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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
SCHEDULE 13E-4
(AMENDMENT NO. 3)
ISSUER TENDER OFFER STATEMENT
(PURSUANT TO SECTION 13(e)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934)
------------------------
ITT CORPORATION
(NAME OF ISSUER)
ITT CORPORATION
(NAME OF PERSON(S) FILING STATEMENT)
COMMON STOCK, NO PAR VALUE
(INCLUDING THE ASSOCIATED RIGHTS)
(TITLE OF CLASS OF SECURITIES)
450912 10 0
(CUSIP NUMBER OF CLASS OF SECURITIES)
------------------------
PATRICK L. DONNELLY, ESQ.
VICE PRESIDENT
AND ASSISTANT GENERAL COUNSEL
ITT CORPORATION
1330 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10019-5490
(212) 258-1000
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON
AUTHORIZED TO RECEIVE NOTICES AND COMMUNICATIONS
ON BEHALF OF THE PERSON(S) FILING STATEMENT)
COPY TO:
GEORGE W. BILICIC, JR., ESQ.
CRAVATH, SWAINE & MOORE
WORLDWIDE PLAZA
825 EIGHTH AVENUE
NEW YORK, NEW YORK 10019-7475
(212) 474-1000
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This Amendment amends and supplements the Issuer Tender Offer Statement on
Schedule 13E-4 filed by ITT Corporation, a Nevada corporation (the "Company"),
with the Securities and Exchange Commission on July 17, 1997 (the "Schedule
13E-4"), relating to a tender offer by the Company to purchase up to 30 million
shares of its Common Stock, no par value (the "Common Stock"), together with the
associated preferred share purchase rights issued pursuant to the Rights
Agreement dated as of November 1, 1995, between the Company and The Bank of New
York, as Rights Agent (the "Rights" and, together with the Common Stock, the
"Shares"), at $70 per Share, net to the seller in cash, upon the terms and
subject to the conditions set forth in the Offer to Purchase dated July 17, 1997
(the "Offer to Purchase") and in the related Letter of Transmittal, as amended
and supplemented by the Supplement to the Offer to Purchase dated August 27,
1997 (the "Supplement to the Offer to Purchase") and the revised Letter of
Transmittal (which collectively constitute the "Offer"), copies of which are
filed as Exhibits (a)(1), (a)(2), (a)(15) and (a)(16), respectively, to the
Schedule 13E-4. Capitalized terms used and not defined herein shall have the
meanings assigned to such terms in the Offer to Purchase and the Schedule 13E-4.
ITEM 2. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
The information set forth in the section of the Supplement to the Offer to
Purchase captioned "The Tender Offer -- 8. Source and Amount of Funds" is
incorporated herein by reference.
ITEM 3. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE ISSUER OR
AFFILIATE.
The information set forth in the sections of the Supplement to the Offer to
Purchase captioned "Introduction" and "Background and Purpose of the Offer" is
incorporated herein by reference.
ITEM 5. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE ISSUER'S SECURITIES.
The information set forth in the sections of the Supplement to the Offer to
Purchase captioned "Introduction" and "Background and Purpose of the Offer" is
incorporated herein by reference.
ITEM 7. FINANCIAL INFORMATION.
(a)-(b) The information set forth in the section of the Supplement to the
Offer to Purchase captioned "The Tender Offer -- 7. Certain Information
Concerning the Company" and all the information set forth in Annex A and Annex B
of the Supplement to the Offer to Purchase are incorporated herein by reference.
ITEM 8. ADDITIONAL INFORMATION.
The information set forth in the sections of the Supplement to the Offer to
Purchase captioned "Introduction," "Background and Purpose of the Offer" and
"The Tender Offer" is incorporated herein by reference.
2
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ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<S> <C> <C>
(a)(14) -- Letter to the Company's Stockholders from Rand V. Araskog, Chairman and
Chief Executive of the Company, dated August 27, 1997.
(a)(15) -- Supplement to the Offer to Purchase, dated August 27, 1997.
(a)(16) -- Letter of Transmittal.
(b)(2) -- Commitment Letter dated as of August 22, 1997, among Chase Securities
Inc., The Chase Manhattan Bank and the Company (incorporated by reference
to exhibit 90 to the Solicitation/Recommendation Statement on Schedule
14D-9 of the Company).
(b)(3) -- Commitment Letter dated as of August 22, 1997, among Chase Securities
Inc., The Chase Manhattan Bank and ITT Promedia CVA (incorporated by
reference to exhibit 91 to the Solicitation/Recommendation Statement on
Schedule 14D-9 of the Company).
(b)(4) -- Commitment Letter dated as of August 22, 1997, among Chase Securities
Inc., The Chase Manhattan Bank and ITT Promedia CVA (incorporated by
reference to exhibit 92 to the Solicitation/Recommendation Statement on
Schedule 14D-9 of the Company).
</TABLE>
3
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SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
Dated: August 27, 1997
ITT CORPORATION
By: /s/ PATRICK L. DONNELLY
------------------------------------
Name: Patrick L. Donnelly
Title: Vice President and
Assistant General Counsel
4
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EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- --------------------------------------------------------------------------------
<S> <C> <C>
(a)(14) -- Letter to the Company's Stockholders from Rand V. Araskog, Chairman and Chief
Executive of the Company, dated August 27, 1997.
(a)(15) -- Supplement to the Offer to Purchase, dated August 27, 1997.
(a)(16) -- Letter of Transmittal.
(b)(2) -- Commitment Letter dated as of August 22, 1997, among Chase Securities Inc., The
Chase Manhattan Bank and the Company (incorporated by reference to exhibit 90 to
the Solicitation/Recommendation Statement on Schedule 14D-9 of the Company).
(b)(3) -- Commitment Letter dated as of August 22, 1997, among Chase Securities Inc., The
Chase Manhattan Bank and ITT Promedia CVA (incorporated by reference to exhibit
91 to the Solicitation/Recommendation Statement on Schedule 14D-9 of the
Company).
(b)(4) -- Commitment Letter dated as of August 22, 1997, among Chase Securities Inc., The
Chase Manhattan Bank and ITT Promedia CVA (incorporated by reference to exhibit
92 to the Solicitation/Recommendation Statement on Schedule 14D-9 of the
Company).
</TABLE>
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EXHIBIT (a)(14)
[ITT LOGO] ITT CORPORATION
Rand V. Araskog
Chairman and Chief
Executive
August 27, 1997
Dear Stockholder:
At a meeting on Thursday, August 14, your Board of Directors considered
Hilton Hotels Corporation's revised $70 per share offer for ITT, and unanimously
reaffirmed its conclusion that Hilton's proposed transaction is inadequate and
not in the best interests of the stockholders and other constituents of ITT.
Accordingly, your Board continues to unanimously recommend that you reject
Hilton's proposed transaction and not tender your shares pursuant to Hilton's
offer.
At such meeting your Board also reaffirmed its belief that the interests of
stockholders and other constituents of ITT would be best served by the continued
independence of ITT and by the pursuit of the previously announced Comprehensive
Plan. The Comprehensive Plan includes the distribution to stockholders of all
the outstanding common stock of ITT Destinations, Inc., a newly formed
subsidiary which will own ITT's hotels and gaming businesses, and the common
stock owned by ITT of ITT Educational Services, Inc., the subsidiary which owns
ITT's post-secondary technical education business, the repurchase, through an
equity self tender offer, of up to 30 million shares of ITT's common stock at a
price of $70 per share, and the allocation of ITT's debt between ITT and ITT
Destinations.
ITT has amended its equity self tender offer, originally commenced on July
17, 1997, to extend its expiration to 5:00 p.m., New York City time, on Tuesday,
September 9, 1997, and to revise the offer in certain other respects. A
supplement to ITT's Offer to Purchase explaining these changes to the equity
self tender offer is enclosed. We are working diligently toward satisfying all
the conditions to our offer as well as the other elements of the Comprehensive
Plan as promptly as possible.
I encourage you to read the enclosed materials and the other offer
materials previously circulated carefully before making any decision with
respect to the equity tender offer.
Any questions you have about the equity tender offer should be directed to
Georgeson & Company Inc., for general information, at (800) 223-2064 or Goldman,
Sachs & Co. or Lazard Freres & Co. LLC, the dealer managers for the equity
tender offer, at the phone numbers on the back cover of the enclosed Supplement
to the Offer to Purchase.
Please be assured that your Board of Directors and the management of ITT
will continue to act in the best interests of its stockholders and ITT. Your
Directors thank you for your support.
Very truly yours,
/s/ RAND V. ARASKOG
Rand V. Araskog
Chairman and Chief Executive
<PAGE> 1
EXHIBIT (a)(15)
SUPPLEMENT TO
OFFER TO PURCHASE FOR CASH
BY
ITT CORPORATION
UP TO 30,000,000 SHARES OF ITS COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS)
AT
$70.00 NET PER SHARE
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW
YORK CITY TIME, ON TUESDAY, SEPTEMBER 9, 1997, UNLESS THE OFFER IS EXTENDED.
ITT Corporation, a Nevada corporation (the "Company"), has offered to
purchase up to 30,000,000 shares of its Common Stock, no par value (the "Common
Stock"), together with the associated preferred share purchase rights (the
"Rights" and, together with the Common Stock, the "Shares") issued pursuant to
the Rights Agreement, dated as of November 1, 1995, between the Company and The
Bank of New York, at $70.00 per Share, net to the seller in cash, upon the terms
and subject to the conditions set forth in the Company's Offer to Purchase dated
July 17, 1997 (the "Offer to Purchase"), as supplemented by this Supplement to
the Offer to Purchase, and in the related Letter of Transmittal (which together
constitute the "Offer").
------------------------
In order to facilitate and accelerate calculation of the final proration
factor for the Offer, the Company has amended the Offer to remove the procedures
for tendering Shares in the Offer by guaranteed delivery. Stockholders may not
use the (green) Notice of Guaranteed Delivery previously circulated to tender
their Shares and the Depositary will not accept Notices of Guaranteed Delivery.
Any tenders in which Shares are not delivered in the manner described herein
prior to the expiration of the Offer will not be valid. Because transactions in
Shares ordinarily settle three trading days after the transaction, persons who
purchase Shares three trading days or a shorter period of time prior to the
expiration of the Offer may be unable to tender such Shares in the Offer, unless
the purchaser in such transaction has made special arrangements to tender in the
Offer, and validly deliver to the Depositary, the Shares purchased in such
transaction prior to the expiration of the Offer. A revised Letter of
Transmittal in which references to procedures for guaranteed delivery have been
deleted is being distributed with this Supplement to the Offer to Purchase.
Although tenders using the previously circulated Letter of Transmittal will be
accepted and will be valid if all requirements for a valid tender are met,
stockholders should ignore any references in the previously circulated Letter of
Transmittal to procedures for guaranteed delivery.
Any stockholder desiring to tender all or any portion of such stockholder's
Shares should either (1) complete and sign the (blue) Letter of Transmittal or a
facsimile copy thereof in accordance with the instructions in the Letter of
Transmittal, have such stockholder's signature thereon guaranteed if required by
Instruction 1 to the Letter of Transmittal, mail or deliver the Letter of
Transmittal or such facsimile and any other required documents to the Depositary
and either deliver the certificate(s) for such Shares to the Depositary along
with the Letter of Transmittal or a facsimile copy thereof or deliver such
Shares pursuant to the procedure for book-entry transfer set forth in Section 2
under "The Tender Offer" in the Offer to Purchase, as amended by this Supplement
to the Offer to Purchase, or (2) request such stockholder's broker, dealer,
bank, trust company or other nominee to effect the transaction for such
stockholder. A stockholder having Shares registered in the name of a broker,
dealer, bank, trust company or other nominee must contact such broker, dealer,
bank, trust company or other nominee if such stockholder desires to tender such
Shares.
Questions and requests for assistance or for additional copies of this
Supplement to the Offer to Purchase, the Offer to Purchase and the Letter of
Transmittal may be directed to the Information Agent or to the Dealer Managers
at their respective addresses and telephone numbers set forth on the back cover
of this Supplement to the Offer to Purchase.
NO PERSON HAS BEEN AUTHORIZED TO MAKE ANY RECOMMENDATION ON BEHALF OF THE
COMPANY AS TO WHETHER STOCKHOLDERS SHOULD TENDER OR REFRAIN FROM TENDERING
SHARES PURSUANT TO THE OFFER. NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFER OTHER
THAN THOSE CONTAINED IN THIS SUPPLEMENT TO THE OFFER TO PURCHASE, THE OFFER TO
PURCHASE OR IN THE LETTER OF TRANSMITTAL. IF GIVEN OR MADE, SUCH RECOMMENDATION
AND SUCH INFORMATION AND REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY.
------------------------
The Dealer Managers for the Offer are:
<TABLE>
<S> <C>
GOLDMAN, SACHS & CO. LAZARD FRERES & CO. LLC
85 Broad Street 30 Rockefeller Plaza
New York, New York 10004 New York, New York 10020
(800) 323-5678 (212) 632-6717
</TABLE>
August 27, 1997
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TO THE HOLDERS OF COMMON STOCK (INCLUDING THE
ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS)
OF ITT CORPORATION:
INTRODUCTION
The following information amends and supplements the Offer to Purchase
dated July 17, 1997 (the "Offer to Purchase") of ITT Corporation, a Nevada
corporation (the "Company"), relating to the Company's offer to purchase up to
30,000,000 shares of its Common Stock, no par value (the "Common Stock"),
together with the associated preferred share purchase rights (the "Rights" and,
together with the Common Stock, the "Shares") issued pursuant to the Rights
Agreement dated as of November 1, 1995 (the "Rights Agreement"), between the
Company and The Bank of New York, as Rights Agent, at a price of $70.00 per
Share, net to the seller in cash, without interest thereon (the "Offer Price"),
upon the terms and subject to the conditions set forth in the Offer to Purchase,
as amended and supplemented by this Supplement to the Offer to Purchase, and in
the related Letter of Transmittal (which, together with any amendments or
supplements thereto, collectively constitute the "Offer").
Except as expressly modified by this Supplement to the Offer to Purchase,
the terms and conditions previously set forth in the Offer to Purchase and the
related Letter of Transmittal remain applicable in all respects to the Offer,
and this Supplement to the Offer to Purchase should be read in conjunction with
the Offer to Purchase. Unless the context requires otherwise, terms not defined
herein have the meanings ascribed to them in the Offer to Purchase.
IN ORDER TO FACILITATE AND ACCELERATE CALCULATION OF THE FINAL PRORATION
FACTOR FOR THE OFFER, THE COMPANY HAS AMENDED THE OFFER TO REMOVE THE PROCEDURES
FOR TENDERING SHARES IN THE OFFER BY GUARANTEED DELIVERY. STOCKHOLDERS MAY NOT
USE THE (GREEN) NOTICE OF GUARANTEED DELIVERY PREVIOUSLY CIRCULATED TO TENDER
THEIR SHARES AND THE DEPOSITARY WILL NOT ACCEPT NOTICES OF GUARANTEED DELIVERY.
A REVISED LETTER OF TRANSMITTAL IN WHICH REFERENCES TO PROCEDURES FOR GUARANTEED
DELIVERY HAVE BEEN DELETED IS BEING DISTRIBUTED WITH THIS SUPPLEMENT TO THE
OFFER TO PURCHASE. ALTHOUGH TENDERS USING THE PREVIOUSLY CIRCULATED LETTER OF
TRANSMITTAL WILL BE ACCEPTED AND WILL BE VALID IF ALL REQUIREMENTS FOR A VALID
TENDER ARE MET, STOCKHOLDERS SHOULD IGNORE ANY REFERENCES IN THE PREVIOUSLY
CIRCULATED LETTER OF TRANSMITTAL TO PROCEDURES FOR GUARANTEED DELIVERY. ANY
TENDERS IN WHICH SHARES ARE NOT DELIVERED IN THE MANNER DESCRIBED HEREIN PRIOR
TO THE EXPIRATION OF THE OFFER WILL NOT BE VALID. BECAUSE TRANSACTIONS IN SHARES
ORDINARILY SETTLE THREE TRADING DAYS AFTER THE TRANSACTION, PERSONS WHO PURCHASE
SHARES THREE TRADING DAYS OR A SHORTER PERIOD OF TIME PRIOR TO THE EXPIRATION OF
THE OFFER MAY BE UNABLE TO TENDER SUCH SHARES IN THE OFFER, UNLESS THE PURCHASER
IN SUCH TRANSACTION HAS MADE SPECIAL ARRANGEMENTS TO TENDER IN THE OFFER, AND
VALIDLY DELIVER TO THE DEPOSITARY, SHARES PURCHASED IN SUCH TRANSACTION PRIOR TO
THE EXPIRATION OF THE OFFER. PROCEDURES FOR TENDERING SHARES ARE SET FORTH IN
SECTION 3 UNDER THE "THE TENDER OFFER" IN THIS SUPPLEMENT TO THE OFFER TO
PURCHASE.
Neither the Company nor its Board of Directors makes any recommendation as
to whether any stockholder should tender any or all of such stockholder's Shares
pursuant to the Offer. Each stockholder must make its own decision whether to
tender Shares and, if so, how many Shares to tender.
The Offer is not conditioned upon any minimum number of Shares being
tendered. The Offer is, however, subject to certain other conditions including
receipt of financing on acceptable terms, satisfaction of all conditions to
consummation of the Destinations Distribution (as defined in the Offer to
Purchase) (other than in respect of the Offer) and the Company being satisfied,
in its reasonable discretion, that there exists no significant impediment, or
material likelihood of a significant impediment, to the timely consummation of
the Destinations Distribution on substantially the terms described in the Offer
to Purchase. See Section 11 under "The Tender Offer" in this Supplement to the
Offer to Purchase. The Company intends to terminate the Offer if Hilton Hotels
Corporation ("Hilton") or any affiliate of Hilton acquires a material number of
Shares pursuant to the Hilton Offer (as defined herein) or otherwise or if any
of Hilton's nominees are elected to the Board of Directors of the Company.
The Company has been advised that none of its directors or executive
officers intends to tender any Shares pursuant to the Offer.
On January 31, 1997, HLT Corporation ("HLT"), a wholly owned subsidiary of
Hilton, commenced a tender offer (the "Hilton Offer") to purchase 61,145,475
Shares, approximately 50.1% of the outstanding
<PAGE> 3
Shares, at a purchase price of $55 per Share, net to the seller in cash, upon
the terms and subject to the conditions set forth in HLT's Offer to Purchase
dated January 31, 1997 (the "Hilton Offer to Purchase"). According to the Hilton
Offer to Purchase, Hilton stated that if the Hilton Offer were successful,
Hilton intended to consummate a merger (the "Proposed Squeeze Out Merger" and,
together with the Hilton Offer, the "Hilton Transaction") pursuant to which all
Shares not tendered and purchased pursuant to the Hilton Offer (other than
Shares owned by Hilton and its subsidiaries or held in the Company's treasury)
would be converted into the right to receive a number of shares of Hilton common
stock, par value $2.50 per share ("Hilton Common Stock"), having a nominal value
of $55 per Share, subject to unspecified collar provisions. On August 7, 1997,
Hilton amended the Hilton Offer to increase the offered purchase price to $70
per Share and to indicate that each Share not tendered pursuant to the Hilton
Offer would be converted in the Proposed Squeeze Out Merger into the right to
receive the number of shares of Hilton Common Stock having a nominal value of
$70 per Share, subject to unspecified collar provisions. If Hilton were to
acquire control of the Company, pursuant to the Hilton Offer, the election of
Hilton's nominees as a majority of the Board of Directors of the Company or
otherwise, the Company believes Hilton would thereafter seek to cause the
Company to terminate the Offer and abandon the Comprehensive Plan. The Hilton
Offer is subject to a number of conditions specified in the Hilton Offer to
Purchase. Any Shares tendered by stockholders of the Company pursuant to the
Hilton Offer may be withdrawn by the tendering stockholders at any time prior to
the expiration of the Hilton Offer, which is presently scheduled for Friday,
August 29, 1997. See "Background and Purpose of the Offer" in the Offer to
Purchase.
At a meeting held on August 14, 1997, the Board of Directors of the Company
reassessed the Hilton Transaction in light of developments since July 15,
including the Comprehensive Plan, and unanimously reaffirmed its conclusion that
the Hilton Transaction, including the Hilton Offer, is inadequate and not in the
best interests of the Company. Accordingly, the Board continues to unanimously
recommend that the stockholders of the Company reject the Hilton Transaction and
not tender their Shares pursuant to the Hilton Offer or take any other action to
facilitate the Hilton Offer. The Board's recommendation is set forth in more
detail in Amendment No. 29 to the Company Schedule 14D-9 which has been filed
with the Commission and is available in the manner set forth under "Available
Information" in Section 7 under "The Tender Offer" in the Offer to Purchase.
BACKGROUND AND PURPOSE OF THE OFFER
The discussion set forth in "Background and Purpose of the Offer" in the
Offer to Purchase is hereby amended and supplemented as follows.
COMPREHENSIVE PLAN
On August 11, 1997, the Company commenced its previously announced Debt
Tender Offer for $2 billion aggregate principal amount of its debt securities at
prices, and on terms and conditions, specified in its Offer to Purchase dated
August 11, 1997. The Debt Tender Offer is currently scheduled to expire at 5:00
p.m., New York City time, on Tuesday, September 9, 1997, unless extended by the
Company.
CERTAIN LITIGATION RELATING TO THE HILTON TRANSACTION
On July 25, 1997, in Hilton Hotels Corp., et al. v. ITT Corp., et al.,
CV-S-97-95-PMP(RLH), Hilton filed a Memorandum of Points and Authorities in
Opposition to the Company's motion filed on July 2, 1997, to dismiss certain
counts included in the First Amended and Supplemental Hilton Complaint or, in
the alternative, for partial summary judgment. On August 5, 1997, the Company
filed with the court a reply memorandum of points and authorities in support of
the Company's motion to dismiss counts III-VII of the First Amended and
Supplemental Hilton Complaint.
On July 31, 1997, in ITT Corp. et al. v. Hilton Hotels Corp., et al.,
CV-S-97-00893-PMP (RLH) ("ITT v. Hilton"), Hilton filed a Memorandum of Points
and Authorities in response to the Company's motion for a speedy hearing on the
Company's declaratory judgment complaint regarding the Comprehensive Plan asking
the court to rule that it is premature to determine an appropriate schedule for
a hearing. On August 5, 1997, Hilton filed answers and counterclaims (the
"Hilton Answer and Counterclaims") with the court in respect of the Company's
declaratory judgment complaint, claiming, among other things, that the
2
<PAGE> 4
Company's Board of Directors has breached its fiduciary duties and that the
Company has made material misstatements and omissions.
On August 25, 1997, in ITT v. Hilton, Hilton filed a motion for injunctive
and preliminary relief seeking, among other things, to enjoin the Company from
proceeding with the Comprehensive Plan. Hilton requested a hearing date during
the week of September 22, 1997 for its motion. On August 26, 1997, the Company
filed a response to Hilton's request for a hearing during the week of September
22, contending that Hilton is not entitled to seek preliminary injunctive relief
at this stage and, in the alternative, requesting that a hearing on Hilton's
motion be scheduled during the week of September 8.
On July 31, 1997, the plaintiffs in the purported class action suit
captioned Taub, et. al. v. Araskog, et. al., CV-S-97-00106, filed an Opening
Memorandum of Points and Authorities in Response to the Company Complaint,
pursuant to which such plaintiffs informed the court that such plaintiffs
consider that when the Hilton Offer is compared to the Comprehensive Plan, the
Comprehensive Plan better serves the interests of the Company's stockholders.
Copies of the foregoing memorandum and response filed by the Company and
the memorandum filed by the plaintiffs in Taub, are filed as exhibits to the
Company Schedule 14D-9. Copies of the memoranda, answers and counterclaims and
motion filed by Hilton are filed as exhibits to the Hilton 14D-1. Copies of all
such documents may be examined and copies thereof may be obtained as set forth
under "Additional Information" in Section 7 under "The Tender Offer" in the
Offer to Purchase.
THE TENDER OFFER
2. PROCEDURE FOR TENDERING SHARES AND RIGHTS
Section 2 under "The Tender Offer" in the Offer to Purchase is amended and
restated in its entirety as follows:
VALID TENDER. For a stockholder validly to tender Shares pursuant to the
Offer, a Letter of Transmittal (or facsimile thereof), properly completed and
duly executed, together with any required signature guarantees, or, in the case
of a book-entry transfer, an Agent's Message (as defined below), and any other
required documents, must be received by the Depositary at one of its addresses
set forth on the back cover of this Supplement to the Offer to Purchase prior to
the Expiration Date and either certificates for tendered Shares must be received
by the Depositary at one of such addresses or such Shares must be delivered
pursuant to the procedures for book-entry transfer set forth below (and a
Book-Entry Confirmation (as defined below) received by the Depositary), in each
case prior to the Expiration Date.
The Depositary has established accounts with respect to the Shares at The
Depository Trust Company and the Philadelphia Depository Trust Company (the
"Book-Entry Transfer Facilities") for purposes of the Offer. Any financial
institution that is a participant in any of the Book-Entry Transfer Facilities'
systems may make book-entry delivery of Shares by causing a Book-Entry Transfer
Facility to transfer such Shares into the Depositary's account in accordance
with such Book-Entry Transfer Facility's procedures for such transfer. However,
although delivery of Shares may be effected through book-entry transfer into the
Depositary's account at a Book-Entry Transfer Facility, the Letter of
Transmittal (or facsimile thereof), properly completed and duly executed, with
any required signature guarantees, or an Agent's Message (as defined below), and
any other required documents, must, in any case, be transmitted to, and received
by, the Depositary at one of its addresses set forth on the back cover of this
Supplement to the Offer to Purchase prior to the Expiration Date. The
confirmation of a book-entry transfer of Shares into the Depositary's account at
a Book-Entry Transfer Facility as described above is referred to herein as a
"Book-Entry Confirmation." DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER
FACILITY IN ACCORDANCE WITH SUCH BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES
NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
The term "Agent's Message" means a message transmitted by a Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that such Book-Entry Transfer Facility has
received an express acknowledgment from the participant in such Book-Entry
3
<PAGE> 5
Transfer Facility tendering the Shares, that such participant has received and
agrees to be bound by the terms of the Letter of Transmittal and that the
Company may enforce such agreement against the participant.
THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER FACILITY,
IS AT THE ELECTION AND RISK OF THE TENDERING STOCKHOLDER. SHARES WILL BE DEEMED
DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY (INCLUDING, IN THE CASE
OF A BOOK-ENTRY TRANSFER, BY BOOK-ENTRY CONFIRMATION). IF DELIVERY IS BY MAIL,
REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED.
IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
SIGNATURE GUARANTEES. No signature guarantee is required on the Letter of
Transmittal (a) if the Letter of Transmittal is signed by the registered
holder(s) (which term, for purposes of this Section, includes any participant in
any of the Book-Entry Transfer Facilities' systems whose name appears on a
security position listing as the owner of the Shares) of Shares tendered
therewith and such registered holder has not completed either the box entitled
"Special Delivery Instructions" or the box entitled "Special Payment
Instructions" on the Letter of Transmittal or (b) if such Shares are tendered
for the account of a financial institution (including most commercial banks,
savings and loan associations and brokerage houses) that is a participant in the
Securities Transfer Agents Medallion Program, the New York Stock Exchange
Medallion Signature Guarantee Program or the Stock Exchange Medallion Program
(each an "Eligible Institution"). In all other cases, all signatures on the
Letter of Transmittal must be guaranteed by an Eligible Institution. See
Instructions 1 and 5 to the Letter of Transmittal. If the certificates for
Shares are registered in the name of a person other than the signer of the
Letter of Transmittal, or if payment is to be made or certificates for Shares
not tendered or not accepted for payment are to be returned to a person other
than the registered holder of the certificates surrendered, the tendered
certificates must be endorsed or accompanied by appropriate stock powers, in
either case signed exactly as the name or names of the registered holders or
owners appear on the certificates, with the signatures on the certificates or
stock powers guaranteed as aforesaid. See Instructions 1 and 5 to the Letter of
Transmittal.
GUARANTEED DELIVERY. The Company has amended the Offer to remove the
procedures for tendering Shares in the Offer by guaranteed delivery, and the
section entitled "Guaranteed Delivery" in Section 2 under "The Tender Offer" in
the Offer to Purchase is deleted in its entirety. STOCKHOLDERS MAY NOT USE THE
(GREEN) NOTICE OF GUARANTEED DELIVERY PREVIOUSLY CIRCULATED TO TENDER THEIR
SHARES AND THE DEPOSITARY WILL NOT ACCEPT NOTICES OF GUARANTEED DELIVERY. ANY
TENDERS IN WHICH SHARES ARE NOT DELIVERED IN THE MANNER DESCRIBED ABOVE PRIOR TO
THE EXPIRATION OF THE OFFER WILL NOT BE VALID. Because transactions in Shares
ordinarily settle three trading days after the transaction, persons who purchase
Shares three trading days or a shorter period of time prior to the expiration of
the Offer may be unable to tender such Shares in the Offer, unless the purchaser
in such transaction has made special arrangements to tender in the Offer, and
validly deliver to the Depositary, Shares purchased in such transaction prior to
the expiration of the Offer. A revised Letter of Transmittal in which references
to procedures for guaranteed delivery have been deleted is being distributed
with this Supplement to the Offer to Purchase. Although tenders using the
previously circulated version of the Letter of Transmittal will be accepted and
will be valid if all requirements for a valid tender are met, stockholders
should ignore any references in the previously circulated Letter of Transmittal
to procedures for guaranteed delivery.
The Company has removed the procedures for guaranteed delivery in order to
facilitate and accelerate calculation of the final proration factor for the
Offer.
Notwithstanding any other provision hereof, payment for Shares accepted for
payment pursuant to the Offer will in all cases be made only after timely
receipt by the Depositary of (a) certificates for (or a timely Book-Entry
Confirmation with respect to) such Shares, (b) a Letter of Transmittal (or
facsimile thereof), properly completed and duly executed, with any required
signature guarantees, or, in the case of a book-entry transfer, an Agent's
Message, and (c) any other documents required by the Letter of Transmittal.
UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE PURCHASE PRICE OF THE SHARES
TO BE PAID BY THE COMPANY, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY
IN MAKING SUCH PAYMENT.
4
<PAGE> 6
The valid tender of Shares pursuant to one of the procedures described
above will constitute a binding agreement between the tendering stockholder and
the Company upon the terms and subject to the conditions of the Offer.
OPTIONS. As of August 15, 1997, 9,087,229 Shares were reserved for
issuance pursuant to exercise of Options. The Company is not offering to
purchase any of the Options. Holders of Options who wish to participate in the
Offer must first exercise such Options, in accordance with the terms and
provisions thereof. NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY
RECOMMENDATION TO ANY HOLDER OF OPTIONS AS TO WHETHER TO EXERCISE ANY OR ALL
SUCH OPTIONS OR AS TO WHETHER TO TENDER ANY OR ALL SHARES ISSUABLE UPON SUCH
EXERCISE.
ITT 401(k) RETIREMENT SAVINGS PLAN. Participants in the ITT 401(k)
Retirement Savings Plan (the "401(k) Plan") who wish to tender Shares allocated
to their accounts under the 401(k) Plan must so indicate by following the
procedures set forth in the notice to be furnished to such participants by the
trustee of the 401(k) Plan. Such participants may not use the Letter of
Transmittal to tender the Shares held for their account under the 401(k) Plan
but must follow the separate procedures referred to above. Shares held by the
401(k) Plan and allocated to participants' accounts for which no instructions
are received will not be tendered into the Offer.
TENDERING STOCKHOLDER'S REPRESENTATION AND WARRANTY; COMPANY'S ACCEPTANCE
CONSTITUTES AN AGREEMENT. It is a violation of Rule 14e-4 promulgated under the
Exchange Act for a person acting alone or in concert with others, directly or
indirectly, to tender Shares for such person's own account unless at the time of
tender and at the Expiration Date such person has a "net long position" equal to
or greater than the amount tendered in (i) the Shares and will deliver or cause
to be delivered such Shares for the purpose of such tender to the Company within
the period specified in the Offer or (ii) other securities immediately
convertible into, exercisable for or exchangeable into Shares ("Equivalent
Securities") and, upon the acceptance of such tender, will acquire such Shares
by conversion, exchange or exercise of such Equivalent Securities to the extent
required by the terms of the Offer and will deliver or cause to be delivered
such Shares so acquired for the purpose of such tender to the Company within the
period specified in the Offer. Rule 14e-4 also provides a similar restriction
applicable to the tender or guarantee of a tender on behalf of another person. A
tender of Shares made pursuant to any method of delivery set forth herein will
constitute the tendering stockholder's representation and warranty to the
Company that (i) such stockholder has a "net long position" in Shares or
Equivalent Securities being tendered within the meaning of the Rule 14e-4 and
(ii) such tender of Shares complies with Rule 14e-4. The Company's acceptance
for payment of Shares tendered pursuant to the Offer will constitute a binding
agreement between the tendering stockholder and the Company upon the terms and
subject to the conditions of the Offer.
DETERMINATION OF VALIDITY. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance of any tender of Shares
will be determined by the Company in its sole discretion, which determination
will be final and binding. The Company reserves the absolute right to reject any
or all tenders determined by it not to be in proper form or the acceptance for
payment of or payment for which may, in the opinion of the Company's counsel, be
unlawful. The Company also reserves the absolute right to waive any defect or
irregularity in the tender of any Shares of any particular stockholder whether
or not similar defects or irregularities are waived in the case of other
stockholders. No tender of Shares will be deemed to have been validly made until
all defects or irregularities relating thereto have been cured or waived.
Tenders of Shares will not be valid unless the Shares are delivered to the
Depositary pursuant to one of the procedures set forth above prior to the
expiration of the Offer. None of the Company, the Depositary, the Information
Agent, the Dealer Managers or any other person will be under any duty to give
notification of any defects or irregularities in tenders or incur any liability
for failure to give any such notification. The Company's interpretation of the
terms and conditions of the Offer (including the Letter of Transmittal and the
instructions thereto) will be final and binding.
BACKUP WITHHOLDING. In order to avoid "backup withholding" of Federal
income tax on payments of cash pursuant to the Offer, a stockholder tendering
Shares in the Offer must, unless an exemption applies, provide the Depositary
with such stockholder's correct taxpayer identification number ("TIN") on a
5
<PAGE> 7
Substitute Form W-9 and certify under penalties of perjury that such TIN is
correct and that such stockholder is not subject to backup withholding. If a
stockholder does not provide such stockholder's correct TIN or fails to provide
the certifications described above, the Internal Revenue Service (the "IRS") may
impose a penalty on such stockholder and payment of cash to such stockholder
pursuant to the Offer may be subject to backup withholding of 31%. All
stockholders surrendering Shares pursuant to the Offer should complete and sign
the main signature form and the Substitute Form W-9 included as part of the
Letter of Transmittal to provide the information and certification necessary to
avoid backup withholding (unless an applicable exemption exists and is proved in
a manner satisfactory to the Company and the Depositary). Certain stockholders
(including, among others, all corporations and certain foreign individuals and
entities) are not subject to backup withholding. Noncorporate foreign
stockholders should complete and sign the main signature form and a Form W-8,
Certificate of Foreign Status, a copy of which may be obtained from the
Depositary, in order to avoid backup withholding. See Instruction 9 to the
Letter of Transmittal.
7. CERTAIN INFORMATION CONCERNING THE COMPANY
Section 7 under "The Tender Offer" in the Offer to Purchase is amended and
supplemented as follows:
BUSINESS DEVELOPMENTS.
On August 1, 1997, Sheraton entered into an agreement in principle with
Davis Gaming, L.L.C. ("Davis Gaming"), a Delaware limited liability company
owned by Marvin Davis, to form two 50/50 joint ventures to own The Desert Inn
Resort and Casino (the "Desert Inn") in Las Vegas, Nevada, and the 34 acre
parcel of land adjacent to the Desert Inn. The Desert Inn and the 34 acre parcel
of land are currently owned by a subsidiary of the Company. Under the terms of
the agreement in principle, the Company will receive $250 million in cash,
including a $150 million cash payment from Davis Gaming and $100 million from
the proceeds of new debt issued by the Desert Inn joint venture. The Company,
through its Caesars World, Inc. subsidiary, will manage the Desert Inn for a
period of ten years with an option to extend the management contract for an
additional ten-year period. Over the next two years, the joint venture partners
intend to consider the feasibility of developing a new hotel and casino on the
34 acre parcel. Should the decision be made to proceed, Sheraton will also
manage the new property. At the insistence of Davis Gaming, the transaction
documentation will include certain "change of control" provisions similar to
those which have been included in other transactions since the commencement of
the Hilton Offer.
The transaction, which is subject to the execution of definitive
agreements, due diligence and certain other customary closing conditions, is
expected to be completed by November 1, 1997. The Company's rights under the
transaction will be retained by Destinations, the subsidiary of the Company that
will hold the Company's hotels and gaming business, after completion of the
Distributions.
6
<PAGE> 8
ITT DESTINATIONS, INC. SELECTED CONSOLIDATED HISTORICAL FINANCIAL
INFORMATION. Set forth below is certain selected consolidated financial
information of Destinations which has been derived from Destinations' audited
consolidated financial statements as of and for the three years ended December
31, 1996, and Destinations' unaudited consolidated financial statements as of
and for the two years ended December 31, 1993 and for the six months ended June
30, 1997 and 1996 and as of June 30, 1997. The financial and operating data set
forth below reflect the discontinuance of the Company's information services
segment, which includes the Company's telephone directories publishing business
(ITT World Directories) and post-secondary technical education business (ITT
Educational). The following financial and operating data should be read in
conjunction with Destinations' Consolidated Financial Statements and related
Notes thereto set forth as Annex A to the Offer to Purchase and hereto.
ITT DESTINATIONS, INC.
SELECTED HISTORICAL FINANCIAL AND OPERATING DATA
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30, YEARS ENDED DECEMBER 31,
----------------- ------------------------------------------
1997 1996 1996 1995 1994 1993 1992
------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues......................................... $2,815 $2,740 $5,718 $5,396 $3,876 $3,184 $3,109
Income (loss) from continuing operations before
accounting changes(1).......................... $ 259 $ 86 $ 183 $ 117 $ 44 $ (38) $ (68)
Earnings (loss) per share from continuing
operations before accounting changes(1)........ $ 2.19 $ .72 $ 1.55 $ .98 $ .37 $ (.32) $ (.58)
OPERATING DATA:
Operating income (loss).......................... $ 159 $ 232 $ 499 $ 394 $ 139 $ (35) $ (84)
EBITDA (2)....................................... $ 293 $ 346 $ 746 $ 617 $ 245 $ 58 $ (19)
Cash from continuing operating activities........ $ 1 $ 108 $ 377 $ 400 $ 164 $ 67 $ 10
Number of Employees (in thousands)............... 33 34 33 34 21 14 14
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
AT JUNE 30, ------------------------------------------
1997 1996 1995 1994 1993 1992
----------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets......................................... $ 8,120 $8,922 $8,225 $4,873 $3,629 $3,131
Long-term debt, including allocated debt and capital
leases............................................. $ 1,789 $2,893 $2,634 $ 599 $ 169 $ 186
</TABLE>
- ---------------
(1) Excluding several one-time items and the results of certain assets held for
sale, income from continuing operations and earnings per share from
continuing operations for the first six months of 1997 were $99 and $0.83,
respectively, compared with $83 and $0.69, respectively, for the first six
months of 1996. These comparable year-over-year results represent increases
of 19% and 20% in income from continuing operations and earnings per share
from continuing operations, respectively. The one-time items reflected in
these results include (i) a $183 pre-tax gain on the sale of 7.5 million
shares of Alcatel Alsthom, (ii) a $200 pre-tax gain on the sale of the
Company's 39.8% ownership interest in MSG, (iii) a $58 pre-tax charge in
connection with the restructuring of the Company's World Headquarters
operations and (iv) a $29 pre-tax charge for costs associated with the
Hilton Offer.
(2) EBITDA, as defined herein, is presented here as an alternative measure of
Destinations' ability to generate cash flow and should not be construed as
an alternative to operating income or to cash flows from operating
activities (which have been determined in accordance with generally accepted
accounting principles). EBITDA was computed above as earnings before
interest, taxes, depreciation, amortization, gains on asset sales and
miscellaneous expense, net. Management believes the EBITDA information
presented supplementally allows for a more complete analysis of results of
operations. Because of the significance of items excluded in determining
EBITDA, this information should not be considered as an alternative to any
measure of performance or liquidity nor should it be considered as an
indicator of the overall financial performance of Destinations.
7
<PAGE> 9
ITT CORPORATION SELECTED CONSOLIDATED HISTORICAL FINANCIAL
INFORMATION. Set forth below is certain selected consolidated financial
information of the Company which has been derived from the Company's audited
consolidated financial statements as of and for the three years ended December
31, 1996 and the Company's unaudited consolidated financial statements as of and
for the two years ended December 31, 1993 and for the six months ended June 30,
1997 and 1996 and as of June 30, 1997. The financial and operating data set
forth below reflect the remaining telephone directories publishing business of
the Company (ITT World Directories) after the Distributions. The following
financial and operating data should be read in conjunction with the Company's
Consolidated Financial Statements and related Notes thereto set forth in Annex B
to the Offer to Purchase and hereto.
ITT CORPORATION
SELECTED HISTORICAL FINANCIAL AND OPERATING DATA
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, YEARS ENDED DECEMBER 31,
------------- --------------------------------
1997 1996 1996 1995 1994 1993 1992
----- ----- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues.......................................... $ 276 $ 291 $647 $654 $646 $817 $993
Income before accounting changes.................. $ 15 $ 26 $ 54 $ 21 $ 23 $ 68 $ 62
Earnings per share before accounting changes...... $ .13 $ .21 $.46 $.18 $.20 $.58 $.53
OPERATING DATA:
Operating income.................................. $ 83 $ 103 $208 $160 $141 $161 $104
EBITDA(1)......................................... $ 91 $ 111 $224 $177 $153 $171 $113
Cash from operating activities.................... $ 16 $ 21 $ 58 $ 85 $ 10 $ 80 $116
Number of employees (in thousands)................ 2 2 2 2 2 2 2
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
AT JUNE 30, ------------------------------------------
1997 1996 1995 1994 1993 1992
----------- ------ ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets............................ $ 459 $ 510 $519 $391 $385 $480
Allocated debt.......................... $ 1,000 $1,000 $941 $ -- $ -- $ --
</TABLE>
- ---------------
(1) EBITDA, as defined herein, is presented here as an alternative measure of
the Company's ability to generate cash flow and should not be construed as
an alternative to operating income or to cash flows from operating
activities (which have been determined in accordance with generally accepted
accounting principles). EBITDA was computed above as earnings before
interest, taxes, depreciation, amortization, gains on asset sales and
miscellaneous expense, net. Management believes the EBITDA information
presented supplementally allows for a more complete analysis of results of
operations. Because of the significance of items excluded in determining
EBITDA, this information should not be considered as an alternative to any
measure of performance or liquidity nor should it be considered as an
indicator of the overall financial performance of the Company.
8
<PAGE> 10
ITT EDUCATIONAL SERVICES, INC. SELECTED CONSOLIDATED HISTORICAL FINANCIAL
INFORMATION. Set forth below is certain selected consolidated financial
information of ITT Educational for the five years ended December 31, 1996, and
the six months ended June 30, 1997 and 1996. The financial information has been
derived from the audited consolidated financial statements included in ITT
Educational's Annual Report on Form 10-K for the year ended December 31, 1996
(the "ITT Educational 10-K") and ITT Educational's Quarterly Report on Form 10-Q
for the six months ended June 30, 1997 (the "ITT Educational 10-Q" and, together
with the ITT Educational 10-K, the "ITT Educational Reports") and other
information and data contained in ITT Educational Reports. Such data should be
read in conjunction with the consolidated financial statements, related notes
and other financial information contained in the ITT Educational Reports. More
comprehensive financial information is included in such reports and the
financial information which follows is qualified in its entirety by reference to
such reports and all of the financial statements and related notes contained
therein, copies of which are available for inspection and may be obtained in the
manner set forth under "Available Information" in Section 7 under "The Tender
Offer" in the Offer to Purchase.
ITT EDUCATIONAL SERVICES, INC.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, YEARS ENDED DECEMBER 31,
------------ ------------------------------------
1997 1996 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues.................................... $123 $109 $232 $202 $187 $169 $155
Income before accounting changes............ $ 7 $ 5 $ 15 $ 11 $ 7 $ 8 $ 7
Earnings per share before accounting
changes................................... $.26 $.19 $.55 $.42 $.32 $.37 $.32
OPERATING DATA:
Operating income............................ $ 9 $ 7 $ 21 $ 14 $ 12 $ 14 $ 12
EBITDA(1)................................... $ 13 $ 11 $ 28 $ 22 $ 19 $ 20 $ 18
Cash from operating activities.............. $ 5 $ 2 $ 26 $ 19 $ 23 $ 22 $ 17
Number of employees (in thousands).......... 2 2 2 2 2 2 2
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
AT JUNE 30, ------------------------------------
1997 1996 1995 1994 1993 1992
----------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets..................................... $ 139 $136 $114 $103 $87 $69
</TABLE>
- ---------------
(1) EBITDA, as defined herein, is presented here as an alternative measure of
ITT Educational's ability to generate cash flow and should not be construed
as an alternative to operating income or to cash flows from operating
activities (which have been determined in accordance with generally accepted
accounting principles). EBITDA was computed above as earnings before
interest, taxes, depreciation, amortization, gains on asset sales and
miscellaneous expense, net. Management believes the EBITDA information
presented supplementally allows for a more complete analysis of results of
operations. Because of the significance of items excluded in determining
EBITDA, this information should not be considered as an alternative to any
measure of performance or liquidity nor should it be considered as an
indicator of the overall financial performance of ITT Educational.
9
<PAGE> 11
ITT DESTINATIONS, INC. SELECTED CONSOLIDATED PRO FORMA FINANCIAL
INFORMATION. The following selected unaudited consolidated pro forma financial
information of Destinations gives effect to the purchase of the Shares pursuant
to the Offer, the Debt Tender Offer and related borrowings by the Company and
Destinations, and certain asset sales, as if such transactions had occurred on
June 30, 1997, and December 31, 1996, for Balance Sheet data and as of January
1, 1997 and January 1, 1996, for Income Statement data. The selected unaudited
consolidated pro forma information should be read in conjunction with the
selected consolidated financial information for Destinations set forth as Annex
A to the Offer to Purchase and hereto and does not purport to be indicative of
the results that would actually have been obtained had the purchase of the
Shares pursuant to the Offer, the Debt Tender Offer and the related borrowings
been completed at the dates indicated or that may be obtained in the future.
ITT DESTINATIONS, INC.
SELECTED UNAUDITED CONSOLIDATED
PRO FORMA FINANCIAL INFORMATION
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
------------------------- -------------------------
ACTUAL AS ADJUSTED(a) ACTUAL AS ADJUSTED(a)
------ -------------- ------ --------------
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues..................................... $2,815 $2,815 $5,718 $5,718
Income from continuing operations............ $ 259 $ 57 $ 183 $ 131
Earnings per share from continuing
operations................................. $ 2.19 $ 0.65 $ 1.55 $ 1.48
</TABLE>
<TABLE>
<CAPTION>
AT JUNE 30, 1997 AT DECEMBER 31, 1996
------------------------- -------------------------
ACTUAL AS ADJUSTED(a) ACTUAL AS ADJUSTED(a)
------ -------------- ------ --------------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Long-term debt, including allocated debt and
capital leases............................. $2,192 $4,187 $2,893 $3,558
</TABLE>
- ---------------
(a) Gives effect to (i) the Distributions, (ii) the repurchase of 30 million
shares of common stock for $2.1 billion (iii) the Debt Tender Offer, (iv)
related borrowings, (v) the sale of the Company's interest in WBIS+, Alcatel
Alsthom and Madison Square Garden, L.P. and (vi) an increase in interest
expense due to the greater leverage of Destinations.
10
<PAGE> 12
ITT CORPORATION SELECTED CONSOLIDATED PRO FORMA FINANCIAL INFORMATION. The
following selected unaudited consolidated pro forma financial information of the
Company gives effect to the purchase of the Shares pursuant to the Offer, the
Debt Tender Offer and related borrowings by the Company and Destinations, the
Strategic Investment and the purchase by the Company of the 20% minority
interest in World Directories, as if such transactions had occurred on June 30,
1997, and December 31, 1996, for Balance Sheet data and as of January 1, 1997
and January 1, 1996 for Income Statement data. The selected unaudited
consolidated pro forma information should be read in conjunction with the
selected consolidated financial information for the Company set forth as Annex B
to the Offer to Purchase and hereto and does not purport to be indicative of the
results that would actually have been obtained had the purchase of the Shares
pursuant to the Offer, the Debt Tender Offer and the related borrowings been
completed at the dates indicated or that may be obtained in the future.
ITT CORPORATION
SELECTED UNAUDITED CONSOLIDATED
PRO FORMA FINANCIAL INFORMATION
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
------------------------- -------------------------
ACTUAL AS ADJUSTED(a) ACTUAL AS ADJUSTED(a)
------ -------------- ------ --------------
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues..................................... $ 276 $ 276 $ 647 $ 647
Income....................................... $ 15 $ 5 $ 54 $ 37
Earnings per share........................... $ 0.13 $ 0.04 $ 0.46 $ 0.37
</TABLE>
<TABLE>
<CAPTION>
AT JUNE 30, 1997 AT DECEMBER 31, 1996
------------------------- -------------------------
ACTUAL AS ADJUSTED(a) ACTUAL AS ADJUSTED(a)
------ -------------- ------ --------------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Long-term debt, including allocated debt..... $1,050 $1,000 $1,000 $1,050
</TABLE>
- ---------------
(a) Gives effect to (i) the Distributions, (ii) the repurchase of 30 million
shares of common stock for $2.1 billion, (iii) related borrowings, (iv) an
increase in interest expense due to the greater leverage of the Company, (v)
an increase in the effective tax rate which assumes the benefits of interest
allocation had been limited to the Company's ability to deduct them on its
separate U.S. Federal tax return, (vi) the Company's purchase of the 20%
minority interest in ITT World Directories from BellSouth Corporation and
(vii) consummation of the Strategic Investment by CD&R for 32.9% of the
outstanding Shares after the Distributions.
8. SOURCE AND AMOUNT OF FUNDS
Section 8 under "The Tender Offer" in the Offer to Purchase is amended and
restated in its entirety, and the discussion set forth in "Background and
Purpose of the Offer" in the Offer to Purchase is hereby amended and
supplemented, as follows:
The Company estimates that the total amount of funds required to purchase
30,000,000 Shares pursuant to the Offer and to pay fees and expenses related to
the Offer will be approximately $2.1 billion. The Company plans to finance the
various elements of the Comprehensive Plan through a combination of available
cash, approximately $1.275 billion of proceeds from borrowings under new bank
credit facilities and the issuance of debt securities by ITT ISI and the
subsidiaries it will have after the Distributions and $3.3 billion comprised of
(a) cash received from Destinations as consideration (along with additional
shares of common stock of Destinations) for certain assets contributed to
Destinations prior to the Distributions (the "First Payment"), (b) the proceeds
from a cash dividend from Destinations (the "Second Payment") and (c) the
proceeds from an additional cash dividend from Destinations (the "Third
Payment"). Destinations plans to finance the First,
11
<PAGE> 13
Second and Third Payments under new credit facilities to be put in place for it.
The Company has received a letter from The Chase Manhattan Bank ("Chase") and
Chase Securities Inc. ("CSI") stating that they are highly confident that they
will be able to arrange borrowings for Destinations and ITT ISI and its
subsidiaries (collectively, the "Credit Facilities") in amounts sufficient to
consummate the Offer and the other elements of the Comprehensive Plan.
The Company has also received commitment letters from Chase and CSI (the
"Commitment Letters") whereby CSI has agreed to structure, arrange and syndicate
credit facilities, and Chase has committed to provide a portion of such
facilities, in aggregate principal amounts of (a) $5 billion for Destinations
(the "Destinations Facilities"), (b) $385 million for ITT Promedia CVA
("Promedia"), a Belgian company and an indirect, wholly owned subsidiary of the
Company (the "Promedia Facilities"), and (c) $270 million for ITT Publimedia
B.V. ("Publimedia"), a Dutch company and wholly owned subsidiary of Promedia
(the "Publimedia Facilities"). The terms of definitive agreements for the
Destinations Facilities, the Promedia Facilities and the Publimedia Facilities
have not yet been finalized. The following is a summary of the anticipated
principal terms of such facilities based upon the Commitment Letters. This
summary is subject to completion of definitive agreements and is qualified in
its entirety by reference to the Commitment Letters, which are filed as exhibits
to the Schedule 13E-4, of which the Offer to Purchase and this Supplement to the
Offer to Purchase are also exhibits.
The $5 billion Destinations Facilities will include (a) a $1.5 billion
2- 1/2-year term loan facility and a $2.5 billion 5-year term loan facility,
each to be fully drawn at closing, and (b) a $1 billion 5-year revolving credit
facility. Chase has committed to provide up to $500 million of these facilities
and agreed to use commercially reasonable efforts to syndicate the balance.
Loans under the Destinations Facilities will be prepayable at any time and will
be subject to mandatory prepayment in certain circumstances (i) upon the
incurrence of certain indebtedness, (ii) upon the sale or disposition of certain
assets and (iii) in an amount equal to 50% of Destinations' excess cash flow.
The Destinations Facilities will be guaranteed by each of Destinations' direct
and indirect domestic subsidiaries other than gaming subsidiaries. The
Destinations Facilities will be secured by a perfected first priority security
interest in all of Destinations' and its subsidiaries' (other than gaming
subsidiaries) tangible (other than mortgages on real property) and intangible
assets (including, without limitation, the Sheraton reservation system, each of
the Sheraton franchise agreements and intellectual property (including the
Sheraton trademark)) and all the capital stock and intercompany obligations of
each of Destinations' direct and indirect domestic subsidiaries (excluding
gaming subsidiaries) and 66% of the capital stock and all the intercompany
obligations of first-tier foreign subsidiaries. In addition, the Destinations
Facilities will contain (a) customary affirmative covenants, (b) financial
covenants that will require Destinations to maintain certain financial ratios
and (c) negative covenants that will limit the ability of Destinations and its
subsidiaries to incur indebtedness, liens, pledges and guarantees, to consummate
mergers, consolidations, liquidations, dissolutions and certain sales of assets,
to enter certain leases and sale and leaseback transactions, to make dividends
and other payments in respect of its capital stock, to make capital
expenditures, acquisitions, investments, loans, advances, optional payments and
modifications to certain debt instruments, to engage in transactions with
affiliates, to change its fiscal year or lines of business, and to restrict
certain distributions from subsidiaries. The Destinations Facilities also will
contain customary representations and warranties and events of default.
The $335 million Promedia Facilities will include (a) a $210 million 6-year
term loan facility, a $65 million 7-year term loan facility and a $60 million
8-year term loan facility, each to be fully drawn at closing, and (b) a $50
million 6-year revolving credit facility. All amounts will be loaned in their
equivalent in Belgian francs. Chase has committed to provide up to $60 million
of these facilities and agreed to use commercially reasonable efforts to
syndicate the balance. Loans under the Promedia Facilities will be prepayable in
amounts to be agreed upon and will be subject to mandatory prepayment in certain
circumstances (i) upon the incurrence of certain indebtedness by ITT ISI and its
subsidiaries (excluding those by Publimedia and its subsidiaries), (ii) upon the
sale or disposition of certain assets by ITT ISI and its subsidiaries (excluding
those by Publimedia and its subsidiaries) and (iii) in an amount equal to 75% of
the excess cash flow of Promedia and its subsidiaries (excluding Publimedia and
its subsidiaries). The Promedia Facilities will be guaranteed by ITT ISI and ITT
World Directories. The Promedia Facilities will be secured by a security
interest in certain tangible and intangible assets of ITT ISI and ITT World
Directories and assets of Promedia
12
<PAGE> 14
as to which it is commercially reasonable to provide security based on the costs
and legal difficulties of obtaining such a security interest in relation to the
value of the security to be afforded thereby. The Promedia Facilities will
contain (a) customary affirmative covenants, (b) financial covenants that will
require Promedia to maintain certain financial ratios and (c) negative covenants
that will limit the ability of Promedia to incur indebtedness, liens, pledges
and guarantees, to consummate mergers, consolidations, liquidations,
dissolutions and certain sales of assets, to enter certain leases and sale and
leaseback transactions, to make dividends and other payments in respect of its
capital stock, to make capital expenditures, acquisitions, investments, loans,
advances, optional payments and modifications to certain debt instruments, to
amend its charter or by-laws, to engage in transactions with affiliates, to
change its fiscal year or lines of business, to restrict certain distributions
from subsidiaries and joint ventures, to create new subsidiaries or joint
ventures and to make certain restricted payments. The Promedia Facilities will
contain customary representations and warranties and events of default.
The $270 million Publimedia Facilities will include (a) a $120 million
6-year term loan facility, a $50 million 7-year term loan facility and a $50
million 8-year term loan facility, each to be fully drawn at closing, and (b) a
$50 million 6-year revolving credit facility. All amounts will be loaned in
their equivalent in Dutch guilders. Chase has committed to provide up to $40
million of these facilities and agreed to use commercially reasonable efforts to
syndicate the balance. Loans under the Publimedia Facilities will be prepayable
at any time and will be subject to mandatory prepayment in certain circumstances
(i) upon the incurrence of certain indebtedness, (ii) upon the sale or
disposition of certain assets and (iii) in an amount equal to 75% of the excess
cash flow of Publimedia and its subsidiaries. The Publimedia Credit Facilities
will be secured by a security interest in 100% of the stock of Publimedia's
direct and indirect subsidiaries. The Publimedia Facilities will contain (a)
customary affirmative covenants, (b) financial covenants that will require
Publimedia to maintain certain financial ratios and (c) negative covenants that
will limit the ability of Publimedia to incur indebtedness, liens, pledges and
guarantees, to consummate mergers, consolidations, liquidations, dissolutions
and certain sales of assets, to enter certain leases and sale and leaseback
transactions, to make dividends and other payments in respect of its capital
stock, to make capital expenditures, acquisitions, investments, loans, advances,
optional payments and modifications to certain debt instruments, to amend its
charter or by-laws, to engage in transactions with affiliates, to change its
fiscal year or lines of business, to restrict certain distributions from
subsidiaries and joint ventures, to create new subsidiaries or joint ventures
and to make certain restricted payments. The Publimedia Facilities will contain
customary representations and warranties and events of default.
The agreements and commitments of Chase and CSI with respect to the
Destinations Facilities, the Promedia Facilities and the Publimedia Facilities
are subject to certain conditions, including conditions relating to (a) material
adverse conditions or changes in or affecting the business, operations, property
or financial condition or prospects of the Company or Destinations, and their
respective subsidiaries, taken as a whole, (b) the satisfaction of Chase and CSI
with the structure and serviceability of the financings of the Company and its
subsidiaries, (c) the disclosure of material and adverse information affecting
the Company or Destinations, as the case may be, (d) material adverse litigation
affecting the Comprehensive Plan or such credit facilities; provided that
litigation or other similar proceedings seeking to challenge the Comprehensive
Plan but which have not had the effect of enjoining any of or all the elements
of the Comprehensive Plan shall not prevent the satisfaction of this condition,
(e) material disruptions or material adverse changes in financial, banking or
capital market conditions, (f) competing offerings, placements or arrangements
by or on behalf of the Company, (g) definitive documentation and (h) certain
other customary conditions. The closings under each of the Destinations Credit
Facilities, Promedia Credit Facilities and Publimedia Credit Facilities will be
conditioned on the closings under the other two credit facilities.
In addition to the Credit Facilities, the Company is currently
contemplating additional debt financing pursuant to the issuance of debt
securities by Promedia and Publimedia (the "Debt Securities"). The Debt
Securities are expected to consist of (i) $320 million of ten-year notes to be
issued by Promedia in two tranches, consisting of a $160 million U.S.
dollar-denominated tranche and a DM 300 million Deutsche mark-denominated
tranche, and (ii) $175 million of ten-year notes to be issued by Publimedia in a
single tranche. The Debt Securities will be unsecured and subordinated and are
expected to have covenants that are typical for high yield offerings.
13
<PAGE> 15
Upon the consummation of the Offer, the Debt Tender Offer, the repayment of
other indebtedness and the Distributions, ITT ISI (which will consist of the
Company and its first tier subsidiary, ITT World Directories, its second tier
subsidiary, Promedia, its third tier subsidiary, Publimedia, and their
respective subsidiaries) will be significantly more leveraged than the Company
was prior to the consummation of such transactions and will have indebtedness
that is substantial in relation to its stockholders' equity. As of June 30,
1997, on a pro forma basis after giving effect to the Offer, the Debt Tender
Offer, the repayment of other indebtedness and the Distributions, ITT ISI would
have had an aggregate of $1.275 billion of outstanding indebtedness. In
addition, upon consummation of the Distributions, Destinations will also be
significantly leveraged. As of June 30, 1997, on a pro forma basis after giving
effect to the Offer, the Debt Tender Offer, the repayment of other indebtedness
and the Distributions, Destinations would have had an aggregate of $4.2 billion
of outstanding indebtedness.
The high degree of leverage for ITT ISI and Destinations following the
Distributions could have important consequences to each, including the
following: (i) each company's ability to obtain additional financing on
favorable terms may be impaired in the future; (ii) a substantial portion of
each company's cash flow from operations will be dedicated to the payment of
principal and interest on its indebtedness, thereby reducing the funds available
to such company for other purposes; (iii) each company may be more leveraged
than some of its competitors, which may place such company at a competitive
disadvantage; and (iv) each company's substantial degree of leverage may hinder
such company's ability to adjust rapidly to changing market conditions and could
make such company more vulnerable in the event of a downturn in general economic
conditions or in its business.
The ability of ITT ISI and its subsidiaries and Destinations to make
scheduled payments or to refinance their respective obligations with respect to
their indebtedness will depend on each company's financial and operating
performance, which, in turn, is subject to prevailing economic conditions and to
certain financial, business and other factors beyond their control. If the cash
flow and capital resources of any of ITT ISI and its subsidiaries or
Destinations following the Distributions are insufficient to fund its debt
service obligations, such company may be forced to reduce or delay planned
expansion and capital expenditures, sell assets, obtain additional equity
capital or restructure its debt. Although management believes that the cash flow
of each of ITT ISI and its subsidiaries and Destinations after the Distributions
will be adequate to meet interest and principal payments, no assurances can be
made that the operating results, cash flow and capital resources of ITT ISI and
its subsidiaries and Destinations will be sufficient for payment of its
respective indebtedness in the future.
The Company expects that ITT ISI and Destinations may put in place
permanent debt financing concurrently with or after the Distributions, which
will involve the issuance of debt securities and the use of the proceeds thereof
to repay indebtedness under the Credit Facilities. The Company also expects that
ITT ISI will use the proceeds of the Strategic Investment, if consummated,
primarily to reduce its indebtedness. The Company expects that Destinations
would use the proceeds of any additional asset sales primarily to reduce its
indebtedness.
11. CERTAIN CONDITIONS OF THE OFFER
Section 11 under "The Tender Offer" in the Offer to Purchase is amended and
restated in its entirety as follows:
Notwithstanding any other term or provision of the Offer, the Company will
not be required to accept for payment or, subject to any applicable rules and
regulations of the Commission, including Rule 14e-1(c) under the Exchange Act
(relating to a bidder's obligation to pay for or return tendered securities
promptly after the termination or withdrawal of such bidder's offer), to pay for
any Shares not theretofore accepted for payment or paid for unless the Company
shall be satisfied, in its reasonable discretion, that (i) all conditions to the
consummation of the Destinations Distribution (other than in respect of the
Offer) are satisfied, (ii) there exists no significant impediment, or material
likelihood of a significant impediment, to the timely consummation of the
Destinations Distribution on substantially the terms described herein and (iii)
all material consents, approvals, orders or authorizations of, or registrations,
declarations or filings with, any governmental authority with jurisdiction in
respect of the Company's gaming operations required or necessary in connection
with the Offer or any other
14
<PAGE> 16
element of the Comprehensive Plan have been made or obtained and are in full
force and effect. See Section 12 under "The Tender Offer" in the Offer to
Purchase. Furthermore, notwithstanding any other term or provision of the Offer,
the Company will not be required to accept for payment or, subject as aforesaid,
to pay for any Shares not theretofore accepted for payment or paid for, and may
terminate or amend the Offer if, at any time on or after July 16, 1997, and
before the acceptance for payment of such Shares or the payment therefor, any of
the following events or facts shall have occurred or exist:
(a) other than the existing claims in litigation concerning the Hilton
Transaction and the Company's declaratory judgment action, there shall be
threatened, instituted or pending any action, proceeding, application or
counterclaim by any government or governmental, regulatory or
administrative authority, instrumentality or agency, domestic, foreign or
supranational (each, a "Governmental Entity"), or by any other person,
domestic or foreign, before any court or Governmental Entity, that (i)(A)
challenges or seeks to, or is reasonably likely to, make illegal, delay or
otherwise directly or indirectly restrain or prohibit, or seeks to, or is
reasonably likely to, impose voting, procedural, price or other
requirements, in addition to those required by Federal securities laws and
the NGCL (each as in effect on the date of this Offer to Purchase), in
connection with, the making of the Offer, the acceptance for payment of, or
payment for, some of or all the Shares by the Company or any affiliate of
the Company or the consummation of the Distributions or any other material
element of the Comprehensive Plan on the terms contemplated hereby, (B)
seeks to obtain material damages or (C) otherwise directly or indirectly
relates to the transactions contemplated by the Offer, the Distributions or
any other material element of the Comprehensive Plan, (ii) might otherwise
materially adversely affect the Company or any of its subsidiaries or
affiliates or the value of the Shares or (iii) could materially adversely
affect the business, properties, assets, liabilities, capitalization,
stockholders' equity, condition (financial or otherwise), operations,
licenses or franchises, results of operations or prospects of the Company
or any of its subsidiaries or affiliates or could materially impair the
contemplated benefits to the Company of the Offer or the other elements of
the Comprehensive Plan;
(b) there shall be any action taken, or any statute, rule, regulation,
legislation, interpretation, judgment, order or injunction proposed,
enacted, enforced, promulgated, amended, issued or deemed applicable to (i)
the Company or any of its subsidiaries or affiliates or (ii) the Offer, the
Distributions or any other material element of the Comprehensive Plan, by
any government, legislative body or court, domestic, foreign or
supranational, or Governmental Entity, that might, directly or indirectly,
(A) make the acceptance for payment of, or payment for, Shares illegal or
otherwise restrict or prohibit consummation of the Offer or any other
material element of the Comprehensive Plan, (B) delay or restrict the
ability of the Company, or render the Company unable, to accept for
payment, or pay for, Shares, (C) materially impair the contemplated
benefits to the Company of the Offer or the other elements of the
Comprehensive Plan, (D) change in any material respect the terms of the
Distributions, the Offer or the Debt Tender Offer or any other element of
the Comprehensive Plan, (E) delay or restrict the ability of the Company,
or render the Company unable, to effect the Distributions or any other
element of the Comprehensive Plan on the terms contemplated hereby, (F)
materially impair in any way the contemplated future conduct of the
business of the Company, ITT ISI, ITT Educational or Destinations or any of
their respective subsidiaries or (G) result in any of the consequences
referred to in clauses (i) through (iii) of paragraph (a) above;
(c) any change shall have occurred or been threatened (or any
condition, event or development shall have occurred or been threatened
involving a prospective change) in the business, properties, assets,
liabilities, capitalization, stockholders' equity, condition (financial or
otherwise), operations, licenses or franchises, results of operations or
prospects of the Company or any of its subsidiaries or affiliates that is
or may be materially adverse to the Company or any of its subsidiaries or
affiliates;
(d) there shall have occurred or been threatened (i) any general
suspension of trading in, or limitation on prices for, securities on any
national securities exchange or in the over-the-counter market in the
United States (other than any coordinated trading halt triggered solely by
a specified decrease in a market index), (ii) any extraordinary or material
adverse change in the financial markets or major stock exchange indices in
the United States or abroad or in the market price of Shares, (iii) any
change in the
15
<PAGE> 17
general political, market, economic or financial conditions in the United
States or abroad that could, in the judgment of the Company, have a
material adverse effect upon the business, properties, assets, liabilities,
capitalization, stockholders' equity, condition (financial or otherwise),
operations, licenses or franchises, results of operations or prospects of
the Company or any of its subsidiaries or the trading in, or value of, the
Shares, (iv) any material change in United States currency exchange rates
or any other currency exchange rates or a suspension of, or limitation on,
the markets therefor, (v) a declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States, (vi) any
limitation (whether or not mandatory) by any government, domestic, foreign
or supranational, or Governmental Entity on, or other event that might
affect, the extension of credit by banks or other lending institutions,
(vii) a commencement of a war or armed hostilities or other national or
international calamity directly or indirectly involving the United States
or (viii) in the case of any of the foregoing existing at the time of the
commencement of the Offer, a material acceleration or worsening thereof;
(e) (i) a tender or exchange offer for any Shares, or a solicitation
of proxies from the Company's stockholders with respect or related to any
proposal for a merger, acquisition or other business combination or
acquisition of a material amount of assets involving the Company, shall
have been made or publicly proposed to be made by any person (other than
Hilton), (ii) any of the Hilton nominees shall have been elected to the
Board of Directors of the Company, (iii) Hilton shall have amended or
publicly disclosed an intention to amend the Hilton Offer in any material
respect (other than an amendment which terminates the Hilton Offer without
the purchase of any Shares thereunder) or (iv) it shall have been publicly
disclosed or the Company shall have otherwise learned that (A) any person,
entity or "group" (within the meaning of Section 13(d)(3) of the Exchange
Act) shall have proposed to acquire (other than Hilton's proposal to
acquire Shares pursuant to the Hilton Offer as in effect on the date of
this Offer to Purchase), or any person, entity or "group" (including Hilton
or any of its affiliates) shall have acquired, beneficial ownership of more
than five percent of the outstanding Shares, through the acquisition of
stock, the formation of a group or otherwise (other than a person, entity
or group which had publicly disclosed such ownership in a Schedule 13D or
Schedule 13G (or an amendment thereto) on file with the Commission prior to
July 16, 1997), (B) any such person, entity or group that prior to July 16,
1997, had filed such a Schedule 13G or 13D with the Commission has acquired
or proposes to acquire, through the acquisition of stock, the formation of
a group or otherwise, beneficial ownership of one percent or more of the
Shares or (C) any person (other than Hilton) shall have filed a
Notification and Report Form under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 (or amended a prior filing to increase the
applicable filing threshold set forth therein) or made a public
announcement reflecting an intent to acquire the Company or any assets or
subsidiaries of the Company;
(f) the Company shall be unable for any reason to effect borrowings
under the Credit Facilities, or obtain alternative sources of financing on
acceptable terms, sufficient to purchase 30,000,000 Shares pursuant to the
Offer and finance the Debt Tender Offer and the repayment of other
indebtedness as contemplated by the Comprehensive Plan;
(g) the Company shall have entered into a definitive agreement or an
agreement in principle with any person with respect to a merger, other
business combination or acquisition proposal, dispositions of assets other
than in the ordinary course or pursuant to the Comprehensive Plan, or the
Board shall have approved any other transaction that, in any such case, in
the opinion of the Company, makes the Offer or the Distributions
inadvisable; or
(h) all consents and approvals required to be obtained from any
Federal or state governmental agency, authority or instrumentality in
connection with each component of the Comprehensive Plan (other than in
connection with the ITT Educational Distribution and including those
described or referred to in Section 12 under "The Tender Offer" in the
Offer to Purchase) shall not have been obtained or the Company shall have
been advised, or otherwise shall have reason to believe, that any such
consent or approval will be denied or substantially delayed, or will not be
given other than upon terms or conditions which would, in the opinion of
the Company, make it inadvisable to proceed with the Offer or any other
element of the Comprehensive Plan;
16
<PAGE> 18
such that, in the reasonable judgment of the Company in any such case, and
regardless of the circumstances (including any action or inaction by the Company
or any of its subsidiaries or affiliates) giving rise to any such condition,
makes it inadvisable to proceed with the Offer and/or with such acceptance for
payment or payment or with any material element of the Comprehensive Plan. THE
COMPANY INTENDS TO TERMINATE THE OFFER IF HILTON OR ANY AFFILIATE OF HILTON
ACQUIRES A MATERIAL NUMBER OF SHARES PURSUANT TO THE HILTON OFFER OR OTHERWISE
OR IF ANY OF THE HILTON NOMINEES ARE ELECTED TO THE BOARD OF DIRECTORS OF THE
COMPANY.
The Company's plan to consummate the Destinations Distribution is subject
to certain conditions, including (a) all necessary approvals of any governmental
or regulatory bodies having been obtained, including approval by the gaming
authorities of the states of Nevada, New Jersey and Mississippi, and by the
Federal Communications Commission (see Section 12 under "The Tender Offer" in
the Offer to Purchase), (b) all necessary consents of third parties having been
obtained, (c) final action by the Board of Directors of the Company declaring
the Destinations Distribution, (d) the satisfaction of all conditions to the
Tender Offers (other than the conditions to the Distributions set forth in this
paragraph), including the financing conditions, (e) the shares of Destinations
common stock to be distributed in the Destinations Distribution having been
approved for listing on the NYSE, subject to official notice of issuance, (f)
Destinations' Registration Statement on Form 10 under the Exchange Act relating
to Destinations common stock having become effective under the Exchange Act, (g)
there not being in effect any statute, rule, regulation or order of any court,
governmental or regulatory body which prohibits or makes illegal the
transactions contemplated by the Comprehensive Plan and (h) the receipt by the
Company of an opinion of counsel that the Destinations Distribution will be
tax-free to the Company and its stockholders. The Destinations Distribution is
not conditioned upon the completion of the Strategic Investment or the ITT
Educational Distribution.
The Board has retained discretion to abandon, defer or modify the
Comprehensive Plan and each element of the Comprehensive Plan in light of
changed circumstances. The Board, however, intends to pursue the Comprehensive
Plan on the terms described herein if Hilton withdraws its interest in acquiring
the Company. The conditions to any element of the Comprehensive Plan may be
waived by the Board. However, the Board will not waive the requirement of
receipt of an opinion of counsel that the Destinations Distribution will be
tax-free to the Company and its stockholders. Accordingly, the terms of the
Comprehensive Plan remain subject to modification, and there can be no assurance
that the Comprehensive Plan will occur as described herein.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances giving rise to any such
condition or may be waived by the Company in whole or in part at any time and
from time to time in its reasonable discretion; provided, however, that the
Exchange Act and the rules and regulations promulgated thereunder require that
all conditions to the Offer, other than those relating to the receipt of certain
necessary governmental approvals, must be satisfied or waived prior to the
Expiration Date. The failure by the Company at any time to exercise any of the
foregoing rights will not be deemed a waiver of any such right, the waiver of
any such right with respect to particular facts and circumstances will not be
deemed a waiver with respect to any other facts and circumstances and each such
right will be deemed an ongoing right that may be asserted at any time and from
time to time. Any determination by the Company concerning the events described
in this section and any related judgment by the Company regarding the
inadvisability of proceeding with the acceptance for payment or payment for any
tendered Shares will be final and binding upon all parties.
* * *
Except as expressly modified by this Supplement to the Offer to Purchase,
the terms set forth in the Offer to Purchase and the related Letter of
Transmittal remain applicable in all respects to the Offer and this Supplement
to the Offer to Purchase should be read in conjunction with the Offer to
Purchase and the Letter of Transmittal.
ITT CORPORATION
August 27, 1997
17
<PAGE> 19
ANNEX A
ITT DESTINATIONS, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND SCHEDULE
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Consolidated Income for the six months ended June 30, 1997 and 1996 (Unaudited)....... A-1
Consolidated Balance Sheet as of June 30, 1997 (Unaudited) and December 31, 1996...... A-2
Consolidated Cash Flow for the six months ended June 30, 1997 and 1996 (Unaudited).... A-3
Notes To Financial Statements (Unaudited)............................................. A-4
Business Segment Information (Unaudited).............................................. A-8
</TABLE>
<PAGE> 20
ITT DESTINATIONS, INC.
CONSOLIDATED INCOME
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX
MONTHS ENDED
JUNE 30,
-----------------
1997 1996
------ ------
<S> <C> <C>
Revenues................................................................... $2,815 $2,740
Costs and expenses:
Salaries, benefits and other operating................................... 2,129 2,060
Selling, general and administrative...................................... 335 334
Restructuring charge..................................................... 58 --
Depreciation and amortization............................................ 134 114
------ ------
2,656 2,508
------ ------
159 232
Interest expense, net...................................................... (76) (83)
Gain on sale of Alcatel Alsthom shares..................................... 183 --
Gain on sale of investment in Madison Square Garden........................ 200 --
Miscellaneous income (expense), net........................................ (18) 9
------ ------
448 158
Provision for income taxes................................................. (189) (70)
Minority equity............................................................ -- (2)
------ ------
Income from continuing operations.......................................... 259 86
Discontinued operations.................................................... 20 30
------ ------
Net income................................................................. $ 279 $ 116
====== ======
Earnings per share:
Income from continuing operations........................................ $ 2.19 $ .72
Income from discontinued operations...................................... .18 .25
------ ------
Net income............................................................... $ 2.37 $ .97
====== ======
Weighted average common and common equivalent shares....................... 118 119
====== ======
</TABLE>
The accompanying notes to financial statements are an integral part of the above
statement.
A-1
<PAGE> 21
ITT DESTINATIONS, INC.
CONSOLIDATED BALANCE SHEET
(IN MILLIONS, EXCEPT FOR SHARE AMOUNTS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
----------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents......................................... $ 312 $ 205
Marketable securities............................................. -- 599
Accounts receivable, net.......................................... 403 435
Inventories....................................................... 56 58
Prepaid expenses and other........................................ 148 102
------ ------
Total current assets...................................... 919 1,399
Plant, property and equipment, net.................................. 4,465 4,700
Investment in Madison Square Garden................................. 85 533
Other investments................................................... 349 386
Long-term receivables, net.......................................... 210 178
Other assets........................................................ 400 346
Goodwill, net....................................................... 1,290 1,323
Net assets held for sale............................................ 339 --
Net assets of discontinued operations............................... 63 57
------ ------
$ 8,120 $8,922
====== ======
LIABILITIES AND STOCKHOLDERS EQUITY
Current liabilities:
Accounts payable.................................................. $ 262 $ 257
Accrued expenses.................................................. 484 451
Notes payable and current maturities of long-term debt............ 403 486
Accrued taxes..................................................... 201 171
------ ------
Total current liabilities................................. 1,350 1,365
Allocated debt of ITT............................................... 1,098 2,095
Other long-term debt................................................ 691 798
Deferred income taxes............................................... 184 186
Other liabilities................................................... 438 378
Net liabilities of discontinued operations.......................... 815 808
Minority interest................................................... 198 218
------ ------
4,774 5,848
------ ------
Stockholders equity:
Common stock: authorized 200,000,000 shares, no par or stated
value, outstanding 116,528,691 and 116,366,176 shares,
respectively................................................... 2,903 2,897
Cumulative translation adjustment................................. (77) (2)
Unrealized loss on securities..................................... -- (62)
Retained earnings................................................. 520 241
------ ------
Total stockholders equity...................................... 3,346 3,074
------ ------
$ 8,120 $8,922
====== ======
</TABLE>
The accompanying notes to financial statements are an integral part of the above
statement.
A-2
<PAGE> 22
ITT DESTINATIONS, INC.
CONSOLIDATED CASH FLOW
(IN MILLIONS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX
MONTHS ENDED
JUNE 30,
-----------------
1997 1996
------- -----
<S> <C> <C>
OPERATING ACTIVITIES
Net income................................................................ $ 279 $ 116
Discontinued operations................................................... (20) (30)
---- ----
Income from continuing operations....................................... 259 86
Adjustments to income from continuing operations:
Depreciation and amortization........................................... 134 114
Provision for doubtful receivables...................................... 19 17
Gain on divestments -- pretax........................................... (411) (20)
Changes in working capital:
Receivables............................................................. (17) (17)
Inventories............................................................. (2) (7)
Accounts payable........................................................ (22) (37)
Accrued expenses........................................................ 41 (36)
Accrued and deferred taxes................................................ 25 1
Other, net................................................................ (25) 7
---- ----
Cash from continuing operations........................................... 1 108
Cash (to)/from discontinued operations.................................... (23) 24
---- ----
Cash (used for)/from operating activities............................... (22) 132
---- ----
INVESTING ACTIVITIES
Additions to plant, property and equipment................................ (470) (233)
Proceeds from divestments................................................. 1,597 219
Collection of Cablevision note receivable................................. 169 --
Acquisitions.............................................................. (29) (75)
Other, net................................................................ (34) 7
---- ----
Cash from/(used for) investing activities............................... 1,233 (82)
---- ----
FINANCING ACTIVITIES
Short-term debt, net...................................................... (8) 30
Long-term debt issued..................................................... 98 139
Long-term debt repaid..................................................... (1,197) (260)
Other, net................................................................ 5 50
---- ----
Cash used for financing activities...................................... (1,102) (41)
---- ----
EXCHANGE RATE EFFECT ON CASH AND CASH EQUIVALENTS......................... (2) 1
---- ----
Increase in cash and cash equivalents..................................... 107 10
Cash and cash equivalents -- Beginning of Period.......................... 205 141
---- ----
CASH AND CASH EQUIVALENTS -- END OF PERIOD................................ $ 312 $ 151
==== ====
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest................................................................ $ 72 $ 74
==== ====
Income taxes............................................................ $ 152 $ 53
==== ====
</TABLE>
The accompanying notes to financial statements are an integral part of the above
statement.
A-3
<PAGE> 23
ITT DESTINATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
(DOLLAR AMOUNTS ARE IN MILLIONS UNLESS OTHERWISE STATED)
COMPREHENSIVE PLAN
At a July 15, 1997 meeting of the Board of Directors of ITT Corporation
("ITT"), the Board approved a comprehensive plan (the "Comprehensive Plan"),
which is designed to enhance the value of the ongoing investment of stockholders
as well as further the interests of ITT's employees, creditors, customers and
the economies and communities in which ITT operates. The major elements of the
Comprehensive Plan are:
(i) A tender offer to repurchase up to 30 million shares (or
approximately 25.7% of all the outstanding shares) of ITT's common stock
from the public for a price per share of $70, net to the seller in cash
(the "Stock Tender Offer"). ITT commenced the Stock Tender Offer on July
17, 1997 and the Stock Tender Offer is currently scheduled to expire at
5:00 p.m., New York City time, on Tuesday, September 9, 1997, unless
extended;
(ii) the pro rata distribution to stockholders of ITT of all the
shares of common stock of ITT Destinations, Inc. (the "Company"), a new
subsidiary that was formed to hold ITT's hotels and gaming business (the
"Destinations Distribution");
(iii) the pro rata distribution to stockholders of ITT of all the
shares of common stock owned by ITT of ITT Educational Services, Inc. ("ITT
Educational"), the subsidiary that operates ITT's post-secondary technical
education business (the "ITT Educational Distribution" and, together with
the Destinations Distribution, the "Distributions"); and
(iv) the allocation of ITT's indebtedness between its hotels and
gaming business and telephone directories publishing business in a manner
that is appropriate for the credit capacity and capitalization requirements
of each entity. In order to effect this allocation, ITT commenced a tender
offer (the "Debt Tender Offer") for all of its outstanding public debt on
August 11, 1997. The Debt Tender Offer is currently scheduled to expire at
5:00 p.m., New York City time, on Tuesday, September 9, 1997, unless
extended.
Consummation of the Comprehensive Plan is subject to receipt of certain
regulatory and other approvals. Following the Distributions, ITT's only direct
subsidiary will be ITT World Directories, Inc. ("ITT World Directories"), the
subsidiary that operates ITT's telephone directories publishing business and it
is expected that ITT will change its name to "ITT Information Services, Inc."
BASIS OF PRESENTATION
The Company is one of the world's largest hotel and gaming companies. The
Company's principal lines of business are hotels and gaming. The hotels segment
is comprised of a worldwide hospitality network of over 420 full-service hotels
serving three markets: luxury, upscale and mid-price. The Company's hotel
operations are represented on every continent and in nearly every major world
market. The Company's gaming operations are located in several key domestic
jurisdictions. The Company also operates various hotel/casino ventures outside
the United States.
These financial statements represent the financial position, results of
operations and cash flows of the Company as if it were a separate entity for all
periods presented. ITT's historical basis in the assets and liabilities of the
Company has been carried over and all majority-owned subsidiaries have been
consolidated. All material intercompany transactions and balances have been
eliminated.
INTERIM PERIOD FINANCIAL STATEMENTS
The unaudited consolidated financial statements reflect all adjustments
(which include only normal recurring adjustments) necessary to present fairly
the financial position of the Company and it subsidiaries at
A-4
<PAGE> 24
June 30, 1997 and their results of operations and cash flows for the six months
ended June 30, 1997 and 1996. Interim results are not necessarily indicative of
full year performance.
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 such promotional allowances was $75 and $83 for the
six months ended June 30, 1997 and 1996, respectively. The estimated cost of
such promotional allowances was $59 and $56 for the six months ended June 30,
1997 and 1996, respectively, and has been included in costs and expenses.
Revenues and costs and expenses of the Gaming operations are comprised of
the following:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30,
-------------
1997 1996
---- ----
<S> <C> <C>
Revenues
Gaming...................................................................... $473 $526
Rooms....................................................................... 33 36
Food and beverage........................................................... 36 39
Other operations............................................................ 53 54
---- ----
Total............................................................... $595 $655
==== ====
Cost and Expenses
Gaming...................................................................... $296 $302
Rooms....................................................................... 12 13
Food and beverage........................................................... 34 35
Other operations............................................................ 28 25
Selling, general and administrative......................................... 91 105
Depreciation and amortization............................................... 41 39
Provision for doubtful accounts............................................. 14 14
---- ----
Total............................................................... $516 $533
==== ====
</TABLE>
DISCONTINUED OPERATIONS
As more fully discussed in "Distributions and Basis of Presentation", the
assets and liabilities of ITT World Directories and ITT Educational are included
in Net Liabilities of Discontinued Operations and Net Assets of Discontinued
Operations, respectively. Summary financial information of the discontinued
operations is as follows:
ITT World Directories
Balance Sheet Data:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
----------- ------------
(UNAUDITED)
<S> <C> <C>
Total assets........................................ $ 459 $ 510
Total liabilities................................... (274) (318)
Allocated debt of ITT............................... (1,000) (1,000)
------- -------
Net liabilities of discontinued operations.......... $ (815) $ (808)
======= =======
</TABLE>
A-5
<PAGE> 25
Income Statement Data:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
----------------------------
1997 1996
----------- ------------
(UNAUDITED)
<S> <C> <C>
Revenues............................................ $ 276 $291
=== ===
Operating income.................................... $ 83 $103
Interest expense, net............................... 36 37
Provision for income taxes.......................... 19 26
Minority equity..................................... 13 14
--- ---
Income from discontinued operations................. $ 15 $ 26
=== ===
</TABLE>
ITT Educational Services
Balance Sheet Data:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
----------- ------------
(UNAUDITED)
<S> <C> <C>
Total assets........................................ $ 138 $134
Total liabilities................................... (75) (77)
---- ----
Net assets of discontinued operations............... $ 62 $ 57
==== ====
</TABLE>
Income Statement Data:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
----------------------------
1997 1996
----------- ------------
(UNAUDITED)
<S> <C> <C>
Revenues............................................ $ 124 $109
=== ===
Operating income.................................... $ 10 $ 7
Interest income..................................... 2 2
Miscellaneous expense, net.......................... -- 1
Provision for income taxes.......................... 5 4
Minority equity..................................... 2 --
--- ---
Earnings from discontinued operations............... $ 5 $ 4
=== ===
</TABLE>
INVESTMENT IN MADISON SQUARE GARDEN
On February 18, 1997, the Company received $169 as payment of the remaining
amount necessary to equalize the partnership interests of Cablevision and ITT in
MSG. On April 15, 1997, ITT entered into a Partnership Interest Transfer
Agreement among ITT, ITT Eden Corporation, ITT MSG Inc., Cablevision, Rainbow
Media Holdings Inc., Rainbow Garden Corp., Garden L.P. Holding Corp., MSG Eden
Corporation and MSG (the "Partnership Interest Transfer Agreement"). Pursuant to
the Partnership Interest Transfer Agreement, Cablevision paid ITT $500 in cash
on June 17, 1997. ITT also has a "put" option to require Cablevision or MSG to
purchase half of ITT's continuing interest in MSG for $75 on June 17, 1998 and
the other half of this continuing interest for an additional $75 on June 17,
1999 (or, if the first option is not exercised the entire continuing interest
for $150). In addition, pursuant to an Aircraft Contribution Agreement dated as
of April 15, 1997, among Garden L.P. Holding Corp., MSG Eden Corporation, ITT
MSG, Inc., ITT Flight Operations, Inc. and MSG, ITT has agreed to contribute to
MSG an ITT-owned aircraft which MSG has used for the Knicks and the Rangers. In
consideration of the aircraft contribution, Cablevision has agreed to add an
additional $19 to the exercise price of each of ITT's "put" options. The
Partnership Interest Transfer Agreement also includes a "call" option requiring
ITT to sell its remaining stake
A-6
<PAGE> 26
in MSG on the third anniversary of the closing at fair market value, but not
below a minimum price based on the "put" prices.
NEW ACCOUNTING PRONOUNCEMENT
In March 1997, the Financial Accounting Standards Board issued SFAS No. 128
"Earnings per Share," which is effective for financial statements issued for
periods ending after December 15, 1997, including interim periods; earlier
application is not permitted. SFAS No. 128 requires replacement of primary and
fully diluted earnings (loss) per share with basic and diluted earnings per
share. The impact of SFAS No. 128 to the Company's current presentation is
immaterial for all periods presented.
RECLASSIFICATIONS
Certain amounts in the 1996 financial statements have been reclassified to
conform to the current year presentation.
NET ASSETS HELD FOR SALE
On April 29, 1997, ITT announced its intention to sell two of its Gaming
properties: The Desert Inn Resort & Casino in Las Vegas, Nevada ("The Desert
Inn"), and The Sheraton Casino in Tunica, Mississippi. For financial reporting
purposes, the assets and liabilities attributable to these two properties have
been classified in the Consolidated Balance Sheet as "Net assets held for sale".
On August 1, 1997, ITT Sheraton Corporation entered into an agreement in
principle with Davis Gaming, L.L.C. ("Davis Gaming"), a Delaware limited
liability company owned by Marvin Davis, to form two 50/50 joint ventures to own
The Desert Inn and the 34 acre parcel of land adjacent to The Desert Inn. The
Desert Inn and the 34 acre parcel of land are currently owned by a subsidiary of
ITT. Under the terms of the agreement in principle, ITT will receive $250 in
cash, including a $150 cash payment from Davis Gaming and $100 from the proceeds
of new debt issued by the Desert Inn joint venture. ITT, through its Caesars
World, Inc. subsidiary, will manage The Desert Inn for a period of ten-years
with an option to extend the management contract for an additional ten-year
period. Over the next two years, the joint venture partners will consider the
feasibility of developing a new hotel and casino on the 34 acre parcel. Should
the decision be made to proceed, ITT will also manage the new property. At the
insistence of Davis Gaming, the transaction documentation will include certain
"change of control" provisions.
This transaction, which is subject to the execution of definitive
agreements, due diligence and certain other customary closing conditions, is
expected to be completed by November 1, 1997. ITT's rights under the transaction
will be retained by Destinations after the completion of the Distributions.
SALE OF WBIS+
On May 12, 1997, ITT Dow Jones Television, a general partnership in which
each of ITT and Dow Jones & Company Inc. ("Dow Jones") owns a 50% interest,
agreed to sell the Federal Communications Commission license of WBIS+ Channel 31
in New York City, to Paxson Communications Corporation for a purchase price of
approximately $258. This agreement is subject to the approval of the Federal
Communications Commission, which is expected to be received in 1997. This
transaction is expected to be completed by the end of 1997.
A-7
<PAGE> 27
THE HILTON OFFER
On January 31, 1997, Hilton Hotels Corporation ("Hilton") commenced a
tender offer for approximately 50.1% of the outstanding shares of ITT's common
stock (the "Hilton Tender Offer") at $55 per share, net to the seller in cash
and without interest upon the terms and subject to the conditions set forth in
the Offer to Purchase dated January 31, 1997 and the related Letter of
Transmittal. On August 7, 1997, Hilton amended the Hilton Tender Offer to
increase the offered price to $70 per share. The Hilton Tender Offer has been
extended to August 29, 1997.
Hilton has announced that, if the Hilton Offer succeeds, it will obtain the
entire equity interest in ITT by merging ITT with Hilton or a subsidiary of
Hilton (such merger, together with the Hilton Tender Offer, the "Hilton
Transaction") in a transaction pursuant to which all shares not tendered and
purchased pursuant to the Hilton Tender Offer (other than shares owned by Hilton
and its subsidiaries or held in ITT's treasury) would be converted into the
right to receive a number of shares of Hilton common stock, par value $2.50 per
share, having a nominal value of $70 per share, subject to unspecified collar
provisions. The Hilton Transaction is more fully described in the Tender Offer
Statement on Schedule 14D-1, and amendments thereto, filed by Hilton with the
Securities and Exchange Commission.
BUSINESS SEGMENT INFORMATION
(IN MILLIONS)
(UNAUDITED)
<TABLE>
<CAPTION>
REVENUES INCOME
----------------- -------------
SIX MONTHS ENDED JUNE 30,
-----------------------------------
1997 1996 1997 1996
------ ------ ---- ----
<S> <C> <C> <C> <C>
Hotels..................................................... $2,220 $2,086 $181 $158
Gaming..................................................... 514 533 98 117
------ ------ ---- ----
Ongoing Segments......................................... 2,734 2,619 279 275
Dispositions............................................... 81 121 (20) 6
------ ------ ---- ----
Total Segments........................................... 2,815 2,740 259 281
Restructuring charge..................................... (58) --
Other...................................................... -- -- (42) (49)
------ ------ ---- ----
2,815 2,740 159 232
Interest expense, net...................................... (76) (83)
Gain on sale of Alcatel Alsthom shares..................... 183 --
Gain on sale of investment in Madison Square Garden........ 200 --
Miscellaneous expenses, net................................ (18) 9
Provision for income taxes................................. (189) (70)
Minority equity............................................ -- (2)
---- ----
Income from continuing operations.......................... 259 86
Discontinued operations.................................... 20 30
------ ------ ---- ----
$2,815 $2,740 $279 $116
====== ====== ==== ====
</TABLE>
A-8
<PAGE> 28
ANNEX B
ITT CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND SCHEDULE
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Consolidated Income for the six months ended June 30, 1997 and 1996 (Unaudited)..... B-1
Consolidated Balance Sheet as of June 30, 1997 (Unaudited) and December 31, 1996.... B-2
Consolidated Cash Flow for the six months ended June 30, 1997 and 1996
(Unaudited)....................................................................... B-3
Notes to Financial Statements (Unaudited)........................................... B-4
</TABLE>
B-1
<PAGE> 29
ITT CORPORATION
CONSOLIDATED INCOME
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-------------------
1997 1996
----- -----
<S> <C> <C>
Revenues................................................................. $ 276 $ 291
Costs and expenses:
Salaries, benefits and other operating................................. 143 138
Selling, general and administrative.................................... 42 42
Depreciation and amortization.......................................... 8 8
------ ------
193 188
------ ------
83 103
Interest expense......................................................... (36) (37)
47 66
Provision for income taxes............................................... (19) (26)
------ ------
Minority equity.......................................................... (13) (14)
Net income............................................................... $ 15 $ 26
====== ======
Earnings per share....................................................... $0.13 $0.21
====== ======
Weighted average common equivalent shares................................ 118 119
====== ======
</TABLE>
The accompanying notes to financial statements are an integral part of the above
statement.
B-2
<PAGE> 30
ITT CORPORATION
CONSOLIDATED BALANCE SHEET
(IN MILLIONS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
----------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents......................................... $ 24 $ 13
Receivables, net.................................................. 302 358
Directories in progress........................................... 37 44
Prepaid expenses and other........................................ 11 5
------ ------
Total current assets...................................... 374 420
Plant, property and equipment, net.................................. 25 27
Goodwill, net....................................................... 34 34
Long-term receivables, net.......................................... 5 8
Other assets........................................................ 21 21
------ ------
$ 459 $ 510
====== ======
LIABILITIES AND STOCKHOLDERS DEFICIT
Current liabilities:
Accounts payable.................................................. $ 25 $ 43
Accrued expenses.................................................. 87 93
Notes payable..................................................... 27 46
Accrued taxes..................................................... 58 57
------ ------
Total current liabilities................................. 197 239
Deferred income taxes............................................... 9 10
Long-term debt...................................................... 1,000 1,000
Other liabilities................................................... 8 8
Minority interest................................................... 60 61
------ ------
1,274 1,318
------ ------
STOCKHOLDERS DEFICIT................................................ (815) (808)
------ ------
$ 459 $ 510
====== ======
</TABLE>
The accompanying notes to financial statements are an integral part of the above
statement.
B-3
<PAGE> 31
ITT CORPORATION
CONSOLIDATED CASH FLOW
(IN MILLIONS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-------------------
1997 1996
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net income.............................................................. $ 15 $ 26
Adjustments to net income:
Depreciation and amortization......................................... 8 7
Provision for doubtful receivables.................................... 6 6
Minority equity in net income......................................... 13 14
Changes in working capital:
Receivables........................................................... (6) (1)
Directories in progress............................................... 3 --
Accounts payable...................................................... (21) (29)
Accrued expenses...................................................... 2 (8)
Accrued and deferred taxes.............................................. 3 17
Other, net.............................................................. (7) (11)
---- ----
Cash from operating activities........................................ 16 21
---- ----
INVESTING ACTIVITIES
Additions to plant, property and equipment.............................. (4) (3)
Other, net.............................................................. -- (1)
---- ----
Cash used for investing activities.................................... (4) (4)
---- ----
FINANCING ACTIVITIES
Short-term debt, net.................................................... (14) 8
Transfers from/(to) Destinations........................................ 26 (21)
Other, net.............................................................. (12) 1
---- ----
Cash used for financing activities.................................... -- (12)
---- ----
EXCHANGE RATE EFFECT ON CASH AND CASH EQUIVALENTS....................... (1) (2)
---- ----
Increase in cash and cash equivalents................................... 11 3
Cash and Cash Equivalents -- Beginning of Period........................ 13 30
---- ----
CASH AND CASH EQUIVALENTS -- END OF PERIOD.............................. $ 24 $ 33
==== ====
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest.............................................................. $ 41 $ 41
==== ====
Income taxes.......................................................... $ 36 $ 30
==== ====
</TABLE>
The accompanying notes to financial statements are an integral part of the above
statement.
B-4
<PAGE> 32
ITT CORPORATION
NOTES TO FINANCIAL STATEMENTS
(DOLLAR AMOUNTS ARE IN MILLIONS UNLESS OTHERWISE STATED)
DISTRIBUTIONS AND BASIS OF PRESENTATION
On July 15, 1997, the Board of Directors of ITT Corporation ("ITT")
approved a plan to distribute (the "Distributions") to the holders of ITT's
common stock all the outstanding shares of common stock of ITT Destinations,
Inc. ("Destinations"), a newly formed company that will hold the hotels and
gaming businesses of ITT, and all the shares representing its approximately 83%
interest in ITT Educational Services, Inc. ("ITT Educational"), its
publicly-traded postsecondary technical education business. After the
Distributions, the shares of ITT (which is expected to be renamed ITT
Information Services, Inc. and is herein referred to as the "Company") will
represent its interest in its telephone directories publishing businesses.
The Company publishes telephone directories -- alphabetical and
classified -- and also publishes specialized directories. The Company's
principal source of revenue in connection with its operations is advertisements
published in its directories. Its principal publications are in Belgium, The
Netherlands, Portugal, the Republic of South Africa, the Republic of Ireland,
Puerto Rico and the United States Virgin Islands. The Company publishes in these
jurisdictions either pursuant to a contract with the national telecommunications
provider or as a proprietary directory in such jurisdiction.
Prior to the Distributions, ITT intends to realign its existing
indebtedness. As part of the debt realignment, certain debt of Destinations will
be offered in exchange for certain issues of ITT debt. ITT will commence tender
offers for all publicly held debt securities issued by ITT and repay certain
other debt. These tender offers will be financed by a combination of new lines
of credit of Destinations and the Company. Upon completion of the debt
realignment, the Company will have responsibility for approximately $1.0 billion
of debt, subject to certain adjustments and Destinations will have
responsibility for the remaining indebtedness of ITT.
The accompanying consolidated financial statements, which include the
accounts of the Company and its wholly and majority owned directory publishing
subsidiaries, present the financial position, results of operations and cash
flows of the Company in a manner that accounts for the Distributions as if the
Company was spun-off by Destinations. Consequently, the accompanying financial
statements present the historical basis in the operations of the Company, after
adjustment for certain indebtedness not allocated to Destinations. All material
intercompany transactions and balances have been eliminated. Investments in
affiliated companies, owned more than 20%, but not in excess of 50%, are
recorded on the equity method.
INTERIM PERIOD FINANCIAL STATEMENTS
The unaudited consolidated financial statements reflect all adjustments
(which include only normal recurring adjustments) necessary to present fairly
the financial position of the Company at June 30, 1997 and their results of
operations and cash flows for the six months ended June 30, 1997 and 1996.
Interim results are not necessarily indicative of full year performances.
EARNINGS PER SHARE
Earnings per share were computed based upon the number of ITT common and
common equivalent shares which were outstanding on June 30, 1997.
SUBSEQUENT EVENT
On July 15, 1997, the Company entered into a definitive agreement with an
investor to purchase approximately 32.9% of the outstanding Common Stock of the
Company and warrants to purchase Shares representing an additional 13.7% of the
outstanding Common Stock of the Company for aggregate consideration of $225. The
warrants will have a ten year term and permit the investor to buy Common Stock
of the Company at a 50% premium to the investor's initial purchase price.
Consummation of this transaction is subject to certain conditions including,
among other things, approval of the Company's stockholders following the
Distributions.
In addition, on July 15, 1997, the Company purchased for $254 the 20%
minority interest in ITT World Directories, Inc., which will be the only direct
subsidiary of the Company after the Distributions, bringing its ownership of ITT
World Directories, Inc. to 100%.
B-5
<PAGE> 33
Manually signed facsimile copies of the Letter of Transmittal will be
accepted. The Letter of Transmittal, certificates for Shares and any other
required documents should be sent or delivered by each stockholder of the
Company or such stockholder's broker, dealer, bank, trust company or other
nominee to the Depositary at one of its addresses set forth below. THERE ARE NO
PROCEDURES FOR GUARANTEED DELIVERY OF SHARES IN THE OFFER.
The Depositary for the Offer is:
CITIBANK, N.A.
(800) 422-2077
<TABLE>
<S> <C> <C> <C>
By Mail: By Carrier: By Facsimile Transmission: By Hand:
CITICORP DATA CITICORP DATA (201) 262-3240 CITIBANK, N.A.
DISTRIBUTION, INC. DISTRIBUTION, INC. 111 Wall Street
P.O. Box 7072 404 Sette Drive Broker Services
Paramus, New Jersey 07653 Paramus, New Jersey 07652 5th Floor
New York, New York
</TABLE>
Questions and requests for assistance or for additional copies of this
Supplement to the Offer to Purchase, the Offer to Purchase and the Letter of
Transmittal may be directed to the Information Agent or the Dealer Managers at
their respective telephone numbers and locations listed below. You may also
contact your broker, dealer, bank, trust company or other nominee for assistance
concerning the Offer.
The Information Agent for the Offer is:
[GEORGESON & COMPANY LOGO]
Wall Street Plaza
New York, New York 10005
Banks and Brokers Call Collect:
(212) 440-9800
or
All Others Call Toll Free:
(800) 223-2064
The Dealer Managers for the Offer are:
<TABLE>
<S> <C>
GOLDMAN, SACHS & CO. LAZARD FRERES & CO. LLC
85 Broad Street 30 Rockefeller Plaza
New York, New York 10004 New York, New York 10020
(800) 323-5678 (212) 632-6717
</TABLE>
August 27, 1997
<PAGE> 1
EXHIBIT (a)(16)
LETTER OF TRANSMITTAL
FOR
TENDER OF SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS)
BY
ITT CORPORATION
PURSUANT TO THE OFFER TO PURCHASE
DATED JULY 17, 1997
AS MODIFIED BY THE
SUPPLEMENT TO THE OFFER TO PURCHASE
DATED AUGUST 27, 1997
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW
YORK CITY TIME, ON TUESDAY, SEPTEMBER 9, 1997, UNLESS EXTENDED.
To: CITIBANK, N.A., Depositary
<TABLE>
<S> <C> <C>
By Mail: By Courier: By Hand:
CITICORP DATA CITICORP DATA CITIBANK, N.A.
DISTRIBUTION, INC. DISTRIBUTION, INC. 111 Wall Street
P.O. Box 7072 404 Sette Drive Broker Services
Paramus, New Jersey 07653 Paramus, New Jersey 07652 5th Floor
New York, New York
</TABLE>
By Facsimile Transmission:
(201) 262-3240
(For Eligible Institutions Only)
Confirm by Telephone:
(800) 422-2077
FOR INFORMATION CALL THE INFORMATION AGENT:
[GEORGESON & COMPANY LOGO]
Banks and Brokers Call Collect:
(212) 440-9800
All Others Call Toll Free:
(800) 223-2064
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN THOSE SHOWN ABOVE OR
TRANSMISSION OF INSTRUCTIONS TO A FACSIMILE NUMBER OTHER THAN THOSE LISTED ABOVE
DOES NOT CONSTITUTE A VALID DELIVERY.
This Letter of Transmittal is to be used only if (a) certificates for
Shares (as defined below) are to be delivered with it or (b) Shares are being
delivered by book-entry transfer to the account maintained by the Depositary at
The Depository Trust Company ("DTC") or the Philadelphia Depository Trust
Company ("PDTC") (collectively, the "Book-Entry Transfer Facilities") as set
forth in Section 2 under the "The Tender Offer" in the Offer to Purchase (as
defined below).
<PAGE> 2
Delivery of the Letter of Transmittal and the other required documents to
one of the Book-Entry Transfer Facilities does not constitute delivery to the
Depositary. THERE ARE NO PROCEDURES FOR GUARANTEED DELIVERY OF SHARES IN THE
OFFER.
The name(s) and address(es) of the registered holder(s) should be printed
below, if they are not already printed below, exactly as they appear on the
receipt(s) representing the Shares tendered herewith. The receipt(s) and the
number of Shares that the registered holder(s) wish(es) to tender should be
indicated in the appropriate boxes below.
- --------------------------------------------------------------------------------
DESCRIPTION OF SHARES OF COMMON STOCK TENDERED (SEE INSTRUCTIONS 3 AND 4)
<TABLE>
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S)
(PLEASE FILL IN EXACTLY AS CERTIFICATE(S) TENDERED
NAME(S) APPEAR(S) ON CERTIFICATE(S)) (ATTACH SIGNED LIST IF NECESSARY)
------------------------------------------------------------------------------------------------------------------------------
NUMBER OF SHARES
OF COMMON STOCK NUMBER OF SHARES
CERTIFICATE REPRESENTED BY OF COMMON STOCK
NUMBER(S)* CERTIFICATE(S)* TENDERED**
======================================================
======================================================
------------------------------------------------------
TOTAL SHARES OF
COMMON STOCK TENDERED
------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Need not be completed if Shares are delivered by book-entry transfer.
** Unless otherwise indicated, it will be assumed that all Shares represented
by any certificates delivered to the Depositary are being tendered. See
Instruction 4.
================================================================================
[ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO AN ACCOUNT MAINTAINED BY THE DEPOSITARY AT ONE OF THE BOOK-ENTRY
TRANSFER FACILITIES AND COMPLETE THE FOLLOWING
Name of Tendering Institution:
------------------------------------------------------------------------------
Check Box of Applicable Book-Entry Transfer Facility:
Depository Trust Company [ ] Philadelphia Depository
Trust Company [ ]
Account Number:
------------------------------------------------------------------------------
Transaction Code Number:
------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 3
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to ITT Corporation, a Nevada corporation
(the "Company"), the above-described shares of Common Stock, no par value, of
the Company (the "Common Stock"), together with the associated preferred share
purchase rights (the "Rights" and, together with the Common Stock, the
"Shares"), at a price of $70.00 per Share (the "Purchase Price"), net to the
seller in cash, upon the terms and subject to the conditions set forth in the
Offer to Purchase dated July 17, 1997 (the "Offer to Purchase"), as amended and
supplemented by the Supplement to the Offer to Purchase dated August 27, 1997
(the "Supplement to the Offer to Purchase"), receipt of which is hereby
acknowledged, and in this Letter of Transmittal (which together constitute the
"Offer").
Subject to and effective upon acceptance for payment of the Shares tendered
herewith in accordance with terms of the Offer (including, if the Offer is
extended or amended, the terms or conditions of any such extension or
amendment), the undersigned hereby sells, assigns and transfers to or upon the
order of the Company all right, title and interest in and to all the Shares
tendered hereby, or orders the registration of such Shares tendered by
book-entry transfer, that are purchased pursuant to the Offer to or upon the
order of the Company and hereby irrevocably constitutes and appoints the
Depositary the true and lawful agent and attorney-in-fact of the undersigned
with respect to such Shares, with full power of substitution (such power of
attorney being deemed to be an irrevocable power coupled with an interest), to:
(a) deliver certificates for such Shares, or transfer ownership of such
Shares on the account books maintained by either of the Book-Entry
Transfer Facilities, together, in any such case, with all accompanying
evidences of transfer and authenticity, to or upon the order of the
Company, upon receipt by the Depositary, as the undersigned's agent, of
the Purchase Price with respect to such Shares;
(b) present certificates for such Shares for cancelation and transfer of
such Shares on the Company's books; and
(c) receive all benefits and otherwise exercise all rights of beneficial
ownership of such Shares, all in accordance with the terms of the
Offer.
The undersigned hereby represents warrants to the Company that:
(a) the undersigned "owns" the Shares tendered hereby within the meaning of
Rule 14e-4 promulgated under the Securities Exchange Act of 1934, as
amended, and has full power and authority to validly tender, sell,
assign and transfer the Shares tendered hereby.
(b) when and to the extent the Company accepts the Shares for purchase, the
Company will acquire good, marketable and unencumbered title thereto,
free and clear of all security interests, liens, charges, encumbrances,
conditional sales agreements or other obligations relating to their
sale or transfer, and not subject to any adverse claim;
(c) on request, the undersigned will execute and deliver any additional
documents the Depositary or the Company deems necessary or desirable to
complete the assignment, transfer and purchase of the Shares tendered
hereby; and
(d) the undersigned has read and agrees to and accepts all the terms of the
Offer.
The undersigned understands that all Shares properly tendered and not
withdrawn will be purchased at $70.00 per Share (or such other price that may be
set forth in an amendment to the Offer), net to the seller in cash, upon the
terms and subject to the conditions of the Offer, including the proration
provisions thereof and that the Company will return all other Shares, including
Shares not purchased because of proration.
The undersigned understands that tenders of Shares pursuant to any one of
the procedures described in Section 2 under "The Tender Offer" in the Offer to
Purchase, as amended by the Supplement to the Offer to
<PAGE> 4
Purchase, and in the instructions hereto will constitute a binding agreement
between the undersigned and the Company upon the terms and subject to the
conditions of the Offer.
The undersigned recognizes that, under certain circumstances set forth in
the Offer to Purchase and in the Supplement to the Offer to Purchase, the
Company may terminate or amend the Offer or may not be required to accept for
payment any of the Shares tendered herewith or may accept for payment, pro rata
with Shares tendered by other stockholders, fewer than all the Shares tendered
therewith.
All authority conferred or agreed to be conferred in this Letter of
Transmittal shall survive the death or incapacity of the undersigned, and any
obligations of the undersigned hereunder shall be binding upon the heirs,
personal representatives, successors and assigns of the undersigned. Except as
stated on the Offer, this tender is irrevocable.
Unless otherwise indicated under "Special Payment Instructions," please
issue the check for the aggregate Purchase Price and/or return or issue the
certificate(s) evidencing any Shares not tendered or not accepted for payment in
the name(s) of the registered holder(s) appearing under "Description of Shares
Tendered." Similarly, unless otherwise indicated under "Special Delivery
Instructions," please mail the check for the aggregate Purchase Price and/or the
certificate(s) evidencing any Shares not tendered or not accepted for payment
(and accompanying documents, as appropriate) to the address(es) of the
registered holder(s) appearing under "Description of Shares Tendered." In the
event that both the "Special Delivery Instructions" and the "Special Payment
Instructions" are completed, please issue the check for the aggregate Purchase
Price and/or issue or return the certificate(s) evidencing any Shares not
tendered or accepted for payment in the name(s) of, and deliver said check
and/or certificate(s) to, the person or persons so indicated. In the case of
book-entry delivery of Shares, please credit the account maintained at the
Book-Entry Transfer Facility indicated above with any Shares not accepted for
payment. The undersigned recognizes that the Company has no obligation pursuant
to the "Special Payment Instructions" to transfer any Shares from the name(s) of
the registered holder(s) thereof, or to order the registration or transfer of
such Shares tendered by book-entry transfer, if the Company does not accept for
payment any of the Shares so tendered.
<PAGE> 5
------------------------------------------------------------
SPECIAL PAYMENT INSTRUCTIONS
(See Instructions 1, 4, 5, 6, 7 and 8)
To be completed ONLY if certificate(s) for Shares not tendered or not
purchased and/or any check for the Purchase Price of Shares purchased are
to be issued in the name of someone other than the undersigned, or if
Shares delivered by book-entry transfer that are not purchased are to be
returned by credit to an account maintained by a Book-Entry Transfer
Facility.
Issue: [ ] Check [ ] Certificate(s) to:
Name:
----------------------------------------------------
(PLEASE PRINT)
Address:
--------------------------------------------------
------------------------------------------------------------
(INCLUDE ZIP CODE)
------------------------------------------------------------
(TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER)
[ ] Credit Shares rendered by book-entry transfer and not purchased to the
account set forth below
------------------------------------------------------------
(NAME OF ACCOUNT PARTY)
------------------------------------------------------------
(ACCOUNT NUMBER)
CHECK BOX OF APPLICABLE BOOK-ENTRY TRANSFER FACILITY
[ ] DTC [ ] PDTC
============================================================
SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 1, 4, 5, 6, 7 and 8)
To be completed ONLY if certificate(s) for Shares not tendered or not
purchased and/or any check for the Purchase Price of Shares purchased are
to be sent to someone other than the undersigned or to the undersigned at
an address other than that shown above.
Deliver: [ ] Check [ ] Certificate(s) to:
Name:
----------------------------------------------------
(PLEASE PRINT)
Address:
--------------------------------------------------
------------------------------------------------------------
(INCLUDE ZIP CODE)
------------------------------------------------------------
<PAGE> 6
STOCKHOLDER(S) SIGN HERE
(See Instructions 1 and 5)
(PLEASE COMPLETE ENCLOSED SUBSTITUTE FORM W-9)
Must be signed by registered holder(s) exactly as name(s) appear(s) on the
certificate(s) or on a security position listing or by person(s) authorized to
become registered holder(s) by certificates and documents transmitted with the
Letter of Transmittal. If signature is by attorney-in-fact, executor,
administrator, trustee, guardian, officer of a corporation or another person
acting in a fiduciary or representative capacity, please set forth full title.
See Instruction 5.
X
- --------------------------------------------------------------------------------
X
- --------------------------------------------------------------------------------
(SIGNATURE(S) OF OWNER(S))
Name(s):
------------------------------------------------------------------------
(PLEASE PRINT)
Capacity (full title):
----------------------------------------------------------
Address:
------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Area Code and Telephone Number:
-------------------------------------------------
Taxpayer ID Number or Social Security Number:
---------------------------
Date:
---------------------------------------------------------------------------
GUARANTEE OF SIGNATURE(S)
(See Instructions 1 and 5)
Authorized Signature:
-----------------------------------------------------------
Name(s):
------------------------------------------------------------------------
(PLEASE PRINT)
Title:
--------------------------------------------------------------------------
Name of Firm:
-------------------------------------------------------------------
Address:
------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(INCLUDING ZIP CODE)
Area Code and Telephone Number:
-------------------------------------------------
Tax ID Number or Social Security Number:
-------------------------------------
Date:
----------------------
<PAGE> 7
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES.
Except as otherwise provided below, all signatures on this Letter of
Transmittal must be guaranteed by a financial institution (including most
commercial banks, savings and loan associations, and brokerage houses) that is a
participant in the Securities Transfer Agents Medallion Program, the New York
Stock Exchange Medallion Signature Guarantee Program or the Stock Exchange
Medallion Program (each such entity being hereinafter referred to as an
"Eligible Institution"). Signatures on this Letter of Transmittal need not be
guaranteed if (a) this Letter of Transmittal is signed by the registered owner
of the Shares (which term, for purposes of this document, shall include any
participant in one of the Book-Entry Transfer Facilities whose name appears on a
security position listing as the owner of Shares) tendered herewith and such
owner has not completed either of the boxes entitled "Special Payment
Instructions" or "Special Delivery Instructions" on this Letter of Transmittal
or (b) such Shares are tendered for the account of an Eligible Institution. See
Instruction 5.
2. DELIVERY OF LETTER OF TRANSMITTAL AND SHARES.
This Letter of Transmittal is to be used only if (a) certificates are to be
forwarded with it to the Depositary or (b) delivery of Shares is to be made by
book-entry transfer pursuant to the procedure set forth in Section 2 under "The
Tender Offer" in the Offer to Purchase, as amended by the Supplement to the
Offer to Purchase. Certificates for all physically delivered Shares, or a
confirmation of a book-entry transfer of all Shares delivered electronically
into the Depositary's account at either of the Book-Entry Transfer Facilities,
together in each case with a properly completed and duly executed Letter of
Transmittal (or a facsimile thereof), with any required signature guarantees,
and any other documents required by this Letter of Transmittal, must be received
by the Depositary at one of its addresses set forth on the front page of this
Letter of Transmittal before the Expiration Date (as defined in the Offer to
Purchase). Delivery of documents to either of the Book-Entry Transfer Facilities
does not constitute delivery to the Depositary.
In order to facilitate and accelerate calculation of the final proration
factor for the Offer, the Company has amended the Offer to remove the procedures
for tendering Shares in the Offer by guaranteed delivery. Stockholders may not
use the (green) Notice of Guaranteed Delivery previously circulated to tender
their Shares and the Depositary will not accept Notices of Guaranteed Delivery.
Any tenders in which Shares are not delivered in the manner described in the
Offer to Purchase, as amended by the Supplement to the Offer to Purchase, prior
to the expiration of the Offer will not be valid. Because transactions in Shares
ordinarily settle three trading days after the transaction, persons who purchase
Shares three trading days or a shorter period of time prior to the expiration of
the Offer may be unable to tender such Shares in the Offer, unless the purchaser
in such transaction has made special arrangements to tender in the Offer, and
validly deliver to the Depositary, the Shares purchased in such transaction
prior to the expiration of the Offer.
THE METHOD OF DELIVERY OF ALL DOCUMENTS, INCLUDING STOCK CERTIFICATES, THE
LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS, IS AT THE ELECTION AND
RISK OF THE TENDERING STOCKHOLDER. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH
RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED.
No alternative, conditional or contingent tenders will be accepted, and no
fractional Shares will be purchased. By executing this Letter of Transmittal (or
a facsimile thereof), each tendering stockholder waives any right to receive any
notice of the acceptance of such stockholder's tender.
<PAGE> 8
3. INADEQUATE SPACE.
If the space provided in the box entitled "Description of Shares Tendered"
is inadequate, the certificate numbers and/or the number of Shares should be
listed on a separate signed schedule and attached to this Letter of Transmittal.
4. PARTIAL TENDERS AND UNPURCHASED SHARES. (Not applicable to stockholders who
deliver Shares by book-entry transfer).
If fewer than all the Shares evidenced by a certificate delivered to the
Depositary are to be tendered, fill in the number of Shares that are to be
tendered in the box entitled "Number of Shares Tendered." If such Shares are
purchased, a new certificate for the remainder of the Shares evidenced by the
old certificate(s) will be sent to and in the name of the registered holder(s)
(unless otherwise specified by such holder(s) having completed either of the
boxes entitled "Special Delivery Instructions" or "Special Payment Instructions"
on this Letter of Transmittal) as soon as practicable following the expiration
or termination of the Offer. All Shares represented by the certificate(s) listed
and delivered to the Depositary will be deemed to have been tendered unless
otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL; STOCK POWERS; AND ENDORSEMENTS.
(a) If this Letter of Transmittal is signed by the registered holder(s) of
the Shares tendered herewith, the signature(s) must correspond exactly with the
name(s) as written on the face of the certificates without any change
whatsoever.
(b) If any of the Shares tendered herewith are registered in the names of
two or more joint owners, each such owner must sign this Letter of Transmittal.
(c) If any of the Shares tendered herewith are registered in different
names on different certificates, it will be necessary to complete, sign and
submit as many separate Letters of Transmittal as there are different
registrations of certificates.
(d) If this Letter of Transmittal is signed by the registered holder(s) of
the Shares tendered herewith, no endorsements of certificates or separate stock
powers are required unless payment is to be made and/or certificates for Shares
not tendered or not purchased are to be issued to a person other than the
registered holder(s). If this Letter of Transmittal is signed by a person other
than the registered holder(s) of the Shares tendered herewith, however, the
certificates must be endorsed or accompanied by appropriate stock powers, in
either case, signed exactly as the name(s) of the registered holder(s) appear on
the certificates for such Shares. Signatures on any such certificates or stock
powers must be guaranteed by an Eligible Institution. See Instruction 1.
(e) If this Letter of Transmittal or any certificates or stock powers are
signed by a trustee, executor, administrator, guardian, attorney-in-fact, agent,
officer of a corporation or other person acting in a fiduciary or representative
capacity, such person should so indicate when signing and proper evidence
satisfactory to the Company of the authority of such person so to act must be
submitted.
6. STOCK TRANSFER TAXES.
The Company will pay any stock transfer taxes with respect to the transfer
and sale of Shares to it or its order pursuant to the Offer. If, however,
payment of the aggregate Purchase Price is to be made to, or certificates for
Shares not tendered or accepted for purchase are to be registered in the name
of, any person other than the registered holder, or if tendered certificates are
registered in the name of any person other than the person(s) signing this
Letter of Transmittal, the amount of any stock transfer taxes (whether imposed
on the registered holder or such person) payable on account of the transfer to
such person will be deducted from the aggregate purchase price unless
satisfactory evidence of payment of such taxes or exemption therefrom is
submitted.
<PAGE> 9
7. IRREGULARITIES.
All questions as to the number of Shares to be accepted and the validity,
form, eligibility (including time of receipt) and acceptance for payment of any
tender of Shares will be determined by the Company, in its sole discretion,
which determination shall be final and binding on all parties. The Company
reserves the absolute right to reject any or all tenders determined by it not to
be in proper form or the acceptance for payment of which may, in the opinion of
the Company's counsel, be unlawful. The Company also reserves the absolute right
to waive any of the conditions of the Offer (except as provided in Section 11
under "The Tender Offer" in the Offer to Purchase, as amended by the Supplement
to the Offer to Purchase) and any defect or irregularity in the tender of any
particular Shares. The Company's interpretation of the terms and conditions of
the Offer (including these instructions) shall be final and binding on all
parties. No tender of Shares will be deemed properly made until all defects or
irregularities have been cured or waived. None of the Company, the Depositary,
the Information Agent or any other person is or will be obligated to give notice
of any defects or irregularities in tenders, and none of them will incur any
liability for failure to give any such notice.
8. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS.
If the check for the aggregate Purchase Price of any Shares purchased is to
be issued to, or any Shares not tendered or not purchased are to be returned in
the name of, a person other than the person(s) signing this Letter of
Transmittal or if the check or any certificates for Shares not tendered or not
purchased are to be mailed to someone other than the person(s) signing this
Letter of Transmittal or the person(s) signing this Letter of Transmittal at an
address other than that shown in the box entitled "Description of Shares
Tendered," the boxes entitled "Special Payment Instructions" and/or "Special
Delivery Instructions" on this Letter of Transmittal should be completed.
9. REQUEST FOR ASSISTANCE OR ADDITIONAL COPIES.
Requests for assistance or additional copies of the Supplement to the Offer
to Purchase, the Offer to Purchase and this Letter of Transmittal may be
directed to the Information Agent or one of the Dealer Managers at their
addresses or telephone numbers set forth below.
10. FEDERAL INCOME TAX WITHHOLDING
Except as provided above under "Important Tax Information," each tendering
stockholder is required to provide the Depositary with a correct TIN on
Substitute Form W-9 which is provided under "Important Tax Information" below.
Failure to provide the information on the form may subject the tendering
stockholder to a $50 penalty and a 31% Federal backup withholding tax may be
imposed on the payments made to the stockholder or other payee with respect to
Shares purchased pursuant to the Offer. For further information concerning
backup withholding and instructions for completing the Substitute Form W-9,
consult the enclosed "Guidelines for Certification of Taxpayer Identification
Number on Substitute W-9."
11. WITHHOLDING ON FOREIGN STOCKHOLDERS.
The Depositary will withhold Federal income tax equal to 30% of the gross
payments payable to a foreign stockholder unless the Depositary determines that
a reduced rate of withholding or an exemption from withholding is applicable.
For this purpose, a foreign stockholder is any stockholder that is not (i) a
citizen or resident of the United States, (ii) a corporation, partnership or
other entity created or organized in or under the laws of the United States or
any political subdivision thereof or (iii) any estate or trust the income of
which is subject to United States Federal income taxation regardless of the
source of such income. The Depositary will determine a stockholder's status as a
foreign stockholder and eligibility for a reduced rate of, or an exemption from,
withholding by reference to the stockholder's address and to any outstanding
certificates or statements concerning eligibility for a reduced rate of, or
exemption from, withholding unless facts and circumstances indicate that
reliance is not warranted. A foreign stockholder who has not previously
submitted the appropriate certificates or statements with respect to a reduced
rate of, or exemption from, withholding for which such stockholder may be
eligible should consider doing so in order to avoid over-withholding. A foreign
<PAGE> 10
stockholder may be eligible to obtain a refund of tax withheld if such
stockholder meets one of the two tests for capital gain or loss treatment
described in Section 5 under "The Tender Offer" in the Offer to Purchase or is
otherwise able to establish that no tax or a reduced amount of tax was due.
IMPORTANT TAX INFORMATION
Under U.S. Federal income tax law, a stockholder whose tendered Shares are
accepted for payment is required by law to provide the Depositary with such
stockholder's correct taxpayer identification number ("TIN") on the Substitute
Form W-9 below. If the Depositary is not provided with the correct TIN, the
Internal Revenue Service may subject the stockholder or other payee to a $50
penalty. In addition, payments that are made to such stockholder or other payee
with respect to Shares purchased pursuant to the Offer may be subject to 31%
backup withholding.
Certain stockholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements and should indicate their status by writing "exempt" across the
face of the Substitute Form W-9. In order for a foreign individual to qualify as
an exempt recipient, the stockholder must submit a Form W-8, signed under
penalties of perjury, attesting to that individual's exempt status. A Form W-8
can be obtained from the Depositary. See the enclosed "Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9" for more
instructions.
If backup withholding applies, the Depositary is required to withhold 31%
of any such payments to be made to the stockholder or other payee. Backup
withholding is not an additional tax. Rather, the tax liability of persons
subject to backup withholding will be reduced by the amount of tax withheld. If
withholding results in an overpayment of taxes, a refund may be obtained from
the Internal Revenue Service.
The box in Part 2 in the Substitute Form W-9 may be checked if the
tendering stockholder has not been issued a TIN and has applied for a TIN or
intends to apply for a TIN in the near future. If the box in Part 2 is checked,
the stockholder or other payee must also complete the Certificate of Awaiting
Taxpayer Identification Number below in order to avoid backup withholding.
Notwithstanding that the Box in Part 2 is checked and the Certificate of
Awaiting Taxpayer Identification Number is completed, the Depositary will
withhold 31% on all payments made prior to the time a properly certified TIN is
provided to the Depositary.
Facsimile copies of this Letter of Transmittal, properly completed and duly
executed, will be accepted. The Letter of Transmittal, certificates for Shares
and any other required documents should be sent or delivered by each stockholder
of the Company or such stockholder's broker, dealer, commercial bank, trust
company or other nominee to the Depositary at one of its addresses set forth
below.
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A MANUALLY SIGNED FACSIMILE HEREOF
(TOGETHER WITH DEPOSITARY RECEIPTS FOR DEPOSITARY SHARES OR CONFIRMATION OF
BOOK-ENTRY TRANSFER OF DEPOSITARY SHARES AND ALL OTHER REQUIRED DOCUMENTS) MUST
BE RECEIVED BY THE DEPOSITARY PRIOR TO THE EXPIRATION DATE.
WHAT NUMBER TO GIVE THE DEPOSITARY
The stockholder is required to give the Depositary the TIN (e.g., social
security number or employer identification number) of the record owner of the
Shares or of the last transferee appearing on the transfers attached to, or
endorsed on, the certificates evidencing the Shares. If the Shares are
registered in more than one name or are not registered in the name of the actual
owner, consult the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" for additional guidance on which
number to report.
<PAGE> 11
<TABLE>
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------
PAYER'S NAME: CITIBANK, N.A.
- ----------------------------------------------------------------------------------------------------
PART 1 -- PLEASE PROVIDE YOUR TIN IN THE Social Security Number
BOX AT THE RIGHT AND CERTIFY BY SIGNING or Employer
AND DATING BELOW. Identification Number
----------------------------
------------------------------------------------------------------------
PART 2 -- CERTIFICATES -- Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer Identification
Number (or I am waiting for a number to be issued to me); and
SUBSTITUTE
FORM W-9 (2) I am not subject to backup withholding because: (a) I am exempt from
backup withholding, or (b) I have not been notified by the Internal
DEPARTMENT OF THE Revenue Service (the "IRS") that I am subject to backup withholding
TREASURY as a result of a failure to report all interest or dividends, or (c)
INTERNAL REVENUE SERVICE the IRS has notified me that I am no longer subject to backup
withholding.
PAYER'S REQUEST FOR
TAXPAYER IDENTIFICATION CERTIFICATION INSTRUCTIONS -- You must cross out item (2) above if
NUMBER ("TIN") you have been notified by the IRS that you are currently subject to
backup withholding because of under-reporting interest or dividends
on your tax return. However, if after being notified by the IRS that
you were subject to backup withholding you received another
notification from the IRS that you are no longer subject to backup
withholding, do not cross out such item (2).
------------------------------------------------------------------------
SIGNATURE
---------------------------------- PART 3 --
DATE
----------------------------------------- Awaiting TIN [ ]
NAME
-----------------------------------------
ADDRESS
--------------------------------------
-----------------------------------------
(City, State and Zip Code)
---------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW
THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN
PART 3 OF SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification
number has not been issued to me, and either (1) I have mailed or
delivered an application to receive a taxpayer identification number to
the appropriate Internal Revenue Service Center or Social Security
Administration Office, or (2) I intend to mail or deliver an application
in the near future. I understand that if I do not provide a taxpayer
identification number by the time of payment, 31% of all reportable
payments made to me will be withheld.
Signature
--------------------------------------------------------------------------
Date
--------------------------------------------------------------------------
<PAGE> 12
IMPORTANT: TO VALIDLY TENDER SHARES, THIS LETTER OF TRANSMITTAL OR A MANUALLY
SIGNED FACSIMILE HEREOF (TOGETHER WITH CERTIFICATES FOR SHARES OR CONFIRMATION
OF BOOK-ENTRY TRANSFER OF SHARES AND ALL OTHER REQUIRED DOCUMENTS) MUST BE
RECEIVED BY THE DEPOSITARY PRIOR TO THE EXPIRATION DATE. THERE ARE NO PROCEDURES
FOR GUARANTEED DELIVERY OF SHARES IN THE OFFER.
The Depositary for the Offer is:
CITIBANK, N.A.
<TABLE>
<S> <C> <C>
By Mail: By Courier: By Hand:
CITICORP DATA CITICORP DATA CITIBANK, N.A.
DISTRIBUTION, INC. DISTRIBUTION, INC. 111 Wall Street
P.O. Box 7072 404 Sette Drive Broker Services
Paramus, New Jersey 07653 Paramus, New Jersey 07652 5th Floor
New York, New York
</TABLE>
By Facsimile Transmission:
(201) 262-3240
For Information
(800) 422-2077
Any questions or requests for assistance or for additional copies of the
Supplement to the Offer to Purchase, the Offer to Purchase and this Letter of
Transmittal may be directed to the Information Agent. Stockholders may also
contact their broker, dealer, commercial bank, trust company or other nominee
for assistance concerning the Offer.
The Information Agent for the Offer is:
[GEORGESON & COMPANY LOGO]
Wall Street Plaza
New York, New York 10005
Banks and Brokers Call Collect:
(212) 440-9800
ALL OTHERS CALL TOLL FREE:
(800) 223-2064
The Dealer Managers for the Offer are:
<TABLE>
<S> <C> <C>
GOLDMAN, SACHS & CO. LAZARD FRERES & CO. LLC
85 Broad Street 30 Rockefeller Plaza
New York, New York 10004 New York, New York 10020
(800) 323-5678 (212) 632-6717
</TABLE>
