bingham
Title: Managing Director
UNION BANK OF SWITZERLAND, NEW
YORK BRANCH,
by
/s/ Robert W. Casey, Jr.
----------------------------------------------
Name: Robert W. Casey, Jr.
Title: Vice President
by
/s/ Daniel R. Strickford
----------------------------------------------
Name: Daniel R. Strickford
Title: Assistant Treasurer
<PAGE> 62
58
WESTDEUTSCHE LANDESBANK
GIROZENTRALE, NEW YORK AND CAYMAN
ISLANDS BRANCHES,
by
/s/ A. Kumbier
----------------------------------------------
Name: A. Kumbier
Title: Managing Director
by
/s/ M.P.M. Ransley
----------------------------------------------
Name: M.P.M. Ransley
Title: Associate
THE YASUDA TRUST AND BANKING
COMPANY, LIMITED, NEW YORK BRANCH,
by
/s/ Rohn M. Laudenschlager
----------------------------------------------
Name: Rohn M. Laudenschlager
Title: Senior Vice President
<PAGE> 63
EXHIBIT A-1
FORM OF COMPETITIVE BID REQUEST
Chemical Bank, as Administrative Agent
for the Lenders referred to below,
270 Park Avenue
New York, NY 10017
Attention: [ ]
Dear Ladies and Gentlemen:
The undersigned, _______________ (the "Borrower"), refers to
the 364-Day Competitive Advance and Revolving Credit Facility Agreement dated
as of November 10, 1995 (as it may hereafter be amended, modified, extended or
restated from time to time, the "364-Day Agreement"), among the Borrower, the
Borrowing Subsidiaries parties thereto, the Lenders parties thereto and
Chemical Bank, as Administrative Agent. Capitalized terms used herein and not
otherwise defined herein shall have the meanings assigned to such terms in the
364-Day Agreement. The Borrower hereby gives you notice pursuant to Section
2.03(a) of the 364-Day Agreement that it requests a Competitive Borrowing under
the 364-Day Agreement, and in that connection sets forth below the terms on
which such Competitive Borrowing is requested to be made:
(A) Date of Competitive Borrowing
(which is a Business Day) __________________
(B) Principal amount of
Competitive Borrowing 1/ __________________
(C) Interest rate basis 2/ __________________
(D) Interest Period and the
last day thereof 3/ __________________
Upon acceptance of any or all of the Loans offered by the Lenders in
response to this request, the Borrower shall be deemed to have represented and
warranted that the conditions to lending specified in Section 4.01(b) and (c)
of the 364-Day Agreement have been satisfied.
Very truly yours,
[NAME OF BORROWER],
by
__________________________
Name:
Title: [Financial Officer]
____________________
1/ Not less than $10,000,000 (and in integral multiples of $5,000,000) or
greater than the Total Commitment then available.
2/ Eurodollar Competitive Loan or Fixed Rate Loan.
3/ Which shall be subject to the definition of Interest Period and end not
later than the Maturity Date.
<PAGE> 64
EXHIBIT A-2
FORM OF NOTICE OF COMPETITIVE BID REQUEST
[Name of Lender]
[Address]
[Date]
Attention: [ ]
Dear Ladies and Gentlemen:
Reference is made to the 364-Day Competitive Advance and Revolving
Credit Facility Agreement dated as of November 10, 1995 (as it may hereafter be
amended, modified, extended or restated from time to time, the "364-Day
Agreement"), among ITT Corporation [,__________] (the "Borrower"), the
Borrowing Subsidiaries parties thereto, the Lenders parties thereto and
Chemical Bank, as Administrative Agent. Capitalized terms used herein and not
otherwise defined herein shall have the meanings assigned to such terms in the
364-Day Agreement. The Borrower made a Competitive Bid Request on __________,
19[ ], pursuant to Section 2.03(a) of the 364- Day Agreement, and in that
connection you are invited to submit a Competitive Bid by [Date]/[Time]. 1/
Your Competitive Bid must comply with Section 2.03(b) of the 364-Day Agreement
and the terms set forth below on which the Competitive Bid Request was made:
(A) Date of Competitive Borrowing _________________
(B) Principal amount of
Competitive Borrowing _________________
(C) Interest rate basis _________________
(D) Interest Period and the
last day thereof _________________
Very truly yours,
CHEMICAL BANK,
as Administrative Agent,
by
__________________________
Name:
Title:
____________________
1/ The Competitive Bid must be received by the Administrative Agent (i) in
the case of Eurodollar Competitive Loans, not later than 10:00 a.m., New York
City time, four Business Days before a proposed Competitive Borrowing, and (ii)
in the case of Fixed Rate Loans, not later than 10:00 a.m., New York City time,
one Business Day before a proposed Competitive Borrowing.
<PAGE> 65
EXHIBIT A-3
FORM OF COMPETITIVE BID
Chemical Bank, as Administrative Agent
for the Lenders referred to below,
270 Park Avenue
New York, N.Y. 10017
[Date]
Attention: [ ]
Dear Ladies and Gentlemen:
The undersigned, [Name of Lender], refers to the 364-Day Competitive
Advance and Revolving Credit Facility Agreement dated as of November 10, 1995
(as it may be amended, modified, extended or restated from time to time, the
"364-Day Agreement"), among ITT Corporation [,__________] (the "Borrower"), the
Borrowing Subsidiaries parties thereto, the Lenders named therein and Chemical
Bank, as Administrative Agent. Capitalized terms used herein and not otherwise
defined herein shall have the meanings assigned to such terms in the 364-Day
Agreement. The undersigned hereby makes a Competitive Bid pursuant to Section
2.03(b) of the 364-Day Agreement, in response to the Competitive Bid Request
made by the Borrower on ___________, 19[ ], and in that connection sets forth
below the terms on which such Competitive Bid is made:
(A) Principal Amount 1/ _________________
(B) Competitive Bid Rate 2/ _________________
(C) Interest Period and last
day thereof _________________
The undersigned hereby confirms that it is prepared, subject to the
conditions set forth in the 364-Day Agreement, to extend credit to the Borrower
upon acceptance by the Borrower of this bid in accordance with Section 2.03(d)
of the 364-Day Agreement.
Very truly yours,
[NAME OF LENDER],
by
_______________________________________
Name:
Title:
____________________
1/ Not less than $5,000,000 or greater than the requested Competitive
Borrowing and in integral multiples of $1,000,000. Multiple bids will be
accepted by the Administrative Agent.
2/ i.e., LIBO Rate + or - __%, in the case of Eurodollar Competitive Loans
or ___%, in the case of Fixed Rate Loans.
<PAGE> 66
EXHIBIT A-4
FORM OF COMPETITIVE BID ACCEPT/REJECT LETTER
[Date]
Chemical Bank, as Administrative Agent
for the Lenders referred to below
270 Park Avenue
New York, N.Y. 10017
Attention: [ ]
Dear Ladies and Gentlemen:
The undersigned, _______________ (the "Borrower"), refers to the
364-Day Competitive Advance and Revolving Credit Facility Agreement dated as of
November 10, 1995 (as it may be amended, modified, extended or restated from
time to time, the "364-Day Agreement"), among the Borrower, the Borrowing
Subsidiaries parties thereto, the Lenders parties thereto and Chemical Bank, as
Administrative Agent for the Lenders.
In accordance with Section 2.03(c) of the 364-Day Agreement, we have
received a summary of bids in connection with our Competitive Bid Request dated
_____________, and in accordance with Section 2.03(d) of the 364-Day Agreement,
we hereby accept the following bids for maturity on [date]:
<TABLE>
<CAPTION>
Principal Amount Fixed Rate/Margin Lender
- - ---------------- ----------------- ------
<S> <C>
$ [%]/[+/-. %]
$
</TABLE>
We hereby reject the following bids:
<TABLE>
<CAPTION>
Principal Amount Fixed Rate/Margin Lender
- - ---------------- ----------------- ------
<S> <C>
$ [%]/[+/-. %]
$
</TABLE>
The $__________ should be deposited in Chemical Bank account number [
] on [date].
Very truly yours,
[NAME OF BORROWER],
by
_______________________________________
Name:
Title:
<PAGE> 67
EXHIBIT A-5
FORM OF STANDBY BORROWING REQUEST
Chemical Bank, as Administrative Agent
for the Lenders referred to below,
270 Park Avenue
New York, N.Y. 10017
[Date]
Attention: [ ]
Dear Ladies and Gentlemen:
The undersigned, _______________ (the "Borrower"), refers to the
364-Day Competitive Advance and Revolving Credit Facility Agreement dated as of
November 10, 1995 (as it may be amended, modified, extended or restated from
time to time, the "364-Day Agreement"), among the Borrower, the Borrowing
Subsidiaries parties thereto, the Lenders parties thereto and Chemical Bank, as
Administrative Agent. Capitalized terms used herein and not otherwise defined
herein shall have the meanings assigned to such terms in the 364-Day Agreement.
The Borrower hereby gives you notice pursuant to Section 2.04 of the 364-Day
Agreement that it requests a Standby Borrowing under the 364-Day Agreement, and
in that connection sets forth below the terms on which such Standby Borrowing
is requested to be made:
(A) Date of Standby Borrowing
(which is a Business Day) __________________
(B) Principal amount of
Standby Borrowing 1/ __________________
(C) Interest rate basis 2/ __________________
(D) Interest Period and the
last day thereof 3/ __________________
Upon acceptance of any or all of the Loans made by the Lenders in
response to this request, the Borrower shall be deemed to have represented and
warranted that the conditions to lending specified in Section 4.01(b) and (c)
of the 364-Day Agreement have been satisfied.
Very truly yours,
[NAME OF BORROWER],
by
__________________________
Name:
Title: [Financial Officer]
____________________
1/ Not less than $20,000,000 (and in integral multiples of $5,000,000) or
greater than the Total Commitment then available.
2/ Eurodollar Standby Loan or Fixed Rate Loan.
3/ Which shall be subject to the definition of Interest Period and end not
later than the Maturity Date.
<PAGE> 68
EXHIBIT B
[CHEMICAL LOGO]
CHEMICAL BANK
140 East 45th Street
New York, NY 10017-3162
212/622-0001
Fax 212/622-0002
Telex 353006 ABSC NYK
ITT CORPORATION
ADMINISTRATIVE QUESTIONNAIRE
Please accurately complete the following information and return via FAX to the
attention of Janet Belden at Chemical Bank as soon as possible:
FAX NUMBER: 212-622-0122
LEGAL NAME TO APPEAR IN DOCUMENTATION:
_______________________________________________________________________________
GENERAL INFORMATION - DOMESTIC LENDING OFFICE:
Institution Name: ____________________________________________________________
Street Address: __________________________________________________________
City, State, Zip Code: _______________________________________________________
GENERAL INFORMATION - EURODOLLAR LENDING OFFICE:
Institution Name: __________________________________________________________
Street Address: _________________________________________________________
City, State, Zip Code: _______________________________________________________
CONTACTS/NOTIFICATION METHODS:
CREDIT CONTACTS:
Primary contact: ______________________________________________________________
Street Address: ______________________________________________________________
City, State, Zip Code: _______________________________________________________
Phone Number: ______________________________________________________________
FAX Number: ______________________________________________________________
Backup Contact: ______________________________________________________________
Street Address: ______________________________________________________________
City, State, Zip Code: _______________________________________________________
Phone Number: ______________________________________________________________
FAX Number: ______________________________________________________________
<PAGE> 69
EXHIBIT B
TAX WITHHOLDING:
Non Resident Alien __________ Y* _________N
* Form 4224 Enclosed
Tax ID Number _______________________________
CONTACTS/NOTIFICATION METHODS:
ADMINISTRATIVE CONTACTS - BORROWINGS, PAYDOWNS, INTEREST, FEES, ETC.
Contact: _____________________________________________________________________
Street Address: ______________________________________________________________
City, State, Zip Code: ________________________________________________________
Phone Number: _________________________________________________________________
FAX Number: ___________________________________________________________________
BID LOAN NOTIFICATION:
Contact: _____________________________________________________________________
Street Address: ______________________________________________________________
City, State, Zip Code: ________________________________________________________
Phone Number: _________________________________________________________________
FAX Number: ___________________________________________________________________
PAYMENT INSTRUCTIONS:
Name of Bank where funds are to be transferred:
_______________________________________________________________________________
Routing Transit/ABA number of Bank where funds are to be transferred:
_______________________________________________________________________________
Name of Account, if applicable:
_______________________________________________________________________________
Account Number: ______________________________________________________________
Additional Information: _______________________________________________________
MAILINGS:
Please specified who should receive financial information:
Name: _________________________________________________________________________
Street Address: _______________________________________________________________
City, State, Zip Code: ________________________________________________________
It is very important that all of the above information is accurately filled in
and returned promptly. If there is someone other than yourself who should
receive this questionnaire, please notify us of their name and FAX number and
we will FAX them a copy of the questionnaire. If you have any questions,
please call me on 212-622-0011.
<PAGE> 70
EXHIBIT C
[FORM OF]
ASSIGNMENT AND ACCEPTANCE
Dated: _________, 19__
Reference is made to the 364-Day Competitive Advance and
Revolving Credit Facility Agreement dated as of November 10, 1995 (the "364-Day
Agreement"), among ITT Corporation (the "Company"), the Borrowing Subsidiaries
parties thereto, the Lenders parties thereto (the "Lenders") and Chemical Bank,
as Administrative Agent for the Lenders. Terms defined in the 364-Day
Agreement are used herein with the same meanings.
1. The Assignor hereby sells and assigns, without recourse,
to the Assignee, and the Assignee hereby purchases and assumes, without
recourse, from the Assignor, effective as of the Effective Date set forth
below, the interests set forth below (the "Assigned Interest") in the
Assignor's rights and obligations under the 364-Day Agreement, including,
without limitation, the interests set forth below in the Commitment of the
Assignor on the Effective Date and the Competitive Loans and Standby Loans
owing to the Assignor which are outstanding on the Effective Date. Each of the
Assignor and the Assignee hereby makes and agrees to be bound by all the
representations, warranties and agreements set forth in Section 9.04 of the
364-Day Agreement, a copy of which has been received by each such party. From
and after the Effective Date, (i) the Assignee shall be a party to and be bound
by the provisions of the 364-Day Agreement and, to the extent of the interests
assigned by this Assignment and Acceptance, have the rights and obligations of
a Lender thereunder and (ii) the Assignor shall, to the extent of the interests
assigned by this Assignment and Acceptance, relinquish its rights and be
released from its obligations under the 364-Day Agreement.
2. This Assignment and Acceptance is being delivered to the
Administrative Agent together with (i) if the Assignee is organized under the
laws of a jurisdiction outside the United States, the forms specified in
Section 2.19(g) of the 364-Day Agreement, duly completed and executed by such
Assignee, (ii) if the Assignee is not already a Lender under the 364-Day
Agreement, an Administrative Questionnaire in the form of Exhibit B to the
364-Day Agreement and (iii) a processing and recordation fee of $3,000.
3. This Assignment and Acceptance shall be governed by and
construed in accordance with the laws of the State of New York.
Date of Assignment:
Legal Name of Assignor:
Legal Name of Assignee:
Assignee's Address for Notices:
<PAGE> 71
Effective Date of Assignment
(may not be fewer than 5 Business
Days after the Date of Assignment):
<TABLE>
<CAPTION>
Percentage Assigned of
Facility/Commitment (set forth,
to at least 8 decimals, as a
Principal Amount Assigned (and percentage of the Facility and
identifying information as to the aggregate Commitments of
Facility individual Competitive Loans) all Lenders thereunder)
-------- ----------------------------- -----------------------
<S> <C> <C>
Commitment Assigned:
$____________ ___________ %
Standby Loans: $____________ ___________ %
Competitive Loans: $____________ ___________ %
</TABLE>
The terms set forth and on the reverse side Accepted:
hereof are hereby agreed to:
ITT CORPORATION,
________________________________, as by: ___________________________
Assignor, Name:
Title:
by: ____________________________
Name:
Title:
________________________________,
as Assignee,
by: ____________________________
Name:
Title:
<PAGE> 72
EXHIBIT D
[FORM OF]
OPINION OF COUNSEL FOR
ITT CORPORATION 1/
1. ITT Corporation (i) is a corporation duly organized,
validly existing and in good standing under the laws of the State of Nevada
(ii) has all requisite power and authority to own its property and assets and
to carry on its business as now conducted, (iii) is qualified to do business in
every jurisdiction within the United States where such qualification is
required, except where the failure so to qualify would not result in a Material
Adverse Effect on ITT Corporation, and (iv) has all requisite corporate power
and authority to execute, deliver and perform its obligations under the
Agreement and to borrow funds thereunder.
2. The execution, delivery and performance by ITT Corporation
of the Agreement and the borrowings of ITT Corporation thereunder
(collectively, the "Transactions") (i) have been duly authorized by all
requisite corporate action and (ii) will not (a) violate (1) any provision of
law, statute, rule or regulation (including without limitation, the Margin
Regulations), or of the certificate of incorporation or other constitutive
documents or by-laws of ITT Corporation, (2) any order of any governmental
authority or (3) any provision of any indenture, agreement or other instrument
to which ITT Corporation is a party or by which it or its property is or may be
bound, (b) be in conflict with, result in a breach of or constitute (alone or
with notice or lapse of time or both) a default under any such indenture,
agreement or other instrument or (c) result in the creation or imposition of
any lien upon any property or assets of ITT Corporation.
3. The Agreement has been duly executed and delivered by ITT
Corporation and constitutes a legal, valid and binding obligation of ITT
Corporation enforceable against ITT Corporation in accordance with its terms,
subject as to the enforceability of rights and remedies to any applicable
bankruptcy, reorganization, insolvency, moratorium or other similar laws of
general application relating to or affecting the enforcement of creditors'
rights from time to time in effect.
4. No action, consent or approval of, registration or filing
with, or any other action by, any government authority is or will be required
in connection with the Transactions, except such as have been made or obtained
and are in full force and effect.
5. Neither ITT Corporation nor any of its subsidiaries is (a)
except as set forth in the next sentence, an "investment company" as defined
in, or subject to regulation under, the Investment Company Act of 1940 (the
"1940 Act") or (b) a "holding company" as defined in, or subject to regulation
under, the Public Utility Holding Company Act of 1935.
____________________
1/ Capitalized terms used but not otherwise defined herein shall have the
meanings assigned to such terms in the 364-Day Competitive Advance and Revolving
Credit Facility Agreement (the Agreement ) dated as of November 10, 1995, among
ITT Corporation, the lenders listed in Schedule 2.01 thereto, and Chemical Bank,
as Administrative Agent.
<PAGE> 73
EXHIBIT E to the
Credit Agreement
BORROWING SUBSIDIARY AGREEMENT dated as of
[ ], among ITT CORPORATION, a Nevada corporation
(the "Company"), [Name of Subsidiary], a [ ]
corporation ("the Subsidiary"), and CHEMICAL BANK, as
administrative agent (the "Administrative Agent") for
the lenders (the "Lenders") party to the 364-Day
Competitive Advance and Revolving Credit Facility
Agreement dated as of November 10, 1995, as amended
(the "Agreement"), among the Company, the
Administrative Agent and the Lenders.
Under the Agreement, the Lenders have agreed, upon the terms
and subject to the conditions therein set forth, to make competitive advance
and revolving credit loans and to issue Letters of Credit to the Company and to
Subsidiaries (as defined in the Agreement) of the Company which execute and
deliver to the Administrative Agent Borrowing Subsidiary Agreements in the form
of this Borrowing Subsidiary Agreement. The Company represents that the
Subsidiary is a subsidiary (as so defined) of the Company and that the
guarantee of the Company contained in Article VII of the Agreement applies to
the obligations of the Subsidiary. In consideration of being permitted to
borrow or have Letters of Credit issued under the Agreement upon the terms and
subject to the conditions set forth therein, the Subsidiary agrees that from
and after the date of this Borrowing Subsidiary Agreement it will be, and will
be liable for the observance and performance of all the obligations of, a
Borrowing Subsidiary under the Agreement, as the same may be amended from time
to time, to the same extent as if it had been one of the original parties to
the Agreement and that it will furnish to the Administration Agent and the
Lenders copies of its financial statements on an annual basis.
IN WITNESS WHEREOF, the Company and the Subsidiary have caused
this Borrowing Subsidiary Agreement to be duly executed by their authorized
officers as of the date first appearing above.
ITT CORPORATION,
by ______________________
Name:
Title:
[NAME OF SUBSIDIARY],
by ______________________
Name:
Title:
Accepted as of the date
first appearing above:
CHEMICAL BANK, as Administrative
Agent,
by ______________________
Name:
Title:
<PAGE> 74
Exhibit F
ITT Corporation
1330 Avenue of the Americas
New York, NY 10019
November ___, 1995
Chemical Bank, as Administrative Agent
for the Lenders
270 Park Avenue
New York, NY 10019
Attention: Elisabeth Hughes
Dear Sirs:
Reference is made to the 364-Day Competitive Advance and
Revolving Credit Facility Agreement and the Five-Year Competitive Advance and
Revolving Credit Facility Agreement (collectively, the "Credit Agreements"),
each among ITT Corporation, a Nevada corporation ("New ITT"), the lenders
listed in Schedules 2.01 thereto (the "Lenders") and Chemical Bank, as
administrative agent for the Lenders (the "Administrative Agent").
1. As contemplated by Section 9.16 of the 364-Day Credit
Agreement, and Section 9.17 of the Five-Year Credit Agreement, ITT Corporation,
a Delaware corporation ("Old ITT"), and the Administrative Agent, acting on
behalf of the Lenders, hereby agree that the Credit Agreements shall be
executed on the date hereof and that, except as otherwise provided herein, Old
ITT will have all rights and obligations of the "Company" referred to therein.
2. Old ITT agrees that upon the completion of the
Distribution, it shall cause New ITT to execute, and New ITT shall succeed to
the rights and obligations of Old ITT under, the Credit Agreements.
3. Old ITT further agrees that prior to each of (a) the
successions referred to in paragraph 2 above, (b) the termination and
cancellation of the Existing Credit Facilities (as defined in the Credit
Agreements), (c) the completion of the Distribution and (d) the satisfaction of
the other conditions set forth in the Credit Agreements, Old ITT shall not make
any Borrowing or request the issuance of any Letter of Credit under the Credit
Agreements.
This letter agreement shall be deemed to be a part of each of
the Credit Agreements and shall have the same effect as if set forth in full
therein. The failure of the
<PAGE> 75
Borrower to comply with the terms of this letter agreement shall constitute an
Event of Default under the Credit Agreements.
Very truly yours,
ITT CORPORATION
by
__________________________
Name:
Title:
Accepted and agreed to
as of the date first
written above:
CHEMICAL BANK, as Administrative Agent
by
______________________
Name:
Title:
<PAGE> 76
SCHEDULE 2.01
<TABLE>
<CAPTION>
Contact Person
--------------
Name and Address of Lender and Telecopy Number Commitment
-------------------------- ------------------- ----------
<S> <C> <C>
Chemical Bank Ms. Nancy Mistretta $ 51,666,666.86
270 Park Avenue (212) 270-6041
New York, NY 10017
ABN AMRO Bank, N.V. Ms. Margaret Hannahoe $ 13,333,333.33
500 Park Avenue (212) 832-7129
New York, NY 10022
Arab Bank Plc Mr. Peter Boyadjian $ 8,333,333.33
520 Madison Avenue (212) 593-4632
New York, NY 10022
Banca Commerciale Italiana Ms. Elizabeth Cronin $ 13,333,333.33
New York Branch (212) 809-2124
1 William Street
New York, NY 10004
Banca di Roma S.p.A. Mr. Ralph Riehle $ 8,333,333.33
34 East 51st Street, 7th Floor (212) 407-1118
New York, NY 10005
Banca Nazionale del Lavoro Mr. Giulio Giovine $ 13,333,333.33
New York Branch (212) 765-2978
25 W. 51st Street Rockefeller Plaza
New York, NY 10019
Banca Popolare di Milano Mr. Nicholas Cinosi $ 8,333,333.33
375 Park Avenue (212) 586-3537
New York, NY 10152
Bank of America Illinois Ms. Bonnie Ptaszkowski $ 23,333,333.33
USCG - Account Administration (312) 974-9626
200 W. Jackson Street, 9th Floor
Chicago, IL 60679
with copy to:
Bank of America Mr. Donald Chin
335 Madison Avenue (212) 503-7771
New York, NY 10017
Bank of Hawaii Mr. Scott G. Balke $ 8,333,333.33
111 South King Street (808) 537-8301
P.O. Box 2900
Honolulu, HI 96813
The Bank of New York Ms. Mary Anne Zagroba $ 18,333,333.33
One Wall Street (212) 635-1480
New York, NY 10286
</TABLE>
<PAGE> 77
3
<TABLE>
<CAPTION>
Contact Person
--------------
Name and Address of Lender and Telecopy Number Commitment
-------------------------- ------------------- ----------
<S> <C> <C>
The Bank of Nova Scotia Mr. Philip Adsetts $ 23,333,333.33
One Liberty Plaza (212) 225-5090/91
New York, NY 10006
The Bank of Tokyo Trust Company Mr. Paul P. Malecki $ 23,333,333.33
1251 Avenue of the Americas (212) 782-6440
12th Floor
New York, NY 10116-3138
Bankers Trust Company Ms. Katherine Judge $ 23,333,333.33
130 Liberty Street (212) 250-4969
New York, NY 10006
Barclays Bank PLC Ms. Afsaneh Naimollah $ 23,333,333.33
222 Broadway, 11th Floor (212) 412-7580
New York, NY 10038
Bayerische Landesbank Girozentrale Ms. Joanne Cicino $ 13,333,333.33
111 East 50th Street (212) 310-9868
New York, NY 10022
CIBC, Inc. Ms. Judith Domkowski $ 18,333,333.33
425 Lexington Avenue (212) 856-3991
New York, NY 10017
The Chase Manhattan Bank, N.A. Mr. Edward F. McNulty $ 23,333,333.33
One Chase Manhattan Plaza (212) 552-7879
New York, NY 10081
Citibank, N.A. Ms. Elizabeth Palermo $ 23,333,333.33
399 Park Avenue (212) 826-2375
New York, NY 10043
Comerica Bank Ms. Tammy Gurne $ 13,333,333.33
500 Woodward Avenue (313) 222-7806
Detroit, MI 48226-3280
Commerzbank AG Mr. Thomas Ausfahl $ 13,333,333.33
2 World Financial Center (212) 266-7235
New York, NY 10281
Compagnie Financiere de CIC et de Ms. Martha Skidmore $ 8,333,333.33
l'Union Europeenne (212) 715-4535
520 Madison Avenue
37th Floor
New York, NY 10022
</TABLE>
<PAGE> 78
4
<TABLE>
<CAPTION>
Contact Person
--------------
Name and Address of Lender and Telecopy Number Commitment
-------------------------- ------------------- ----------
<S> <C> <C>
Credit Lyonnais Mr. Michael Moretti $ 23,333,333.33
1301 Avenue of the Americas (212) 459-3179
18th Floor
New York, NY 10019
Credit Suisse Ms. Carole Lustig $ 23,333,333.33
Tower 49 (212) 238-5439
12 East 49th Street
New York, NY 10017
Credito Italiano Mr. Harmon Butler $ 8,333,333.33
375 Park Avenue (212) 546-9675
New York, NY 10152
The Dai-Ichi Kangyo Bank, Ltd. Mr. Timothy White $ 18,333,333.33
One World Trade Center (212) 524-0579
Suite 4911
New York, NY 10048
Den Danske Bank Mr. Mogens Sondergaard $ 8,333,333.33
280 Park Avenue (212) 370-9239
New York, NY 10017
Deutsche Bank AG Mr. Rolf-Peter Mikolayczyk $ 23,333,333.33
New York Branch (212) 474-8212
31 West 52nd Street
New York, NY 10019
DG Bank Deutsche Mr. Mark Connelly $ 13,333,333.33
Genossenschaftsbank (212) 745-1556
609 Fifth Avenue
8th Floor
New York, NY 10017
Dresdner Bank AG Mr. Michael Leffler $ 23,333,333.33
New York Branch (212) 574-0130
75 Wall Street
New York, NY 10005-2889
First Interstate Bank of California Mr. Roy Roberts $ 13,333,333.33
885 Third Avenue (212) 593-5241
New York, NY 10022
The First National Bank of Boston Ms. Cindy Chen $ 13,333,333.33
100 Federal Street (617) 434-0601
01-06-12
Boston, MA 02106
</TABLE>
<PAGE> 79
5
<TABLE>
<CAPTION>
Contact Person
--------------
Name and Address of Lender and Telecopy Number Commitment
-------------------------- ------------------- ----------
<S> <C> <C>
The First National Bank of Chicago Mr. Stephen Liggins $ 23,333,333.33
153 West 51st Street (212) 373-1388
New York, NY 10019
First Union National Bank of North Mr. Dave Johnson $ 8,333,333.33
Carolina (704) 374-2802
One First Union Center
Charlotte, NC 28288
The Fuji Bank, Limited Mr. Roy Tanfield $ 23,333,333.33
Two World Trade Center 79th Floor (212) 912-0516
New York, NY 10048
The Industrial Bank of Japan, Ltd., Mr. John Veltri $ 18,333,333.33
New York Branch (212) 856-9450
245 Park Avenue
23rd Floor
New York, NY 10167-0037
Istituto Bancario San Paolo Bank di Mr. Wendell Jones $ 8,333,333.33
Torino S.p.A. (212) 599-5303
245 Park Avenue
New York, NY 10167
Kredietbank N.V. Ms. Jennifer Pariente $ 8,333,333.33
125 West 55th Street (212) 956-5580
New York, NY 10019
Lloyds Bank Plc Mr. Theodore Walser $ 18,333,333.33
199 Water Street (212) 607-4999
9th Floor
New York, NY 10038
LTCB Trust Company Mr. Yoshi Nakagawa $ 8,333,333.33
165 Broadway (212) 608-2371
New York, NY 10006
The Mitsubishi Bank Mr. J. Bruce Meredith $ 18,333,333.33
New York Branch (212) 667-3562
225 Liberty Street
New York, NY 10281-1059
The Mitsubishi Trust and Banking Mr. Randolph Medrano $ 13,333,333.33
Corporation (212) 593-4691
520 Madison Avenue
New York, NY 10022
</TABLE>
<PAGE> 80
6
<TABLE>
<CAPTION>
Contact Person
--------------
Name and Address of Lender and Telecopy Number Commitment
-------------------------- ------------------- ----------
<S> <C> <C>
Morgan Guaranty Trust Company of Mr. Stephen J. Kenneally $ 23,333,333.33
New York (212) 648-5018
60 Wall Street
New York, NY 10260-0060
National Westminster Bank Plc Mr. Jordan Fragiacorno $ 18,333,333.33
175 Water Street (212) 602-4256
New York, NY 10038-4924
Nationsbank, N.A. Mr. James Gilland $ 23,333,333.33
767 Fifth Avenue (212) 593-1083
23rd Floor
New York, NY 10153
Nippon Credit Bank Mr. Jeff Pasquale $ 8,333,333.33
245 Park Avenue (212) 490-3895
New York, NY 10167
The Northern Trust Company Mr. Daryl M. Robicsek $ 8,333,333.33
50 South LaSalle Street (312) 444-3508
Chicago, IL 60675
PNC Bank, National Association Mr. Tom Partridge $ 8,333,333.33
5th and Wood Streets (212) 557-5461
Pittsburgh, PA 15265
Royal Bank of Canada Mr. John Crawford $ 23,333,333.33
One Financial Square (212) 428-6459
New York, NY 10005-3531
The Sakura Bank, Limited, Mr. Pierre Vautravers $ 13,333,333.33
New York Branch (212) 888-7651
277 Park Avenue
New York, NY 10172
The Sanwa Bank, Ltd. Mr. Stephen C. Small $ 23,333,333.33
New York Branch (212) 754-1304
55 East 52nd Street
New York, NY 10055
Societe Generale Ms. Sedare Coradin $ 23,333,333.33
1221 Avenue of the Americas (212) 278-7430
New York, NY 10020
The Sumitomo Bank, Limited Mr. Edward McColly $ 23,333,333.33
New York Branch (212) 224-5188
277 Park Avenue
New York, NY 10172
</TABLE>
<PAGE> 81
7
<TABLE>
<CAPTION>
Contact Person
--------------
Name and Address of Lender and Telecopy Number Commitment
-------------------------- ------------------- ----------
<S> <C> <C>
SunTrust Bank, Atlanta Ms. May Smith $ 13,333,333.33
711 Fifth Avenue (212) 371-9386
5th Floor
New York, NY 10022
Swiss Bank Corporation Ms. Susan Isquith $ 18,333,333.33
New York Branch (212) 574-3228
222 Broadway
New York, NY 10038
The Tokai Bank, Limited Mr. Stuart Schulman $ 13,333,333.33
55 East 52nd Street (212) 754-2170
12th Floor
New York, NY 10022
The Toronto-Dominion Bank Mr. Reginald Waylen $ 18,333,333.33
31 West 52nd Street (212) 262-1926
New York, NY 10019
Union Bank of Switzerland Mr. Daniel H. Perron $ 23,333,333.33
299 Park Avenue (212) 821-3383
New York, NY 10171
Westdeutsche Landesbank Mr. Ralph White $ 13,333,333.33
Girozentrale (212) 852-8307
1211 Avenue of the Americas
New York, NY 10036
The Yasuda Trust and Banking Co., Mr. Rohn Laudenschlager $ 13,333,333.33
Ltd. (212) 373-5796
New York Branch
666 Fifth Avenue
Suite 801
New York, NY 10103
_________________
TOTAL COMMITMENT $1,000,000,000.00
</TABLE>
<PAGE> 82
SCHEDULE 3.13
ITT CORPORATION
SUMMARY OF SIGNIFICANT CAPITALIZATION FORECAST ASSUMPTIONS
1. The use of $275 million in cash balances at various subsidiaries of
ITT Destinations, Inc. to repay existing short-term borrowings.
2. Net capital expenditures totaling $106 million in the last three
months of 1995 ($57 million was incurred in the comparable 1994
period).
3. Receipt of a $100 million contribution from ITT Industries, Inc.
4. The results of operation between the date of the Distribution and the
date projected in the forecasted capitalization table.
5. Such additional modifications as outlined in the Form 8-K filed on
November 7, 1995 by Old ITT with the Securities and Exchange
Commission.
<PAGE> 83
Schedule 5.10
ITT Corporation
Liens on Principal Properties
Sheraton Boston
Liens in favor of Citibank. N.A. to secure approximately $192.6
million of outstanding indebtedness.
Sheraton Buenos Aires
Liens in favor of Overseas Private Investment Corp. to secure
approximately $34 million of indebtedness.
Park Grande Sydney
Liens in favor of Commonwealth Bank of Australia to secure
approximately $200 million of indebtedness.
<PAGE> 1
33
Borrowing Amounts and Local Currency Lender Maximum Borrowing Amounts pursuant
to this Section 2.22(c) shall be effective until the amount thereof shall be
recalculated by the Administrative Agent on the next succeeding Reset Date or
Borrowing Date, and shall not be deemed to reduce the stated amount of any
commitment of any Local Currency Lender in respect of any Local Currency
Addendum.
(d) If, on any Reset Date or Borrowing Date (after giving
effect to (i) any Loans to be made or repaid on such date, (ii) any amendment,
supplement or other modification to any Local Currency Addendum effective on
such date of which the Administrative Agent has received notice and (iii) any
reduction in the Local Currency Facility Maximum Borrowing Amounts pursuant to
Section 2.22(c) effective on such date), the sum of (A) the aggregate
outstanding Dollar Standby Extensions of Credit of all the Lenders, (B) the
aggregate L/C Exposures and (C) the aggregate Competitive Loan Exposures exceed
the Dollar Facility Overage (the amount of such excess being called the "Dollar
Facility Excess"), then the Local Currency Facility Maximum Borrowing Amount
under each Local Currency Addendum shall be reduced on such date by an amount
equal to the product of such Dollar Facility Excess times a fraction the
numerator of which shall equal the Local Currency Facility Maximum Borrowing
Amount under such Local Currency Addendum and the denominator of which shall
equal the aggregate of the Local Currency Facility Maximum Borrowing Amounts
with respect to all Local Currency Addenda. Each such reduction in the Local
Currency Facility Maximum Borrowing Amount under a Local Currency Addendum
shall in turn reduce the respective Local Currency Lender Maximum Borrowing
Amounts of each Local Currency Lender party to such Local Currency Addendum,
pro rata on the basis of the respective Local Currency Lender Maximum Borrowing
Amounts of such Local Currency Lenders immediately prior to such reduction.
Reductions in Local Currency Facility Maximum Borrowing Amounts and Local
Currency Lender Maximum Borrowing Amounts pursuant to this Section 2.22(d)
shall be effective until the amount thereof shall be recalculated by the
Administrative Agent on the next succeeding Reset Date or Borrowing Date, and
shall not be deemed to reduce the stated amount of any commitment of any Local
Currency Lender in respect of any Local Currency Addendum.
(e) If, on any Reset Date, the Dollar Equivalent of the Local
Currency Loans outstanding under a Local Currency Addendum exceeds 105% of the
Local Currency Facility Maximum Borrowing Amount with respect thereto (after
giving effect to any reductions therein effected pursuant to Section 2.22(c) or
(d) on such date), then the relevant Borrower shall, within three Business Days
after notice thereof from the Administrative Agent, (i) increase the Local
Currency Facility Maximum Borrowing Amount with respect to such Local Currency
Facility in accordance with Section 2.21(e) and/or (ii) prepay Local Currency
Loans, in either case in an aggregate amount such that, after giving effect
thereto, (x) the Dollar Equivalent of all such Local Currency Loans shall be
equal to or less than such Local Currency Facility Maximum Borrowing Amount and
(y) the Dollar Equivalent of the Local Currency Loans of each relevant Local
Currency Lender shall be equal to or less than such Local Currency Lender's
Local Currency Lender Maximum Borrowing Amount with respect to such Local
Currency Addendum.
(f) If, on any Reset Date, the Standby Credit Exposure of any
Lender exceeds 105% of such Lender's Commitment, then, within three Business
Days after notice thereof from the Administrative Agent, the Company shall
prepay and/or cause the relevant Borrowing Subsidiaries to prepay the Loans in
accordance with this Agreement, in an aggregate amount such that, after giving
effect thereto, the Standby Credit Exposure of such Lender shall be equal to or
less than such Lender's Commitment.
<PAGE> 2
34
(g) The Administrative Agent shall promptly notify the
relevant Lenders of the amount of any reductions in Local Currency Facility
Maximum Borrowing Amounts or Local Currency Lender Maximum Borrowing Amounts
required pursuant to this Section 2.22.
SECTION 2.23. Letters of Credit. (a) General. The Borrowers
may request the issuance of Letters of Credit, in a form reasonably acceptable
to the Administrative Agent and the applicable Issuing Bank, appropriately
completed, for the accounts of the Borrowers, at any time and from time to time
while the Commitments remain in effect. All Letters of Credit shall be
denominated in Dollars. This Section shall not be construed to impose an
obligation upon any Issuing Bank to issue any Letter of Credit that is
inconsistent with the terms and conditions of this Agreement.
(b) Notice of Issuance, Amendment, Renewal, Extension; Certain
Conditions. In order to request the issuance of a Letter of Credit (or to
amend, renew or extend an existing Letter of Credit), the applicable Borrower
shall hand deliver or telecopy to the applicable Issuing Bank and the
Administrative Agent (reasonably in advance of the requested date of issuance,
amendment, renewal or extension) a notice requesting the issuance of a Letter
of Credit, or identifying the Letter of Credit to be amended, renewed or
extended, the date of issuance, amendment, renewal or extension, the date on
which such Letter of Credit is to expire (which shall comply with paragraph
2.23(c) below), the amount of such Letter of Credit, the name and address of
the beneficiary thereof and such other information as shall be necessary to
prepare such Letter of Credit. Following receipt of such notice and prior to
the issuance of the requested Letter of Credit or the applicable amendment,
renewal or extension, the Administrative Agent shall notify the Borrowers, each
Lender and the applicable Issuing Bank of the amount of the Aggregate Credit
Exposure after giving effect to (i) the issuance, amendment, renewal or
extension of such Letter of Credit, (ii) the issuance or expiration of any
other Letter of Credit that is to be issued or will expire prior to the
requested date of issuance of such Letter of Credit and (iii) the borrowing or
repayment of any Loans that (based upon notices delivered to the Administrative
Agent by the Borrowers) are to be borrowed or repaid prior to the requested
date of issuance of such Letter of Credit. A Letter of Credit shall be issued,
amended, renewed or extended only if, and upon issuance, amendment, renewal or
extension of each Letter of Credit, the Borrowers shall be deemed to represent
and warrant that, (i) after giving effect to such issuance, amendment, renewal
or extension (A) the L/C Exposure shall not exceed $350,000,000 and (B) the
Aggregate Credit Exposure shall not exceed the Total Commitment and (ii) in the
case of a Letter of Credit that will expire later than the first anniversary of
such issuance, amendment, renewal or extension, the applicable Borrower, the
applicable Issuing Bank and the Required Lenders shall have reached agreement
on the fees to be applicable thereto as contemplated by the last sentence of
Section 2.06(c).
(c) Expiration Date. Each Letter of Credit shall expire at
the close of business on the earlier of the date five years after the date of
the issuance of such Letter of Credit and the date that is five Business Days
prior to the Maturity Date, unless such Letter of Credit expires by its terms
on an earlier date; provided that a Letter of Credit shall not be issued (nor
shall a Letter of Credit be amended, renewed or extended) that would result in
the Aggregate Credit Exposure exceeding the Total Commitment. Compliance with
the foregoing proviso shall be determined based upon the assumption that (i)
each Letter of Credit remains outstanding and undrawn in accordance with its
terms until its expiration date (taking into account any rights of renewal or
extension that do not require written notice by or consent of the applicable
Issuing Bank, in its sole discretion, in order to effect such renewal or
extension) and (ii) the Commitments will not be reduced voluntarily pursuant to
Section 2.11(b).
(d) Participations. By the issuance of a Letter of Credit and
without any further action on the part of the applicable Issuing Bank or the
Lenders, the applicable Issuing Bank hereby grants to each Lender, and each
such Lender hereby acquires from the applicable Issuing Bank, a participation
in such Letter of Credit equal to such Lender's Applicable Share from time to
time of the
<PAGE> 3
35
aggregate amount available to be drawn under such Letter of Credit, effective
upon the issuance of such Letter of Credit. In consideration and in
furtherance of the foregoing, each Lender hereby absolutely and unconditionally
agrees to pay to the Administrative Agent, for the account of the applicable
Issuing Bank, such Lender's Applicable Share from time to time of each L/C
Disbursement made by such Issuing Bank and not reimbursed by the Borrower (or,
if applicable, another party pursuant to its obligations under any other Loan
Document) forthwith on the date due as provided in Section 2.02(e). Each
Lender acknowledges and agrees that its obligation to acquire participations
pursuant to this paragraph in respect of Letters of Credit is absolute and
unconditional and shall not be affected by any circumstance whatsoever,
including the occurrence and continuance of a Default or an Event of Default,
and that each such payment shall be made without any offset, abatement,
withholding or reduction whatsoever.
(e) Reimbursement. If an Issuing Bank shall make any L/C
Disbursement in respect of a Letter of Credit, the applicable Borrower shall
pay to the Administrative Agent such L/C Disbursement not later than two hours
after the Borrower shall have received notice from such Issuing Bank that
payment of such draft will be made, or, if the Borrower shall have received
such notice later than 10:00 a.m., New York City time, on any Business Day, not
later than 10:00 a.m., New York City time, on the immediately following
Business Day.
(f) Obligations Absolute. The Borrowers' obligations to
reimburse L/C Disbursements as provided in paragraph 2.23(e) above shall be
absolute, unconditional and irrevocable, and shall be performed strictly in
accordance with the terms of this Agreement, under any and all circumstances
whatsoever, and irrespective of:
(i) any lack of validity or enforceability of any Letter of
Credit or any Loan Document, or any term or provision therein;
(ii) any amendment or waiver of or any consent to departure
from all or any of the provisions of any Letter of Credit or any Loan
Document;
(iii) the existence of any claim, setoff, defense or other
right that the Borrowers, any other party guaranteeing, or otherwise
obligated with, the Borrowers, any Subsidiary or other Affiliate
thereof or any other person may at any time have against the
beneficiary under any Letter of Credit, any Issuing Bank, the
Administrative Agent or any Lender or any other person, whether in
connection with this Agreement, any other Loan Document or any other
related or unrelated agreement or transaction;
(iv) any draft or other document presented under a Letter of
Credit proving to be forged, fraudulent, invalid or insufficient in
any respect or any statement therein being untrue or inaccurate in any
respect;
(v) payment by the applicable Issuing Bank under a Letter of
Credit against presentation of a draft or other document that does not
comply with the terms of such Letter of Credit; and
(vi) any other act or omission to act or delay of any kind of
any Issuing Bank, the Lenders, the Administrative Agent or any other
person or any other event or circumstance whatsoever, whether or not
similar to any of the foregoing, that might, but for the provisions of
this Section, constitute a legal or equitable discharge of the
Borrowers' obligations hereunder.
<PAGE> 4
36
Without limiting the generality of the foregoing, it is
expressly understood and agreed that the absolute and unconditional obligation
of the Borrowers hereunder to reimburse L/C Disbursements will not be excused
by the gross negligence or wilful misconduct of any Issuing Bank. However, the
foregoing shall not be construed to excuse any Issuing Bank from liability to
the Borrowers to the extent of any direct damages (as opposed to consequential
damages, claims in respect of which are hereby waived by the Borrowers to the
extent permitted by applicable law) suffered by the Borrowers that are caused
by such Issuing Bank's gross negligence or wilful misconduct in determining
whether drafts and other documents presented under a Letter of Credit comply
with the terms thereof; it is understood that each Issuing Bank may accept
documents that appear on their face to be in order, without responsibility for
further investigation, regardless of any notice or information to the contrary
and, in making any payment under any Letter of Credit (i) an Issuing Bank's
exclusive reliance on the documents presented to it under such Letter of Credit
as to any and all matters set forth therein, including reliance on the amount
of any draft presented under such Letter of Credit, whether or not the amount
due to the beneficiary thereunder equals the amount of such draft and whether
or not any document presented pursuant to such Letter of Credit proves to be
insufficient in any respect, if such document on its face appears to be in
order, and whether or not any other statement or any other document presented
pursuant to such Letter of Credit proves to be forged or invalid or any
statement therein proves to be inaccurate or untrue in any respect whatsoever
and (ii) any noncompliance in any immaterial respect of the documents presented
under such Letter of Credit with the terms thereof shall, in each case, be
deemed not to constitute wilful misconduct or gross negligence of an Issuing
Bank.
(g) Disbursement Procedures. The applicable Issuing Bank
shall, promptly following its receipt thereof, examine all documents purporting
to represent a demand for payment under a Letter of Credit. Such Issuing Bank
shall as promptly as possible give telephonic notification, confirmed by
telecopy, to the Administrative Agent and the applicable Borrower of such
demand for payment and whether such Issuing Bank has made or will make an L/C
Disbursement thereunder; provided that any failure to give or delay in giving
such notice shall not relieve the Borrower of its obligation to reimburse the
Issuing Bank and the Lenders with respect to any such L/C Disbursement. The
Administrative Agent shall promptly give each Lender notice thereof.
(h) Interim Interest. If an Issuing Bank shall make any L/C
Disbursement in respect of a Letter of Credit, then, unless the Borrower shall
reimburse such L/C Disbursement in full on such date, the unpaid amount thereof
shall bear interest for the account of such Issuing Bank, for each day from and
including the date of such L/C Disbursement, to but excluding the earlier of
the date of payment or the date on which interest shall commence to accrue
thereon as provided in paragraph 2.02(e) above, at the rate per annum that
would apply to such amount if such amount were an ABR Loan.
(i) Resignation or Removal of an Issuing Bank. An Issuing
Bank may resign at any time by giving 180 days' prior written notice to the
Administrative Agent, the Lenders and the Borrowers, and may be removed at any
time by the Borrowers by notice to the Issuing Bank, the Administrative Agent
and the Lenders. Subject to the next succeeding paragraph, upon the acceptance
of any appointment as an Issuing Bank hereunder by a successor Issuing Bank,
such successor shall succeed to and become vested with all the interests,
rights and obligations of the retiring Issuing Bank and the retiring Issuing
Bank shall be discharged from its obligations to issue additional Letters of
Credit hereunder. At the time such removal or resignation shall become
effective, the Borrowers shall pay all accrued and unpaid fees pursuant to
Section 2.06(c)(ii). The acceptance of any appointment as an Issuing Bank
hereunder by a successor Lender shall be evidenced by an agreement entered into
by such successor, in a form satisfactory to the Borrowers and the
Administrative Agent, and, from and after the effective date of such agreement,
(i) such successor Lender shall have all the rights and obligations of the
previous Issuing Bank under this Agreement and the other Loan Documents and
(ii)
<PAGE> 5
37
references herein and in the other Loan Documents to the term "Issuing Bank"
shall be deemed to refer to such successor or to any previous Issuing Bank, or
to such successor and all previous Issuing Banks, as the context shall require.
After the resignation or removal of an Issuing Bank hereunder, the retiring
Issuing Bank shall remain a party hereto and shall continue to have all the
rights and obligations of an Issuing Bank under this Agreement and the other
Loan Documents with respect to Letters of Credit issued by it prior to such
resignation or removal, but shall not be required to issue additional Letters
of Credit.
(j) Additional Issuing Banks. The Borrowers may, at any time
and from time to time with the consent of the Administrative Agent (which
consent shall not be unreasonably withheld) and such Lender, designate one or
more additional Lenders to act as an issuing bank under the terms of the
Agreement. Any Lender designated as an issuing bank pursuant to this paragraph
2.23(j) shall, upon entering into an Issuing Bank Agreement with the Company,
be deemed to be an "Issuing Bank" (in addition to being a Lender) in respect of
Letters of Credit issued or to be issued by such Lender, and, with respect to
such Letters of Credit, such term shall thereafter apply to the other Issuing
Banks and such Lender.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Each Borrower represents and warrants to each of the Lenders
that:
SECTION 3.01. Organization; Powers. Each Borrower and each
of the Subsidiaries (a) is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction of its organization, (b)
has all requisite power and authority to own its property and assets and to
carry on its business as now conducted and as proposed to be conducted, (c) is
qualified to do business in every jurisdiction where such qualification is
required, except where the failure so to qualify would not result in a Material
Adverse Effect, and (d) in the case of each Borrower, has the corporate power
and authority to execute, deliver and perform its obligations under the Loan
Documents and to borrow hereunder and thereunder.
SECTION 3.02. Authorization. The execution, delivery and
performance by the Borrowers of this Agreement, the Issuing Bank Agreements,
the promissory notes, if any, issued pursuant to Section 9.04(i) and each Local
Currency Addendum (and by the Borrowing Subsidiaries of each Borrowing
Subsidiary Agreement), the Borrowings hereunder and the completion of the
Distribution (collectively, the "Transactions") (a) have been duly authorized
by all requisite corporate action and (b) will not (i) violate (A) any
provision of any law, statute, rule or regulation (including the Margin
Regulations) or of the certificate of incorporation or other constitutive
documents or by-laws of the Borrowers, (B) any order of any Governmental
Authority or (C) any provision of any indenture, agreement or other instrument
to which any Borrower is a party or by which it or any of its property is or
may be bound, (ii) be in conflict with, result in a breach of or constitute
(alone or with notice or lapse of time or both) a default under any such
indenture, agreement or other instrument or (iii) result in the creation or
imposition of any lien upon any property or assets of any Borrower.
SECTION 3.03. Enforceability. This Agreement and each Loan
Document to which a Borrower is a party constitutes a legal, valid and binding
obligation of each Borrower enforceable in accordance with its terms.
<PAGE> 6
38
SECTION 3.04. Governmental Approvals. No action, consent or
approval of, registration or filing with or other action by any Governmental
Authority, other than those which have been taken, given or made, as the case
may be, is or will be required with respect to any Borrower in connection with
the Transactions.
SECTION 3.05. Financial Statements. (a) The Company has
heretofore furnished to the Administrative Agent and the Lenders copies of its
combined balance sheet and statement of income and cash flow as of and for the
year ended December 31, 1994, and the six months ended June 30, 1995, as
included in the Proxy Statement. Such financial statements present fairly, in
all material respects, the consolidated combined financial condition and the
results of operations of the Company and the Subsidiaries as of such dates and
for such periods in accordance with GAAP.
(b) The Company has heretofore furnished to the
Administrative Agent and the Lenders copies of its pro forma combined balance
sheet and statements of income as of June 30, 1995, and for the year and the
six months ended December 31, 1994, and June 30, 1995, respectively, giving
effect to the Distribution and certain related transactions. Such financial
statements present fairly, in all material respects, the consolidated combined
financial condition and the results of operations of the Company and the
Subsidiaries on a pro forma basis as of such dates and for such periods in
accordance with GAAP.
(c) As of the Effective Date, there has been no material
adverse change in the consolidated financial condition of the Company and the
Subsidiaries taken as a whole from the financial condition reported in the
financial statements referenced in paragraph (a) of this Section 3.05.
SECTION 3.06. Litigation; Compliance with Laws. (a) As of
the Effective Date, there are no actions, proceedings or investigations filed
or (to the knowledge of the Borrowers) threatened affecting any Borrower or any
Subsidiary in any court or before any Governmental Authority or arbitration
board or tribunal which question the validity or legality of this Agreement,
the Transactions or any action taken or to be taken pursuant to this Agreement
and no order or judgment has been issued or entered restraining or enjoining
any Borrower or any Subsidiary from the execution, delivery or performance of
this Agreement nor is there any other action, proceeding or investigation filed
or (to the knowledge of any Borrower or any Subsidiary) threatened against any
Borrower or any Subsidiary in any court or before any Governmental Authority or
arbitration board or tribunal which would be reasonably likely to result in a
Material Adverse Effect or materially restrict the ability of any Borrower to
comply with its obligations under the Loan Documents.
(b) Neither any Borrower nor any Subsidiary is in violation
of any law, rule or regulation (including any law, rule or regulation relating
to the protection of the environment or to employee health or safety), or in
default with respect to any judgment, writ, injunction or decree of any
Governmental Authority, where such violation or default would be reasonably
likely to result in a Material Adverse Effect.
(c) No exchange control law or regulation materially
restricts any Borrower from complying with its obligations in respect of any
Loan or Letter of Credit or otherwise under this Agreement or any Local
Currency Addendum.
SECTION 3.07. Federal Reserve Regulations. (a) Neither any
Borrower nor any Subsidiary that will receive proceeds of the Loans hereunder
is engaged principally, or as one of its important activities, in the business
of extending credit for the purpose of purchasing or carrying Margin Stock.
<PAGE> 7
39
(b) No part of the proceeds of any Loan will be used, whether
directly or indirectly, and whether immediately, incidentally or ultimately, to
purchase or carry Margin Stock or to refund indebtedness originally incurred
for such purpose, or for any other purpose which entails a violation of, or
which is inconsistent with, the provisions of the Margin Regulations.
SECTION 3.08. Investment Company Act; Public Utility Holding
Company Act. No Borrower is (a) an "investment company" as defined in, or
subject to regulation under, the Investment Company Act of 1940 (the "1940
Act") or (b) a "holding company" as defined in, or subject to regulation under,
the Public Utility Holding Company Act of 1935.
SECTION 3.09. Use of Proceeds. All proceeds of the Loans and
Letters of Credit shall be used for the purposes referred to in the recitals to
this Agreement.
SECTION 3.10. Full Disclosure; No Material Misstatements.
None of the representations or warranties made by any Borrower in connection
with this Agreement as of the date such representations and warranties are made
or deemed made, and no report, financial statement or other information
furnished by or on behalf of any Borrower to the Administrative Agent or any
Lender pursuant to or in connection with this Agreement or the credit
facilities established hereby, contains or will contain any material
misstatement of fact or omits or will omit to state any material fact necessary
to make the statements therein, in the light of the circumstances under which
they were or will be made, not misleading.
SECTION 3.11. Taxes. Each Borrower and each of the material
Subsidiaries have filed or caused to be filed all Federal, state and local tax
returns which are required to be filed by them, and have paid or caused to be
paid all taxes shown to be due and payable on such returns or on any
assessments received by any of them, other than any taxes or assessments the
validity of which is being contested in good faith by appropriate proceedings,
and with respect to which appropriate accounting reserves have to the extent
required by GAAP been set aside.
SECTION 3.12. Employee Pension Benefit Plans. The present
aggregate value of accumulated benefit obligations of all unfunded and
underfunded pension plans of the Company and its Subsidiaries (based on those
assumptions used for disclosure in corporate financial statements in accordance
with GAAP) did not, as of December 31, 1994, exceed by more than $8,923,000 the
value of the assets of all such plans. Of such $8,923,000, $2,019,000 is
attributable to employee pension plans in countries where the funding of such
obligations is not required or customary and $3,076,000 relates to domestic
pension plans where funding is not permitted under current tax regulations. In
these cases the Company has recorded book reserves to meet the obligations.
SECTION 3.13. Distribution. At or prior to the Effective
Date, the Distribution will have been duly completed in accordance with
applicable law and as described in the Proxy Statement, and the assets,
liabilities and capitalization of the Company will have been consistent at the
time of and after giving effect to the Distribution in all material respects
with the forecasted capitalization table of the Company set forth in the Proxy
Statement and the pro forma financial statements referred to in Section
3.05(b), except that in the event the Distribution shall occur prior to
December 31, 1995, the transactions set forth in Schedule 3.13 which are
reflected as having occurred in such capitalization table and such pro forma
financial statements might not yet have occurred.
<PAGE> 8
40
ARTICLE IV
CONDITIONS OF LENDING
The obligations of the Lenders to make Loans and of the
Issuing Banks to issue Letters of Credit hereunder are subject to the
satisfaction of the following conditions:
SECTION 4.01. All Extensions of Credit. On the date of each
Borrowing and on the date of each issuance of a Letter of Credit:
(a) The Administrative Agent shall have received a notice of
such Borrowing as required by Section 2.03 or Section 2.04, as
applicable, or, in the case of the issuance of a Letter of Credit, the
applicable Issuing Bank shall have been selected to issue such Letter
of Credit as contemplated by Section 2.23.
(b) The representations and warranties set forth in Article
III hereof shall be true and correct in all material respects on and
as of the date of such Borrowing or issuance of a Letter of Credit
with the same effect as though made on and as of such date, except to
the extent such representations and warranties expressly relate to an
earlier date.
(c) At the time of and immediately after such Borrowing or
issuance of a Letter of Credit no Event of Default or Default shall
have occurred and be continuing.
Each Borrowing and issuance of a Letter of Credit shall be deemed to constitute
a representation and warranty by each Borrower on the date of such Borrowing or
issuance of a Letter of Credit as to the matters specified in paragraphs (b)
and (c) of this Section 4.01.
SECTION 4.02. Effective Date. On the Effective Date:
(a) The Administrative Agent shall have received a favorable
written opinion of Walter Diehl, Esq., dated the Effective Date and addressed
to the Lenders and satisfactory to the Lenders, the Administrative Agent and
Cravath, Swaine & Moore, counsel for the Administrative Agent, to the effect
set forth in Exhibit D hereto.
(b) The Administrative Agent shall have received (i) a copy
of the certificate of incorporation, including all amendments thereto, of the
Company, certified as of a recent date by the Secretary of State of its state
of incorporation, and a certificate as to the good standing of the Company as
of a recent date from such Secretary of State; (ii) a certificate of the
Secretary or an Assistant Secretary of the Company dated the Effective Date and
certifying (A) that attached thereto is a true and complete copy of the by-laws
of the Company as in effect on the Effective Date and at all times since a date
prior to the date of the resolutions described in clause (B) below, (B) that
attached thereto is a true and complete copy of resolutions duly adopted by the
Board of Directors of the Company authorizing the execution, delivery and
performance of this Agreement and the Borrowings hereunder, and that such
resolutions have not been modified, rescinded or amended and are in full force
and effect, (C) that the certificate of incorporation referred to in clause (i)
above has not been amended since the date of the last amendment thereto shown
on the certificate of good standing furnished pursuant to such clause (i) and
(D) as to the incumbency and specimen signature of each officer executing this
Agreement or any other document delivered in connection herewith on behalf of
the Company; and (iii) a certificate of another officer of the Company as to
the incumbency and specimen signature of the Secretary or Assistant Secretary
executing the certificate pursuant to (ii) above.
<PAGE> 9
41
(c) The Administrative Agent shall have received a
certificate, dated the Effective Date and signed by a Financial Officer of the
Company, confirming compliance with the conditions precedent set forth in
paragraphs (b) and (c) of Section 4.01.
(d) The principal of and accrued and unpaid interest on any
loans outstanding under the Existing Credit Facilities shall have been paid in
full, all other amounts due in respect of the Existing Credit Facilities shall
have been paid in full and the commitments to lend under the Existing Credit
Facilities shall have been permanently terminated.
(e) The Administrative Agent shall have received any Fees or
other amounts due and payable on or prior to the Effective Date.
SECTION 4.03. First Borrowing by Each Borrowing Subsidiary.
On or prior to the first date on which Loans are made to or Letters of Credit
are issued for the benefit of any Borrowing Subsidiary:
(a) The Lenders and any Issuing Banks shall have received the
favorable written opinion of counsel satisfactory to the
Administrative Agent, addressed to the Lenders and satisfactory to the
Lenders, the Administrative Agent and Cravath, Swaine & Moore, counsel
for the Administrative Agent, to the effect set forth in Exhibit D
hereto.
(b) Each Lender and any Issuing Banks shall have received a
copy of the Borrowing Subsidiary Agreement executed by such Borrowing
Subsidiary.
ARTICLE V
COVENANTS
A. Affirmative Covenants. Each Borrower covenants and agrees
with each Lender and the Administrative Agent that so long as this Agreement
shall remain in effect or the principal of or interest on any Loan, any Fees or
any other amounts payable hereunder shall be unpaid or any Letters of Credit
have not been canceled or have not expired or any amounts drawn thereunder have
not been reimbursed in full, unless the Required Lenders shall otherwise
consent in writing, it will, and will cause each of the Subsidiaries to:
SECTION 5.01. Existence. Do or cause to be done all things
necessary to preserve and keep in full force and effect its corporate
existence, rights and franchises, except as expressly permitted under Section
5.09; provided, however, that nothing in this Section shall prevent the
abandonment or termination of the existence, rights or franchises of any
Subsidiary or any rights or franchises of any Borrower if such abandonment or
termination is in the best interests of the Borrowers and is not
disadvantageous in any material respect to the Lenders.
SECTION 5.02. Business and Properties. Comply in all
material respects with all applicable laws, rules, regulations and orders of
any Governmental Authority (including any of the foregoing relating to the
protection of the environment or to employee health and safety), whether now in
effect or hereafter enacted; and at all times maintain and preserve all
property material to the conduct of its business and keep such property in good
repair, working order and condition and from time to time make, or cause to be
made, all needful and proper repairs, renewals, additions, improvements and
replacements thereto necessary in order that the business carried on in
connection therewith may be properly conducted at all times.
<PAGE> 10
42
SECTION 5.03. Financial Statements, Reports, Etc. In the case
of the Company, furnish to the Administrative Agent for distribution to each
Lender:
(a) within 120 days after the end of each fiscal year, its
consolidated balance sheet and the related consolidated statements of
income and cash flows showing its consolidated financial condition as
of the close of such fiscal year and the consolidated results of its
operations during such year, all audited by Arthur Andersen LLP or
other independent certified public accountants of recognized national
standing selected by the Company and accompanied by an opinion of such
accountants to the effect that such consolidated financial statements
fairly present its financial condition and results of operations on a
consolidated basis in accordance with GAAP (it being agreed that the
requirements of this paragraph may be satisfied by the delivery
pursuant to paragraph (d) below of an annual report on Form 10-K
containing the foregoing);
(b) within 90 days after the end of each of the first three
fiscal quarters of each fiscal year, its consolidated balance sheet
and related consolidated statements of income and cash flow showing
its consolidated financial condition as of the close of such fiscal
quarter and the consolidated results of its operations during such
fiscal quarter and the then elapsed portion of the fiscal year, all
certified by one of its Financial Officers as fairly presenting its
financial condition and results of operations on a consolidated basis
in accordance with GAAP, subject to normal year-end audit adjustments
(it being agreed that the requirements of this paragraph may be
satisfied by the delivery pursuant to paragraph (d) below of a
quarterly report on Form 10-Q containing the foregoing);
(c) concurrently with any delivery of financial statements
under paragraph (a) or (b) above, a certificate of a Financial Officer
certifying that, to the best of such Financial Officer's knowledge, no
Event of Default or Default has occurred or, if such an Event of
Default or Default has occurred, specifying the nature and extent
thereof and any corrective action taken or proposed to be taken with
respect thereto;
(d) promptly after the same become publicly available, copies
of all reports on forms 10-K, 10-Q and 8-K filed by it with the SEC,
or any Governmental Authority succeeding to any of or all the
functions of the SEC, or, in the case of the Company, copies of all
reports distributed to its shareholders, as the case may be;
(e) promptly, from time to time, such other information as
any Lender shall reasonably request through the Administrative Agent;
and
(f) concurrently with any delivery of financial statements
under paragraph (a) or (b) above, calculations of the financial test
referred to in Section 5.12.
SECTION 5.04. Insurance. Keep its insurable properties
adequately insured at all times by financially sound and reputable insurers,
and maintain such other insurance, to such extent and against such risks,
including fire and other risks insured against by extended coverage, as is
customary with companies similarly situated and in the same or similar
businesses (it being understood that the Borrowers and their Subsidiaries may
self-insure to the extent customary with companies similarly situated and in
the same or similar businesses).
SECTION 5.05. Obligations and Taxes. Pay and discharge
promptly when due all taxes, assessments and governmental charges imposed upon
it or upon its income or profits or in respect of its property, as well as all
other material liabilities, in each case before the same shall
<PAGE> 11
43
become delinquent or in default and before penalties accrue thereon, unless and
to the extent that the same are being contested in good faith by appropriate
proceedings and adequate reserves with respect thereto shall, to the extent
required by GAAP, have been set aside.
SECTION 5.06. Litigation and Other Notices. Give the
Administrative Agent prompt written notice of the following (which the
Administrative Agent shall promptly provide to the Lenders):
(a) the filing or commencement of, or any written threat or
written notice of intention of any person to file or commence, any
action, suit or proceeding which could reasonably be expected to
result in a Material Adverse Effect;
(b) any Event of Default or Default, specifying the nature
and extent thereof and the action (if any) which is proposed to be
taken with respect thereto; and
(c) any change in any of the Ratings.
SECTION 5.07. Maintaining Records; Access to Properties and
Inspections. Maintain financial records in accordance with GAAP and, upon
reasonable notice, at all reasonable times, permit any authorized
representative designated by the Administrative Agent to visit and inspect the
properties of the Company and of any material Subsidiary and to discuss the
affairs, finances and condition of the Company and any material Subsidiary with
a Financial Officer of the Company and such other officers as the Company shall
deem appropriate.
SECTION 5.08. Use of Proceeds. Use the proceeds of the Loans
only for the purposes set forth in the recitals to this Agreement.
B. Negative Covenants. Each Borrower covenants and agrees
with each Lender and the Administrative Agent that so long as this Agreement
shall remain in effect or the principal of or interest on any Loan, any Fees or
any other amounts payable hereunder shall be unpaid or any Letters of Credit
have not been canceled or have not expired or any amounts drawn thereunder have
not been reimbursed in full, unless the Required Lenders shall otherwise
consent in writing, it will not, and will not cause or permit any of the
Subsidiaries to:
SECTION 5.09. Consolidations, Mergers, and Sales of Assets.
Consolidate or merge with or into any other person or sell, lease or transfer
all or substantially all of its property and assets, or agree to do any of the
foregoing, unless (a) no Default or Event of Default has occurred and is
continuing or would have occurred immediately after giving effect thereto, and
(b) in the case of a consolidation or merger or transfer of assets involving
the Company and in which the Company is not the surviving corporation or sells,
leases or transfers all or substantially all of its property and assets, the
surviving corporation or person purchasing, leasing or receiving such property
and assets is organized in the United States of America or a state thereof and
agrees to be bound by the terms and provisions applicable to the Company
hereunder.
SECTION 5.10. Limitations on Liens. In the case of the
Company, create, suffer to be created, or assume (directly or indirectly) any
mortgage, pledge or other lien upon any Principal Property, or permit any
Restricted Subsidiary to create, suffer to be created, or assume (directly or
indirectly) any mortgage, pledge or other lien upon any Principal Property;
provided, however, that this covenant shall not apply to any of the following:
<PAGE> 12
44
(a) any mortgage, pledge or other lien on any Principal
Property hereafter acquired, constructed or improved by the Company or
any Restricted Subsidiary which is created or assumed to secure or
provide for the payment of any part of the purchase price of such
property or the cost of such construction or improvement, or any
mortgage, pledge or other lien on any Principal Property existing at
the time of acquisition thereof, provided, however, that the mortgage,
pledge or other lien shall not extend to any Principal Property
theretofore owned by the Company or any Restricted Subsidiary;
(b) any mortgage, pledge or other lien on any Principal
Property existing on the date of this Agreement as described in
Schedule 5.10;
(c) any mortgage, pledge or other lien existing upon any
property of a company which is merged with or into or is consolidated
into, or substantially all the assets or shares of capital stock of
which are acquired by, the Company or a Restricted Subsidiary, at the
time of such merger, consolidation or acquisition, provided that such
mortgage, pledge or other lien does not extend to any other Principal
Property, other than improvements to the property subject to such
mortgage, pledge or other lien;
(d) any pledge or deposit to secure payment of workers'
compensation or insurance premiums, or in connection with tenders,
bids, contracts (other than contracts for the payment of money) or
leases;
(e) any pledge of, or other lien upon, any assets as security
for the payment of any tax, assessment or other similar charge by any
Governmental Authority or public body, or as security required by law
or governmental regulation as a condition to the transaction of any
business or the exercise of any privilege or right;
(f) any pledge or lien necessary to secure a stay of any legal
or equitable process in a proceeding to enforce a liability or
obligation contested in good faith by the Company or a Restricted
Subsidiary or required in connection with the institution by the
Company or a Restricted Subsidiary of any legal or equitable
proceeding to enforce a right or to obtain a remedy claimed in good
faith by the Company or a Restricted Subsidiary, or required in
connection with any order or decree in any such proceeding or in
connection with any contest of any tax or other governmental charge;
or the making of any deposit with or the giving of any form of
security to any governmental agency or any body created or approved by
law or governmental regulation in order to entitle the Company or a
Restricted Subsidiary to maintain self-insurance or to participate in
any fund in connection with workers' compensation, unemployment
insurance, old age pensions or other social security or to share in
any provisions or other benefits provided for companies participating
in any such arrangement or for liability on insurance of credits or
other risks;
(g) any mechanics', carriers', workmen's, repairmen's, or
other like liens, if arising in the ordinary course of business, in
respect of obligations which are not overdue or liability for which is
being contested in good faith by appropriate proceedings;
(h) any lien or encumbrance on property in favor of the United
States of America, or of any agency, department or other
instrumentality thereof, to secure partial, progress or advance
payments pursuant to the provisions of any contract;
(i) any mortgage, pledge or other lien securing any
indebtedness incurred in any manner to finance or recover the cost to
the Company or any Restricted Subsidiary of any
<PAGE> 13
45
physical property, real or personal, which prior to or simultaneously
with the creation of such indebtedness shall have been leased by the
Company or a Restricted Subsidiary to the United States of America or
a department or agency thereof at an aggregate rental, payable during
that portion of the initial term of such lease (without giving effect
to any options of renewal or extension) which shall be unexpired at
the date of the creation of such indebtedness, sufficient (taken
together with any amounts required to be paid by the lessee to the
lessor upon any termination of such lease) to pay in full at the
stated maturity date or dates thereof the principal of and the
interest on such indebtedness;
(j) any mortgage, pledge or other lien securing indebtedness
of a Restricted Subsidiary to the Company or a Restricted Subsidiary,
provided that in the case of any sale or other disposition of such
indebtedness by the Company or such Restricted Subsidiary, such sale
or other disposition shall be deemed to constitute the creation of
another mortgage, pledge or other lien not permitted by this clause
(j);
(k) any mortgage, pledge or other lien affecting property of
the Company or any Restricted Subsidiary securing indebtedness of the
United States of America or a State thereof (or any instrumentality or
agency of either thereof) issued in connection with a pollution
control or abatement program required in the opinion of the Company to
meet environmental criteria of the Company or any Restricted
Subsidiary and the proceeds of which indebtedness have financed the
cost of acquisition of such program;
(l) the renewal, extension, replacement or refunding of any
mortgage, pledge, lien, deposit, charge or other encumbrance permitted
by the foregoing provisions of this covenant upon the same property
theretofore subject thereto, or the renewal, extension, replacement or
refunding of the amount secured thereby, provided that in each case
such amount outstanding at that time shall not be increased; or
(m) any other mortgage, pledge or other lien, provided that
immediately after the creation or assumption of such mortgage, pledge
or other lien, the total of (x) the aggregate principal amount of
indebtedness of the Company and all Restricted Subsidiaries secured by
all mortgages, pledges and other liens created or assumed under the
provisions of this clause (m), plus (y) the aggregate amount of
Capitalized Lease-Back Obligations of the Company and Restricted
Subsidiaries under the entire unexpired terms of all leases entered
into in connection with sale and lease-back transactions which would
have been precluded by the provisions of Section 5.11 but for the
satisfaction of the condition set forth in clause (b) thereof, shall
not exceed an amount equal to 10% of Consolidated Net Tangible Assets.
The lease of any property by the Company or a Restricted Subsidiary and rental
obligations with respect thereto (whether or not arising out of a sale and
lease-back of properties and whether or not in accordance with GAAP such
property is carried as an asset and such rental obligations are carried as
indebtedness on the Company's or a Restricted Subsidiary's balance sheet) shall
not in any event be deemed to be the creation of a mortgage, pledge or other
lien.
SECTION 5.11. Limitations on Sale and Leaseback Transactions.
In the case of the Company or any Restricted Subsidiary, enter into any
arrangement with any person providing for the leasing by the Company or any
Restricted Subsidiary of any Principal Property (except for temporary leases
for a term of not more than three years and except for leases between the
Company and a Restricted Subsidiary or between Restricted Subsidiaries), which
property has been or is to be sold or transferred by the Company or such
Restricted Subsidiary to such person more than 120 days after the acquisition
thereof or the completion of construction and commencement of full operation
thereof,
<PAGE> 14
46
unless either (a) the Company shall apply an amount equal to the greater of the
Fair Value of such property or the net proceeds of such sale, within 120 days
of the effective date of any such arrangement, to the retirement (other than
any mandatory retirement or by way of payment at maturity) of Indebtedness or
to the acquisition, construction, development or improvement of properties,
facilities or equipment used for operating purposes which are, or upon such
acquisition, construction, development or improvement will be, a Principal
Property or a part thereof; or (b) at the time of entering into such
arrangement, such Principal Property could have been subjected to a mortgage,
pledge or other lien securing indebtedness of the Company or a Restricted
Subsidiary in a principal amount equal to the Capitalized Lease-Back
Obligations with respect to such Principal Property under paragraph (m) of
Section 5.10.
SECTION 5.12. Consolidated Total Debt to Consolidated EBITDA.
Permit the ratio of (a) Consolidated Total Debt to (b) Consolidated EBITDA at
the end of and for any period of four consecutive fiscal quarters to exceed 5.0
to 1.0.
ARTICLE VI
EVENTS OF DEFAULT
In case of the happening of any of the following events (each
an "Event of Default"):
(a) any representation or warranty made or deemed made in or
in connection with the execution and delivery of this Agreement or any
Local Currency Addenda or the Borrowings or issuances of Letters of
Credit hereunder shall prove to have been false or misleading in any
material respect when so made, deemed made or furnished;
(b) default shall be made in the payment of any principal of
any Loan or the reimbursement with respect to any L/C Disbursement
when and as the same shall become due and payable, whether at the due
date thereof or at a date fixed for prepayment thereof or by
acceleration thereof or otherwise;
(c) default shall be made in the payment of any interest on
any Loan or L/C Disbursement or any Fee or any other amount (other
than an amount referred to in paragraph (b) above) due hereunder, when
and as the same shall become due and payable, and such default shall
continue unremedied for a period of ten days;
(d) default shall be made in the due observance or performance
of any covenant, condition or agreement contained in Section 5.01,
5.09, 5.10, 5.11 or 5.12 or in any Local Currency Addendum and, in the
case of any default under Section 5.10, such default shall continue
for 30 days;
(e) default shall be made in the due observance or performance
of any covenant, condition or agreement contained herein or in any
other Loan Document (other than those specified in clauses (b), (c) or
(d) above) and such default shall continue unremedied for a period of
30 days after notice thereof from the Administrative Agent or any
Lender to the Company;
(f) the Company or any Subsidiary shall (i) fail to pay any
principal or interest, regardless of amount, due in respect of any
Indebtedness in a principal amount in excess of $20,000,000, beyond
the period of grace, if any, provided in the agreement or instrument
<PAGE> 15
47
under which such Indebtedness was created or (ii) fail to observe or
perform any other term, covenant, condition or agreement contained in
any agreement or instrument evidencing or governing any such
Indebtedness, or any other event shall occur or condition shall exist,
beyond the period of grace, if any, provided in such agreement or
instrument, if the effect of any failure referred to in this clause
(ii) is to cause, or to permit the holder or holders of such
Indebtedness or a trustee on its or their behalf (with or without the
giving of notice) to cause, such Indebtedness to become due prior to
its stated maturity;
(g) an involuntary proceeding shall be commenced or an
involuntary petition shall be filed in a court of competent
jurisdiction seeking (i) relief in respect of the Company, or of a
substantial part of the property or assets of the Company or any
Subsidiary with assets having a gross book value in excess of
$25,000,000, under Title 11 of the United States Code, as now
constituted or hereafter amended, or any other Federal or state
bankruptcy, insolvency, receivership or similar law, (ii) the
appointment of a receiver, trustee, custodian, sequestrator,
conservator or similar official for the Company or for a substantial
part of the property or assets of the Company or any Subsidiary with
assets having a gross book value in excess of $25,000,000 or (iii) the
winding up or liquidation of the Company; and such proceeding or
petition shall continue undismissed for 60 days or an order or decree
approving or ordering any of the foregoing shall be entered;
(h) the Company or any Subsidiary with assets having a gross
book value in excess of $25,000,000 shall (i) voluntarily commence any
proceeding or file any petition seeking relief under Title 11 of the
United States Code, as now constituted or hereafter amended, or any
other Federal or state bankruptcy, insolvency, receivership or similar
law, (ii) consent to the institution of, or fail to contest in a
timely and appropriate manner, any proceeding or the filing of any
petition described in (g) above, (iii) apply for or consent to the
appointment of a receiver, trustee, custodian, sequestrator,
conservator or similar official for the Company or for a substantial
part of the property or assets of the Company, (iv) file an answer
admitting the material allegations of a petition filed against it in
any such proceeding, (v) make a general assignment for the benefit of
creditors, (vi) become unable, admit in writing its inability or fail
generally to pay its debts as they become due or (vii) take any action
for the purpose of effecting any of the foregoing;
(i) one or more final judgments shall be entered by any court
against the Company or any of the Subsidiaries for the payment of
money in an aggregate amount in excess of $100,000,000, and such
judgment or judgments shall not have been paid, covered by insurance,
discharged or stayed for a period of 60 days, or a warrant of
attachment or execution or similar process shall have been issued or
levied against property of the Company or any of the Subsidiaries to
enforce any such judgment or judgments;
(j) an ERISA Event shall have occurred that, in the opinion of
the Required Lenders, when taken together with all other such ERISA
Events, could reasonably be expected to result in a Material Adverse
Effect; or
(k) a Change in Control shall occur;
then, and in every such event (other than an event with respect to the Company
or any Subsidiary with assets having a gross book value in excess of
$25,000,000 described in paragraph (g) or (h) above), and at any time
thereafter during the continuance of such event, the Administrative Agent, at
the request of the Required Lenders, shall, by notice to the Company, take any
or all of the following actions, at the same or different times: (i) terminate
forthwith the Commitments, (ii) declare the Loans
<PAGE> 16
48
then outstanding to be forthwith due and payable in whole or in part, whereupon
the principal of the Loans so declared to be due and payable, together with
accrued interest thereon and any unpaid accrued Fees and all other liabilities
of the Borrowers accrued hereunder, without presentment, demand, protest or any
other notice of any kind, all of which are hereby expressly waived anything
contained herein to the contrary notwithstanding, (iii) require the Borrowers
to deposit with the Administrative Agent cash collateral in an amount equal to
the aggregate L/C Exposures to secure the Borrowers' reimbursement obligations
under Section 2.23; and, in the case of any event with respect to the Company
or any Subsidiary having a gross book value in excess of $25,000,000 described
in paragraph (g) or (h) above, the Commitments shall automatically terminate
and the principal of the Loans then outstanding, together with accrued interest
thereon and any unpaid accrued Fees and all other liabilities of the Borrowers
accrued hereunder shall automatically become due and payable, without
presentment, demand, protest or any other notice of any kind, all of which are
hereby expressly waived anything contained herein to the contrary
notwithstanding, and the Borrowers shall deposit with the Administrative Agent
cash collateral in an amount equal to the aggregate L/C Exposure to secure the
Borrowers' reimbursement obligations under Section 2.23.
ARTICLE VII
GUARANTEE
The Company unconditionally and irrevocably guarantees the due
and punctual payment and performance, when and as due, whether at maturity, by
acceleration, upon one or more dates set for prepayment or otherwise, of the
Guaranteed Obligations. The Company further agrees that the Guaranteed
Obligations may be extended or renewed, in whole or in part, without notice or
further assent from it and that it will remain bound upon its guarantee
notwithstanding any extension or renewal of any Guaranteed Obligations.
The Company waives presentment to, demand of payment from and
protest to the Borrowing Subsidiaries of any of the Guaranteed Obligations, and
also waives notice of acceptance of its guarantee and notice of protest for
nonpayment. The obligations of the Company hereunder shall not be affected by
(a) the failure of any Lender to assert any claim or demand or to enforce any
right or remedy against the Borrowing Subsidiaries under the provisions of this
Agreement or otherwise; (b) any rescission, waiver, amendment or modification
of any of the terms or provisions of this Agreement, any guarantee or any other
agreement; or (c) the failure of any Lender to exercise any right or remedy
against any other guarantor of the Guaranteed Obligations.
The Company further agrees that its guarantee constitutes a
guarantee of payment when due and not of collection, and waives any right to
require that any resort be had by the Administrative Agent or any Lender to any
security, if any, held for payment of the Guaranteed Obligations or to any
balance of any deposit account or credit on its books, in favor of the
Borrowing Subsidiaries or any other person.
The obligations of the Company hereunder shall not be subject
to any reduction, limitation, impairment or termination for any reason,
including any claim of waiver, release, surrender, alteration or compromise,
and shall not be subject to any defense or setoff, counterclaim, recoupment or
termination whatsoever by reason of the invalidity, illegality or
unenforceability of the Guaranteed Obligations or otherwise. Without limiting
the generality of the foregoing, the obligations of the Company hereunder shall
not be discharged or impaired or otherwise affected by the failure of the
Administrative Agent or any Lender to assert any claim or demand or to enforce
any remedy under this Agreement, any guarantee or any other agreement, by any
waiver or modification of any provision
<PAGE> 17
49
thereof, by any default, failure or delay, wilful or otherwise, in the
performance of the Guaranteed Obligations, or by any other act or omission
which may or might in any manner or to any extent vary the risk of the Company
or otherwise operate as a discharge of the Company as a matter of law or
equity.
To the extent permitted by applicable law, the Company waives
any defense based on or arising out of any defense available to the Borrowing
Subsidiaries, including any defense based on or arising out of any disability
of the Borrowing Subsidiaries, or the unenforceability of the Guaranteed
Obligations or any part thereof from any cause, or the cessation from any cause
of the liability of the Borrowing Subsidiaries, other than final payment in
full of the Guaranteed Obligations. The Administrative Agent and the Lenders
may, at their election, foreclose on any security held by one or more of them
by one or more judicial or non-judicial sales, or exercise any other right or
remedy available to them against the Borrowing Subsidiaries, or any security
without affecting or impairing in any way the liability of the Company
hereunder except to the extent the Guaranteed Obligations have been fully and
finally paid. The Company waives any defense arising out of any such election
even though such election operates to impair or to extinguish any right of
reimbursement or subrogation or other right or remedy of the Company against
the Borrowing Subsidiaries or any security.
The Company further agrees that its guarantee shall continue
to be effective or be reinstated, as the case may be, if at any time payment,
or any part thereof, of principal of or interest on any Guaranteed Obligation
is rescinded or must otherwise be restored by any Lender upon the bankruptcy or
reorganization of any Borrowing Subsidiary or otherwise.
In furtherance of the foregoing and not in limitation of any
other right which the Administrative Agent or any Lender may have at law or in
equity against the Company by virtue hereof, upon the failure of any Borrowing
Subsidiary to pay any Guaranteed Obligation when and as the same shall become
due, whether at maturity, by acceleration, after notice of prepayment or
otherwise, the Company hereby promises to and will, upon receipt of written
demand by the Administrative Agent or any Lender, forthwith pay or cause to be
paid to the Administrative Agent or such Lender in cash the amount of such
unpaid Guaranteed Obligation.
The Company hereby irrevocably waives and releases any and all
rights of subrogation, indemnification, reimbursement and similar rights which
it may have against or in respect of the Borrowing Subsidiaries at any time
relating to the Guaranteed Obligations, including all rights that would result
in its being deemed a "creditor" of the Borrowing Subsidiaries under the United
States Code as now in effect or hereafter amended, or any comparable provision
of any successor statute.
ARTICLE VIII
THE ADMINISTRATIVE AGENT
In order to expedite the transactions contemplated by this
Agreement, Chemical Bank is hereby appointed to act as Administrative Agent on
behalf of the Lenders and the Issuing Banks. Each of the Lenders and the
Issuing Banks hereby irrevocably authorizes the Administrative Agent to take
such actions on behalf of such Lender or Issuing Bank and to exercise such
powers as are specifically delegated to the Administrative Agent by the terms
and provisions hereof, together with such actions and powers as are reasonably
incidental thereto. The Administrative Agent is hereby expressly authorized by
the Lenders and the Issuing Banks, without hereby limiting any implied
authority, (a) to receive on behalf of the Lenders and the Issuing Banks all
payments of principal of and
<PAGE> 18
50
interest on the Loans and all other amounts due to the Lenders and the Issuing
Banks hereunder, and promptly to distribute to each Lender or Issuing Bank its
proper share of each payment so received; (b) to give notice on behalf of each
of the Lenders to the Borrowers of any Event of Default of which the
Administrative Agent has actual knowledge acquired in connection with its
agency hereunder; and (c) to distribute to each Lender copies of all notices,
financial statements and other materials delivered by the Borrowers pursuant to
this Agreement as received by the Administrative Agent.
Neither the Administrative Agent nor any of its directors,
officers, employees or agents shall be liable as such for any action taken or
omitted by any of them except for its or his or her own gross negligence or
willful misconduct, or be responsible for any statement, warranty or
representation herein or the contents of any document delivered in connection
herewith, or be required to ascertain or to make any inquiry concerning the
performance or observance by the Borrowers of any of the terms, conditions,
covenants or agreements contained in this Agreement. The Administrative Agent
shall not be responsible to the Lenders for the due execution, genuineness,
validity, enforceability or effectiveness of this Agreement or other
instruments or agreements. The Administrative Agent may deem and treat the
Lender which makes any Loan as the holder of the indebtedness resulting
therefrom for all purposes hereof until it shall have received notice from such
Lender, given as provided herein, of the transfer thereof. The Administrative
Agent shall in all cases be fully protected in acting, or refraining from
acting, in accordance with written instructions signed by the Required Lenders
and, except as otherwise specifically provided herein, such instructions and
any action or inaction pursuant thereto shall be binding on all the Lenders.
The Administrative Agent shall, in the absence of knowledge to the contrary, be
entitled to rely on any instrument or document believed by it in good faith to
be genuine and correct and to have been signed or sent by the proper person or
persons. Neither the Administrative Agent nor any of its directors, officers,
employees or agents shall have any responsibility to the Borrowers on account
of the failure of or delay in performance or breach by any Lender or Issuing
Bank of any of its obligations hereunder or to any Lender or Issuing Bank on
account of the failure of or delay in performance or breach by any other Lender
or Issuing Bank or the Borrowers of any of their respective obligations
hereunder or in connection herewith. The Administrative Agent may execute any
and all duties hereunder by or through agents or employees and shall be
entitled to rely upon the advice of legal counsel selected by it with respect
to all matters arising hereunder and shall not be liable for any action taken
or suffered in good faith by it in accordance with the advice of such counsel.
The Lenders hereby acknowledge that the Administrative Agent
shall be under no duty to take any discretionary action permitted to be taken
by it pursuant to the provisions of this Agreement unless it shall be requested
in writing to do so by the Required Lenders.
Subject to the appointment and acceptance of a successor
Administrative Agent as provided below, the Administrative Agent may resign at
any time by notifying the Lenders and the Company. Upon any such resignation,
the Required Lenders shall have the right to appoint a successor Administrative
Agent acceptable to the Company. If no successor shall have been so appointed
by the Required Lenders and shall have accepted such appointment within 30 days
after the retiring Administrative Agent gives notice of its resignation, then
the retiring Administrative Agent may, on behalf of the Lenders, appoint a
successor Administrative Agent which shall be a bank with an office in New
York, New York, having a combined capital and surplus of at least $500,000,000
or an Affiliate of any such bank. Upon the acceptance of any appointment as
Administrative Agent hereunder by a successor bank, such successor shall
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring Administrative Agent and the retiring Administrative Agent
shall be discharged from its duties and obligations hereunder. After the
Administrative Agent's resignation hereunder, the provisions of this Article
and Section 9.05 shall continue in effect for its benefit in respect of any
actions taken or omitted to be taken by it while it was acting as
Administrative Agent.
<PAGE> 19
51
With respect to the Loans made by it hereunder, the
Administrative Agent in its individual capacity and not as Administrative Agent
shall have the same rights and powers as any other Lender and may exercise the
same as though it were not the Administrative Agent, and the Administrative
Agent and its Affiliates may accept deposits from, lend money to and generally
engage in any kind of business with the Borrowers or any Subsidiary or other
Affiliate thereof as if it were not the Administrative Agent.
Each Lender agrees (i) to reimburse the Administrative Agent,
on demand, in the amount of its pro rata share (based on its Commitment
hereunder or, if the Commitments shall have been terminated, the amount of its
outstanding Loans and L/C Exposure) of any expenses incurred for the benefit of
the Lenders by the Administrative Agent, including counsel fees and
compensation of agents and employees paid for services rendered on behalf of
the Lenders, which shall not have been reimbursed by the Borrowers and (ii) to
indemnify and hold harmless the Administrative Agent and any of its directors,
officers, employees or agents, on demand, in the amount of such pro rata share,
from and against any and all liabilities, taxes, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever which may be imposed on, incurred by or asserted
against it in its capacity as the Administrative Agent in any way relating to
or arising out of this Agreement or any action taken or omitted by it under
this Agreement to the extent the same shall not have been reimbursed by the
Borrowers; provided that no Lender shall be liable to the Administrative Agent
for any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements resulting from the
gross negligence or wilful misconduct of the Administrative Agent or any of its
directors, officers, employees or agents. Each Lender agrees that any
allocation made in good faith by the Administrative Agent of expenses or other
amounts referred to in this paragraph between this Agreement and the Facility A
Credit Agreement shall be conclusive and binding for all purposes.
Each Lender acknowledges that it has, independently and
without reliance upon the Administrative Agent or any other Lender and based on
such documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement. Each Lender also
acknowledges that it will, independently and without reliance upon the
Administrative Agent or any other Lender and based on such documents and
information as it shall from time to time deem appropriate, continue to make
its own decisions in taking or not taking action under or based upon this
Agreement or any related agreement or any document furnished hereunder or
thereunder.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Notices. Notices and other communications
provided for herein shall be in writing and shall be delivered by hand or
overnight courier service, mailed or sent by telecopy, as follows:
(a) if to any Borrower, to ITT Corporation, 1330 Avenue of the
Americas, New York, New York 10019-5490, Attention of Ms. Elizabeth A.
Tuttle (Telecopy No. 212-489-3995);
(b) if to the Administrative Agent, to Chemical Bank Agency
Services Corp., 140 East 45th Street, 29th Floor, New York, New York
10017, Attention of Mr. Chris Moriarty, (Telecopy No. 212-622-0002),
with a copy to Chemical Bank at 270 Park Avenue, New York, New York
10017, Re: ITT Corporation; and
<PAGE> 20
52
(c) if to a Lender, to it at its address (or telecopy number)
set forth in Schedule 2.01 or in the Assignment and Acceptance
pursuant to which such Lender became a party hereto.
All notices and other communications given to any party hereto in accordance
with the provisions of this Agreement shall be deemed to have been given on the
date of receipt if delivered by hand or overnight courier service or sent by
telecopy to such party as provided in this Section or in accordance with the
latest unrevoked direction from such party given in accordance with this
Section.
SECTION 9.02. Survival of Agreement. All covenants,
agreements, representations and warranties made by the Borrowers herein and in
the certificates or other instruments prepared or delivered in connection with
or pursuant to this Agreement shall be considered to have been relied upon by
the Lenders and the Issuing Banks and shall survive the making by the Lenders
of the Loans and issuance of Letters of Credit regardless of any investigation
made by the Lenders or the Issuing Banks or on their behalf, and shall continue
in full force and effect as long as the principal of or any accrued interest on
any Loan or any Fee or any other amount payable under this Agreement is
outstanding and unpaid, any Letter of Credit is outstanding or the Commitments
have not been terminated. The provisions of Sections 2.13, 2.15, 2.19 and 9.05
shall remain operative and in full force and effect regardless of the
expiration of the term of this Agreement, the consummation of the transactions
contemplated hereby, the repayment of any of the Loans, the expiration of any
Letter of Credit, the expiration of the Commitments, the invalidity or
unenforceability of any term or provision of this Agreement, or any
investigation made by or on behalf of the Administrative Agent or any Lender.
SECTION 9.03. Binding Effect. This Agreement shall become
effective on the Effective Date and when it shall have been executed by the
Company and the Administrative Agent and when the Administrative Agent shall
have received copies hereof (telecopied or otherwise) which, when taken
together, bear the signature of each Lender, and thereafter shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns, except that the Borrowers shall not have the right to
assign any rights hereunder or any interest herein without the prior consent of
all the Lenders.
SECTION 9.04. Successors and Assigns. (a) Whenever in this
Agreement any of the parties hereto is referred to, such reference shall be
deemed to include the successors and assigns of such party; and all covenants,
promises and agreements by or on behalf of any party that are contained in this
Agreement shall bind and inure to the benefit of its successors and assigns.
(b) Each Lender may assign to one or more assignees all or a
portion of its interests, rights and obligations under this Agreement
(including all or a portion of its Commitment and the Loans at the time owing
to it); provided, however, that (i) except in the case of an assignment to a
Lender or an Affiliate of a Lender, the Company must give its prior written
consent to such assignment (which consent, if required, shall not be
unreasonably withheld in the event an Event of Default has occurred and is
continuing), (ii) the parties to each such assignment shall execute and deliver
to the Administrative Agent an Assignment and Acceptance, and a processing and
recordation fee of $3,000 (provided that, in the case of simultaneous
assignment of interests under this Agreement and the Facility A Credit
Agreement, the aggregate fee shall be $3,000), (iii) the assignee, if it shall
not be a Lender, shall deliver to the Administrative Agent an Administrative
Questionnaire, and (iv) the amount of the Commitment of the assigning Lender
subject to each such assignment (determined as of the date the Assignment and
Acceptance with respect to such assignment is delivered to the Administrative
Agent) shall not be less than $5,000,000 and the amount of the Commitment of
such Lender remaining after such assignment shall not be less than $5,000,000
or shall be zero. Upon acceptance and recording pursuant to paragraph (e) of
this Section, from and after the effective date specified in each Assignment
and Acceptance, which effective date shall be at least five Business Days after
the
<PAGE> 21
53
execution thereof, (A) the assignee thereunder shall be a party hereto and, to
the extent of the interest assigned by such Assignment and Acceptance, have the
rights and obligations of a Lender under this Agreement and (B) the assigning
Lender thereunder shall, to the extent of the interest assigned by such
Assignment and Acceptance, be released from its obligations under this
Agreement (and, in the case of an Assignment and Acceptance covering all or the
remaining portion of an assigning Lender's rights and obligations under this
Agreement, such Lender shall cease to be a party hereto (but shall continue to
be entitled to the benefits of Sections 2.13, 2.15, 2.19 and 9.05, as well as
to any Fees accrued for its account hereunder and not yet paid)).
Notwithstanding the foregoing, any Lender assigning its rights and obligations
under this Agreement may retain any Competitive Loans made by it outstanding at
such time, and in such case shall retain its rights hereunder in respect of any
Loans so retained until such Loans have been repaid in full in accordance with
this Agreement.
(c) By executing and delivering an Assignment and Acceptance,
the assigning Lender thereunder and the assignee thereunder shall be deemed to
confirm to and agree with each other and the other parties hereto as follows:
(i) such assigning Lender warrants that it is the legal and beneficial owner of
the interest being assigned thereby free and clear of any adverse claim, (ii)
except as set forth in (i) above, such assigning Lender makes no representation
or warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement, or
the execution, legality, validity, enforceability, genuineness, sufficiency or
value of this Agreement or any other instrument or document furnished pursuant
hereto or the financial condition of the Borrowers or the performance or
observance by the Borrowers of any obligations under this Agreement or any
other instrument or document furnished pursuant hereto; (iii) such assignee
represents and warrants that it is legally authorized to enter into such
Assignment and Acceptance; (iv) such assignee confirms that it has received a
copy of this Agreement, together with copies of the most recent financial
statements delivered pursuant to Section 5.03 and such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into such Assignment and Acceptance; (v) such assignee will
independently and without reliance upon the Administrative Agent, such
assigning Lender or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement; (vi) such
assignee appoints and authorizes the Administrative Agent to take such action
as agent on its behalf and to exercise such powers under this Agreement as are
delegated to the Administrative Agent by the terms hereof, together with such
powers as are reasonably incidental thereto; and (vii) such assignee agrees
that it will perform in accordance with their terms all the obligations which
by the terms of this Agreement are required to be performed by it as a Lender.
(d) The Administrative Agent shall maintain at one of its
offices in The City of New York a copy of each Assignment and Acceptance
delivered to it and a register for the recordation of the names and addresses
of the Lenders, and the Commitment of, and the principal amount of the Loans
owing to, each Lender pursuant to the terms hereof from time to time (the
"Register"). The entries in the Register shall be conclusive in the absence of
manifest error and the Borrowers, the Administrative Agent, the Issuing Banks
and the Lenders may treat each person whose name is recorded in the Register
pursuant to the terms hereof as a Lender hereunder for all purposes of this
Agreement. The Register shall be available for inspection by each party
hereto, at any reasonable time and from time to time upon reasonable prior
notice.
(e) Upon its receipt of a duly completed Assignment and
Acceptance executed by an assigning Lender and an assignee together with an
Administrative Questionnaire completed in respect of the assignee (unless the
assignee shall already be a Lender hereunder), the processing and recordation
fee referred to in paragraph (b) above and the written consent of the Company
to such assignment, the
<PAGE> 22
54
Administrative Agent shall (i) accept such Assignment and Acceptance and (ii)
record the information contained therein in the Register.
(f) Each Lender may sell participations to one or more banks
or other entities in all or a portion of its rights and obligations under this
Agreement (including all or a portion of its Commitment and the Loans owing to
it); provided, however, that (i) such Lender's obligations under this Agreement
shall remain unchanged, (ii) such Lender shall remain solely responsible to the
other parties hereto for the performance of such obligations, (iii) each
participating bank or other entity shall be entitled to the benefit of the cost
protection provisions contained in Sections 2.13, 2.15 and 2.19 to the same
extent as if it were the selling Lender (and limited to the amount that could
have been claimed by the selling Lender had it continued to hold the interest
of such participating bank or other entity), except that all claims made
pursuant to such Sections shall be made through such selling Lender, and (iv)
the Borrowers, the Administrative Agent, the Issuing Banks and the other
Lenders shall continue to deal solely and directly with such selling Lender in
connection with such Lender's rights and obligations under this Agreement.
(g) Any Lender or participant may, in connection with any
assignment or participation or proposed assignment or participation pursuant to
this Section, disclose to the assignee or participant or proposed assignee or
participant any information relating to the Borrowers furnished to such Lender;
provided that, prior to any such disclosure, each such assignee or participant
or proposed assignee or participant shall execute an agreement for the benefit
of the Company whereby such assignee or participant shall agree (subject to
customary exceptions) to preserve the confidentiality of any such information.
(h) The Borrowers shall not assign or delegate any rights and
duties hereunder without the prior written consent of all Lenders.
(i) Any Lender may at any time pledge all or any portion of
its rights under this Agreement to a Federal Reserve Bank; provided that no
such pledge shall release any Lender from its obligations hereunder or
substitute any such Bank for such Lender as a party hereto. In order to
facilitate such an assignment to a Federal Reserve Bank, each Borrower shall,
at the request of the assigning Lender, duly execute and deliver to the
assigning Lender a promissory note or notes evidencing the Loans made to such
Borrower by the assigning Lender hereunder.
SECTION 9.05. Expenses; Indemnity. (a) The Borrowers agree
to pay all reasonable out-of-pocket expenses incurred by the Administrative
Agent in connection with entering into this Agreement or in connection with any
amendments, modifications or waivers of the provisions hereof, or incurred by
the Administrative Agent or any Lender in connection with the enforcement or
protection of their rights in connection with this Agreement or in connection
with the Loans made or Letters of Credit issued hereunder or under any Local
Currency Addendum, including the fees and disbursements of counsel for the
Administrative Agent or, in the case of enforcement, the Lenders.
(b) The Borrowers agree to indemnify the Administrative
Agent, the Issuing Banks, each Lender, each of their Affiliates and the
directors, officers, employees and agents of the foregoing (each such person
being called an "Indemnitee") against, and to hold each Indemnitee harmless
from, any and all losses, claims, damages, liabilities and related expenses,
including reasonable counsel fees and expenses, incurred by or asserted against
any Indemnitee arising out of (i) the consummation of the transactions
contemplated by this Agreement, (ii) the use of the proceeds of the Loans or
issuance of Letters of Credit or (iii) any claim, litigation, investigation or
proceeding relating to any of the foregoing, whether or not any Indemnitee is a
party thereto; provided that such indemnity shall not, as to any Indemnitee, be
available to the extent that such losses, claims, damages, liabilities or
related
<PAGE> 23
55
expenses are determined by a final judgment of a court of competent
jurisdiction to have resulted from the gross negligence or willful misconduct
of such Indemnitee.
(c) The provisions of this Section shall remain operative and
in full force and effect regardless of the expiration of the term of this
Agreement, the consummation of the transactions contemplated hereby, the
repayment of any of the Loans, the expiration of any Letter of Credit, the
invalidity or unenforceability of any term or provision of this Agreement or
any investigation made by or on behalf of the Administrative Agent, the Issuing
Banks or any Lender. All amounts due under this Section shall be payable on
written demand therefor.
SECTION 9.06. APPLICABLE LAW. THIS AGREEMENT SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
EACH LETTER OF CREDIT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED IN
ACCORDANCE WITH, THE LAWS OR RULES DESIGNATED IN SUCH LETTER OF CREDIT, OR IF
NO SUCH LAWS OR RULES ARE DESIGNATED, THE UNIFORM CUSTOMS AND PRACTICE FOR
DOCUMENTARY CREDITS (1993 REVISION), INTERNATIONAL CHAMBER OF COMMERCE,
PUBLICATION NO. 500 (THE "UNIFORM CUSTOMS") AND, AS TO MATTERS NOT GOVERNED BY
THE UNIFORM CUSTOMS, THE LAWS OF THE STATE OF NEW YORK.
SECTION 9.07. Waivers; Amendment. (a) No failure or delay
of the Administrative Agent, the Issuing Banks or any Lender in exercising any
power or right hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, preclude any other or
further exercise thereof or the exercise of any other right or power. The
rights and remedies of the Administrative Agent, the Issuing Banks and the
Lenders hereunder are cumulative and are not exclusive of any rights or
remedies which they would otherwise have. No waiver of any provision of this
Agreement or consent to any departure therefrom shall in any event be effective
unless the same shall be permitted by paragraph (b) below, and then such waiver
or consent shall be effective only in the specific instance and for the purpose
for which given. No notice or demand on any Borrower or any Subsidiary in any
case shall entitle such party to any other or further notice or demand in
similar or other circumstances.
(b) Neither this Agreement nor any provision hereof may be
waived, amended or modified except pursuant to an agreement or agreements in
writing entered into by the Borrowers and the Required Lenders; provided,
however, that no such agreement shall (i) decrease the principal amount of, or
extend the maturity of or any scheduled principal payment date or date for the
payment of any interest or fees on any Loan or for reimbursement of any L/C
Disbursement, or waive or excuse any such payment or any part thereof, or
decrease the rate of interest on any Loan or L/C Disbursement, without the
prior written consent of each Lender affected thereby, (ii) increase the
Commitment or decrease the Facility Fee, L/C Participation Fee of any Lender or
other amounts due to any Lender without the prior written consent of such
Lender, (iii) limit or release the guarantee set forth in Article VII, or (iv)
amend or modify the provisions of Section 2.16 or Section 9.04(h), the
provisions of this Section or the definition of the "Required Lenders", without
the prior written consent of each Lender; provided further, however, that no
such agreement shall amend, modify or otherwise affect the rights or duties of
the Administrative Agent or the Issuing Banks hereunder without the prior
written consent of the Administrative Agent or the Issuing Banks. Each Lender
shall be bound by any waiver, amendment or modification authorized by this
Section and any consent by any Lender pursuant to this Section shall bind any
assignee of its rights and interests hereunder.
SECTION 9.08. Entire Agreement. This Agreement, the
agreements referenced in Section 2.06(b) and the letter agreement attached as
Exhibit H constitute the entire contract among the
<PAGE> 24
56
parties relative to the subject matter hereof. Any previous agreement among
the parties with respect to the subject matter hereof is superseded by this
Agreement. Nothing in this Agreement, expressed or implied, is intended to
confer upon any party other than the parties hereto any rights, remedies,
obligations or liabilities under or by reason of this Agreement.
SECTION 9.09. Severability. In the event any one or more of
the provisions contained in this Agreement should be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected or
impaired thereby. The parties shall endeavor in good-faith negotiations to
replace the invalid, illegal or unenforceable provisions with valid provisions
the economic effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.
SECTION 9.10. Counterparts. This Agreement may be executed
in two or more counterparts, each of which shall constitute an original but all
of which when taken together shall constitute but one contract, and shall
become effective as provided in Section 9.03.
SECTION 9.11. Headings. Article and Section headings and the
Table of Contents used herein are for convenience of reference only, are not
part of this Agreement and are not to affect the construction of, or to be
taken into consideration in interpreting, this Agreement.
SECTION 9.12. Right of Setoff. If an Event of Default shall
have occurred and be continuing, each Lender is hereby authorized at any time
and from time to time, to the fullest extent permitted by law, to set off and
apply any and all deposits (general or special, time or demand, provisional or
final) at any time held and other indebtedness at any time owing by such Lender
to or for the credit or obligations of the Company and any Borrowing Subsidiary
now or hereafter existing under this Agreement held by such Lender,
irrespective of whether or not such Lender shall have made any demand under
this Agreement and although such obligations may be unmatured. Each Lender
agrees promptly to notify the Company and the Administrative Agent after such
setoff and application made by such Lender, but the failure to give such notice
shall not affect the validity of such setoff and application. The rights of
each Lender under this Section are in addition to other rights and remedies
(including other rights of setoff) which such Lender may have.
SECTION 9.13. JURISDICTION; CONSENT TO SERVICE OF PROCESS.
(A) EACH BORROWER HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF
AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF ANY NEW YORK STATE COURT
OR FEDERAL COURT OF THE UNITED STATES OF AMERICA SITTING IN NEW YORK CITY, AND
ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT
OF OR RELATING TO THIS AGREEMENT, ANY LOCAL CURRENCY ADDENDA OR ANY LETTER OF
CREDIT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE
PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN
RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH
NEW YORK STATE OR, TO THE EXTENT PERMITTED BY LAW, IN SUCH FEDERAL COURT. EACH
OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR
PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY
SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. SUBJECT TO THE
FOREGOING AND TO PARAGRAPH (B) BELOW, NOTHING IN THIS AGREEMENT SHALL AFFECT
ANY RIGHT THAT ANY PARTY HERETO MAY OTHERWISE HAVE TO BRING ANY ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT, ANY LOCAL CURRENCY ADDENDUM
<PAGE> 25
57
OR ANY LETTER OF CREDIT AGAINST ANY OTHER PARTY HERETO IN THE COURTS OF ANY
JURISDICTION.
(B) EACH BORROWER HEREBY IRREVOCABLY AND UNCONDITIONALLY
WAIVES, TO THE FULLEST EXTENT IT MAY LEGALLY AND EFFECTIVELY DO SO, ANY
OBJECTION WHICH IT MAY NOW OR THEREAFTER HAVE TO THE LAYING OF VENUE OF ANY
SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY
LOCAL CURRENCY ADDENDUM OR ANY LETTER OF CREDIT IN ANY NEW YORK STATE OR
FEDERAL COURT. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE
MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.
(C) EACH PARTY TO THIS AGREEMENT IRREVOCABLY CONSENTS TO
SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 9.01. NOTHING
IN THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY TO THIS AGREEMENT TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
SECTION 9.14. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY
HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY
ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT. EACH PARTY HERETO
(A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES
THAT IT AND OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT
BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATION IN THIS SECTION.
SECTION 9.15. Addition of Borrowing Subsidiaries. Each
Borrowing Subsidiary which shall deliver to the Administrative Agent a
Borrowing Subsidiary Agreement executed by such Subsidiary and the Company
shall, upon such delivery and without further act, become a party hereto and a
Borrower hereunder with the same effect as if it had been an original party to
this Agreement.
SECTION 9.16. Conversion of Currencies. (a) If, for the
purpose of obtaining judgment in any court, it is necessary to convert a sum
owing hereunder in one currency into another currency, each party hereto
agrees, to the fullest extent that it may effectively do so, that the rate of
exchange used shall be that at which in accordance with normal banking
procedures in the relevant jurisdiction the first currency could be purchased
with such other currency on the Business Day immediately preceding the day on
which final judgment is given.
(b) The obligations of the Borrowers in respect of any sum
due to any party hereto or any holder of the obligations owing hereunder (the
"Applicable Creditor") shall, notwithstanding any judgment in a currency (the
"Judgment Currency") other than the currency in which such sum is stated to be
due hereunder (the "Agreement Currency"), be discharged only to the extent
that, on the Business Day following receipt by the Applicable Creditor of any
sum adjudged to be so due in the Judgment Currency, the Applicable Creditor may
in accordance with normal banking procedures in the relevant jurisdiction
purchase the Agreement Currency with the Judgment Currency; if the amount of
the Agreement Currency so purchased is less than the sum originally due to the
Applicable Creditor in the
<PAGE> 26
58
Agreement Currency, the Borrowers agree, as a separate obligation and
notwithstanding any such judgment, to indemnify the Applicable Creditor against
such loss. The obligations of the Borrowers contained in this Section 9.16
shall survive the termination of this Agreement and the payment of all other
amounts owing hereunder.
SECTION 9.17. Execution. Upon execution by the Lenders, this
Agreement will be executed with Old ITT as "the Company" all as contemplated by
the letter agreement attached as Exhibit H, and upon execution of this
Agreement by the Company, the Company shall succeed to the rights and
obligations of Old ITT as contemplated in such agreement.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized officers as of the
day and year first above written.
ITT CORPORATION, as Borrower,
by
/s/ Elizabeth A. Tuttle
--------------------------------------
Name: Elizabeth A. Tuttle
Title: Vice President and Assistant Treasurer
CHEMICAL BANK, individually and as
Administrative Agent,
by
/s/ Robert K. Gaynor
--------------------------------------
Name: Robert K. Gaynor
Title: Vice President
ABN AMRO BANK N.V., NEW YORK BRANCH,
by
/s/ Frances O'R. Logan
--------------------------------------
Name: Frances O'R. Logan
Title: Vice President
by
/s/ William J. Van Nostrand
--------------------------------------
Name: William J. Van Nostrand
Title: Vice President
ARAB BANK PLC,
by
/s/ Nofal S. Barbar
--------------------------------------
Name: Nofal S. Barbar
Title: Executive Vice President
and Branch Manager
<PAGE> 27
59
BANCA COMMERCIALE ITALIANA, NEW YORK BRANCH,
by
/s/ C. Dougherty
--------------------------------------
Name: C. Dougherty
Title: Vice President
by
/s/ J. M. Welch
--------------------------------------
Name: J. M. Welch
Title: Assistant Vice President
BANCA DI ROMA, NEW YORK BRANCH,
by
/s/ Ralph L. Riehle
--------------------------------------
Name: Ralph L. Riehle
Title: First Vice President
by
/s/ Luca Balestra
--------------------------------------
Name: Luca Balestra
Title: Assistant Vice President
BANCA NAZIONALE DEL LAVORO S.P.A., NEW YORK BRANCH,
by
/s/ Giuliano Violetta
--------------------------------------
Name: Giuliano Violetta
Title: First Vice President
by
/s/ Giulio Giovine
--------------------------------------
Name: Giulio Giovine
Title: Vice President
BANCA POPOLARE DI MILANO,
by
/s/ Anthony Franco
--------------------------------------
Name: Anthony Franco
Title: Executive Vice President/General
Manager
by
/s/ Nicholas Cinosi
--------------------------------------
Name: Nicholas Cinosi
Title: Vice President
<PAGE> 28
60
BANK OF AMERICA ILLINOIS,
by
/s/ Donald J. Chin
--------------------------------------
Name: Donald J. Chin
Title: Authorized Officer
BANK OF HAWAII,
by
/s/ John R. Landgraf
--------------------------------------
Name: John R. Landgraf
Title: Officer
THE BANK OF NEW YORK,
by
/s/ Mary Anne Zagroba
--------------------------------------
Name: Mary Anne Zagroba
Title: Vice President
THE BANK OF NOVA SCOTIA,
by
/s/ J. Alan Edwards
--------------------------------------
Name: J. Alan Edwards
Title: Authorized Signatory
THE BANK OF TOKYO TRUST COMPANY,
by
/s/ Paul P. Malecki
--------------------------------------
Name: Paul P. Malecki
Title: Vice President
BANKERS TRUST COMPANY,
by
/s/ Katherine A. Judge
--------------------------------------
Name: Katherine A. Judge
Title: Vice President
BARCLAYS BANK PLC,
by
/s/ John C. Livingston
--------------------------------------
Name: John C. Livingston
Title: Associate Director
<PAGE> 29
61
BAYERISCHE LANDESBANK GIROZENTRALE, CAYMAN ISLANDS
BRANCH,
by
/s/ Wilfried Freudenberger
--------------------------------------
Name: Wilfried Freudenberger
Title: Executive Vice President and
General Manager
by
/s/ Peter Obermann
--------------------------------------
Name: Peter Obermann
Title: Senior Vice President
Manager Lending Division
CIBC, INC.,
by
/s/ J. Domkowski
--------------------------------------
Name: J. Domkowski
Title: Vice President
THE CHASE MANHATTAN BANK, N.A.,
by
/s/ David B. Townsend
--------------------------------------
Name: David B. Townsend
Title: Managing Director
CITIBANK, N.A.,
by
/s/ Elizabeth A. Palermo
--------------------------------------
Name: Elizabeth A. Palermo
Title: Attorney-in-fact
COMERICA BANK,
by
/s/ Tamara J. Gurne
--------------------------------------
Name: Tamara J. Gurne
Title: Account Officer
<PAGE> 30
62
COMMERZBANK AKTIENGESELLSCHAFT, GRAND CAYMAN BRANCH,
by
/s/ Thomas Ausfahl
--------------------------------------
Name: Thomas Ausfahl
Title: Assistant Vice President
by
/s/ Robert Donohue
--------------------------------------
Name: Robert Donohue
Title: Vice President
COMPAGNIE FINANCIERE DE CIC ET DE L'UNION EUROPEENNE,
by
/s/ Eric Longuet
--------------------------------------
Name: Eric Longuet
Title: Vice President
by
/s/ Albert M. Calo
--------------------------------------
Name: Albert M. Calo
Title: Vice President
CREDIT LYONNAIS, NEW YORK BRANCH,
by
/s/ Robert Ivosevich
--------------------------------------
Name: Robert Ivosevich
Title: Senior Vice President
CREDIT SUISSE,
by
/s/ Robert B. Potter
--------------------------------------
Name: Robert B. Potter
Title: Member of Senior Management
by
/s/ Chris T. Horgan
--------------------------------------
Name: Chris T. Horgan
Title: Associate
<PAGE> 31
63
CREDITO ITALIANO, S.P.A.,
by
/s/ Harmon P. Butler
--------------------------------------
Name: Harmon P. Butler
Title: First Vice President and Deputy Manager
by
/s/ Saiyed A. Abbas
--------------------------------------
Name: Saiyed A. Abbas
Title: Assistant Vice President
THE DAI-ICHI KANGYO BANK, LTD., NEW YORK BRANCH,
by
/s/ Timothy White
--------------------------------------
Name: Timothy White
Title: Vice President
DEN DANSKE BANK, AKTIESELSKAB
CAYMAN ISLANDS BRANCH,
by
/s/ Bent V. Christensen
--------------------------------------
Name: Bent V. Christensen
Title: Vice President
by
/s/ Mogens Sendergaard
--------------------------------------
Name: Mogens Sendergaard
Title: Vice President
DEUTSCHE BANK AG, NEW YORK BRANCH, AND/OR CAYMAN
ISLANDS BRANCH,
by
/s/ Hans-Josef Thiele
--------------------------------------
Name: Hans-Josef Thiele
Title: Vice President
by
/s/ Stephan A. Wiedemann
--------------------------------------
Name: Stephan A. Wiedemann
Title: Vice President
<PAGE> 32
64
DG BANK DEUTSCHE GENOSSENSCHAFTSBANK,
by
/s/ Mark K. Connelly
--------------------------------------
Name: Mark K. Connelly
Title: Vice President
by
/s/ Karen A. Brinkman
--------------------------------------
Name: Karen A. Brinkman
Title: Vice President
DRESDNER BANK AG, NEW YORK BRANCH, AND GRAND CAYMAN
BRANCH,
by
/s/ J. Michael Leffler
--------------------------------------
Name: J. Michael Leffler
Title: Senior Vice President
by
/s/ Ernest C. Fung
--------------------------------------
Name: Ernest C. Fung
Title: Vice President
FIRST INTERSTATE BANK OF CALIFORNIA,
by
/s/ William J. Baird
--------------------------------------
Name: William J. Baird
Title: Senior Vice President
by
/s/ Judy A. Maahs
--------------------------------------
Name: Judy A. Maahs
Title: Assistant Vice President
THE FIRST NATIONAL BANK OF BOSTON,
by
/s/ Paul P. Sassieni
--------------------------------------
Name: Paul P. Sasieni
Title: Vice President
THE FIRST NATIONAL BANK OF CHICAGO,
by
/s/ Rebecca McCloskey
--------------------------------------
Name: Rebecca McCloskey
Title: Vice President
<PAGE> 33
65
FIRST UNION NATIONAL BANK OF NORTH CAROLINA,
by
/s/ Mark M. Harden
--------------------------------------
Name: Mark M. Harden
Title: Vice President
THE FUJI BANK, LIMITED, NEW YORK BRANCH,
by
/s/ Gina M. Kearns
--------------------------------------
Name: Gina M. Kearns
Title: Vice President and Manager
THE INDUSTRIAL BANK OF JAPAN, LIMITED, NEW YORK
BRANCH,
by
/s/ John V. Veltri
--------------------------------------
Name: John V. Veltri
Title: Senior Vice President
ISTITUTO BANCARIO SAN PAOLO DI TORINO SPA,
by
/s/ Wendell Jones
--------------------------------------
Name: Wendell Jones
Title: Vice President
by
/s/ Ettore Viazzo
--------------------------------------
Name: Ettore Viazzo
Title: Vice President
KREDIETBANK N.V.,
by
/s/ Armen Karozichian
--------------------------------------
Name: Armen Karozichian
Title: Vice President
by
/s/ Robert Snauffer
--------------------------------------
Name: Robert Snauffer
Title: Vice President
<PAGE> 34
66
LLOYDS BANK PLC,
by
/s/ Paul D. Briamonte
--------------------------------------
Name: Paul D. Briamonte
Title: Vice President
by
/s/ Stephen J. Attree
--------------------------------------
Name: Stephen J. Attree
Title: Assistant Vice President
LTCB TRUST COMPANY,
by
/s/ Rene O. LeBlanc
--------------------------------------
Name: Rene O. LeBlanc
Title: Senior Vice President
THE MITSUBISHI BANK, LIMITED,
by
/s/ Paula Mueller
--------------------------------------
Name: Paula Mueller
Title: Vice President
THE MITSUBISHI TRUST AND BANKING CORPORATION,
by
/s/ Patricia Loret de Mola
--------------------------------------
Name: Patricia Loret de Mola
Title: Senior Vice President
MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
by
/s/ George J. Stapleton
--------------------------------------
Name: George J. Stapleton
Title: Vice President
NATIONAL WESTMINSTER BANK PLC, NASSAU BRANCH,
by
/s/ Anne Marie Torre
--------------------------------------
Name: Anne Marie Torre
Title: Vice President
<PAGE> 35
67
NATIONSBANK, N.A.,
by
/s/ James T. Gilland
--------------------------------------
Name: James T. Gilland
Title: Senior Vice President
THE NIPPON CREDIT BANK LTD.,
by
/s/ Barry S. Fein
--------------------------------------
Name: Barry S. Fein
Title: Assistant Vice President
THE NORTHERN TRUST COMPANY,
by
/s/ Daryl M. Robicsek
--------------------------------------
Name: Daryl M. Robicsek
Title: Vice President
PNC BANK, NATIONAL ASSOCIATION,
by
/s/ Tom Partridge
--------------------------------------
Name: Tom Partridge
Title: Commercial Banking Officer
ROYAL BANK OF CANADA,
by
/s/ Rainer R. Kraft
--------------------------------------
Name: Rainer R. Kraft
Title: Manager
THE SAKURA BANK, LIMITED, NEW YORK BRANCH,
by
/s/ Masahiro Nakajo
--------------------------------------
Name: Masahiro Nakajo
Title: Senior Vice President and Manager
THE SANWA BANK LIMITED, NEW YORK BRANCH,
by
/s/ Stephen C. Small
--------------------------------------
Name: Stephen C. Small
Title: Vice President and Area Manager
<PAGE> 36
68
SOCIETE GENERALE,
by
/s/ Sedare Coradin
--------------------------------------
Name: Sedare Coradin
Title: Vice President
THE SUMITOMO BANK, LIMITED, NEW YORK BRANCH,
by
/s/ Yoshinori Kawamura
--------------------------------------
Name: Yoshinori Kawamura
Title: Joint General Manager
SUNTRUST BANK, ATLANTA,
by
/s/ May M. Smith
--------------------------------------
Name: May M. Smith
Title: Banking Officer
by
/s/ Craig W. Farnsworth
--------------------------------------
Name: Craig W. Farnsworth
Title: Vice President
SWISS BANK CORPORATION, NEW YORK BRANCH,
by
/s/ Susan N. Isquith
--------------------------------------
Name: Susan N. Isquith
Title: Director
by
/s/ Edward J. McDonnell III
--------------------------------------
Name: Edward J. McDonnell III
Title: Associate Director
THE TOKAI BANK, LIMITED,
by
/s/ Stuart Schulman
--------------------------------------
Name: Stuart Schulman
Title: Senior Vice President
<PAGE> 37
69
TORONTO DOMINION (NEW YORK),
by
/s/ Randall Bingham
--------------------------------------
Name: Randall Bingham
Title: Managing Director
UNION BANK OF SWITZERLAND, NEW YORK BRANCH,
by
/s/ Robert W. Casey, Jr.
--------------------------------------
Name: Robert W. Casey, Jr.
Title: Vice President
by
/s/ Daniel R. Strickford
--------------------------------------
Name: Daniel R. Strickford
Title: Assistant Treasurer
WESTDEUTSCHE LANDESBANK GIROZENTRALE, NEW YORK AND
CAYMAN ISLANDS BRANCHES,
by
/s/ A. Kumbier
--------------------------------------
Name: A. Kumbier
Title: Managing Director
by
/s/ M.P.M. Ransley
--------------------------------------
Name: M.P.M. Ransley
Title: Associate
THE YASUDA TRUST AND BANKING COMPANY, LIMITED, NEW
YORK BRANCH,
by
/s/ Rohn M. Laudenschlager
--------------------------------------
Name: Rohn M. Laudenschlager
Title: Senior Vice President
<PAGE> 38
EXHIBIT A-1
FORM OF COMPETITIVE BID REQUEST
Chemical Bank, as Administrative Agent
for the Lenders referred to below,
270 Park Avenue
New York, NY 10017
Attention: [ ]
Dear Ladies and Gentlemen:
The undersigned, _______________ (the "Borrower"), refers to
the Five-Year Competitive Advance and Revolving Credit Facility Agreement dated
as of November 10, 1995 (as it may be amended, modified, extended or restated
from time to time, the "5-Year Agreement"), among the Borrower, the Borrowing
Subsidiaries parties thereto, the Lenders parties thereto and Chemical Bank, as
Administrative Agent. Capitalized terms used herein and not otherwise defined
herein shall have the meanings assigned to such terms in the 5-Year Agreement.
The Borrower hereby gives you notice pursuant to Section 2.03(a) of the 5-Year
Agreement that it requests a Competitive Borrowing under the 5-Year Agreement,
and in that connection sets forth below the terms on which such Competitive
Borrowing is requested to be made:
(A) Date of Competitive Borrowing
(which is a Business Day) __________________
(B) Principal amount of
Competitive Borrowing 1/ __________________
(C) Interest rate basis 2/ __________________
(D) Interest Period and the
last day thereof 3/ __________________
Upon acceptance of any or all of the Loans offered by the Lenders in
response to this request, the Borrower shall be deemed to have represented and
warranted that the conditions to lending specified in Section 4.01(b) and (c)
of the 5-Year Agreement have been satisfied.
Very truly yours,
[NAME OF BORROWER],
by
__________________________
Name:
Title: [Financial Officer]
____________________
1/ Not less than $10,000,000 (and in integral multiples of $5,000,000) or
greater than the Total Commitment then available.
2/ Eurocurrency Competitive Loan or Fixed Rate Loan.
3/ Which shall be subject to the definition of "Interest Period" and end not
later than the Maturity Date.
<PAGE> 39
EXHIBIT A-2
FORM OF NOTICE OF COMPETITIVE BID REQUEST
[Name of Lender]
[Address]
[Date]
Attention: [ ]
Dear Ladies and Gentlemen:
Reference is made to the Five-Year Competitive Advance and Revolving
Credit Facility Agreement dated as of November 10, 1995 (as it may hereafter be
amended, modified, extended or restated from time to time, the "5-Year
Agreement"), among ITT Corporation [,__________] (the "Borrower"), the
Borrowing Subsidiaries parties thereto, the Lenders parties thereto and
Chemical Bank, as Administrative Agent. Capitalized terms used herein and not
otherwise defined herein shall have the meanings assigned to such terms in the
5-Year Agreement. The Borrower made a Competitive Bid Request on __________,
19[ ], pursuant to Section 2.03(a) of the 5-Year Agreement, and in that
connection you are invited to submit a Competitive Bid by [Date]/[Time]. 1/
Your Competitive Bid must comply with Section 2.03(b) of the 5-Year Agreement
and the terms set forth below on which the Competitive Bid Request was made:
(A) Date of Competitive Borrowing _________________
(B) Principal amount of
Competitive Borrowing _________________
(C) Interest rate basis _________________
(D) Interest Period and the
last day thereof _________________
Very truly yours,
CHEMICAL BANK,
as Administrative Agent,
by
__________________________
Name:
Title:
____________________
1/ The Competitive Bid must be received by the Administrative Agent (i) in
the case of Eurocurrency Competitive Loans, not later than 10:00 a.m., New York
City time, four Business Days before a proposed Competitive Borrowing, and (ii)
in the case of Fixed Rate Loans, not later than 10:00 a.m., New York City time,
one Business Day before a proposed Competitive Borrowing.
<PAGE> 40
EXHIBIT A-3
FORM OF COMPETITIVE BID
Chemical Bank, as Administrative Agent
for the Lenders referred to below,
270 Park Avenue
New York, N.Y. 10017
[Date]
Attention: [ ]
Dear Ladies and Gentlemen:
The undersigned, [Name of Lender], refers to the Five-Year Competitive
Advance and Revolving Credit Facility Agreement dated as of November 10, 1995
(as it may be amended, modified, extended or restated from time to time, the
"5-Year Agreement"), among ITT Corporation (the "Borrower"), the Borrowing
Subsidiaries parties thereto, the Lenders parties thereto and Chemical Bank, as
Administrative Agent. Capitalized terms used herein and not otherwise defined
herein shall have the meanings assigned to such terms in the 5-Year Agreement.
The undersigned hereby makes a Competitive Bid pursuant to Section 2.03(b) of
the 5-Year Agreement, in response to the Competitive Bid Request made by the
Borrower on ___________, 19[ ], and in that connection sets forth below the
terms on which such Competitive Bid is made:
(A) Principal Amount 1/ _________________
(B) Competitive Bid Rate 2/ _________________
(C) Interest Period and last
day thereof _________________
The undersigned hereby confirms that it is prepared, subject to the
conditions set forth in the 5-Year Agreement, to extend credit to the Borrower
upon acceptance by the Borrower of this bid in accordance with Section 2.03(d)
of the 5-Year Agreement.
Very truly yours,
[NAME OF LENDER],
by
_____________________________________
Name:
Title:
____________________
1/ Not less than $5,000,000 or greater than the requested Competitive
Borrowing and in integral multiples of $1,000,000. Multiple bids will be
accepted by the Administrative Agent.
2/ i.e., LIBO Rate + or - __%, in the case of Eurocurrency Competitive
Loans or ___%, in the case of Fixed Rate Loans.
<PAGE> 41
EXHIBIT A-4
FORM OF COMPETITIVE BID ACCEPT/REJECT LETTER
[Date]
Chemical Bank, as Administrative Agent
for the Lenders referred to below
270 Park Avenue
New York, N.Y. 10017
Attention: [ ]
Dear Ladies and Gentlemen:
The undersigned, _______________ (the "Borrower"), refers to the
Five-Year Competitive Advance and Revolving Credit Facility Agreement dated as
of November 10, 1995 (as it may be amended, modified, extended or restated from
time to time, the 5-Year Agreement"), among the Borrower, the Borrowing
Subsidiaries parties thereto, the Lenders parties thereto and Chemical Bank, as
Administrative Agent for the Lenders.
In accordance with Section 2.03(c) of the 5-Year Agreement, we have
received a summary of bids in connection with our Competitive Bid Request dated
_____________, and in accordance with Section 2.03(d) of the 5-Year Agreement,
we hereby accept the following bids for maturity on [date]:
<TABLE>
<CAPTION>
Principal Amount Fixed Rate/Margin Lender
- - ---------------- ----------------- ------
<S> <C> <C>
$ [%]/[+/-. %]
$
</TABLE>
We hereby reject the following bids:
<TABLE>
<CAPTION>
Principal Amount Fixed Rate/Margin Lender
- - ---------------- ----------------- ------
<S> <C> <C>
$ [%]/[+/-. %]
$
</TABLE>
The $__________ should be deposited in Chemical Bank account number
[ ] on [date].
Very truly yours,
[NAME OF BORROWER],
by
_________________________________________
Name:
Title:
<PAGE> 42
EXHIBIT A-5
FORM OF STANDBY BORROWING REQUEST
Chemical Bank, as Administrative Agent
for the Lenders referred to below,
270 Park Avenue
New York, N.Y. 10017
[Date]
Attention: [ ]
Dear Ladies and Gentlemen:
The undersigned, _______________ (the "Borrower"), refers to the
Five-Year Competitive Advance and Revolving Credit Facility Agreement dated as
of November 10, 1995 (as it may be amended, modified, extended or restated from
time to time, the "5- Year Agreement"), among the Borrower, the Borrowing
Subsidiaries parties thereto, the Lenders parties thereto and Chemical Bank, as
Administrative Agent. Capitalized terms used herein and not otherwise defined
herein shall have the meanings assigned to such terms in the 5-Year Agreement.
The Borrower hereby gives you notice pursuant to Section 2.04 of the 5-Year
Agreement that it requests a Standby Borrowing under the 5-Year Agreement, and
in that connection sets forth below the terms on which such Standby Borrowing
is requested to be made:
(A) Date of Standby Borrowing
(which is a Business Day) __________________
(B) Principal amount of
Standby Borrowing 1/ __________________
(C) Interest rate basis 2/ __________________
(D) Interest Period and the
last day thereof 3/ __________________
Upon acceptance of any or all of the Loans made by the Lenders in
response to this request, the Borrower shall be deemed to have represented and
warranted that the conditions to lending specified in Section 4.01(b) and (c)
of the 5-Year Agreement have been satisfied.
Very truly yours,
[NAME OF BORROWER],
by
__________________________
Name:
Title: [Financial Officer]
____________________
1/ Not less than $20,000,000 (and in integral multiples of $5,000,000) or
greater than the Total Commitment then available.
2/ Eurocurrency Standby Loan or Fixed Rate Loan.
3/ Which shall be subject to the definition of "Interest Period" and end not
later than the Maturity Date.
<PAGE> 43
EXHIBIT B
[CHEMICAL LOGO]
CHEMICAL BANK
140 East 45th Street
New York, NY 10017-3162
212/622-0001
Fax 212/622-0002
Telex 353006 ABSC NYK
ITT CORPORATION
ADMINISTRATIVE QUESTIONNAIRE
Please accurately complete the following information and return via FAX to the
attention of Janet Belden at Chemical Bank as soon as possible:
FAX NUMBER: 212-622-0122
LEGAL NAME TO APPEAR IN DOCUMENTATION:
_______________________________________________________________________________
GENERAL INFORMATION - DOMESTIC LENDING OFFICE:
Institution Name: ____________________________________________________________
Street Address: __________________________________________________________
City, State, Zip Code: _______________________________________________________
GENERAL INFORMATION - EURODOLLAR LENDING OFFICE:
Institution Name: __________________________________________________________
Street Address: _________________________________________________________
City, State, Zip Code: _______________________________________________________
CONTACTS/NOTIFICATION METHODS:
CREDIT CONTACTS:
Primary contact: ______________________________________________________________
Street Address: ______________________________________________________________
City, State, Zip Code: _______________________________________________________
Phone Number: ______________________________________________________________
FAX Number: ______________________________________________________________
Backup Contact: ______________________________________________________________
Street Address: ______________________________________________________________
City, State, Zip Code: _______________________________________________________
Phone Number: ______________________________________________________________
FAX Number: ______________________________________________________________
<PAGE> 44
EXHIBIT B
TAX WITHHOLDING:
Non Resident Alien __________ Y* _________N
* Form 4224 Enclosed
Tax ID Number _______________________________
CONTACTS/NOTIFICATION METHODS:
ADMINISTRATIVE CONTACTS - BORROWINGS, PAYDOWNS, INTEREST, FEES, ETC.
Contact: _____________________________________________________________________
Street Address: ______________________________________________________________
City, State, Zip Code: ________________________________________________________
Phone Number: _________________________________________________________________
FAX Number: ___________________________________________________________________
BID LOAN NOTIFICATION:
Contact: _____________________________________________________________________
Street Address: ______________________________________________________________
City, State, Zip Code: ________________________________________________________
Phone Number: _________________________________________________________________
FAX Number: ___________________________________________________________________
PAYMENT INSTRUCTIONS:
Name of Bank where funds are to be transferred:
_______________________________________________________________________________
Routing Transit/ABA number of Bank where funds are to be transferred:
_______________________________________________________________________________
Name of Account, if applicable:
_______________________________________________________________________________
Account Number: ______________________________________________________________
Additional Information: _______________________________________________________
MAILINGS:
Please specified who should receive financial information:
Name: _________________________________________________________________________
Street Address: _______________________________________________________________
City, State, Zip Code: ________________________________________________________
It is very important that all of the above information is accurately filled in
and returned promptly. If there is someone other than yourself who should
receive this questionnaire, please notify us of their name and FAX number and
we will FAX them a copy of the questionnaire. If you have any questions,
please call me on 212-622-0011.
<PAGE> 45
EXHIBIT C
[FORM OF]
ASSIGNMENT AND ACCEPTANCE
Dated: _________, 19__
Reference is made to the Five-Year Competitive Advance and
Revolving Credit Facility Agreement dated as of November 10, 1995 (the "5-Year
Agreement"), among ITT Corporation (the "Company"), the Borrowing Subsidiaries
parties thereto, the Lenders parties thereto (the "Lenders") and Chemical Bank,
as Administrative Agent for the Lenders. Terms defined in the 5-Year Agreement
are used herein with the same meanings.
1. The Assignor hereby sells and assigns, without recourse,
to the Assignee, and the Assignee hereby purchases and assumes, without
recourse, from the Assignor, effective as of the Effective Date set forth
below, the interests set forth below (the "Assigned Interest") in the
Assignor's rights and obligations under the 5-Year Agreement, including,
without limitation, the interests set forth below in the Commitment of the
Assignor on the Effective Date and the Competitive Loans and Standby Loans
owing to the Assignor which are outstanding on the Effective Date. Each of the
Assignor and the Assignee hereby makes and agrees to be bound by all the
representations, warranties and agreements set forth in Section 9.04 of the
5-Year Agreement, a copy of which has been received by each such party. From
and after the Effective Date, (i) the Assignee shall be a party to and be bound
by the provisions of the 5-Year Agreement and, to the extent of the interests
assigned by this Assignment and Acceptance, have the rights and obligations of
a Lender thereunder and (ii) the Assignor shall, to the extent of the interests
assigned by this Assignment and Acceptance, relinquish its rights and be
released from its obligations under the 5-Year Agreement.
2. This Assignment and Acceptance is being delivered to the
Administrative Agent together with (i) if the Assignee is organized under the
laws of a jurisdiction outside the United States, the forms specified in
Section 2.19(g) of the 5-Year Agreement, duly completed and executed by such
Assignee, (ii) if the Assignee is not already a Lender under the 5-Year
Agreement, an Administrative Questionnaire in the form of Exhibit B to the
5-Year Agreement and (iii) a processing and recordation fee of $3,000.
3. This Assignment and Acceptance shall be governed by and
construed in accordance with the laws of the State of New York.
Date of Assignment:
Legal Name of Assignor:
Legal Name of Assignee:
Assignee's Address for Notices:
<PAGE> 46
Effective Date of Assignment
(may not be fewer than 5 Business
Days after the Date of Assignment):
<TABLE>
<CAPTION>
Percentage Assigned of
Facility/Commitment (set forth,
to at least 8 decimals, as a
Principal Amount Assigned (and percentage of the Facility and
identifying information as to the aggregate Commitments of
Facility individual Competitive Loans) all Lenders thereunder)
-------- ----------------------------- -----------------------
<S> <C> <C>
Commitment Assigned:
$____________ ___________ %
Standby Loans: $____________ ___________ %
Competitive Loans: $____________ ___________ %
</TABLE>
The terms set forth and on the reverse side Accepted:
hereof are hereby agreed to:
ITT CORPORATION,
________________________________, as by: ___________________________
Assignor, Name:
Title:
by: ____________________________
Name:
Title:
________________________________,
as Assignee,
by: ____________________________
Name:
Title:
<PAGE> 47
EXHIBIT D
[FORM OF]
OPINION OF COUNSEL FOR
ITT CORPORATION 1/
1. ITT Corporation (i) is a corporation duly organized,
validly existing and in good standing under the laws of the State of Nevada
(ii) has all requisite power and authority to own its property and assets and
to carry on its business as now conducted, (iii) is qualified to do business in
every jurisdiction within the United States where such qualification is
required, except where the failure so to qualify would not result in a Material
Adverse Effect on ITT Corporation, and (iv) has all requisite corporate power
and authority to execute, deliver and perform its obligations under the
Agreement and to borrow funds thereunder.
2. The execution, delivery and performance by ITT Corporation
of the Agreement and the borrowings of ITT Corporation thereunder
(collectively, the "Transactions") (i) have been duly authorized by all
requisite corporate action and (ii) will not (a) violate (1) any provision of
law, statute, rule or regulation (including without limitation, the Margin
Regulations), or of the certificate of incorporation or other constitutive
documents or by-laws of ITT Corporation, (2) any order of any governmental
authority or (3) any provision of any indenture, agreement or other instrument
to which ITT Corporation is a party or by which it or its property is or may be
bound, (b) be in conflict with, result in a breach of or constitute (alone or
with notice or lapse of time or both) a default under any such indenture,
agreement or other instrument or (c) result in the creation or imposition of
any lien upon any property or assets of ITT Corporation.
3. The Agreement has been duly executed and delivered by ITT
Corporation and constitutes a legal, valid and binding obligation of ITT
Corporation enforceable against ITT Corporation in accordance with its terms,
subject as to the enforceability of rights and remedies to any applicable
bankruptcy, reorganization, insolvency, moratorium or other similar laws of
general application relating to or affecting the enforcement of creditors'
rights from time to time in effect.
4. No action, consent or approval of, registration or filing
with, or any other action by, any government authority is or will be required
in connection with the Transactions, except such as have been made or obtained
and are in full force and effect.
5. Neither ITT Corporation nor any of its subsidiaries is (a)
except as set forth in the next sentence, an "investment company" as defined
in, or subject to regulation under, the Investment Company Act of 1940 (the
"1940 Act") or (b) a "holding company" as defined in, or subject to regulation
under, the Public Utility Holding Company Act of 1935.
____________________
1/ Capitalized terms used but not otherwise defined herein shall have the
meanings assigned to such terms in the 5-Year Competitive Advance and Revolving
Credit Facility Agreement (the "Agreement") dated as of November 10, 1995, among
ITT Corporation, the lenders listed in Schedule 2.01 thereto, and Chemical Bank,
as Administrative Agent.
<PAGE> 48
EXHIBIT E to the
Credit Agreement
BORROWING SUBSIDIARY AGREEMENT dated as of
[ ], among ITT CORPORATION, a Nevada
corporation (the "Company"), [Name of Subsidiary], a
[ ] corporation ("the Subsidiary"), and
CHEMICAL BANK, as administrative agent (the
"Administrative Agent") for the lenders (the
"Lenders") party to the 5-Year Competitive Advance and
Revolving Credit Facility Agreement dated as of
November 10, 1995, as amended (the "Agreement"), among
the Company, the Administrative Agent and the Lenders.
Under the Agreement, the Lenders have agreed, upon the terms
and subject to the conditions therein set forth, to make competitive advance
and revolving credit loans and to issue Letters of Credit to the Company and to
Subsidiaries (as defined in the Agreement) of the Company which execute and
deliver to the Administrative Agent Borrowing Subsidiary Agreements in the form
of this Borrowing Subsidiary Agreement. The Company represents that the
Subsidiary is a subsidiary (as so defined) of the Company and that the
guarantee of the Company contained in Article VII of the Agreement applies to
the obligations of the Subsidiary. In consideration of being permitted to
borrow or have Letters of Credit issued under the Agreement upon the terms and
subject to the conditions set forth therein, the Subsidiary agrees that from
and after the date of this Borrowing Subsidiary Agreement it will be, and will
be liable for the observance and performance of all the obligations of, a
Borrowing Subsidiary under the Agreement, as the same may be amended from time
to time, to the same extent as if it had been one of the original parties to
the Agreement and that it will furnish to the Administrative Agent and the
Lenders copies of its financial statements on an annual basis.
IN WITNESS WHEREOF, the Company and the Subsidiary have caused
this Borrowing Subsidiary Agreement to be duly executed by their authorized
officers as of the date first appearing above.
ITT CORPORATION,
by ______________________
Name:
Title:
[NAME OF SUBSIDIARY],
by ______________________
Name:
Title:
Accepted as of the date
first appearing above:
CHEMICAL BANK, as Administrative
Agent,
by ______________________
Name:
Title:
<PAGE> 49
EXHIBIT F to the
Credit Agreement
ISSUING BANK AGREEMENT dated as of [ ],
1995, between ITT CORPORATION, a Nevada corporation
("ITT") and the financial institution identified on
Schedule I hereto as the Issuing Bank (the "Issuing
Bank").
Reference is made to the 5-Year Competitive Advance and
Revolving Credit Facility Agreement dated as of November 10, 1995 (as amended,
modified, extended or restated from time to time, the "Credit Agreement"),
among ITT, the Borrowing Subsidiaries parties thereto, the Lenders named
therein and Chemical Bank, as Administrative Agent. ITT and the Issuing Bank
desire to enter into this Agreement in order to provide for Letters of Credit
to be issued by the Issuing Bank as contemplated by the Credit Agreement.
Accordingly, the parties hereto agree as follows:
SECTION 1. Defined Terms. Capitalized terms used herein and
not otherwise defined herein shall have the respective meanings specified in
the Credit Agreement. The provisions of Section 1.02 of the Credit Agreement
shall apply to this Agreement as though set forth herein.
SECTION 2. Letter of Credit Commitment. The Issuing Bank
hereby agrees to be an "Issuing Bank" under, and, subject to the terms and
conditions hereof and of the Credit Agreement, to issue Letters of Credit
under, the Credit Agreement; provided, however, that Letters of Credit issued
by the Issuing Bank hereunder shall be subject to the limitations, if any, set
forth on Schedule I hereto, in addition to the limitations set forth in the
Credit Agreement.
SECTION 3. Issuance Procedure. In order to request the
issuance of a Letter of Credit hereunder, the Account Party (or ITT on behalf
of the applicable Account Party) shall hand deliver or telecopy a notice
(specifying the information required by Section 2.23(b) of the Credit
Agreement) to the Issuing Bank, at its address or telecopy number specified on
Schedule I hereto (or such other address or telecopy number as the Issuing Bank
may specify by notice to ITT), not later than the time of day (local time at
such address) specified on Schedule I hereto prior to the proposed date of
issuance of such Letter of Credit. A copy of such notice shall be sent,
concurrently, by the applicable Account Party (or ITT on behalf of the
applicable Account Party) to the Administrative Agent in the manner specified
for Borrowing Requests under the Credit Agreement. Upon receipt of such
notice, the Issuing Bank shall consult the Administrative Agent by telephone in
order to determine (i) whether the conditions specified in the last sentence of
Section 2.23(b) of the Credit Agreement will be satisfied in connection with
the issuance of such Letter of Credit and (ii) whether the requested expiration
date for such Letter of Credit complies with the proviso to Section 2.23(c) of
the Credit Agreement.
SECTION 4. Issuing Bank Fees, Interest and Payments. The
Issuing Bank Fees payable to the Issuing Bank in respect of Letters of Credit
issued hereunder are specified on Schedule I hereto (and such fees shall be in
addition to the Issuing Bank's customary documentary and processing charges in
connection with the issuance, amendment or transfer of any Letter of Credit
issued hereunder). Each payment of Issuing Bank Fees payable hereunder shall
be made not later than 12:00 (noon), local time at the place of payment, on the
date when due, in immediately available funds, to the account of the Issuing
Bank specified on Schedule I hereto (or to such other account of the Issuing
Bank as it may specify by notice to ITT).
<PAGE> 50
SECTION 5. Credit Agreement Terms. Notwithstanding any
provision hereof which may be construed to the contrary, it is expressly
understood and agreed that (a) this Agreement is supplemental to the Credit
Agreement and is intended to constitute an Issuing Bank Agreement, as defined
therein (and, as such, constitutes an integral part of the Credit Agreement as
though the terms of this Agreement were set forth in the Credit Agreement), (b)
each Letter of Credit issued hereunder and each and every L/C Disbursement made
under any such Letter of Credit shall constitute a "Letter of Credit" and an
"L/C Disbursement", respectively, for all purposes of the Credit Agreement and
the other Loan Documents, (c) the Issuing Bank's commitment to issue Letters of
Credit hereunder and each and every Letter of Credit requested or issued
hereunder shall be subject to the terms and conditions of the Credit Agreement
and entitled to the benefits of the Loan Documents and (d) the terms and
conditions of the Credit Agreement are hereby incorporated herein as though set
forth herein in full and shall supersede any contrary provisions hereof.
SECTION 6. Assignment. The Issuing Bank may not assign its
commitment to issue Letters of Credit hereunder without the consent of ITT and
prior notice to the Administrative Agent. In the event of an assignment by the
Issuing Bank of all its other interests, rights and obligations under the
Credit Agreement, then the Issuing Bank's commitment to issue Letters of Credit
hereunder shall terminate unless the Issuing Bank, ITT and the Administrative
Agent otherwise agree.
SECTION 7. Effectiveness. This Agreement shall not be
effective until counterparts hereof executed on behalf of each of ITT and the
Issuing Bank have been delivered to and accepted by the Administrative Agent.
IN WITNESS WHEREOF, each of the parties hereto has caused a
counterpart of this Agreement to be duly executed and delivered as of the date
first above written.
ITT CORPORATION,
by ______________________
Name:
Title:
[ISSUING BANK],
by _______________________
Name:
Title:
Accepted:
CHEMICAL BANK, as
Administrative Agent,
by ____________________________
Name:
Title:
<PAGE> 51
SCHEDULE I to
Issuing Bank Agreement
<TABLE>
<S> <C>
A. Issuing Bank:
B. Issuing Bank's Address and
Telecopy Number for Notices:
C. Time of Day by Which Notices A notice requesting the issuance of a Letter of Credit
Must be Received must be received by the Issuing Bank by 10:00 a.m. (New
York time) not less than five Business Days prior to the
proposed date of issuance.
D. Special Terms: The aggregate L/C Exposure in respect of Letters of
Credit issued pursuant to this Agreement shall not exceed
$[ ].
E. Issuing Bank Fees: [ ]% per annum on the average daily undrawn amount of
the Scheduled Letters of Credit, payable on the same
dates that L/C Participation Fees are payable under the
Credit Agreement.
F. Issuing Bank's Account for
Payment of Issuing Bank Fees:
</TABLE>
<PAGE> 52
EXHIBIT G
[FORM OF]
LOCAL CURRENCY ADDENDUM
To: Chemical Bank, as Administrative Agent
From: ITT Corporation
1. This Local Currency Addendum is being delivered to you
pursuant to Section 2.21(b) of the 5-Year Competitive Bid and Revolving Credit
Facility, dated as of November 10, 1995, among ITT Corporation, the Borrowing
Subsidiaries parties thereto, the Lenders parties thereto and Chemical Bank, as
Administrative Agent (as the same may be amended, supplemented or otherwise
modified from time to time, the "Credit Agreement"). Terms defined in the
Credit Agreement and used herein shall have the meanings given to them in the
Credit Agreement.
2. The effective date (the "Effective Date") of this Local
Currency Addendum will be [ ].
LOCAL CURRENC(Y)(IES):
<TABLE>
<S> <C>
LOCAL CURRENCY FACILITY
MAXIMUM BORROWING AMOUNT: $
</TABLE>
<TABLE>
<CAPTION>
LOCAL CURRENCY Local Currency Lender
LENDERS: Name of Lender Maximum Borrowing Amount
-------------- ------------------------
<S> <C> <C>
$
</TABLE>
LIST OF DOCUMENTATION GOVERNING
LOCAL CURRENCY FACILITY
(THE "DOCUMENTATION"): 1/
3. The Company hereby represents and warrants that (i) as of
the Effective Date, an Exchange Rate with respect to each Local Currency is
determinable by reference to the Reuters currency pages (or comparable publicly
available screen), (ii) the Documentation complies in all respects with the
requirements of Section 2.21 of the Credit Agreement and (iii)___________
____________________
1/ Copies of the Documentation must accompany the Local Currency Addendum,
together with, if applicable, an English translation thereof (provided, that the
Company may instead furnish a summary term sheet in English so long as an
English translation of the Documentation is furnished to the Administrative
Agent or its counsel within 90 days after the date of delivery of the Local
Currency Addendum).
<PAGE> 53
2
of__________ 2/ contains an express acknowledgement that such Local Currency
Loan shall be subject to the provisions of Sections 2.21 and 2.22 of the Credit
Agreement.
ITT CORPORATION
By ______________________________
Title:
Accepted and Acknowledged:
CHEMICAL BANK, as Administrative Agent
By _____________________________________
Title:
[ ], as Local Currency Lender
By ______________________________
Title:
____________________
2/ Provide citation to relevant provision from the Documentation.
<PAGE> 54
Exhibit H
ITT Corporation
1330 Avenue of the Americas
New York, NY 10019
November ___, 1995
Chemical Bank, as Administrative Agent
for the Lenders
270 Park Avenue
New York, NY 10019
Attention: Elisabeth Hughes
Dear Sirs:
Reference is made to the 364-Day Competitive Advance and
Revolving Credit Facility Agreement and the Five-Year Competitive Advance and
Revolving Credit Facility Agreement (collectively, the "Credit Agreements"),
each among ITT Corporation, a Nevada corporation ("New ITT"), the lenders
listed in Schedules 2.01 thereto (the "Lenders") and Chemical Bank, as
administrative agent for the Lenders (the "Administrative Agent").
1. As contemplated by Section 9.16 of the 364-Day Credit
Agreement, and Section 9.17 of the Five-Year Credit Agreement, ITT Corporation,
a Delaware corporation ("Old ITT"), and the Administrative Agent, acting on
behalf of the Lenders, hereby agree that the Credit Agreements shall be
executed on the date hereof and that, except as otherwise provided herein, Old
ITT will have all rights and obligations of the "Company" referred to therein.
2. Old ITT agrees that upon the completion of the
Distribution, it shall cause New ITT to execute, and New ITT shall succeed to
the rights and obligations of Old ITT under, the Credit Agreements.
3. Old ITT further agrees that prior to each of (a) the
successions referred to in paragraph 2 above, (b) the termination and
cancellation of the Existing Credit Facilities (as defined in the Credit
Agreements), (c) the completion of the Distribution and (d) the satisfaction of
the other conditions set forth in the Credit Agreements, Old ITT shall not make
any Borrowing or request the issuance of any Letter of Credit under the Credit
Agreements.
This letter agreement shall be deemed to be a part of each of
the Credit Agreements and shall have the same effect as if set forth in full
therein. The failure of the
<PAGE> 55
Borrower to comply with the terms of this letter agreement shall constitute an
Event of Default under the Credit Agreements.
Very truly yours,
ITT CORPORATION
by
__________________________
Name:
Title:
Accepted and agreed to
as of the date first
written above:
CHEMICAL BANK, as Administrative Agent
by
______________________
Name:
Title:
<PAGE> 56
SCHEDULE 2.01
<TABLE>
<CAPTION>
Contact Person
--------------
Name and Address of Lender and Telecopy Number Commitment
-------------------------- ------------------- ----------
<S> <C> <C>
Chemical Bank Ms. Nancy Mistretta $ 103,333,333.14
270 Park Avenue (212) 270-6041
New York, NY 10017
ABN AMRO Bank, N.V. Ms. Margaret Hannahoe $ 26,666,666.67
500 Park Avenue (212) 832-7129
New York, NY 10022
Arab Bank Plc Mr. Peter Boyadjian $ 16,666,666.67
520 Madison Avenue (212) 593-4632
New York, NY 10022
Banca Commerciale Italiana Ms. Elizabeth Cronin $ 26,666,666.67
New York Branch (212) 809-2124
1 William Street
New York, NY 10004
Banca di Roma S.p.A. Mr. Ralph Riehle $ 16,666,666.67
34 East 51st Street, 7th Floor (212) 407-1118
New York, NY 10005
Banca Nazionale del Lavoro Mr. Giulio Giovine $ 26,666,666.67
New York Branch (212) 765-2978
25 W. 51st Street Rockefeller Plaza
New York, NY 10019
Banca Popolare di Milano Mr. Nicholas Cinosi $ 16,666,666.67
375 Park Avenue (212) 586-3537
New York, NY 10152
Bank of America Illinois Ms. Bonnie Ptaszkowski $ 46,666,666.67
USCG - Account Administration (212) 974-9626
200 W. Jackson Street, 9th Floor
Chicago, IL 60679
with copy to:
Bank of America Mr. Donald Chin
335 Madison Avenue (212) 503-7771
New York, NY 10017
Bank of Hawaii Mr. Scott G. Balke $ 16,666,666.67
111 South King Street (808) 537-8301
P.O. Box 2900
Honolulu, HI 96813
The Bank of New York Ms. Mary Anne Zagroba $ 36,666,666.67
One Wall Street (212) 635-1480
New York, NY 10286
</TABLE>
<PAGE> 57
2
<TABLE>
<CAPTION>
Contact Person
--------------
Name and Address of Lender and Telecopy Number Commitment
-------------------------- ------------------- ----------
<S> <C> <C>
The Bank of Nova Scotia Mr. Philip Adsetts $ 46,666,666.67
One Liberty Plaza (212) 225-5090/91
New York, NY 10006
The Bank of Tokyo Trust Company Mr. Paul P. Malecki $ 46,666,666.67
1251 Avenue of the Americas (212) 782-6440
12th Floor
New York, NY 10116-3138
Bankers Trust Company Ms. Katherine Judge $ 46,666,666.67
130 Liberty Street (212) 250-4969
New York, NY 10006
Barclays Bank PLC Ms. Afsaneh Naimollah $ 46,666,666.67
222 Broadway, 11th Floor (212) 412-7580
New York, NY 10038
Bayerische Landesbank Girozentrale Ms. Joanne Cicino $ 26,666,666.67
111 East 50th Street (212) 310-9868
New York, NY 10022
CIBC, Inc. Ms. Judith Domkowski $ 36,666,666.67
425 Lexington Avenue (212) 856-3991
New York, NY 10017
The Chase Manhattan Bank, N.A. Mr. Edward F. McNulty $ 46,666,666.67
One Chase Manhattan Plaza (212) 552-7879
New York, NY 10081
Citibank, N.A. Ms. Elizabeth Palermo $ 46,666,666.67
399 Park Avenue (212) 826-2375
New York, NY 10043
Comerica Bank Ms. Tammy Gurne $ 26,666,666.67
500 Woodward Avenue (313) 222-7806
Detroit, MI 48226-3280
Commerzbank AG Mr. Thomas Ausfahl $ 26,666,666.67
2 World Financial Center (212) 266-7235
New York, NY 10281
Compagnie Financiere de CIC et de Ms. Martha Skidmore $ 16,666,666.67
l'Union Europeenne (212) 715-4535
520 Madison Avenue
37th Floor
New York, NY 10022
</TABLE>
<PAGE> 58
3
<TABLE>
<CAPTION>
Contact Person
--------------
Name and Address of Lender and Telecopy Number Commitment
-------------------------- ------------------- ----------
<S> <C> <C>
Credit Lyonnais Mr. Michael Moretti $ 46,666,666.67
1301 Avenue of the Americas (212) 459-3179
18th Floor
New York, NY 10019
Credit Suisse Ms. Carole Lustig $ 46,666,666.67
Tower 49 (212) 238-5439
12 East 49th Street
New York, NY 10017
Credito Italiano Mr. Harmon Butler $ 16,666,666.67
375 Park Avenue (212) 546-9675
New York, NY 10152
The Dai-Ichi Kangyo Bank, Ltd. Mr. Timothy White $ 36,666,666.67
One World Trade Center (212) 524-0579
Suite 4911
New York, NY 10048
Den Danske Bank Mr. Mogens Sondergaard $ 16,666,666.67
280 Park Avenue (212) 370-9239
New York, NY 10017
Deutsche Bank AG Mr. Rolf-Peter Mikolayczyk $ 46,666,666.67
New York Branch (212) 474-8212
31 West 52nd Street
New York, NY 10019
DG Bank Deutsche Mr. Mark Connelly $ 26,666,666.67
Genossenschaftsbank (212) 745-1556
609 Fifth Avenue
8th Floor
New York, NY 10017
Dresdner Bank AG Mr. Michael Leffler $ 46,666,666.67
New York Branch (212) 574-0130
75 Wall Street
New York, NY 10005-2889
First Interstate Bank of California Mr. Roy Roberts $ 26,666,666.67
885 Third Avenue (212) 593-5241
New York, NY 10022
The First National Bank of Boston Ms. Cindy Chen $ 26,666,666.67
100 Federal Street (617) 434-0601
01-06-12
Boston, MA 02106
</TABLE>
<PAGE> 59
4
<TABLE>
<CAPTION>
Contact Person
--------------
Name and Address of Lender and Telecopy Number Commitment
-------------------------- ------------------- ----------
<S> <C> <C>
The First National Bank of Chicago Mr. Stephen Liggins $ 46,666,666.67
153 West 51st Street (212) 373-1388
New York, NY 10019
First Union National Bank of North Mr. Dave Johnson $ 16,666,666.67
Carolina (704) 374-2802
One First Union Center
Charlotte, NC 28288
The Fuji Bank, Limited Mr. Roy Tanfield $ 46,666,666.67
Two World Trade Center 79th Floor (212) 912-0516
New York, NY 10048
The Industrial Bank of Japan, Ltd., Mr. John Veltri $ 36,666,666.67
New York Branch (212) 856-9450
245 Park Avenue
23rd Floor
New York, NY 10167-0037
Istituto Bancario San Paolo Bank di Mr. Wendell Jones $ 16,666,666.67
Torino S.p.A. (212) 599-5303
245 Park Avenue
New York, NY 10167
Kredietbank N.V. Ms. Jennifer Pariente $ 16,666,666.67
125 West 55th Street (212) 956-5580
New York, NY 10019
Lloyds Bank Plc Mr. Theodore Walser $ 36,666,666.67
199 Water Street (212) 607-4999
9th Floor
New York, NY 10038
LTCB Trust Company Mr. Yoshi Nakagawa $ 16,666,666.67
165 Broadway (212) 608-2371
New York, NY 10006
The Mitsubishi Bank Mr. J. Bruce Meredith $ 36,666,666.67
New York Branch (212) 667-3562
225 Liberty Street
New York, NY 10281-1059
The Mitsubishi Trust and Banking Mr. Randolph Medrano $ 26,666,666.67
Corporation (212) 593-4691
520 Madison Avenue
New York, NY 10022
</TABLE>
<PAGE> 60
5
<TABLE>
<CAPTION>
Contact Person
--------------
Name and Address of Lender and Telecopy Number Commitment
-------------------------- ------------------- ----------
<S> <C> <C>
Morgan Guaranty Trust Company of Mr. Stephen J. Kenneally $ 46,666,666.67
New York (212) 648-5018
60 Wall Street
New York, NY 10260-0060
National Westminster Bank Plc Mr. Jordan Fragiacorno $ 36,666,666.67
175 Water Street (212) 602-4256
New York, NY 10038-4924
Nationsbank, N.A. Mr. James Gilland $ 46,666,666.67
767 Fifth Avenue (212) 593-1083
23rd Floor
New York, NY 10153
Nippon Credit Bank Mr. Jeff Pasquale $ 16,666,666.67
245 Park Avenue (212) 490-3895
New York, NY 10167
The Northern Trust Company Mr. Daryl M. Robicsek $ 16,666,666.67
50 South LaSalle Street (312) 444-3508
Chicago, IL 60675
PNC Bank, National Association Mr. Tom Partridge $ 16,666,666.67
5th and Wood Streets (212) 557-5461
Pittsburgh, PA 15265
Royal Bank of Canada Mr. John Crawford $ 46,666,666.67
One Financial Square (212) 428-6459
New York, NY 10005-3531
The Sakura Bank, Limited, Mr. Pierre Vautravers $ 26,666,666.67
New York Branch (212) 888-7651
277 Park Avenue
New York, NY 10172
The Sanwa Bank, Ltd. Mr. Stephen C. Small $ 46,666,666.67
New York Branch (212) 754-1304
55 East 52nd Street
New York, NY 10055
Shawmut Bank, N.A. Mr. Frazier Caner $ 16,666,666.67
One Landmark Square (203) 358-6111
P.O. Box 1454
Stamford, CT 06904
Societe Generale Ms. Sedare Coradin $ 46,666,666.67
1221 Avenue of the Americas (212) 278-7430
New York, NY 10020
</TABLE>
<PAGE> 61
6
<TABLE>
<CAPTION>
Contact Person
--------------
Name and Address of Lender and Telecopy Number Commitment
-------------------------- ------------------- ----------
<S> <C> <C>
The Sumitomo Bank, Limited Mr. Edward McColly $ 46,666,666.67
New York Branch (212) 224-5188
277 Park Avenue
New York, NY 10172
SunTrust Bank, Atlanta Ms. May Smith $ 26,666,666.67
711 Fifth Avenue (212) 371-9386
5th Floor
New York, NY 10022
Swiss Bank Corporation Ms. Susan Isquith $ 36,666,666.67
New York Branch (212) 574-3228
222 Broadway
New York, NY 10038
The Tokai Bank, Limited Mr. Stuart Schulman $ 26,666,666.67
55 East 52nd Street (212) 754-2170
12th Floor
New York, NY 10022
The Toronto-Dominion Bank Mr. Reginald Waylen $ 36,666,666.67
31 West 52nd Street (212) 262-1926
New York, NY 10019
Union Bank of Switzerland Mr. Daniel H. Perron $ 46,666,666.67
299 Park Avenue (212) 821-3383
New York, NY 10171
Westdeutsche Landesbank Mr. Ralph White $ 26,666,666.67
Girozentrale (212) 852-8307
1211 Avenue of the Americas
New York, NY 10036
The Yasuda Trust and Banking Co., Mr. Rohn Laudenschlager $ 26,666,666.67
Ltd. (212) 373-5796
New York Branch
666 Fifth Avenue
Suite 801
New York, NY 10103
_________________
TOTAL COMMITMENT $2,000,000,000.00
</TABLE>
<PAGE> 62
SCHEDULE 3.13
ITT CORPORATION
SUMMARY OF SIGNIFICANT CAPITALIZATION FORECAST ASSUMPTIONS
1. The use of $275 million in cash balances at various subsidiaries of
ITT Destinations, Inc. to repay existing short-term borrowings.
2. Net capital expenditures totaling $106 million in the last three
months of 1995 ($57 million was incurred in the comparable 1994
period).
3. Receipt of a $100 million contribution from ITT Industries, Inc.
4. The results of operation between the date of the Distribution and the
date projected in the forecasted capitalization table.
5. Such additional modifications as outlined in the Form 8-K filed on
November 7, 1995 by Old ITT with the Securities and Exchange
Commission.
<PAGE> 63
Schedule 5.10
ITT Corporation
Liens on Principal Properties
Sheraton Boston
Liens in favor of Citibank. N.A. to secure approximately $192.6 million
of outstanding indebtedness.
Sheraton Buenos Aires
Liens in favor of Overseas Private Investment Corp. to secure
approximately $34 million of indebtedness.
Park Grande Sydney
Liens in favor of Commonwealth Bank of Australia to secure
approximately $200 million of indebtedness.
<PAGE> 1
EXHIBIT 12
ITT CORPORATION AND SUBSIDIARIES
CALCULATION OF RATIO OF EARNINGS TO TOTAL FIXED CHARGES
IN MILLIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Earnings:
Income from continuing operations....................................... $147 $ 74 $ 39 $ 2 $ 43
Add:
Adjustment for distributions in excess of (less than) equity earnings
and losses(a)....................................................... 8 16 13 21 --
Income taxes.......................................................... 114 58 63 4 28
Minority equity in net income......................................... 21 12 17 15 14
Amortization of interest capitalized.................................. 3 3 3 4 17
---- ---- ---- ---- ----
293 163 135 46 102
---- ---- ---- ---- ----
Fixed Charges:
Interest and other financial charges.................................. 345 132 30 41 171
Interest factor attributable to rentals(b)............................ 26 25 29 29 27
---- ---- ---- ---- ----
371 157 59 70 198
---- ---- ---- ---- ----
Earnings, as adjusted, from continuing operations....................... $664 $320 $194 $116 $300
===== ===== ===== ===== =====
Fixed Charges:
Fixed charges above................................................... $371 $157 $ 59 $ 70 $198
Interest capitalized.................................................. 7 5 1 8 15
---- ---- ---- ---- ----
Total fixed charges................................................... $378 $162 $ 60 $ 78 $213
===== ===== ===== ===== =====
Ratios:
Earnings, as adjusted, from continuing operations to total fixed
charges............................................................. 1.76 1.98 3.23 1.49 1.41
===== ===== ===== ===== =====
</TABLE>
- - ---------------
Notes:
(a) The adjustment for distributions in excess of (less than) equity earnings
and losses represents the adjustment to income for distributions in excess
of (less than) earnings and losses of companies in which at least 20% but
less than 50% equity is owned.
(b) The interest factor attributable to rentals was computed by calculating the
estimated present value of all long-term rental commitments and applying the
approximate weighted average interest rate inherent in the lease obligations
and adding thereto the interest element assumed in short-term cancelable and
contingent rentals excluded from the commitment data but included in rental
expense.
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
<TABLE>
<CAPTION>
WHOLLY-OWNED DIRECT OR
INDIRECT SUBSIDIARIES OF
ITT CARRYING ON THE SAME
LINE OF BUSINESS AS
NAMED SUBSIDIARIES
------------------------------
PERCENTAGE OPERATING
JURISDICTION OF VOTING OPERATING IN
IN WHICH SECURITIES IN THE FOREIGN
NAME ORGANIZED PARENT OWNED UNITED STATES COUNTRIES
- - ---------------------------------------------------- -------------- ------- ----------- --------------- ----------
<S> <C> <C> <C> <C> <C>
ITT Corporation ("ITT")............................. Nevada -- -- -- --
ITT Educational Services, Inc..................... Delaware ITT 83.33 -- --
ITT Sheraton Corporation ("ITTSC")................ Delaware ITT 100 74 98
Caesars World, Inc.............................. Florida ITTSC 100 52 --
ITT Broadcasting Corp. ("ITTBC")................ Delaware ITTSC 100 -- --
ITT-Dow Jones Television...................... Delaware ITTBC 50 -- --
ITT Eden Corp. ("Eden")......................... Delaware ITTSC 100 -- --
MSG Eden Corporation ("MSG GP")............... Delaware Eden 50 -- --
Madison Square Garden, L.P.................. Delaware MSG GP 50 -- --
ITT Flight Operations, Inc...................... Pennsylvania ITTSC 100 -- --
ITT Information Services, Inc................... Delaware ITTSC 100 -- --
ITT MSG Inc..................................... Delaware ITTSC 100 -- --
Sheraton International, Inc.("SII") Delaware ITTSC 100 -- 97
Ciga S.p.A.................................. Italy SII 70.3 -- 48
ITT World Directories, Inc........................ Delaware ITT 80 -- 11
</TABLE>
Note: The names of some consolidated wholly-owned subsidiaries of ITT carrying
on the same lines of business as other subsidiaries named above have been
omitted, the number of such omitted subsidiaries operating in the United
States or in foreign countries being shown. Also omitted from the list are
the names of other subsidiaries since, if considered in the aggregate as a
single subsidiary, they would not constitute a significant subsidiary.
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO ITT CORPORATION:
As independent public accountants, we hereby consent to the incorporation
of our report included in this Form 10-K into the Corporation's previously filed
Registration Statements (i) on Form S-3 (File No. 33-63445 and (ii) on Form S-8
(File Nos. 33-64815 and 33-64817).
ARTHUR ANDERSEN LLP
New York, New York
March 29, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the December
31, 1995 Financial Statements included in Form 10-K and is qualified in its
entirety by reference to such Financial Statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1994
<PERIOD-END> DEC-31-1995 DEC-31-1994
<CASH> 177 191
<SECURITIES> 0 0
<RECEIVABLES> 890 553
<ALLOWANCES> 106 55
<INVENTORY> 86 59
<CURRENT-ASSETS> 1,143 965
<PP&E> 4,625 3,363
<DEPRECIATION> 646 481
<TOTAL-ASSETS> 8,692 5,012
<CURRENT-LIABILITIES> 1,430 624
<BONDS> 3,840 631
0 0
0 0
<COMMON> 2,944 0
<OTHER-SE> (8) 3,353
<TOTAL-LIABILITY-AND-EQUITY> 8,692 5,012
<SALES> 0 0
<TOTAL-REVENUES> 6,346 4,760
<CGS> 0 0
<TOTAL-COSTS> 5,775 4,468
<OTHER-EXPENSES> (2) 17
<LOSS-PROVISION> 132 69
<INTEREST-EXPENSE> 291 131
<INCOME-PRETAX> 282 144
<INCOME-TAX> 114 58
<INCOME-CONTINUING> 147 74
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 147 74
<EPS-PRIMARY> 1.24 .63
<EPS-DILUTED> 1.24 .63
</TABLE>
