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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10/A
(AMENDMENT NO. 2)
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES
EXCHANGE ACT OF 1934
ITT DESTINATIONS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
NEVADA 91-1835827
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
1330 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10019-5490
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
212-258-1000
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE ON WHICH
TITLE OF EACH CLASS TO BE SO REGISTERED EACH CLASS IS TO BE REGISTERED
- --------------------------------------------------------------------------------------------
<S> <C>
COMMON STOCK, PAR VALUE $.01 PER SHARE NEW YORK STOCK EXCHANGE
SERIES A PARTICIPATING CUMULATIVE PREFERRED NEW YORK STOCK EXCHANGE
STOCK PURCHASE RIGHTS
</TABLE>
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NONE
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ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS
(b) Exhibits
The following documents are filed as exhibits hereto:
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -------------------------------------------------------------------------------------
<C> <S>
3.1 Form of Restated Articles of Incorporation of ITT Destinations, Inc.*
3.2 Form of Amended and Restated By-laws of ITT Destinations, Inc.*
4.1 Specimen Common Share certificate*
4.2 Form of Restated Articles of Incorporation of ITT Destinations, Inc. (filed as
Exhibit 3.1 hereto)*
4.3 Form of Amended and Restated By-laws of ITT Destinations, Inc. (filed as Exhibit 3.2
hereto)*
4.4 Form of Rights Agreement between ITT Destinations, Inc. and The Bank of New York, as
Rights Agent*
4.5 Form of Certificate of the Designations, Voting Powers, Preferences and Relative,
Participating, Optional and Other Special Rights and Qualifications, Limitations or
Restrictions of Series A Participating Cumulative Preferred Stock of ITT
Destinations, Inc. (attached as Exhibit A to the Rights Agreement filed as Exhibit
4.4 hereto)*
4.6 Form of Right Certificate (attached as Exhibit B to the Rights Agreement filed as
Exhibit 4.4 hereto)*
10.1 Form of Agreement and Plan of Distribution between ITT Destinations, Inc. and ITT
Corporation*
10.2 Form of Agreement and Plan of Distribution among ITT Destinations, Inc., ITT
Corporation and ITT Educational Services, Inc. (attached as Exhibit D to the
Agreement and Plan of Distribution filed as Exhibit 10.1 hereto)*
10.3 Form of Intellectual Property License and Assignment Agreement between ITT
Destinations, Inc., ITT Corporation, ITT World Directories, Inc. and ITT Sheraton
Corporation (attached as Exhibit B-1 to the Agreement and Plan of Distribution filed
as Exhibit 10.1 hereto)*
10.4 Form of Trade Name and Service Mark License Agreement between ITT Sheraton
Corporation, ITT Corporation and ITT World Directories, Inc. (attached as Exhibit B-2
to the Agreement and Plan of Distribution filed as Exhibit 10.1 hereto)*
10.5 Form of Tax Allocation Agreement among ITT Corporation, ITT Destinations, Inc. and
ITT Educational Services, Inc. (attached as Exhibit C to the Agreement and Plan of
Distribution filed as Exhibit 10.1 hereto)*
10.6 Form of Employee Benefits Services and Liabilities Agreement among ITT Destinations,
Inc, ITT Corporation and ITT Educational Services, Inc. (attached as Exhibit A to the
Agreement and Plan of Distribution filed as Exhibit 10.1 hereto)*
10.7 Form of ITT Destinations, Inc. 1997 Restricted Stock Plan for Non-Employee
Directors++
10.8 Form of Indemnification Agreement with members of the Board of Directors*
10.9 Form of ITT Destinations, Inc. Incentive Stock Plan++
10.10 ITT Corporation Senior Executive Severance Pay Plan*
10.11 Form of R.V. Araskog employment agreement++
10.12 Form of Severance Agreement between ITT Destinations, Inc. and certain executives*
10.13 Commitment Letter dated as of August 22, 1997, among Chase Securities Inc., The Chase
Manhattan Bank and ITT Corporation**
21 List of Subsidiaries of ITT Destinations, Inc.*
99.1 ITT Destinations, Inc. Information Statement dated September 4, 1997**
</TABLE>
- ---------------
* Filed herewith.
** Previously filed.
++ To be filed by amendment.
1
<PAGE> 3
PURSUANT TO THE REQUIREMENTS OF SECTION 12 OF THE SECURITIES EXCHANGE ACT
OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
ITT DESTINATIONS, INC.
By: /s/ PATRICK L. DONNELLY
------------------------------------
Name: Patrick L. Donnelly
Title: Vice President
Date: September 19, 1997
2
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EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -------------------------------------------------------------------------------------
<C> <S>
3.1 Form of Restated Articles of Incorporation of ITT Destinations, Inc.*
3.2 Form of Restated By-laws of ITT Destinations, Inc.*
4.1 Specimen Common Share certificate*
4.2 Form of Amended and Restated Articles of Incorporation of ITT Destinations, Inc.
(filed as Exhibit 3.1 hereto)*
4.3 Form of Amended and Restated By-laws of ITT Destinations, Inc. (filed as Exhibit 3.2
hereto)*
4.4 Form of Rights Agreement between ITT Destinations, Inc. and The Bank of New York, as
Rights Agent*
4.5 Form of Certificate of the Designations, Voting Powers, Preferences and Relative,
Participating, Optional and Other Special Rights and Qualifications, Limitations or
Restrictions of Series A Participating Cumulative Preferred Stock of ITT
Destinations, Inc. (attached as Exhibit A to the Rights Agreement filed as Exhibit
4.4 hereto)*
4.6 Form of Right Certificate (attached as Exhibit B to the Rights Agreement filed as
Exhibit 4.4 hereto)*
10.1 Form of Agreement and Plan of Distribution between ITT Destinations, Inc. and ITT
Corporation*
10.2 Form of Agreement and Plan of Distribution among ITT Destinations, Inc., ITT
Corporation and ITT Educational Services, Inc. (attached as Exhibit D to the
Agreement and Plan of Distribution filed as Exhibit 10.1 hereto)*
10.3 Form of Intellectual Property License and Assignment Agreement between ITT
Destinations, Inc., ITT Corporation, ITT World Directories, Inc. and ITT Sheraton
Corporation (attached as Exhibit B-1 to the Agreement and Plan of Distribution filed
as Exhibit 10.1 hereto)*
10.4 Form of Trade Name and Service Mark License Agreement between ITT Sheraton
Corporation, ITT Corporation and ITT World Directories, Inc. (attached as Exhibit B-2
to the Agreement and Plan of Distribution filed as Exhibit 10.1 hereto)*
10.5 Form of Tax Allocation Agreement among ITT Corporation, ITT Destinations, Inc. and
ITT Educational Services, Inc. (attached as Exhibit C to the Agreement and Plan of
Distribution filed as Exhibit 10.1 hereto)*
10.6 Form of Employee Benefits Services and Liabilities Agreement among ITT Destinations,
Inc, ITT Corporation and ITT Educational Services, Inc. (attached as Exhibit A to the
Agreement and Plan of Distribution filed as Exhibit 10.1 hereto)*
10.7 Form of ITT Destinations, Inc. 1997 Restricted Stock Plan for Non-Employee
Directors++
10.8 Form of Indemnification Agreement with members of the Board of Directors*
10.9 Form of ITT Destinations, Inc. Incentive Stock Plan++
10.10 ITT Corporation Senior Executive Severance Pay Plan*
10.11 Form of R.V. Araskog employment agreement++
10.12 Form of Severance Agreement between ITT Destinations, Inc. and certain executives*
10.13 Commitment Letter dated as of August 22, 1997, among Chase Securities Inc., The Chase
Manhattan Bank and ITT Corporation**
21 List of Subsidiaries of ITT Destinations, Inc.*
99.1 ITT Destinations, Inc. Information Statement dated September 4, 1997**
</TABLE>
- ---------------
* Filed herewith.
** Previously filed.
++ To be filed by amendment.
<PAGE> 1
EXHIBIT 3.1
CERTIFICATE OF RESTATED
ARTICLES OF INCORPORATION
OF
ITT DESTINATIONS, INC.
The undersigned hereby certifies that he is the duly elected and acting
Assistant Secretary of ITT Destinations, Inc., a corporation organized and
existing under the laws of the State of Nevada, and that, for the purpose of
amending and restating its original Articles of Incorporation, which were filed
with the Secretary of State of the State of Nevada on July 15, 1997, pursuant to
and by virtue of Chapter 78 of the Nevada Revised Statutes, the following
Restated Articles of Incorporation have been duly adopted in accordance with the
provisions of Chapter 78 of the Nevada Revised Statutes.
ARTICLE FIRST
The name of the corporation is ITT Destinations, Inc. (the "Corporation").
ARTICLE SECOND
The address of the registered office of the Corporation in the State of
Nevada is One East First Street, Reno, Nevada 89501. The name of the resident
agent of the Corporation at such address is The Corporation Trust Company.
ARTICLE THIRD
The purpose of the Corporation is to engage in any lawful act or activity
for which the Corporation may be organized under the provisions of Chapter 78 of
the Nevada Revised Statutes.
ARTICLE FOURTH
(a) The aggregate number of shares of stock that the Corporation shall have
authority to issue is 250,000,000 shares, consisting of 200,000,000 shares
designated "Common Stock" and 50,000,000 shares designated "Preferred Stock".
The shares of Common Stock and the shares of Preferred Stock shall each have a
par value of $.01 per share.
(b) The Board of Directors of the Corporation shall have the full authority
permitted by law, at any time and from time to time, to divide the authorized
and unissued shares of Preferred Stock into classes or series, or both, and to
determine the following provisions, designations, powers, preferences and
relative, participating, optional and other special rights and the
qualifications, limitations or restrictions thereof for shares of any such class
or series of Preferred Stock:
(1) the designation of such class or series, the number of shares to
constitute such class or series and the stated or liquidation value
thereof;
(2) whether the shares of such class or series shall have voting
rights, in addition to any voting rights provided by law, and, if so, the
terms of such voting rights;
(3) the dividends, if any, payable on such class or series, whether
any such dividends shall be cumulative, and, if so, from what dates, the
conditions and dates upon which such dividends shall be payable, the
preference or relation which such dividends shall bear to the dividends
payable on any shares of stock of any other class or any other series of
the same class;
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(4) whether the shares of such class or series shall be subject to
redemption at the election of the Corporation and/or the holders of such
class or series and, if so, the times, price and other conditions of such
redemption, including securities or other property payable upon any such
redemption, if any;
(5) the amount or amounts, if any, payable upon shares of such class
or series upon, and the rights of the holders of such class or series in,
the voluntary or involuntary liquidation, dissolution or winding up, or any
distribution of the assets, of the Corporation;
(6) whether the shares of such class or series shall be subject to
the operation of a retirement or sinking fund and, if so, the extent to and
manner in which any such retirement or sinking fund shall be applied to the
purchase or redemption of the shares of such class or series for retirement
or other corporate purposes and the terms and provisions relative to the
operation thereof;
(7) whether the shares of such class or series shall be convertible
into, or exchangeable for, shares of stock of any other class or any other
series of the same class or any securities, whether or not issued by the
Corporation, and, if so, the price or prices or the rate or rates of
conversion or exchange and the method, if any, of adjusting the same, and
any other terms and conditions of conversion or exchange;
(8) the limitations and restrictions, if any, to be effective while
any shares of such class or series are outstanding upon the payment of
dividends or the making of other distributions on, and upon the purchase,
redemption or other acquisition by the Corporation of, the Common Stock or
shares of stock of any other class or any other series of the same class;
(9) the conditions or restrictions, if any, upon the creation of
indebtedness of the Corporation or upon the issuance of any additional
shares of stock, including additional shares of such class or series or of
any other series of the same class or of any other class;
(10) the ranking (be it pari passu, junior or senior) of each class
or series vis-a-vis any other class or series of any class of Preferred
Stock as to the payment of dividends, the distribution of assets and all
other matters; and
(11) any other powers, preferences and relative, participating,
optional and other special rights and any qualifications, limitations or
restrictions thereof, insofar as they are not inconsistent with the
provisions of these Articles of Incorporation, to the full extent permitted
in accordance with the laws of the State of Nevada.
(c) Such divisions and determinations may be accomplished solely by action
of the Board of Directors, which shall have the full authority permitted by law
to make such divisions and determinations.
(d) The powers, preferences and relative, participating, optional and other
special rights of each class or series of Preferred Stock and the
qualifications, limitations or restrictions thereof, if any, may differ from
those of any and all other classes or series at any time outstanding; provided
that each series and class is given a distinguishing designation and that all
shares of a series have powers, preferences and relative, participating,
optional and other special rights and the qualifications, limitations or
restrictions thereof identical with those of other shares of the same series
and, except to the extent otherwise provided in the description of the series,
with those other series of the same class.
(e) Holders of shares of Preferred Stock shall be entitled to receive,
when, as and if declared by the Board of Directors, out of funds legally
available for the payment thereof, dividends at the rates fixed by the Board of
Directors for the respective series before any dividends shall be declared and
paid, or set aside for payment, on shares of Common Stock with respect to the
same dividend period. Nothing in this ARTICLE FOURTH shall limit the power of
the Board of Directors to create a series of Preferred Stock with dividends the
rate of which is calculated by reference to, and the payment of which is
concurrent with, dividends on shares of Common Stock.
(f) In the event of the voluntary or involuntary liquidation, dissolution
or winding up of the Corporation, holders of shares of each series of Preferred
Stock will be entitled to receive the amount fixed for such series upon any such
event plus, in the case of any series on which dividends will have been
determined by the Board
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of Directors to be cumulative, an amount equal to all dividends accumulated and
unpaid thereon to the date of final distribution whether or not earned or
declared before any distribution shall be paid, or set aside for payment, to
holders of Common Stock. If the assets of the Corporation are not sufficient to
pay such amounts in full, holders of all shares of Preferred Stock will
participate in the distribution of assets ratably in proportion to the full
amounts to which they are entitled or in such order or priority, if any, as will
have been fixed in the resolution or resolutions providing for the issue of the
series of Preferred Stock. Neither the merger nor consolidation of the
Corporation into or with any other corporation, nor a sale, transfer or lease of
all or part of its assets, will be deemed a liquidation, dissolution or winding
up of the Corporation within the meaning of this paragraph except to the extent
specifically provided for herein. Nothing in this ARTICLE FOURTH shall limit the
power of the Board of Directors to create a series of Preferred Stock for which
the amount to be distributed upon any liquidation, dissolution or winding up of
the Corporation is calculated by reference to, and the payment of which is
concurrent with, the amount to be distributed to the holders of shares of Common
Stock.
(g) The Corporation, at the option of the Board of Directors, may redeem
all or part of the shares of any series of Preferred Stock on the terms and
conditions fixed for such series.
(h) Except as otherwise required by law, as otherwise provided herein or as
otherwise determined by the Board of Directors as to the shares of any series of
Preferred Stock prior to the issuance of any such shares, the holders of
Preferred Stock shall have no voting rights and shall not be entitled to any
notice of meetings of stockholders.
(i) Each holder of shares of Common Stock shall be entitled to one vote for
each share of Common Stock held of record on all matters on which the holders of
shares of Common Stock are entitled to vote. Subject to the provisions of
applicable law and any certificate of designation providing for the issuance of
any series of Preferred Stock, the holders of outstanding shares of Common Stock
shall have and possess the exclusive right to notice of stockholders' meetings
and the exclusive power to vote. No stockholder will be permitted to cumulate
votes at any election of directors.
(j) Subject to all the rights of the Preferred Stock, the holders of the
Common Stock shall be entitled to receive, when, as and if declared by the Board
of Directors, out of funds legally available for the payment thereof, dividends
payable in cash, stock or otherwise. Upon any liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, and after the
holders of the Preferred Stock of each series shall have been paid in full in
cash the amounts to which they respectively shall be entitled or a sum
sufficient for such payment in full shall have been set aside, the remaining net
assets of the Corporation shall be distributed pro rata to the holders of the
Common Stock in accordance with their respective rights and interests, to the
exclusion of the holders of the Preferred Stock.
ARTICLE FIFTH
(a) The members of the governing board of the Corporation shall be styled
directors of the Corporation. The number of directors which shall constitute the
whole Board of Directors of the Corporation shall be such as from time to time
shall be determined by resolution adopted by a majority of the entire Board of
Directors, but in no event shall the number of directors be less than one or
more than twenty-five; provided, however, that compliance with the foregoing
limitation shall be determined without counting directors elected by the holders
of any class or series of stock having a preference over the Common Stock as to
dividends or upon liquidation. The directors, other than those who may be
elected by the holders of any class or series of stock having a preference over
the Common Stock as to dividends or upon liquidation, shall be classified, with
respect to the time for which they severally hold office, into three classes, as
nearly equal in number as possible, one class of directors shall have an initial
term expiring at the first annual meeting of stockholders held after the
distribution (the "Distribution") by ITT Corporation, a Nevada corporation
("ITT"), of the issued and outstanding shares of Common Stock held by ITT to ITT
stockholders, the second class of directors shall have an initial term expiring
at the second annual meeting of stockholders held after the Distribution and the
third class of directors shall have an initial term expiring at the third annual
meeting of stockholders held after Distribution. Except as specifically
contemplated by the prior sentence and other than with respect to any
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directors elected by the holders of any series of Preferred Stock pursuant to
the terms of these Articles of Incorporation, at each annual meeting of the
stockholders of the Corporation, the date of which shall be fixed by or pursuant
to the By-laws of the Corporation, the successors of the class of directors
whose term expires at that meeting shall be elected to hold office for a term
expiring at the third succeeding annual meeting of stockholders. Each director
shall hold office until such director's successor is duly elected and qualified.
The election of directors need not be by written ballot.
(b) Advance notice of stockholder nominations for the election of directors
and advance notice of business to be brought by stockholders before an annual
meeting must be given in the manner provided in the By-laws of the Corporation.
(c) Except as otherwise provided for or fixed by or pursuant to the
provisions of ARTICLE FOURTH hereof relating to the rights of the holders of any
class or series of stock having a preference over the Common Stock as to
dividends or upon liquidation to elect additional directors under specified
circumstances, newly created directorships resulting from any increase in the
number of directors and any vacancies on the Board of Directors resulting from
death, resignation, disqualification, removal or other cause shall be filled
only by the affirmative vote of a majority of the remaining directors then in
office, even though less than a quorum of the Board of Directors. Any director
elected in accordance with the preceding sentence shall hold office for the
remainder of the full term of the class of directors in which the new
directorship was created or the vacancy occurred and until such director's
successor shall have been duly elected and qualified. No decrease in the number
of directors constituting the Board of Directors shall shorten the term of any
incumbent director.
(d) Subject to the rights of any class or series of stock having a
preference over the Common Stock as to dividends or upon liquidation to elect
directors under specified circumstances, any director may be removed from
office, with or without cause, only by the affirmative vote of the holders of at
least 80% of the voting power of all shares of the Corporation entitled to vote
generally in the election of directors, voting together as a single class.
(e) Notwithstanding anything contained in these Articles of Incorporation
to the contrary, the affirmative vote of the holders of at least 80% of the
voting power of all shares of the Corporation entitled to vote generally in the
election of directors, voting together as a single class, shall be required to
alter, amend or repeal, or adopt any provision inconsistent with, this ARTICLE
FIFTH.
ARTICLE SIXTH
(a) Any action required or permitted to be taken by the stockholders of the
Corporation must be effected at a duly called annual or special stockholders'
meeting and may not be effected by consent in writing by such stockholders.
Special meetings of stockholders of the Corporation may be called by the
Chairman of the Board of Directors or by a majority vote of the entire Board of
Directors. Notwithstanding anything contained in these Articles of Incorporation
to the contrary, the affirmative vote of the holders of at least 80% of the
voting power of all shares of the Corporation entitled to vote generally in the
election of directors, voting together as a single class, shall be required to
alter, amend or repeal, or adopt any provision inconsistent with, this paragraph
(a) of ARTICLE SIXTH.
(b) Stockholders of the Corporation shall not have any preemptive rights to
subscribe for additional issues of stock of the Corporation except as may be
agreed from time to time by the Corporation and any such stockholder.
(c) Notwithstanding the foregoing, whenever the holders of any one or more
classes or series of Preferred Stock issued by the Corporation, if any, shall
have the right, voting separately by class or series, to elect directors at an
annual or special meeting of stockholders, an election, term of office, filling
of vacancies and other features of such directorships shall be governed by the
terms of the applicable resolution or resolutions of the Board of Directors
adopted pursuant to ARTICLE FOURTH of these Articles of Incorporation.
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ARTICLE SEVENTH
To the fullest extent permitted by applicable law as then in effect, no
director or officer shall be personally liable to the Corporation or any of its
stockholders for damages for breach of fiduciary duty as a director or officer,
except for liability (a) for acts or omissions which involve intentional
misconduct, fraud or a knowing violation of law or (b) for the payment of
distributions to stockholders in violation of Section 78.300 of the Nevada
Revised Statutes. Any repeal or modification of this ARTICLE SEVENTH by the
stockholders of the Corporation shall not adversely affect any right or
protection of a director or officer of the Corporation existing at the time of
such repeal or modification with respect to acts or omissions occurring prior to
such repeal or modifications.
ARTICLE EIGHTH
The holders of the capital stock of the Corporation shall not be personally
liable for the payment of the Corporation's debts and the private property of
the holders of the capital stock of the Corporation shall not be subject to the
payment of debts of the Corporation to any extent whatsoever.
ARTICLE NINTH
In order to enable the Corporation and any Subsidiary (as hereinafter
defined) to secure and maintain in good standing all licenses, franchises and
other regulatory approvals issued by Gaming Authorities (as hereinafter defined)
which are necessary for the lawful operation of gaming and related businesses
now or hereafter engaged in by the Corporation or any Subsidiary within or
without the United States of America, which licenses, franchises or other
regulatory approvals are conditioned upon some or all of the holders of the
Corporation's stock possessing prescribed qualifications (the "Gaming
Licenses"), and in order to insure that the business of the Corporation and its
Subsidiaries will be carried on in compliance with the laws and regulations
governing the conduct of gaming and related businesses (the "Gaming Laws"), the
following provisions are made and shall apply for so long as the Corporation is
subject to Gaming Laws:
(a) Securities (as hereinafter defined) of the Corporation shall be
subject to redemption by the Corporation, pursuant to Section 78.196 of the
Nevada Revised Statutes or any other applicable provision of law, to the
extent necessary to prevent the loss or to secure the reinstatement of any
Gaming License held by the Corporation or any Subsidiary.
(b) Securities of the Corporation shall be held subject to the
condition that if a holder thereof is found by a Gaming Authority to be
disqualified or unsuitable pursuant to any Gaming Law (a "Disqualified
Holder"), such holder shall dispose of all of the Corporation's Securities
held by such holder within the 120 day period (the "Disposition Period")
commencing on the date (the "Notice Date") upon which the Corporation shall
have received notice from a Gaming Authority of such holder's
disqualification or unsuitability (the "Disqualification Notice"). Promptly
following its receipt of a Disqualification Notice, the Corporation shall
cause such Disqualification Notice to be delivered to the Disqualified
Holder named therein by personal delivery, by mailing it to the address
shown on the Corporation's books and records or through the use of any
other reasonable means. Failure of the Corporation to provide such
Disqualification Notice to a Disqualified Holder after making reasonable
efforts to do so shall not preclude the Corporation from exercising its
rights.
(c) If any Disqualified Holder fails to dispose of the Corporation's
Securities within the Disposition Period, the Corporation may redeem such
Securities at the lesser of (1) the lowest closing sale price of such
Securities on any trading day during the Disposition Period or (2) such
Disqualified Holder's original purchase price.
(d) Commencing on the Notice Date, it shall be unlawful for a
Disqualified Holder to:
(1) receive payments of dividends or interest upon any Securities
of the Corporation held by such Disqualified Holder,
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(2) exercise, directly or indirectly, any right conferred by the
Corporation's Securities upon the holders thereof, or
(3) receive any remuneration in any form, for services rendered or
otherwise, from the Subsidiary of the Corporation that holds a Gaming
License.
(e) The Board of Directors shall have the power to determine, on the
basis of information known to the Board after reasonable inquiry, all
questions arising under this ARTICLE NINTH including, without limitation,
(1) whether a person is a Disqualified Holder, (2) whether a Disqualified
Holder has disposed of Securities pursuant to Paragraph (b) of this ARTICLE
NINTH and (3) the amount of Securities held directly or indirectly by any
person. Any such determination shall be binding and conclusive on all such
persons.
(f) The Corporation shall be entitled to injunctive relief in any
court of competent jurisdiction to enforce the provisions of this ARTICLE
NINTH, and each holder of Securities of the Corporation will be deemed to
have acknowledged by acquiring or retaining Securities of the Corporation
that failure to comply with this ARTICLE NINTH will expose the Corporation
to irreparable injury for which there is not adequate remedy at law and
that the Corporation is entitled to injunctive relief to enforce the
provisions of this ARTICLE NINTH.
(g) A Disqualified Holder shall indemnify the Corporation and its
Subsidiaries for any and all direct or indirect costs (including attorneys'
fees) incurred by the Corporation as a result of such holder's continuing
ownership of or failure to divest the Securities.
(h) The following definitions shall apply with respect to this ARTICLE
NINTH:
(1) The term "Gaming Authorities" includes all governmental
authorities within or without the United States of America which issue
or grant any license, franchise or regulatory approval necessary or
appropriate for the lawful operation of gaming and related businesses.
With respect to the State of Nevada, the term "Gaming Authorities" shall
include, without limitation, the Nevada Gaming Commission, the Nevada
State Gaming Control Board or their respective successors; and with
respect to Atlantic City, New Jersey, the term "Gaming Authorities"
shall include, without limitation, the New Jersey Casino Control
Commission, the Division of Gaming Enforcement or their respective
successors.
(2) The term "Securities" means any instrument evidencing a direct
or indirect beneficial ownership or creditor interest in the
Corporation, including but not limited to, Common Stock, Preferred
Stock, bonds, mortgages, debentures, security agreements, notes,
warrants, options and rights.
(3) The term "Subsidiary" (A) in matters relating to Gaming Laws of
the State of New Jersey, shall have the definition set forth in the New
Jersey Statutes Annotated 5:12-47 or (B) in matters relating to Gaming
Laws outside of the State of New Jersey, means (i) a corporation, more
than 50% of the outstanding voting securities of which the Corporation
or a Subsidiary of the Corporation owns or has the power to vote or (ii)
a firm, association, partnership, limited liability company, trust or
other form of business organization, not a natural person, of which the
Corporation or a Subsidiary of the Corporation owns or has the power to
vote a majority interest.
ARTICLE TENTH
Subject to the provisions of these Articles of Incorporation, the By-laws
of the Corporation may be altered, amended or repealed at any annual meeting of
the stockholders (or at any special meeting thereof duly called for that
purpose) by a majority vote of the shares represented and entitled to vote at
such meeting; provided that in the notice of such meeting notice of such purpose
shall be given. Subject to the laws of the State of Nevada, these Articles of
Incorporation and the By-laws of the Corporation, the Board of Directors may, by
majority vote of those present at any meeting at which a quorum is present,
amend the By-laws of the
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Corporation, or enact such other By-laws as in their judgment may be advisable
for the regulation of the conduct of the affairs of the Corporation.
ARTICLE ELEVENTH
The Corporation reserves the right to supplement, amend or repeal any
provision contained in these Articles of Incorporation, in the manner now or
hereafter prescribed by the laws of the State of Nevada, and all rights
conferred on stockholders herein are granted subject to this reservation.
IN WITNESS WHEREOF, ITT Destinations, Inc. has caused this Certificate of
Restated Articles of Incorporation to be executed by the following authorized
officer of said corporation on this th day of September, 1997.
ITT DESTINATIONS, INC.,
by
------------------------------------
Name:
Title:
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EXHIBIT 3.2
================================================================================
AMENDED AND RESTATED
BY-LAWS
OF
ITT DESTINATIONS, INC.
(AS AMENDED THROUGH SEPTEMBER , 1997)
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TABLE OF CONTENTS
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ARTICLE I
STOCKHOLDERS
SECTION 1.01. Place of Stockholders' Meetings....................................... 1
SECTION 1.02. Day and Time of Regular Meetings of Stockholders...................... 1
SECTION 1.03. Purposes of Regular Meetings.......................................... 1
SECTION 1.04. Special Meetings of Stockholders...................................... 2
SECTION 1.05. Notice of Meetings of Stockholders.................................... 2
SECTION 1.06. Quorum of Stockholders................................................ 2
SECTION 1.07. Chairman and Secretary of Meeting..................................... 2
SECTION 1.08. Voting by Stockholders................................................ 3
SECTION 1.09. Proxies............................................................... 3
SECTION 1.10. Inspectors............................................................ 3
SECTION 1.11. List of Stockholders.................................................. 3
SECTION 1.12. Confidential Voting................................................... 4
ARTICLE II
DIRECTORS
SECTION 2.01. Powers of Directors................................................... 4
SECTION 2.02. Method of Election.................................................... 4
SECTION 2.03. Vacancies on Board.................................................... 5
SECTION 2.04. Meetings of the Board................................................. 5
SECTION 2.05. Quorum and Action..................................................... 6
SECTION 2.06. Presiding Officer and Secretary of Meeting............................ 6
SECTION 2.07. Action by Consent Without Meeting..................................... 6
SECTION 2.08. Standing Committees................................................... 6
SECTION 2.09. Other Committees...................................................... 7
SECTION 2.10. Compensation of Directors............................................. 7
SECTION 2.11. Independent Directors................................................. 7
ARTICLE III
OFFICERS
SECTION 3.01. Officers, Titles, Elections, Terms.................................... 8
SECTION 3.02. General Powers of Officers............................................ 8
SECTION 3.03. Powers and Duties of the Chairman..................................... 9
SECTION 3.04. Powers and Duties of the President.................................... 9
SECTION 3.05. Powers and Duties of Executive Vice Presidents, Senior Vice Presidents 9
and Vice Presidents...................................................
SECTION 3.06. Powers and Duties of the Chief Financial Officer...................... 9
SECTION 3.07. Powers and Duties of the Controller and Assistant Controllers......... 9
SECTION 3.08. Powers and Duties of the Treasurer and Assistant Treasurers........... 9
SECTION 3.09. Powers and Duties of the Secretary and Assistant Secretaries.......... 10
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ARTICLE IV
INDEMNIFICATION
SECTION 4.01. Right to Indemnification.............................................. 10
SECTION 4.02. Insurance, Contracts and Funding...................................... 10
SECTION 4.03. Indemnification; Not Exclusive Right.................................. 11
SECTION 4.04. Advancement of Expenses; Procedures; Presumptions and Effect of 11
Certain Proceedings; Remedies.........................................
SECTION 4.05. Indemnification of Employees and Agents............................... 13
SECTION 4.06. Severability.......................................................... 14
ARTICLE V
CAPITAL STOCK
SECTION 5.01. Stock Certificates.................................................... 14
SECTION 5.02. Record Ownership...................................................... 14
SECTION 5.03. Transfer of Record Ownership.......................................... 14
SECTION 5.04. Lost, Stolen or Destroyed Certificates................................ 15
SECTION 5.05. Transfer Agent; Registrar; Rules Respecting Certificates.............. 15
SECTION 5.06. Fixing Record Date for Determination of Stockholders of Record........ 15
ARTICLE VI
SECURITIES HELD BY THE CORPORATION
SECTION 6.01. Voting................................................................ 15
SECTION 6.02. General Authorization to Transfer Securities Held by the 15
Corporation...........................................................
ARTICLE VII
DEPOSITARIES AND SIGNATORIES
SECTION 7.01. Depositaries.......................................................... 16
SECTION 7.02. Signatories........................................................... 16
ARTICLE VIII
Seal.................................................................. 16
ARTICLE IX
Fiscal Year........................................................... 16
ARTICLE X
Waiver of or Dispensing With Notice................................... 16
ARTICLE XI
Political Contributions By the Corporation............................ 17
ARTICLE XII
Transfer of Shares to Aliens.......................................... 17
ARTICLE XIII
Amendment of By-laws.................................................. 17
ARTICLE XIV
Offices and Agent..................................................... 18
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AMENDED AND RESTATED BY-LAWS
OF
ITT DESTINATIONS, INC.
(AS AMENDED THROUGH SEPTEMBER , 1997)
ARTICLE I
STOCKHOLDERS
SECTION 1.01. Place of Stockholders' Meetings. All meetings of the
stockholders of the Corporation shall be held at such place or places, within or
outside the State of Nevada, as may be fixed by the Corporation's Board of
Directors (the "Board", and each member thereof a "Director") from time to time
or as shall be specified in the respective notices thereof.
SECTION 1.02. Day and Time of Annual Meetings of Stockholders. An annual
or regular meeting of stockholders shall be held at such place (within or
outside the State of Nevada), date and hour as shall be determined by the Board
and designated in the notice thereof. The Board may designate any date for the
annual meeting, subject only to any mandatory limitations set by the Nevada
General Corporation Law (the "NGCL"), as it may be amended from time to time,
including the provisions of NGCL Section 78.345. Failure to hold an annual
meeting of stockholders at such designated time shall not affect otherwise valid
corporate acts or work a forfeiture or dissolution of the Corporation.
SECTION 1.03. Purposes of Annual Meetings. (a) At each annual meeting,
the stockholders shall elect the successors of the class of Directors whose term
expires at such annual meeting for a term expiring at the third succeeding
annual meeting. At any such annual meeting any business properly brought before
the meeting may be transacted.
(b) To be properly brought before an annual meeting, business must be (i)
specified in the notice of the meeting (or any supplement thereto) given by or
at the direction of the Board, (ii) otherwise properly brought before the
meeting by or at the direction of the Board, or (iii) otherwise properly brought
before the meeting by a stockholder. For business to be properly brought before
an annual meeting by a stockholder, the stockholder must have given timely
notice thereof in writing to the Secretary of the Corporation. To be timely, a
stockholder's notice must be personally delivered or sent by United States mail,
postage prepaid, to the Secretary of the Corporation, not less than 90 nor more
than 120 days prior to the anniversary date of the immediately preceding annual
meeting; provided, however, that in the event the date of the annual meeting is
more than 30 days earlier or more than 60 days later than such anniversary date,
notice by the stockholder must be so delivered or received not earlier than the
120th day prior to such annual meeting and not later than the close of business
on the later of the 90th day prior to the scheduled date of such annual meeting
or the tenth day following the day on which public announcement of the scheduled
date of such annual meeting is first made. A stockholder's notice to the
Secretary shall set forth as to each matter the stockholder proposes to bring
before the annual meeting (i) a brief description of the business desired to be
brought before the meeting and the reasons for conducting such business at the
meeting and, in the event that such business includes a proposal to amend either
the Articles of Incorporation or these By-laws, the text of the proposed
amendment, (ii) the name and address, as they appear on the Corporation's books,
of the stockholder proposing such business, (iii) a representation that the
stockholder is a holder of record of stock of the Corporation entitled to vote
at such meeting and intends to appear in person or by proxy at the meeting to
propose such business, (iv) any material interest of the stockholder in such
business, and (v) if the stockholder intends to solicit proxies in support of
such stockholder's proposal, a representation to that effect. The foregoing
notice requirements shall be deemed satisfied by a stockholder if the
stockholder has notified the Secretary of the Corporation of his or her
intention to present a proposal at an annual meeting and such stockholder's
proposal has been included in a proxy statement that has been prepared by
management of the Corporation to solicit proxies for such annual meeting;
provided, however, that if such stockholder does not appear or send a qualified
representative to present such proposal at such annual meeting, the Corporation
need not present such proposal for a vote at such meeting, notwithstanding that
proxies in respect of such vote may have been received by the Corporation.
Notwithstanding anything in these By-laws to the contrary, no business shall be
conducted at an annual meeting except in accordance with the procedures set
forth in this
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By-law. The Chairman of an annual meeting shall, if the facts warrant, determine
and declare to the meeting that business was not properly brought before the
meeting and in accordance with the provisions of this By-law or if the
stockholder solicits proxies in support of such stockholder's proposal without
such stockholder having made the representation required by clause (v) of this
By-law, and if the Chairman should so determine, the Chairman shall so declare
to the meeting and any such business not properly brought before the meeting
shall not be transacted.
SECTION 1.04. Special Meetings of Stockholders. Except as otherwise
expressly required by applicable law, special meetings of the stockholders or of
any class or series entitled to vote may be called for any purpose or purposes
by the Chairman or by a majority vote of the entire Board, to be held at such
place (within or outside the State of Nevada), date and hour as shall be
determined by the Board and designated in the notice thereof. Only such business
as is specified in the notice of any special meeting of the stockholders shall
come before such meeting.
SECTION 1.05. Notice of Meetings of Stockholders. Except as otherwise
expressly required or permitted by applicable law, not less than 10 days nor
more than 60 days before the date of every stockholders' meeting the Secretary
shall give to each stockholder of record entitled to vote at such meeting
written notice stating the place, day and time of the meeting and, in the case
of a special meeting, the purpose or purposes for which the meeting is called.
Except as provided in Section 1.06(d) or as otherwise expressly required by
applicable law, notice of any adjourned meeting of stockholders need not be
given if the time and place thereof are announced at the meeting at which the
adjournment is taken. Any previously scheduled meeting of stockholders may be
postponed, and (unless the Articles of Incorporation otherwise provide) any
special meeting of stockholders may be canceled, by resolution of the Board upon
public notice given prior to the date previously scheduled for such meeting of
stockholders. Any notice, if mailed, shall be deemed to be given when deposited
in the United States mail, postage prepaid, addressed to the stockholder at the
address for notices to such stockholder as it appears on the records of the
Corporation.
SECTION 1.06. Quorum of Stockholders. (a) Unless otherwise expressly
required by applicable law, at any meeting of the stockholders, the presence in
person or by proxy of stockholders entitled to cast a majority of votes thereat
shall constitute a quorum for the entire meeting, notwithstanding the withdrawal
of stockholders entitled to cast a sufficient number of votes in person or by
proxy to reduce the number of votes represented at the meeting below a quorum.
Shares of the Corporation's stock belonging to the Corporation or to another
corporation, if a majority of the shares entitled to vote in an election of the
directors of such other corporation is held by the Corporation, shall neither be
counted for the purpose of determining the presence of a quorum nor entitled to
vote at any meeting of the stockholders.
(b) At any meeting of the stockholders at which a quorum shall be present,
a majority of those present in person or by proxy may adjourn the meeting from
time to time without notice other than announcement at the meeting. In the
absence of a quorum, the officer presiding thereat shall have power to adjourn
the meeting from time to time until a quorum shall be present. Notice of any
adjourned meeting other than announcement at the meeting shall not be required
to be given, except as provided in Section 1.06(d) below and except where
expressly required by applicable law.
(c) At any adjourned meeting at which a quorum shall be present, any
business may be transacted which might have been transacted at the meeting
originally called, but only those stockholders entitled to vote at the meeting
as originally noticed shall be entitled to vote at any adjournment or
adjournments thereof unless a new record date is fixed by the Board.
(d) If an adjournment is for more than 30 days, or if after the adjournment
a new record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given in the manner specified in Section 1.05 to each
stockholder of record entitled to vote at the meeting.
SECTION 1.07. Chairman and Secretary of Meeting. The Chairman or, in his
or her absence, another officer of the Corporation designated by the Chairman,
shall preside at meetings of the stockholders. The Secretary shall act as
secretary of the meeting, or in the absence of the Secretary, an Assistant
Secretary
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shall so act, or if neither is present, then the presiding officer may appoint a
person to act as secretary of the meeting.
SECTION 1.08. Voting by Stockholders. (a) Except as otherwise expressly
required by applicable law, at every meeting of the stockholders each
stockholder shall be entitled to the number of votes specified in the Articles
of Incorporation, in person or by proxy, for each share of stock standing in his
or her name on the books of the Corporation on the date fixed pursuant to the
provisions of Section 5.06 of these By-laws as the record date for the
determination of the stockholders who shall be entitled to receive notice of and
to vote at such meeting.
(b) When a quorum is present at any meeting of the stockholders, questions
shall be decided by the vote of a majority in voting power of the stockholders
present in person or by proxy and entitled to vote at such meeting, unless a
question is one upon which by express provision of law, the Articles of
Incorporation or these By-laws, a different vote is required, in which case such
express provision shall govern and control the decision of such question.
(c) Except as required by applicable law, the vote at any meeting of
stockholders on any question need not be by ballot, unless so directed by the
chairman of the meeting. On a vote by ballot, each ballot shall be signed by the
stockholder voting, or by his or her proxy, if there be such proxy, and shall
state the number of shares voted.
SECTION 1.09. Proxies. Any stockholder entitled to vote at any meeting of
stockholders may vote either in person or by his or her attorney-in-fact. Every
proxy shall be in writing and shall be subscribed by the stockholder or his or
her duly authorized attorney-in-fact, but need not be sealed, witnessed or
acknowledged.
SECTION 1.10. Inspectors. (a) The election of Directors and any other
vote by ballot at any meeting of the stockholders shall be supervised by at
least two inspectors. Such inspectors may be appointed by the Chairman before or
at the meeting. If the Chairman shall not have so appointed such inspectors or
if one or both inspectors so appointed shall refuse to serve or shall not be
present, such appointment shall be made by the officer presiding at the meeting.
Each inspector, before entering upon the discharge of his or her duties, shall
take and sign an oath faithfully to execute the duties of inspector with strict
impartiality and according to the best of his or her ability.
(b) The inspectors shall (i) ascertain the number of shares of the
Corporation outstanding and the voting power of each, (ii) determine the shares
represented at any meeting of stockholders and the validity of the proxies and
ballots, (iii) count all proxies and ballots, (iv) determine and retain for a
reasonable period a record of the disposition of any challenges made to any
determination by the inspectors, and (v) certify their determination of the
number of shares represented at the meeting, and their count of all proxies and
ballots. The inspectors may appoint or retain other persons or entities to
assist the inspectors in the performance of the duties of the inspectors.
SECTION 1.11. List of Stockholders. (a) At least 10 days before every
meeting of stockholders, the Chief Financial Officer shall cause to be prepared
and made a complete list of the stockholders entitled to vote at the meeting,
arranged in alphabetical order and showing the address of each stockholder and
the number of shares registered in the name of each stockholder.
(b) During ordinary business hours, for a period of at least 10 days prior
to the meeting, such list shall be open to examination by any stockholder for
any purpose germane to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or if not so specified, at the Corporation's registered office.
(c) The list shall also be produced and kept at the time and place of the
meeting during the whole time of the meeting, and it may be inspected by any
stockholder who is present.
(d) The stock ledger shall be the only evidence as to who are the
stockholders entitled to examine the stock ledger, the list required by this
Section 1.11 or the books of the Corporation, or to vote in person or by proxy
at any meeting of stockholders.
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SECTION 1.12. Confidential Voting. (a) Proxies and ballots that identify
the votes of specific stockholders shall be kept in confidence by the tabulators
and the inspectors of election unless (i) there is an opposing solicitation with
respect to the election or removal of Directors, (ii) disclosure is required by
applicable law, (iii) a stockholder expressly requests or otherwise authorizes
disclosure, or (iv) the Corporation concludes in good faith that a bona fide
dispute exists as to the authenticity of one or more proxies, ballots or votes,
or as to the accuracy of any tabulation of such proxies, ballots or votes.
(b) The tabulators and inspectors of election and any authorized agents or
other persons engaged in the receipt, count and tabulation of proxies and
ballots shall be advised of this By-law and instructed to comply herewith.
(c) The inspectors of election shall certify, to the best of their
knowledge based on due inquiry, that proxies and ballots have been kept in
confidence as required by this Section 1.12.
ARTICLE II
DIRECTORS
SECTION 2.01. Powers of Directors. The business and affairs of the
Corporation shall be managed by or under the direction of the Board, which may
exercise all the powers of the Corporation except such as are by applicable law,
the Articles of Incorporation or these By-laws required to be exercised or
performed by the stockholders.
SECTION 2.02. Method of Election. The number of Directors which shall
constitute the whole Board shall be as set forth in the Articles of
Incorporation. The Directors shall be classified as specified in the Articles of
Incorporation. Directors need not be stockholders of the Corporation or citizens
of the United States of America.
Nominations of persons for election as Directors may be made by the Board
or by any stockholder who is a stockholder of record at the time of giving of
the notice of nomination provided for in this Section 2.02 and who is entitled
to vote for the election of Directors. Any stockholder of record entitled to
vote for the election of Directors at a meeting may nominate a person or persons
for election as Directors only if written notice of such stockholder's intent to
make such nomination is given in accordance with the procedures for bringing
business before the meeting set forth in Section 1.03(b) of these By-laws,
either by personal delivery or by United States mail, postage prepaid, to the
Secretary (i) with respect to an election to be held at an annual meeting of
stockholders, not less than 90 nor more than 120 days prior to the anniversary
date of the immediately preceding annual meeting; provided, however, that in the
event the date of the annual meeting is more than 30 days earlier or more than
60 days later than such anniversary date, notice by the stockholder must be so
delivered or received not earlier than the 120th day prior to the scheduled date
of such annual meeting and not later than the close of business on the later of
the 90th day prior to the scheduled date of such annual meeting or the 10th day
following the day on which public announcement of the date of such annual
meeting is first made, and (ii) with respect to an election to be held at a
special meeting of stockholders for the election of Directors, not earlier than
the 90th day prior to such special meeting and not later than the close of
business on the later of the 60th day prior to such special meeting or the 10th
day following the date on which notice of such meeting is first given to
stockholders. Each such notice shall set forth:
(a) the name and address of the stockholder who intends to make the
nomination and of the person or persons to be nominated;
(b) a representation that the stockholder is a holder of record of
stock of the Corporation entitled to vote at such meeting and intends to
appear in person or by proxy at the meeting to nominate the person or
persons specified in the notice;
(c) a description of all arrangements or understandings between the
stockholder and each nominee and any other person or persons (naming such
person or persons) pursuant to which the nomination or nominations are to
be made by the stockholder;
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(d) such other information regarding each nominee proposed by such
stockholder as would have been required to be included in a proxy statement
filed pursuant to the proxy rules of the Securities and Exchange Commission
had each nominee been nominated, or intended to be nominated, by the Board;
(e) the consent of each nominee to serve as a Director if so elected;
and
(f) if the stockholder intends to solicit proxies in support of such
stockholder's nominee(s), a representation to that effect.
The chairman of any meeting of stockholders to elect Directors and the Board may
refuse to acknowledge the nomination of any person not made in compliance with
the foregoing procedure or if the stockholder solicits proxies in support of
such stockholder's nominee(s) without such stockholder having made the
representation required by clause (f) of this By-law.
At each meeting of the stockholders for the election of Directors at which
a quorum is present, the persons receiving the greatest number of votes, up to
the number of Directors to be elected, shall be the Directors.
SECTION 2.03. Vacancies on Board; Increase in Size of Board. (a) Any
Director may resign from office at any time by delivering a written resignation
to the Chairman or the Secretary. The resignation will take effect at the time
specified therein, or, if no time is specified, at the time of its receipt by
the Corporation. The acceptance of a resignation shall not be necessary to make
it effective, unless expressly so provided in the resignation.
(b) Newly created directorships resulting from any increase in the number
of Directors and any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal or other cause shall be filled in the
manner provided in the Articles of Incorporation.
(c) Other than with respect to Directors who may be elected by the holders
of any class or series of stock having a preference over the common stock of the
Corporation as to dividends or upon liquidation, in exercising its powers to
increase the size of the Board pursuant to Article Fifth of the Articles of
Incorporation, the Board may not create new directorships after the first annual
meeting following the distribution by ITT Corporation, a Nevada corporation
("ITT"), of the issued and outstanding shares of common stock of the Corporation
held by ITT to ITT stockholders such that the number of Directors composing the
class of Directors to be elected at the next annual meeting when added to the
number of Directors elected at the immediately preceding annual meeting would be
less than a majority of the entire Board. Notwithstanding anything contained in
these By-laws or the Articles of Incorporation to the contrary, a majority vote
of the shares represented and entitled to vote at any annual meeting of the
stockholders (or at any special meeting thereof duly called for that purpose),
shall be required to alter, amend or repeal, or adopt any provision inconsistent
with, this Section 2.03(c).
SECTION 2.04. Meetings of the Board. (a) The Board may hold its meetings,
both regular and special, either within or outside the State of Nevada, at such
places as from time to time may be determined by the Board or as may be
designated in the respective notices or waivers of notice thereof.
(b) Annual meetings of the Board shall be held at such times and at such
places as from time to time shall be determined by the Board.
(c) The first meeting of each newly elected Board shall be held as soon as
practicable after the annual meeting of the stockholders and shall be for the
election of officers and the transaction of such other business as may come
before it.
(d) Special meetings of the Board shall be held whenever called by
direction of the Chairman or at the request of Directors constituting a majority
of the number of Directors then in office.
(e) Members of the Board or any Committee of the Board may participate in a
meeting of the Board or Committee, as the case may be, by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and such participation shall
constitute presence in person at such meeting.
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(f) The Secretary, or an Assistant Secretary designated by the Secretary,
shall give notice to each Director of any meeting of the Board by mailing the
same at least two days before the meeting or by electronically transmitting or
delivering the same not later than the day before the meeting. Such notice need
not include a statement of the business to be transacted at, or the purpose of,
any such meeting. Any and all business may be transacted at any meeting of the
Board. No notice of any adjourned meeting need be given. No notice to or waiver
by any Director shall be required with respect to any meeting at which the
Director is present.
SECTION 2.05. Quorum and Action. Except as otherwise expressly required
by applicable law, the Articles of Incorporation or these By-laws, at any
meeting of the Board, the presence of at least one-third of the entire Board
shall constitute a quorum for the transaction of business; but if there shall be
less than a quorum at any meeting of the Board, a majority of those present may
adjourn the meeting from time to time. Unless otherwise provided by applicable
law, the Articles of Incorporation or these By-laws, the vote of a majority of
the Directors present (and not abstaining) at any meeting at which a quorum is
present shall be necessary for the approval and adoption of any resolution or
the approval of any act of the Board.
SECTION 2.06. Presiding Officer and Secretary of Meeting. The Chairman
or, in the absence of the Chairman, a member of the Board selected by the
members present, shall preside at meetings of the Board. The Secretary, or an
Assistant Secretary designated by the Secretary, shall act as secretary of the
meeting, but in the absence of the Secretary, or an Assistant Secretary
designated by the Secretary, the presiding officer may appoint a secretary of
the meeting.
SECTION 2.07. Action by Consent Without Meeting. Any action required or
permitted to be taken at any meeting of the Board or of any Committee thereof
may be taken without a meeting if all members of the Board or Committee, as the
case may be, consent thereto in writing and the writing or writings are filed
with the minutes of proceedings of the Board or the Committee.
SECTION 2.08. Standing Committees. By resolution adopted by a majority of
the entire Board, the Board shall elect, from among its members, individuals to
serve on the Standing Committees established by this Section 2.08. Each Standing
Committee shall be comprised of such number of Directors, not less than three,
as shall be elected to such Committee; provided that no officer or employee of
the Corporation shall be eligible to serve on the Audit, Compensation and
Personnel or Nominating Committees and provided further that no officer or
employee of the Corporation, other than the Chairman, shall be eligible to serve
on the Executive and Policy Committee. Each Committee shall keep a record of all
its proceedings and report the same to the Executive and Policy Committee and/or
the Board. One-third of the members of a Committee, but not less than two, shall
constitute a quorum, and the act of a majority of the members of a Committee
present at any meeting at which a quorum is present shall be the act of the
Committee. Each Standing Committee shall meet at the call of its chairman or any
two of its members. The chairmen of the various Committees shall preside, when
present, at all meetings of such Committees, and shall have such powers and
perform such duties as the Board may from time to time prescribe. The Standing
Committees of the Board, and functions of each, are as follows:
(a) Executive and Policy Committee. The Executive and Policy
Committee shall, during the intervals between the meetings of the Board,
possess and exercise all of the powers of the Board in the management of
the business and affairs of the Corporation, except as otherwise provided
by applicable law, the Articles of Incorporation or these By-laws.
(b) Compensation and Personnel Committee. The Compensation and
Personnel Committee shall exercise the power of oversight of the
compensation and benefits of the employees of the Corporation, and shall be
charged with evaluating management performance, and establishing executive
compensation. This Committee shall have access to its own independent
outside compensation counsel and shall consist of a majority of independent
directors. For purposes of this Section 2.08(b), "independent director"
shall mean a Director who: (i) has not been employed by the Corporation in
an executive capacity within the past five years; (ii) is not, and is not
affiliated with a company or firm that is, an advisor or consultant to the
Corporation; (iii) is not affiliated with a significant customer or
supplier of the Corporation; (iv) has no personal services contract(s) with
the Corporation; (v) is not affiliated with a tax-exempt entity that
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receives significant contributions from the Corporation; and (vi) is not a
familial relative of any person described by clauses (i) through (v). This
By-law shall not be amended or repealed except by a majority of the voting
power of the stockholders present in person or by proxy and entitled to
vote at any meeting at which a quorum is present.
(c) Audit Committee. The Audit Committee shall recommend the
selection of the independent auditors for the Corporation, confirm the
scope of audits to be performed by such auditors, review audit results and
internal accounting and control procedures and policies, review the fees
paid to the Corporation's independent auditors, and review and recommend
the approval of the audited financial statements of the Corporation and the
annual reports to stockholders. The Audit Committee shall also review
expense accounts of senior executives.
(d) Capital Committee. The Capital Committee shall have the
responsibility for maximizing the effective utilization of the assets of
the Corporation and its subsidiaries and reviewing capital expenditures and
appropriations.
(e) Corporate Governance and Legal Affairs Committee. The Legal
Affairs Committee shall review and consider major claims and litigation and
legal, regulatory, intellectual property and related governmental policy
matters affecting the Corporation and its subsidiaries, and review
management policies and programs relating to compliance with legal and
regulatory requirements and business ethics.
(f) Nominating Committee. The Nominating Committee shall make
recommendations as to the organization, size and composition of the Board
and Committees thereof, select candidates for election to the Board and the
Committees thereof, and consider the qualifications, compensation and
retirement of Directors.
(g) Public Affairs Committee. The Public Affairs Committee shall
review and define the Corporation's social responsibilities, including
issues of significance to the Corporation, its stockholders and its
employees.
(h) Gaming Audit Committee. The Gaming Audit Committee shall review
audit results and internal accounting, control and surveillance procedures
and policies employed in connection with the Corporation's casino gaming
activities.
SECTION 2.09. Other Committees. By resolution passed by a majority of the
entire Board, the Board may also appoint from among its members such other
Committees, Standing or otherwise, as it may from time to time deem desirable
and may delegate to such Committees such powers of the Board as it may consider
appropriate; consistent with applicable law, the Articles of Incorporation and
these By-laws.
SECTION 2.10. Compensation of Directors. Unless otherwise restricted by
the Articles of Incorporation or these By-laws, Directors shall receive for
their services on the Board or any Committee thereof such compensation and
benefits, including the granting of options, together with expenses, if any, as
the Board may from time to time determine. The Directors may be paid a fixed sum
for attendance at each meeting of the Board or Committee thereof and/or a stated
annual sum as a Director, together with expenses, if any, of attendance at each
meeting of the Board or Committee thereof. Nothing herein contained shall be
construed to preclude any Director from serving the Corporation in any other
capacity and receiving compensation therefor.
SECTION 2.11. Independent Directors. (a) Independence of Nominees for
Election as Directors at the Annual meeting. The persons nominated by the Board
for election as Directors at any annual meeting of the stockholders of the
Corporation shall include a sufficient number of persons who have been, on the
date of their nomination, determined by the Board to be eligible to be
classified as independent directors such that if all such nominees are elected,
the majority of all Directors holding office would be independent directors.
(b) Directors Elected to Fill Vacancies on the Board. If the Board elects
Directors between annual meetings of stockholders to fill vacancies or newly
created Directorships, the majority of all Directors holding office immediately
after such elections shall be independent directors.
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(c) Definition of Independent Director. For purposes of this Section 2.11,
"independent director" shall mean a Director who: (i) has not been employed by
the Corporation in an executive capacity within the past five years; (ii) is
not, and is not affiliated with a company or a firm that is, an adviser or
consultant to the Corporation; (iii) is not affiliated with a significant
customer or supplier of the Corporation; (iv) has no personal services
contract(s) with the Corporation; (v) is not affiliated with a tax-exempt entity
that receives significant contributions from the Corporation; (vi) is not a
familial relative of any person described by clauses (i) through (v); and (vii)
is free of any other relationship which would interfere with the exercise of
independent judgment by such Director.
ARTICLE III
OFFICERS
SECTION 3.01. Officers, Titles, Elections, Terms. (a) The Board may from
time to time elect a Chairman, a President, one or more Executive Vice
Presidents, one or more Senior Vice Presidents, one or more Vice Presidents, a
Chief Financial Officer, a Controller, a Treasurer, a Secretary, a General
Counsel, one or more Assistant Controllers, one or more Assistant Treasurers,
one or more Assistant Secretaries, and one or more Associate or Assistant
General Counsels, to serve at the pleasure of the Board or otherwise as shall be
specified by the Board at the time of such election and until their successors
are elected and qualified or until their earlier death, retirement, resignation
or removal.
(b) The Board may elect or appoint at any time such other officers or
agents with such duties as it may deem necessary or desirable. Such other
officers or agents shall serve at the pleasure of the Board or otherwise as
shall be specified by the Board at the time of such election or appointment and,
in the case of such other officers, until their successors are elected and
qualified or until their earlier death, retirement, resignation or removal. Each
such officer or agent shall have such authority and shall perform such duties as
may be provided herein or as the Board may prescribe. The Board may from time to
time authorize any officer or agent to appoint and remove any other such officer
or agent and to prescribe such person's authority and duties.
(c) No person may be elected or appointed an officer who is not a citizen
of the United States of America if such election or appointment is prohibited by
applicable law or regulation.
(d) Any vacancy in any office may be filled for the unexpired portion of
the term by the Board. Each officer elected or appointed during the year shall
hold office until the next annual meeting of the Board at which officers are
regularly elected or appointed and until his or her successor is elected or
appointed and qualified or until his or her earlier death, retirement,
resignation or removal.
(e) Any officer or agent elected or appointed by the Board may be removed
at any time by the affirmative vote of a majority of the entire Board.
(f) Any officer may resign from office at any time. Such resignation shall
be made in writing and given to the President or the Secretary. Any such
resignation shall take effect at the time specified therein, or, if no time is
specified, at the time of its receipt by the Corporation. The acceptance of a
resignation shall not be necessary to make it effective, unless expressly so
provided in the resignation.
SECTION 3.02. General Powers of Officers. Except as may be otherwise
provided by applicable law or in Article VI or Article VII of these By-laws, the
Chairman, the President, any Executive Vice President, any Senior Vice
President, any Vice President, the Chief Financial Officer, the General Counsel,
the Controller, the Treasurer and the Secretary, or any of them, may (i) execute
and deliver in the name of the Corporation, in the name of any Division of the
Corporation or in both names any agreement, contract, instrument, power of
attorney or other document pertaining to the business or affairs of the
Corporation or any Division of the Corporation, including, without limitation,
agreements or contracts with any government or governmental department, agency
or instrumentality, and (ii) delegate to any employee or agent the power to
execute and deliver any such agreement, contract, instrument, power of attorney
or other document.
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SECTION 3.03. Powers and Duties of the Chairman. The Chairman shall be
the Chief Executive of the Corporation and shall report directly to the Board.
Except in such instances as the Board may confer powers in particular
transactions upon any other officer, and subject to the control and direction of
the Board, the Chairman shall manage and direct the business and affairs of the
Corporation and shall communicate to the Board and any Committee thereof
reports, proposals and recommendations for their respective consideration or
action. He or she may do and perform all acts on behalf of the Corporation and
shall preside at meetings of the Board and the stockholders.
SECTION 3.04. Powers and Duties of the President. The President shall
have such powers and perform such duties as the Board or the Chairman may from
time to time prescribe or as may be prescribed in these By-laws.
SECTION 3.05. Powers and Duties of Executive Vice Presidents, Senior Vice
Presidents and Vice Presidents. Executive Vice Presidents, Senior Vice
Presidents and Vice Presidents shall have such powers and perform such duties as
the Board or the Chairman may from time to time prescribe or as may be
prescribed in these By-laws.
SECTION 3.06. Powers and Duties of the Chief Financial Officer. The Chief
Financial Officer shall have such powers and perform such duties as the Board or
the Chairman may from time to time prescribe or as may be prescribed in these
By-laws. The Chief Financial Officer shall cause to be prepared and maintained
(i) a stock ledger containing the names and addresses of all stockholders and
the number of shares held by each and (ii) the list of stockholders for each
meeting of the stockholders as required by Section 1.11 of these By-laws. The
Chief Financial Officer shall be responsible for the custody of all stock books
and of all unissued stock certificates.
SECTION 3.07. Powers and Duties of the Controller and Assistant
Controllers. (a) The Controller shall be responsible for the maintenance of
adequate accounting records of all assets, liabilities, capital and transactions
of the Corporation. The Controller shall prepare and render such balance sheets,
income statements, budgets and other financial statements and reports as the
Board or the Chairman may require, and shall perform such other duties as may be
prescribed or assigned pursuant to these By-laws and all other acts incident to
the position of Controller.
(b) Each Assistant Controller shall perform such duties as from time to
time may be assigned by the Controller or by the Board. In the event of the
absence, incapacity or inability to act of the Controller, then any Assistant
Controller may perform any of the duties and may exercise any of the powers of
the Controller.
SECTION 3.08. Powers and Duties of the Treasurer and Assistant
Treasurers. (a) The Treasurer shall have the care and custody of all the funds
and securities of the Corporation, except as may be otherwise ordered by the
Board, and shall cause such funds (i) to be invested or reinvested from time to
time for the benefit of the Corporation as may be designated by the Board, the
Chairman, the President, the Chief Financial Officer or the Treasurer or (ii) to
be deposited to the credit of the Corporation in such banks or depositories as
may be designated by the Board, the Chairman, the President, the Chief Financial
Officer or the Treasurer, and shall cause such securities to be placed in
safekeeping in such manner as may be designated by the Board, the Chairman, the
President, the Chief Financial Officer or the Treasurer.
(b) The Treasurer, any Assistant Treasurer or such other person or persons
as may be designated for such purpose by the Board, the Chairman, the President,
the Chief Financial Officer or the Treasurer may endorse in the name and on
behalf of the Corporation all instruments for the payment of money, bills of
lading, warehouse receipts, insurance policies and other commercial documents
requiring such endorsement.
(c) The Treasurer, any Assistant Treasurer or such other person or persons
as may be designated for such purpose by the Board, the Chairman, the President,
the Chief Financial Officer or the Treasurer (i) may sign all receipts and
vouchers for payments made to the Corporation; (ii) shall render a statement of
the cash account of the Corporation to the Board as often as it shall require
the same; and (iii) shall enter regularly in books to be kept for that purpose
full and accurate account of all moneys received and paid on account of the
Corporation and of all securities received and delivered by the Corporation.
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(d) The Treasurer shall perform such other duties as may be prescribed or
assigned pursuant to these By-laws and all other acts incident to the position
of Treasurer. Each Assistant Treasurer shall perform such duties as may from
time to time be assigned by the Treasurer or by the Board. In the event of the
absence, incapacity or inability to act of the Treasurer, then any Assistant
Treasurer may perform any of the duties and may exercise any of the powers of
the Treasurer.
SECTION 3.09. Powers and Duties of the Secretary and Assistant
Secretaries. (a) The Secretary, or an Assistant Secretary designated by the
Secretary, shall keep the minutes of all proceedings of the stockholders, the
Board and the Committees of the Board. The Secretary, or an Assistant Secretary
designated by the Secretary, shall attend to the giving and serving of all
notices of the Corporation, in accordance with the provisions of these By-laws
and as required by applicable law. The Secretary, or an Assistant Secretary
designated by the Secretary, shall be the custodian of the seal of the
Corporation. The Secretary shall affix or cause to be affixed the seal of the
Corporation to such contracts, instruments and other documents requiring the
seal of the Corporation, and when so affixed may attest the same and shall
perform such other duties as may be prescribed or assigned pursuant to these
By-laws and all other acts incident to the position of Secretary.
(b) Each Assistant Secretary shall perform such duties as may from time to
time be assigned by the Secretary or by the Board. In the event of the absence,
incapacity or inability to act of the Secretary, then any Assistant Secretary
may perform any of the duties and may exercise any of the powers of the
Secretary.
ARTICLE IV
INDEMNIFICATION
SECTION 4.01. (a) Right to Indemnification. The Corporation, to the
fullest extent permitted by applicable law as then in effect, shall indemnify
any person who is or was a Director or officer of the Corporation and who is or
was involved in any manner (including, without limitation, as a party or a
witness) or is threatened to be made so involved in any threatened, pending or
completed investigation, claim, action, suit or proceeding, whether civil,
criminal, administrative or investigative (including, without limitation, any
action, suit or proceeding by or in the right of the Corporation to procure a
judgment in its favor) (a "Proceeding") by reason of the fact that such person
is or was a Director, officer, employee or agent of the Corporation or is or was
serving at the request of the Corporation as a director, officer, employee,
fiduciary or agent of another corporation, partnership, joint venture, limited
liability company, trust or other enterprise (including, without limitation, any
employee benefit plan) (a "Covered Entity"), against all expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such Proceeding. Any
Director or officer of the Corporation entitled to indemnification as provided
in this Section 4.01(a) is hereinafter called an "Indemnitee". Any right of an
Indemnitee to indemnification shall be a contract right and shall include the
right to receive, prior to the conclusion of any Proceeding, payment of any
expenses incurred by the Indemnitee in connection with such Proceeding,
consistent with the provisions of applicable law as then in effect and the other
provisions of this Article IV.
(b) Effect of Amendments. Neither the amendment or repeal of, nor the
adoption of a provision inconsistent with, any provision of this Article IV
(including, without limitation, this Section 4.01(b)) shall adversely affect the
rights of any Director or officer under this Article IV: (i) with respect to any
Proceeding commenced or threatened prior to such amendment, repeal or adoption
of an inconsistent provision or (ii) after the occurrence of a Change in Control
(as defined in Section 4.04(e)(i) of this Article IV), with respect to any
Proceeding arising out of any action or omission occurring prior to such
amendment, repeal or adoption of an inconsistent provision, in either case
without the written consent of such Director or officer.
SECTION 4.02. Insurance, Contracts and Funding. The Corporation may
purchase and maintain insurance to protect itself and any Indemnitee against any
expenses, judgments, fines and amounts paid in settlement as specified in
Section 4.01(a) or Section 4.05 of this Article IV or incurred by any Indemnitee
in connection with any Proceeding referred to in such Sections, to the fullest
extent permitted by applicable law
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as then in effect. The Corporation may enter into contracts with any Director,
officer, employee or agent of the Corporation or any director, officer,
employee, fiduciary or agent of any Covered Entity in furtherance of the
provisions of this Article IV and may create a trust fund or use other means
(including, without limitation, a letter of credit) to ensure the payment of
such amounts as may be necessary to effect indemnification as provided in this
Article IV.
SECTION 4.03. Indemnification; Not Exclusive Right. The right of
indemnification provided in this Article IV shall not be exclusive of any other
rights to which any Indemnitee may otherwise be entitled, and the provisions of
this Article IV shall inure to the benefit of the heirs and legal
representatives of any Indemnitee and shall be applicable to Proceedings
commenced or continuing after the adoption of this Article IV, whether arising
from acts or omissions occurring before or after such adoption.
SECTION 4.04. Advancement of Expenses; Procedures; Presumptions and Effect
of Certain Proceedings; Remedies. In furtherance, but not in limitation, of the
foregoing provisions, the following procedures, presumptions and remedies shall
apply with respect to the advancement of expenses and the right to
indemnification under this Article IV:
(a) Advancement of Expenses. All reasonable expenses incurred by or
on behalf of an Indemnitee in connection with any Proceeding shall be
advanced to the Indemnitee by the Corporation within 20 days after the
receipt by the Corporation of a statement or statements from the Indemnitee
requesting such advance or advances from time to time, whether prior to or
after final disposition of such Proceeding. Any such statement or
statements shall reasonably evidence the expenses incurred by the
Indemnitee and shall include any written affirmation or undertaking
required by applicable law in effect at the time of such advance.
(b) Procedures for Determination of Entitlement to
Indemnification. (i) To obtain indemnification under this Article IV, an
Indemnitee shall submit to the Secretary of the Corporation a written
request, including such documentation and information as is reasonably
available to the Indemnitee and reasonably necessary to determine whether
and to what extent the Indemnitee is entitled to indemnification (the
"Supporting Documentation"). The determination of the Indemnitee's
entitlement to indemnification shall be made not later than 60 days after
receipt by the Corporation of the written request for indemnification
together with the Supporting Documentation. The Secretary of the
Corporation shall, promptly upon receipt of such a request for
indemnification, advise the Board in writing that the Indemnitee has
requested indemnification.
(ii) The Indemnitee's entitlement to indemnification under this
Article IV shall be determined in one of the following ways: (A) by a
majority vote of the Disinterested Directors (as hereinafter defined), if
they constitute a quorum of the Board; (B) by a written opinion of
Independent Counsel (as hereinafter defined) if (x) a Change in Control (as
hereinafter defined) shall have occurred and the Indemnitee so requests or
(y) a quorum of the Board consisting of Disinterested Directors is not
obtainable or, even if obtainable, a majority of such Disinterested
Directors so directs; (C) by the stockholders of the Corporation (but only
if a majority of the Disinterested Directors, if they constitute a quorum
of the Board, presents the issue of entitlement to indemnification to the
stockholders for their determination); or (D) as provided in Section
4.04(c) of this Article IV.
(iii) In the event the determination of entitlement to indemnification
is to be made by Independent Counsel pursuant to Section 4.04(b)(ii), a
majority of the Disinterested Directors shall select the Independent
Counsel, but only an Independent Counsel to which the Indemnitee does not
reasonably object; provided, however, that if a Change in Control shall
have occurred, the Indemnitee shall select such Independent Counsel, but
only an Independent Counsel to which a majority of the Disinterested
Directors does not reasonably object.
(c) Presumptions and Effect of Certain Proceedings. Except as
otherwise expressly provided in this Article IV, if a Change in Control
shall have occurred, the Indemnitee shall be presumed to be entitled to
indemnification under this Article IV (with respect to actions or failures
to act occurring prior to such Change in Control) upon submission of a
request for indemnification together with the
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Supporting Documentation in accordance with Section 4.04(b) of this Article
IV, and thereafter the Corporation shall have the burden of proof to
overcome that presumption in reaching a contrary determination. In any
event, if the person or persons empowered under Section 4.04(b) of this
Article IV to determine entitlement to indemnification shall not have been
appointed or shall not have made a determination within 60 days after
receipt by the Corporation of the request therefor together with the
Supporting Documentation, the Indemnitee shall be deemed to be, and shall
be, entitled to indemnification unless (A) the Indemnitee misrepresented or
failed to disclose a material fact in making the request for
indemnification or in the Supporting Documentation or (B) such
indemnification is prohibited by law. The termination of any Proceeding
described in Section 4.01 of this Article IV, or of any claim, issue or
matter therein, by judgment, order, settlement or conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself, adversely
affect the right of the Indemnitee to indemnification or create a
presumption that the Indemnitee did not act in good faith and in a manner
which the Indemnitee reasonably believed to be in or not opposed to the
best interests of the Corporation or, with respect to any criminal
Proceeding, that the Indemnitee had reasonable cause to believe that his or
her conduct was unlawful.
(d) Remedies of Indemnitee. (i) In the event that a determination is
made pursuant to Section 4.04(b) of this Article IV that the Indemnitee is
not entitled to indemnification under this Article IV, (A) the Indemnitee
shall be entitled to seek an adjudication of his or her entitlement to such
indemnification either, at the Indemnitee's sole option, in (x) an
appropriate court of the State of Nevada or any other court of competent
jurisdiction or (y) an arbitration to be conducted by a single arbitrator
pursuant to the rules of the American Arbitration Association; (B) any such
judicial proceeding or arbitration shall be de novo and the Indemnitee
shall not be prejudiced by reason of such adverse determination; and (C) if
a Change in Control shall have occurred, in any such judicial proceeding or
arbitration the Corporation shall have the burden of proving that the
Indemnitee is not entitled to indemnification under this Article IV (with
respect to actions or failures to act occurring prior to such Change in
Control).
(ii) If a determination shall have been made or deemed to have been
made, pursuant to Section 4.04(b) or (c) of this Article IV, that the
Indemnitee is entitled to indemnification, the Corporation shall be
obligated to pay the amounts constituting such indemnification within five
days after such determination has been made or deemed to have been made and
shall be conclusively bound by such determination unless (A) the Indemnitee
misrepresented or failed to disclose a material fact in making the request
for indemnification or in the Supporting Documentation or (B) such
indemnification is prohibited by law. In the event that (x) advancement of
expenses is not timely made pursuant to Section 4.04(a) of this Article IV
or (y) payment of indemnification is not made within five days after a
determination of entitlement to indemnification has been made or deemed to
have been made pursuant to Section 4.04(b) or (c) of this Article IV, the
Indemnitee shall be entitled to seek judicial enforcement of the
Corporation's obligation to pay to the Indemnitee such advancement of
expenses or indemnification. Notwithstanding the foregoing, the Corporation
may bring an action, in an appropriate court in the State of Nevada or any
other court of competent jurisdiction, contesting the right of the
Indemnitee to receive indemnification hereunder due to the occurrence of an
event described in Subclause (A) or (B) of this clause (ii) (a
"Disqualifying Event"); provided, however, that in any such action the
Corporation shall have the burden of proving the occurrence of such
Disqualifying Event.
(iii) The Corporation shall be precluded from asserting in any
judicial proceeding or arbitration commenced pursuant to this Section
4.04(d) that the procedures and presumptions of this Article IV are not
valid, binding and enforceable and shall stipulate in any such court or
before any such arbitrator that the Corporation is bound by all the
provisions of this Article IV.
(iv) In the event that the Indemnitee, pursuant to this Section
4.04(d), seeks a judicial adjudication of or an award in arbitration to
enforce his or her rights under, or to recover damages for breach of, this
Article IV, the Indemnitee shall be entitled to recover from the
Corporation, and shall be indemnified by the Corporation against, any
expenses actually and reasonably incurred by the Indemnitee if the
Indemnitee prevails in such judicial adjudication or arbitration. If it
shall be determined in such
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judicial adjudication or arbitration that the Indemnitee is entitled to
receive part but not all of the indemnification or advancement of expenses
sought, the expenses incurred by the Indemnitee in connection with such
judicial adjudication or arbitration shall be prorated accordingly.
(e) Definitions. For purposes of this Article IV:
(i) "Change in Control" means a change in control of the
Corporation of a nature that would be required to be reported in
response to Item 6(e) (or any successor provision) of Schedule 14A of
Regulation 14A (or any amendment or successor provision thereto)
promulgated under the Securities Exchange Act of 1934 (the "Act"),
whether or not the Corporation is then subject to such reporting
requirement; provided that, without limitation, a change in control
shall be deemed to have occurred if (A) any "person" (as such term is
used in Sections 13(d) and 14(d) of the Act) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Act), directly or
indirectly, of securities of the Corporation representing 20% or more of
the voting power of all outstanding shares of stock of the Corporation
entitled to vote generally in an election of Directors without the prior
approval of at least two-thirds of the members of the Board in office
immediately prior to such acquisition; (B) the Corporation is a party to
any merger or consolidation in which the Corporation is not the
continuing or surviving corporation or pursuant to which shares of the
Corporation's common stock would be converted into cash, securities or
other property, other than a merger of the Corporation in which the
holders of the Corporation's common stock immediately prior to the
merger have the same proportionate ownership of common stock of the
surviving corporation immediately after the merger; (C) there is a sale,
lease, exchange or other transfer (in one transaction or a series of
related transactions) of all, or substantially all, the assets of the
Corporation, or liquidation or dissolution of the Corporation; (D) the
Corporation is a party to a merger, consolidation, sale of assets or
other reorganization, or a proxy contest, as a consequence of which
members of the Board in office immediately prior to such transaction or
event constitute less than a majority of the Board thereafter; or (E)
during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board (including for this
purpose any new Director whose election or nomination for election by
the stockholders was approved by a vote of at least two-thirds of the
Directors then still in office who were Directors at the beginning of
such period) cease for any reason to constitute at least a majority of
the Board.
(ii) "Disinterested Director" means a Director who is not or was
not a party to the proceeding in respect of which indemnification is
sought by the Indemnitee.
(iii) "Independent Counsel" means a law firm or a member of a law
firm that neither presently is, nor in the past five years has been,
retained to represent:
(A) the Corporation or the Indemnitee in any matter material to
either such party; or
(B) any other party to the Proceeding giving rise to a claim for
indemnification under this Article IV.
Notwithstanding the foregoing, the term "Independent Counsel", shall not
include any person who, under applicable standards of professional
conduct, would have a conflict of interest in representing either the
Corporation or the Indemnitee in an action to determine the Indemnitee's
rights under this Article IV.
SECTION 4.05. Indemnification of Employees and Agents. Notwithstanding
any other provision of this Article IV, the Corporation, to the fullest extent
permitted by applicable law as then in effect, may indemnify any person other
than a Director or officer of the Corporation who is or was an employee or agent
of the Corporation and who is or was involved in any manner (including, without
limitation, as a party or a witness) or is threatened to be made so involved in
any threatened, pending or completed Proceeding by reasons of the fact that such
person is or was an employee or agent of the Corporation or, at the request of
the Corporation, a director, officer, employee, fiduciary or agent of a Covered
Entity against all expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such Proceeding. The Corporation may also advance expenses
incurred by
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such employee, fiduciary or agent in connection with any such Proceeding,
consistent with the provisions of applicable law as then in effect.
SECTION 4.06. Severability. If any provision of this Article IV shall be
held to be invalid, illegal or unenforceable for any reason whatsoever:
(a) the validity, legality and enforceability of the remaining
provisions of this Article IV (including, without limitation, all portions
of any Section of this Article IV containing any such provision held to be
invalid, illegal or unenforceable, that are not themselves invalid, illegal
or unenforceable) shall not in any way be affected or impaired thereby; and
(b) to the fullest extent possible, the provisions of this Article IV
(including, without limitation, all portions of any Section of this Article
IV containing any such provision held to be invalid, illegal or
unenforceable, that are not themselves invalid, illegal or unenforceable)
shall be construed so as to give effect to the intent manifested by the
provision held invalid, illegal or unenforceable.
ARTICLE V
CAPITAL STOCK
SECTION 5.01. Stock Certificates. (a) Every holder of stock in the
Corporation shall be entitled to have a certificate certifying the number of
shares owned by him or her in the Corporation and designating the class and
series of stock to which such shares belong, which certificate shall otherwise
be in such form as the Board shall prescribe and as provided in Section 5.01(d).
Each such certificate shall be signed by, or in the name of, the Corporation by
the Chairman or the President or any Vice President, and by the Treasurer or any
Assistant Treasurer or the Secretary or any Assistant Secretary.
(b) If such certificate is countersigned by a transfer agent other than the
Corporation or its employee, or by a registrar other than the Corporation or its
employee, the signatures of the officers of the Corporation may be facsimiles,
and, if permitted by applicable law, any other signature on the certificate may
be a facsimile.
(c) In case any officer who has signed or whose facsimile signature has
been placed upon a certificate shall have ceased to be such officer before such
certificate is issued, it may be issued by the Corporation with the same effect
as if such person were such officer at the date of issue.
(d) Certificates of stock shall be issued in such form not inconsistent
with the Articles of Incorporation. They shall be numbered and registered in the
order in which they are issued. No certificate shall be issued until fully paid.
(e) All certificates surrendered to the Corporation shall be canceled
(other than treasury shares) with the date of cancelation and shall be retained
by the Chief Financial Officer, together with the powers of attorney to transfer
and the assignments of the shares represented by such certificates, for such
period of time as such officer shall designate.
SECTION 5.02. Record Ownership. A record of the name of the person, firm
or corporation and address of such holder of each certificate, the number of
shares represented thereby and the date of issue thereof shall be made on the
Corporation's books. The Corporation shall be entitled to treat the holder of
record of any share of stock as the holder in fact thereof, and accordingly
shall not be bound to recognize any equitable or other claim to or interest in
any share on the part of any person, whether or not it shall have express or
other notice thereof, except as required by applicable law.
SECTION 5.03. Transfer of Record Ownership. Transfers of stock shall be
made on the books of the Corporation only by direction of the person named in
the certificate or such person's attorney, lawfully constituted in writing, and
only upon the surrender of the certificate therefor and a written assignment of
the shares evidenced thereby. Whenever any transfer of stock shall be made for
collateral security, and not absolutely, it shall be so expressed in the entry
of the transfer if, when the certificates are presented to the Corporation for
transfer, both the transferor and transferee request the Corporation to do so.
14
<PAGE> 18
SECTION 5.04. Lost, Stolen or Destroyed Certificates. Certificates
representing shares of the stock of the Corporation shall be issued in place of
any certificate alleged to have been lost, stolen or destroyed in such manner
and on such terms and conditions as the Board from time to time may authorize in
accordance with applicable law.
SECTION 5.05. Transfer Agent; Registrar; Rules Respecting
Certificates. The Corporation shall maintain one or more transfer offices or
agencies where stock of the Corporation shall be transferable. The Corporation
shall also maintain one or more registry offices where such stock shall be
registered. The Board may adopt such rules and regulations as it may deem proper
concerning the issue, transfer and registration of stock certificates in
accordance with applicable law.
SECTION 5.06. Fixing Record Date for Determination of Stockholders of
Record. (a) The Board may fix, in advance, a date as the record date for the
purpose of determining the stockholders entitled to notice of, or to vote at,
any meeting of the stockholders or any adjournment thereof, which record date
shall not precede the date upon which the resolution fixing the record date is
adopted by the Board, and which record date shall not be more than 60 days nor
less than 10 days before the date of a meeting of the stockholders. If no record
date is fixed by the Board, the record date for determining the stockholders
entitled to notice of or to vote at a stockholders' meeting shall be at the
close of business on the day next preceding the day on which notice is given,
or, if notice is waived, at the close of business on the day next preceding the
day on which the meeting is held. A determination of stockholders of record
entitled to notice of or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting; provided, however, that the Board may fix a new
record date for the adjourned meeting.
(b) The Board may fix, in advance, a date as the record date for the
purpose of determining the stockholders entitled to receive payment of any
dividend or other distribution or the allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock,
or in order to make a determination of the stockholders for the purpose of any
other lawful action, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the Board, and which record date
shall not be more than 60 calendar days prior to such action. If no record date
is fixed by the Board, the record date for determining the stockholders for any
such purpose shall be at the close of business on the day on which the Board
adopts the resolution relating thereto.
ARTICLE VI
SECURITIES HELD BY THE CORPORATION
SECTION 6.01. Voting. Unless the Board shall otherwise order, the
Chairman, the President, any Executive Vice President, any Senior Vice
President, any Vice President, the Chief Financial Officer, the Controller, the
Treasurer or the Secretary shall have full power and authority, on behalf of the
Corporation, to attend, act and vote at any meeting of the stockholders of any
corporation in which the Corporation may hold stock and at such meeting to
exercise any or all rights and powers incident to the ownership of such stock,
and to execute on behalf of the Corporation a proxy or proxies empowering
another or others to act as aforesaid. The Board from time to time may confer
like powers upon any other person or persons.
SECTION 6.02. General Authorization to Transfer Securities Held by the
Corporation. (a) Any of the following officers, to wit: the Chairman, the
President, any Executive Vice President, any Senior Vice President, any Vice
President, the Chief Financial Officer, the Controller, the Treasurer, any
Assistant Controller, any Assistant Treasurer, and each of them, hereby is
authorized and empowered to transfer, convert, endorse, sell, assign, set over
and deliver any and all shares of stock, bonds, debentures, notes, subscription
warrants, stock purchase warrants, evidences of indebtedness, or other
securities now or hereafter standing in the name of or owned by the Corporation,
and to make, execute and deliver any and all written instruments of assignment
and transfer necessary or proper to effectuate the authority hereby conferred.
(b) Whenever there shall be annexed to any instrument of assignment and
transfer executed pursuant to and in accordance with the foregoing Section
6.02(a), a certificate of the Secretary or any Assistant Secretary in office at
the date of such certificate setting forth the provisions hereof and stating
that they are in full force
15
<PAGE> 19
and effect and setting forth the names of persons who are then officers of the
corporation, all persons to whom such instrument and annexed certificate shall
thereafter come shall be entitled, without further inquiry or investigation and
regardless of the date of such certificate, to assume and to act in reliance
upon the assumption that (i) the shares of stock or other securities named in
such instrument were theretofore duly and properly transferred, endorsed, sold,
assigned, set over and delivered by the Corporation, and (ii) with respect to
such securities, the authority of the provisions of these By-laws and of such
officers is still in full force and effect.
ARTICLE VII
DEPOSITARIES AND SIGNATORIES
SECTION 7.01. Depositaries. The Chairman, the President, the Chief
Financial Officer and the Treasurer are each authorized to designate
depositaries for the funds of the Corporation deposited in its name or that of a
Division of the Corporation, or both, and the signatories with respect thereto
in each case, and from time to time, to change such depositaries and
signatories, with the same force and effect as if each such depositary and the
signatories with respect thereto and changes therein had been specifically
designated or authorized by the Board; and each depositary designated by the
Board or by the Chairman, the President, the Chief Financial Officer or the
Treasurer shall be entitled to rely upon the certificate of the Secretary or any
Assistant Secretary of the Corporation or of a Division of the Corporation
setting forth the fact of such designation and of the appointment of the
officers of the Corporation or of the Division or of both or of other persons
who are to be signatories with respect to the withdrawal of funds deposited with
such depositary, or from time to time the fact of any change in any depositary
or in the signatories with respect thereto.
SECTION 7.02. Signatories. Unless otherwise designated by the Board or by
the Chairman, the President, the Chief Financial Officer or the Treasurer, all
notes, drafts, checks, acceptances, orders for the payment of money and all
other negotiable instruments obligating the Corporation for the payment of money
shall be (a) signed by the Treasurer or any Assistant Treasurer and (b)
countersigned by the Controller or any Assistant Controller, or (c) either
signed or countersigned by the Chairman, the President, any Executive Vice
President, any Senior Vice President or any Vice President in lieu of either the
officers designated in clause (a) or the officers designated in clause (b) of
this Section 7.02.
ARTICLE VIII
SEAL
The seal of the Corporation shall be in such form and shall have such
content as the Board shall from time to time determine.
ARTICLE IX
FISCAL YEAR
The fiscal year of the Corporation shall end on December 31 in each year,
or on such other date as the Board shall determine.
ARTICLE X
WAIVER OF OR DISPENSING WITH NOTICE
(a) Whenever any notice of the time, place or purpose of any meeting of the
stockholders is required to be given by applicable law, the Articles of
Incorporation or these By-laws, a written waiver of notice, signed by a
stockholder entitled to notice of a stockholders' meeting, whether by telegraph,
cable or other form of recorded communication, whether signed before or after
the time set for a given meeting, shall be deemed equivalent to notice of such
meeting. Attendance of a stockholder in person or by proxy at a stockholders'
16
<PAGE> 20
meeting shall constitute a waiver of notice to such stockholder of such meeting,
except when the stockholder attends the meeting for the express purpose of
objecting at the beginning of the meeting to the transaction of any business
because the meeting was not lawfully called or convened.
(b) Whenever any notice of the time or place of any meeting of the Board or
Committee of the Board is required to be given by applicable law, the Articles
of Incorporation or these By-laws, a written waiver of notice signed by a
Director, whether by telegraph, cable or other form of recorded communication,
whether signed before or after the time set for a given meeting, shall be deemed
equivalent to notice of such meeting. Attendance of a Director at a meeting
shall constitute a waiver of notice to such Director of such meeting.
(c) No notice need be given to any person with whom communication is made
unlawful by any law of the United States or any rule, regulation, proclamation
or executive order issued under any such law.
ARTICLE XI
POLITICAL CONTRIBUTIONS BY THE CORPORATION
The Corporation and its direct and indirect subsidiaries shall be permitted
to make contributions or expenditures (a) in connection with the election of any
candidate for state or local political office in jurisdictions which permit such
contributions, including contributions to any committee supporting such a
candidate, to the extent such contributions or expenditures are permitted by
applicable law, and (b) to the extent necessary to permit in the United States
the expenditure of corporate assets for the payment of expenses for
establishing, registering and administering any political action committee and
of soliciting contributions thereto, all as may be authorized by Federal or
state laws.
ARTICLE XII
TRANSFER OF SHARES TO ALIENS
Except as otherwise provided by law, not more than 25% of the aggregate
number of shares of stock outstanding shall at any time be owned of record by or
for the account of aliens or their representatives, a foreign government or
representative thereof or any corporation organized under the laws of a foreign
country.
Shares of stock shall be transferable on the books of the Corporation to
aliens and their representatives, foreign governments and representatives
thereof, and corporations organized under the laws of foreign countries (or to
any persons holding for the account of aliens and their representatives, foreign
governments and representatives thereof, and corporations organized under the
laws of foreign countries) only, if after giving effect to such transfer, the
aggregate number of shares of voting stock owned by or for the account of aliens
and their representatives, foreign governments and representatives thereof and
corporations organized under the laws of foreign countries, would be not more
than 25% of the number of shares of stock then outstanding.
The Board of Directors may from time to time make such rules and
regulations as it may deem necessary or appropriate to enforce the foregoing
provisions of this Article XII.
ARTICLE XIII
AMENDMENT OF BY-LAWS
Subject to the provisions of the Articles of Incorporation, these By-laws
may be altered, amended or repealed at any annual meeting of the stockholders
(or at any special meeting thereof duly called for that purpose) by the
affirmative vote of the holders of at least a majority of the voting power of
all shares of the Corporation entitled to vote generally in the election of
directors, voting together as a single class; provided that in the notice of
such special meeting notice of such purpose shall be given. Subject to the laws
of the State of Nevada, the Articles of Incorporation and these By-laws, the
Board of Directors may, by majority
17
<PAGE> 21
vote of those present at any meeting at which a quorum is present, amend the
By-laws, or enact such other By-laws as in their judgment may be advisable for
the regulation of the conduct of the affairs of the Corporation.
ARTICLE XIV
OFFICES AND AGENT
(a) Registered Office and Agent. The registered office of the Corporation
in the State of Nevada shall be One East First Street, Reno, Nevada 89501. The
name of the registered agent is The Corporation Trust Company. Such registered
agent has a business office identical with such registered office.
(b) Other Offices. The Corporation may also have offices at other places,
either within or outside the State of Nevada, as the Board of Directors may from
time to time determine or as the business of the Corporation may require.
18
<PAGE> 1
EXHIBIT 4.1
NUMBER SHARES
ITT COMMON STOCK
COMMON STOCK [ART]
INCORPORATED UNDER THE LAWS CUSIP #
OF NEVADA SEE LEGENDS ON REVERSE
ITT DESTINATIONS, INC.
This certifies that
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK,
$0.01 PAR VALUE PER SHARE, OF
ITT Destinations, Inc., transferable on the books of the Corporation by the
holder hereof in person or by duly authorized attorney upon surrender of this
certificate properly executed. This certificate and the shares represented
hereby are issued and shall be held subject to all the provisions of the
Restated Articles of Incorporation and the amendments thereto (copies of which
are on file with the Transfer Agent). This certificate is not valid until
countersigned by the Transfer Agent and registered by the Registrar.
Witness the signatures of its duly authorized officers.
Dated
[SEAL]
<TABLE>
<S> <C>
/s/ RICHARD S. WARD /s/ RAND V. ARASKOG
Executive Vice President Chairman and Chief Executive Officer
</TABLE>
Countersigned and Registered:
The Bank of New York
(NEW YORK, NY)
Transfer Agent
and Registrar
By Authorized Signature
<PAGE> 2
Any and all shares of the common stock of the Corporation are held subject
to the conditions that, if a holder thereof is found to be disqualified or
unsuitable by any governmental authority which issues or grants any license,
franchise or regulatory approval necessary or appropriate for the lawful
operation of gaming and related businesses by the Corporation or any subsidiary
thereof, such holder shall dispose of all the common stock of the Corporation
held by such holder within the 120 day period commencing on the date upon which
the Corporation shall have received notice from such an authority (or such other
time period as may be specified by any governmental authority) of such holder's
disqualification or unsuitability. On or after such date that such notice is
received, it shall be unlawful for such a holder to, among other things, receive
payments of dividends upon any shares of common stock of the Corporation held by
such holder or exercise, directly or indirectly, any voting or other rights
conferred by the shares of common stock. Any and all shares of the common stock
of the Corporation are subject to redemption by the Corporation, pursuant to
Article Ninth of its Restated Articles of Incorporation, to the extent necessary
to prevent the loss or to secure the reinstatement of any such license,
franchise or regulatory approval held by the Corporation or any subsidiary. Any
redemption price will be determined in accordance with the terms of the Restated
Articles of Incorporation. The Corporation shall be entitled to injunctive
relief to enforce the foregoing provisions (and the related provisions contained
in the Restated Articles of Incorporation) since failure to comply with such
provisions will expose the Corporation to irreparable injury for which there is
no adequate remedy at law.
This certificate also evidences and entitles the holder hereof to certain
Rights as set forth in a Rights Agreement dated as of September ,1997, as it
may be amended from time to time (the "Rights Agreement"), between the
Corporation, and The Bank of New York, as Rights Agent (the "Rights Agent"), the
terms of which are hereby incorporated herein by reference and a copy of which
is on file at the principal executive offices of the Corporation. Under certain
circumstances, as set forth in the Rights Agreement, such Rights will be
evidenced by separate certificates and will no longer be evidenced by this
certificate. The Rights Agent will mail to the holder of this certificate a copy
of the Rights Agreement without charge after receipt of a written request
therefor. Rights beneficially owned by Acquiring Persons or their Affiliates or
Associates (as such terms are defined in the Rights Agreement) and by any
subsequent holder of such Rights are null and void and nontransferable.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C> <C>
TEN COM -- as tenants in common
TEN ENT -- as tenants by the entireties
JT TEN -- as joint tenants with right of survivorship and
not as tenants in common
GIFT MIN ACT -- ____________________ Custodian ________________
(Cust) (Minor)
Under the________________ Transfers to Minors Act
(State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
For value received, ____________ hereby sell, assign and transfer unto
Please insert social security or other identifying number of assignee
[ ]
-------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING ZIP CODE OF ASSIGNEE)
<PAGE> 3
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
common shares represented by the within Certificate, and do hereby irrevocably
constitute and appoint
- --------------------------------------------------------------------------------
Attorney to transfer the said stock on the books of the within-named Corporation
with full power of substitution in the premises.
Dated, ____________________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST
CORRESPOND WITH THE NAME AS WRITTEN UPON THE
FACE OF THE CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERNATION OR ENLARGEMENT OR ANY
CHANGE WHATEVER. THE SIGNATURE OF THE PERSON
EXECUTING THIS POWER MUST BE GUARANTEED BY
AN ELIGIBLE GUARANTOR INSTITUTION SUCH AS A
COMMERCIAL BANK, TRUST COMPANY, SECURITIES
BROKER/DEALER, CREDIT UNION OR A SAVINGS
ASSOCIATION PARTICIPATING IN MEDALLION
PROGRAMS APPROVED BY THE SECURITIES TRANSFER
ASSOCIATION, INC.
<PAGE> 1
EXHIBIT 4.4
================================================================================
RIGHTS AGREEMENT
BETWEEN
ITT DESTINATIONS, INC.
AND
THE BANK OF NEW YORK,
AS RIGHTS AGENT
DATED AS OF SEPTEMBER , 1997
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
SECTION 1. Certain Definitions..................................................... 1
SECTION 2. Appointment of Rights Agent............................................. 5
SECTION 3. Issue of Rights and Right Certificates.................................. 5
SECTION 4. Form of Right Certificates.............................................. 6
SECTION 5. Execution, Countersignature and Registration............................ 6
Transfer, Split-Up, Combination and Exchange of Right Certificates;
Mutilated, Destroyed, Lost or Stolen Right Certificates; Uncertificated
SECTION 6. Rights.................................................................. 7
SECTION 7. Exercise of Rights; Expiration Date of Rights........................... 7
SECTION 8. Cancelation of Right Certificates....................................... 9
SECTION 9. Reservation and Availability of Preferred Shares........................ 9
SECTION 10. Preferred Shares Record Date............................................ 10
Adjustments in Rights After There Is an Acquiring Person; Exchange of
SECTION 11. Rights for Shares; Business Combinations................................ 10
SECTION 12. Certain Adjustments..................................................... 13
SECTION 13. Certificate of Adjustment............................................... 13
SECTION 14. Additional Covenants.................................................... 14
SECTION 15. Fractional Rights and Fractional Shares................................. 14
SECTION 16. Rights of Action........................................................ 15
SECTION 17. Transfer and Ownership of Rights and Right Certificates................. 15
SECTION 18. Right Certificate Holder Not Deemed a Stockholder....................... 15
SECTION 19. Concerning the Rights Agent............................................. 15
SECTION 20. Merger or Consolidation or Change of Rights Agent....................... 16
SECTION 21. Duties of Rights Agent.................................................. 16
SECTION 22. Change of Rights Agent.................................................. 18
SECTION 23. Issuance of Additional Rights and Right Certificates.................... 19
SECTION 24. Redemption and Termination.............................................. 19
SECTION 25. Notices................................................................. 20
SECTION 26. Supplements and Amendments.............................................. 20
SECTION 27. Successors.............................................................. 21
Benefits of Rights Agreement; Determinations and Actions by the Board of
SECTION 28. Directors, etc.......................................................... 21
SECTION 29. Severability............................................................ 21
SECTION 30. Governing Law........................................................... 21
SECTION 31. Counterparts; Effectiveness............................................. 21
SECTION 32. Descriptive Headings.................................................... 22
EXHIBIT A Certificate of Designation
EXHIBIT B Form of Right Certificate
</TABLE>
<PAGE> 3
RIGHTS AGREEMENT dated as of September , 1997, between ITT
DESTINATIONS, INC., a Nevada corporation (the "Company"), and THE BANK OF
NEW YORK, a New York banking corporation, as Rights Agent (the "Rights
Agent").
The Board of Directors of the Company has authorized and declared a
dividend of one Right (as hereinafter defined) for each share of Common Stock,
par value $.01 per share, of the Company (the "Common Stock") outstanding at the
Close of Business (as hereinafter defined) on the effective date of the
distribution of Common Stock by ITT Corporation to its stockholders (the "Record
Date") and has authorized the issuance of one Right (as such number may
hereafter be adjusted pursuant to the provisions of this Rights Agreement) with
respect to each share of Common Stock that shall become outstanding between the
Record Date and the earliest of the Distribution Date, the Redemption Date or
the Expiration Date (as such terms are hereinafter defined); provided, however,
that Rights may be issued with respect to shares of Common Stock that shall
become outstanding after the Distribution Date and prior to the earlier of the
Redemption Date or the Expiration Date in accordance with the provisions of
Section 23. Each Right shall initially represent the right to purchase one
one-thousandths (1/1,000ths) of a share of Series A Participating Cumulative
Preferred Stock, without par value, of the Company (the "Preferred Shares"),
having the powers, rights and preferences set forth in the Certificate of
Designation attached as Exhibit A.
Accordingly, in consideration of the premises and the mutual agreements
herein set forth, the parties hereby agree as follows:
SECTION 1. Certain Definitions. For purposes of this Rights Agreement,
the following terms have the meanings indicated:
"Acquiring Person" shall mean any Person who or which, alone or together
with all Affiliates and Associates of such Person, shall be the Beneficial Owner
of more than 15% of the Common Shares then outstanding but shall not include (a)
the Company, any Subsidiary of the Company, any employee benefit or compensation
plan of the Company or of any of its Subsidiaries, or any Person holding Common
Shares for or pursuant to the terms of any such employee benefit or compensation
plan or (b) any such Person who has become and is such a Beneficial Owner solely
because (i) of a change in the aggregate number of Common Shares outstanding
since the last date on which such Person acquired Beneficial Ownership of any
Common Shares or (ii) it acquired such Beneficial Ownership in the good faith
belief that such acquisition would not (x) cause such Beneficial Ownership to
exceed 15% of the Common Shares then outstanding and such Person relied in good
faith in computing the percentage of its Beneficial Ownership on publicly filed
reports or documents of the Company which are inaccurate or out-of-date or (y)
otherwise cause a Distribution Date or the adjustment provided for in Section
11(a) to occur. Notwithstanding clause (b)(ii) of the prior sentence, if any
Person that is not an Acquiring Person due to such clause (b)(ii) does not
reduce its percentage of Beneficial Ownership of Common Shares to 15% or less by
the Close of Business on the fifth Business Day after notice from the Company
(the date of notice being the first day) that such Person's Beneficial Ownership
of Common Shares so exceeds 15%, such Person shall, at the end of such five
Business Day period, become an Acquiring Person (and such clause (b)(ii) shall
no longer apply to such Person). For purposes of this definition, the
determination whether any Person acted in "good faith" shall be conclusively
determined by the Board of Directors of the Company, acting by a vote of those
directors of the Company whose approval would be required to redeem the Rights
under Section 24.
"Affiliate" and "Associate", when used with reference to any Person, shall
have the respective meanings ascribed to such terms in Rule 12b-2 of the General
Rules and Regulations under the Exchange Act, as in effect on the date of this
Rights Agreement.
A Person shall be deemed the "Beneficial Owner" of, and shall be deemed to
"beneficially own", and shall be deemed to have "Beneficial Ownership" of, any
securities:
(i) which such Person or any of such Person's Affiliates or Associates
is deemed to "beneficially own" within the meaning of Rule 13d-3 of the
General Rules and Regulations under the Exchange Act, as in effect on the
date of this Rights Agreement;
<PAGE> 4
(ii) which such Person or any of such Person's Affiliates or
Associates has (A) the right to acquire (whether such right is exercisable
immediately or only after the passage of time) pursuant to any agreement,
arrangement or understanding (written or oral), or upon the exercise of
conversion rights, exchange rights, rights (other than the Rights),
warrants or options, or otherwise; provided, however, that a Person shall
not be deemed the Beneficial Owner of, or to beneficially own, or to have
Beneficial Ownership of, securities tendered pursuant to a tender or
exchange offer made by or on behalf of such Person or any of such Person's
Affiliates or Associates until such tendered securities are accepted for
purchase or exchange thereunder or cease to be subject to withdrawal by the
tendering security holder, or (B) the right to vote pursuant to any
agreement, arrangement or understanding (written or oral); provided,
however, that a Person shall not be deemed the Beneficial Owner of, or to
beneficially own any security if (1) the agreement, arrangement or
understanding (written or oral) to vote such security arises solely from a
revocable proxy or consent given to such Person in response to a public
proxy or consent solicitation made generally to all holders of Common Stock
pursuant to, and in accordance with, the applicable rules and regulations
under the Exchange Act and (2) the beneficial ownership of such security is
not also then reportable on Schedule 13D under the Exchange Act (or any
comparable or successor report);
(iii) which are beneficially owned, directly or indirectly, by any
other Person with which such Person or any of such Person's Affiliates or
Associates has any agreement, arrangement or understanding (written or
oral) for the purpose of acquiring, holding, voting (except pursuant to a
revocable proxy as described in clause (ii)(B) of this definition) or
disposing of any securities of the Company; or
(iv) which would be beneficially owned by such Person but for the
application of the provisions of Chapter 78 of the Nevada Revised Statutes
pertaining to the Acquisition of a Controlling Interest or any comparable
or successor provisions.
Notwithstanding the foregoing, nothing contained in this definition shall cause
a Person ordinarily engaged in business as an underwriter of securities to be
the "Beneficial Owner" of, or to "beneficially own", any securities acquired in
a bona fide firm commitment underwriting pursuant to an underwriting agreement
with the Company.
"Book Value", when used with reference to Common Shares issued by any
Person, shall mean the amount of equity of such Person applicable to each Common
Share, determined (i) in accordance with generally accepted accounting
principles in effect on the date as of which such Book Value is to be
determined, (ii) using all the consolidated assets and all the consolidated
liabilities of such Person on the date as of which such Book Value is to be
determined, except that no value shall be included in such assets for goodwill
arising from consummation of a business combination, and (iii) after giving
effect to (A) the exercise of all rights, options and warrants to purchase such
Common Shares (other than the Rights), and the conversion of all securities
convertible into such Common Shares, at an exercise or conversion price, per
Common Shares, which is less than such Book Value before giving effect to such
exercise or conversion (whether or not exercisability or convertibility is
conditioned upon occurrence of a future event), (B) all dividends and other
distributions on the capital stock of such Person declared prior to the date as
of which such Book Value is to be determined and to be paid or made after such
date, and (C) any other agreement, arrangement or understanding (written or
oral), or transaction or other action contemplated prior to the date as of which
such Book Value is to be determined which would have the effect of thereafter
reducing such Book Value.
"Business Combination" shall have the meaning set forth in Section
11(c)(I).
"Business Day" shall mean each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in the Borough of
Manhattan, The City of New York, are authorized or obligated by law or executive
order to close.
"Certificate of Designation" shall mean the Certificate of Designation of
Series A Participating Cumulative Preferred Stock setting forth the powers,
preferences, rights, qualifications, limitations and restrictions of such series
of Preferred Stock of the Company, a copy of which is attached as Exhibit A.
2
<PAGE> 5
"Close of Business" on any given date shall mean 5:00 p.m., New York City
time, on such date; provided, however, that, if such date is not a Business Day,
"Close of Business" shall mean 5:00 p.m., New York City time, on the next
succeeding Business Day.
"Common Shares", when used with reference to the Company prior to a
Business Combination, shall mean the shares of Common Stock of the Company or
any other shares of capital stock of the Company into which the Common Stock
shall be reclassified or changed. "Common Shares", when used with reference to
any Person (other than the Company prior to a Business Combination), shall mean
shares of capital stock of such Person (if such Person is a corporation) of any
class or series, or units of equity interests in such Person (if such Person is
not a corporation) of any class or series, the terms of which do not limit (as a
maximum amount and not merely in proportional terms) the amount of dividends or
income payable or distributable on such class or series or the amount of assets
distributable on such class or series upon any voluntary or involuntary
liquidation, dissolution or winding up of such Person and do not provide that
such class or series is subject to redemption at the option of such Person, or
any shares of capital stock or units of equity interests into which the
foregoing shall be reclassified or changed; provided, however, that, if at any
time there shall be more than one such class or series of capital stock or
equity interests of such Person, "Common Shares" of such Person shall include
all such classes and series substantially in the proportion of the total number
of shares or other units of each such class or series outstanding at such time
unless any such class or series is identical to another such class except for
voting power, in which case "Common Shares" shall include such higher voting
class in place of such lower voting class.
"Common Stock" shall have the meaning set forth in the introductory
paragraph of this Rights Agreement.
"Company" shall have the meaning set forth in the heading of this Rights
Agreement; provided, however, that if there is a Business Combination, "Company"
shall have the meaning set forth in Section 11(c)(III).
The term "control" with respect to any Person shall mean the power to
direct the management and policies of such Person, directly or indirectly, by or
through stock ownership, agency or otherwise, or pursuant to or in connection
with an agreement, arrangement or understanding (written or oral) with one or
more other Persons by or through stock ownership, agency or otherwise; and the
terms "controlling" and "controlled" shall have meanings correlative to the
foregoing.
"Distribution Date" shall have the meaning set forth in Section 3(b).
"Exchange Act" shall mean the Securities Exchange Act of 1934, as in effect
on the date in question, unless otherwise specifically provided.
"Exchange Consideration" shall have the meaning set forth in Section
11(b)(I).
"Expiration Date" shall have the meaning set forth in Section 7(a).
"Major Part", when used with reference to the assets of the Company and its
Subsidiaries as of any date, shall mean assets (i) having a fair market value
aggregating 50% or more of the total fair market value of all the assets of the
Company and its Subsidiaries (taken as a whole) as of the date in question, (ii)
accounting for 50% or more of the total value (net of depreciation and
amortization) of all the assets of the Company and its Subsidiaries (taken as a
whole) as would be shown on a consolidated or combined balance sheet of the
Company and its Subsidiaries as of the date in question, prepared in accordance
with generally accepted accounting principles then in effect, or (iii)
accounting for 50% or more of the total amount of earnings before interest,
taxes, depreciation and amortization or of the revenues of the Company and its
Subsidiaries (taken as a whole) as would be shown on, or derived from, a
consolidated or combined statement of income or operations of the Company and
its Subsidiaries for the period of 12 months ending on the last day of the
Company's monthly accounting period next preceding the date in question,
prepared in accordance with generally accepted accounting principles then in
effect.
"Market Value", when used with reference to Common Shares on any date,
shall be deemed to be the average of the daily closing prices, per share, of
such Common Shares for the period which is the shorter of (1) 30 consecutive
Trading Days immediately prior to the date in question or (2) the number of
consecutive
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<PAGE> 6
Trading Days beginning on the Trading Day immediately after the date of the
first public announcement of the event requiring a determination of the Market
Value and ending on the Trading Day immediately prior to the record date of such
event; provided, however, that, in the event that the Market Value of such
Common Shares is to be determined in whole or in part during a period following
the announcement by the issuer of such Common Shares of any action of the type
described in Section 12(a) that would require an adjustment thereunder, then,
and in each such case, the Market Value of such Common Shares shall be
appropriately adjusted to reflect the effect of such action on the market price
of such Common Shares. The closing price for each Trading Day shall be the
closing price quoted on the principal United States securities exchange
registered under the Exchange Act (or any recognized foreign stock exchange) on
which such securities are listed, or, if such securities are not listed on any
such exchange, the closing price quoted on The Nasdaq Stock Market or, if such
securities are not so quoted, the average of the closing bid and asked
quotations with respect to a share of such securities on any National
Association of Securities Dealers, Inc. quotations system, or, if no such
quotations are available, the average of the closing bid and asked prices as
furnished by a professional market maker making a market in such securities
selected by the Board of Directors of the Company. If on any such Trading Day no
market maker is making a market in such securities, the closing price of such
securities on such Trading Day shall be deemed to be the fair value of such
securities as determined in good faith by the Board of Directors of the Company
acting by a vote of those directors whose approval would be required to redeem
the Rights under Section 24 (whose determination shall be described in a
statement filed with the Rights Agent and shall be binding on the Rights Agent,
the holders of Rights and all other Persons); provided, however, that for the
purpose of determining the closing price of the Preferred Shares for any Trading
Day on which there is no such market maker for the Preferred Shares the closing
price on such Trading Day shall be deemed to be the Formula Number (as defined
in the Certificate of Designation) times the closing price of the Common Shares
of the Company on such Trading Day.
"Person" shall mean an individual, corporation, partnership, joint venture,
association, trust, unincorporated organization or other entity.
"Preferred Shares" shall have the meaning set forth in the introductory
paragraph of this Rights Agreement. Any reference in this Rights Agreement to
Preferred Shares shall be deemed to include any authorized fraction of a
Preferred Share, unless the context otherwise requires.
"Principal Party" shall mean the Surviving Person in a Business
Combination, provided, however, that, if such Surviving Person is a direct or
indirect Subsidiary of any other Person, "Principal Party" shall mean the Person
which is the ultimate parent of such Surviving Person and which is not itself a
Subsidiary of another Person. In the event ultimate control of such Surviving
Person is shared by two or more Persons, "Principal Party" shall mean that
Person that is immediately controlled by such two or more Persons.
"Purchase Price" with respect to each Right shall mean $ , as such
amount may from time to time be adjusted as provided herein, and shall be
payable in lawful money of the United States of America. All references herein
to the Purchase Price shall mean the Purchase Price as in effect at the time in
question.
"Record Date" shall have the meaning set forth in the introductory
paragraph of this Rights Agreement.
"Redemption Date" shall have the meaning set forth in Section 24(a).
"Redemption Price" with respect to each Right shall mean $.01, as such
amount may from time to time be adjusted in accordance with Section 12. All
references herein to the Redemption Price shall mean the Redemption Price as in
effect at the time in question.
"Registered Common Shares" shall mean Common Shares which are, as of the
date of consummation of a Business Combination, and have continuously been for
the 12 months immediately preceding such date, registered under Section 12 of
the Exchange Act.
"Right Certificate" shall mean a certificate evidencing a Right in
substantially the form attached as Exhibit B.
"Rights" shall mean the rights to purchase Preferred Shares (or other
securities) as provided in this Rights Agreement.
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<PAGE> 7
"Securities Act" shall mean the Securities Act of 1933, as in effect on the
date in question, unless otherwise specifically provided.
"Subsidiary" shall mean a Person, at least a majority of the total
outstanding voting power (being the power under ordinary circumstances (and not
merely upon the happening of a contingency) to vote in the election of directors
of such Person (if such Person is a corporation) or to participate in the
management and control of such Person (if such Person is not a corporation)) of
which is owned, directly or indirectly, by another Person or by one or more
other Subsidiaries of such other Person or by such other Person and one or more
other Subsidiaries of such other Person.
"Surviving Person" shall mean (1) the Person which is the continuing or
surviving Person in a consolidation or merger specified in Section 11(c)(I)(i)
or 11(c)(I)(ii) or (2) the Person to which the Major Part of the assets of the
Company and its Subsidiaries is sold, leased, exchanged or otherwise transferred
or disposed of in a transaction specified in Section 11(c)(I)(iii); provided,
however, that, if the Major Part of the assets of the Company and its
Subsidiaries is sold, leased, exchanged or otherwise transferred or disposed of
in one or more related transactions specified in Section 11(c)(I)(iii) to more
than one Person, the "Surviving Person" in such case shall mean the Person that
acquired assets of the Company and/or its Subsidiaries with the greatest fair
market value in such transaction or transactions.
"Trading Day" shall mean a day on which the principal national securities
exchange (or principal recognized foreign stock exchange, as the case may be) on
which any securities or Rights, as the case may be, are listed or admitted to
trading is open for the transaction of business or, if the securities or Rights
in question are not listed or admitted to trading on any national securities
exchange (or recognized foreign stock exchange, as the case may be), a Business
Day.
SECTION 2. Appointment of Rights Agent. The Company hereby appoints the
Rights Agent to act as agent for the Company in accordance with the terms and
conditions hereof, and the Rights Agent hereby accepts such appointment. The
Company may from time to time appoint one or more co-Rights Agents as it may
deem necessary or desirable upon 10 days' prior written notice to the Rights
Agent (the term "Rights Agent" being used herein to refer, collectively, to the
Rights Agent together with any such co-Rights Agents). In the event the Company
appoints one or more co-Rights Agents, the respective duties of the Rights Agent
and any co-Rights Agents shall be as the Company shall determine. The initial
Rights Agent shall have no duty to supervise, and shall in no event be liable
for, the acts or omissions of any such co-Rights Agent.
SECTION 3. Issue of Rights and Right Certificates. (a) One Right shall be
associated with each Common Share outstanding on the Record Date, each
additional Common Share that shall become outstanding between the Record Date
and the earliest of the Distribution Date, the Redemption Date or the Expiration
Date and each additional Common Share with which Rights are issued after the
Distribution Date but prior to the earlier of the Redemption Date or the
Expiration Date as provided in Section 23; provided, however, that, if the
number of outstanding Rights are combined into a smaller number of outstanding
Rights pursuant to Section 12(a), the appropriate fractional Right determined
pursuant to such Section shall thereafter be associated with each such Common
Share.
(b) Until the earlier of (i) such time as the Company learns that a Person
has become an Acquiring Person or (ii) the Close of Business on such date, if
any, as may be designated by the Board of Directors of the Company following the
commencement of, or first public disclosure of an intent to commence, a tender
or exchange offer by any Person (other than the Company, any Subsidiary of the
Company, any employee benefit or compensation plan of the Company or of any of
its Subsidiaries, or any Person holding Common Shares for or pursuant to the
terms of any such employee benefit or compensation plan) for outstanding Common
Shares, if upon consummation of such tender or exchange offer such Person could
be the Beneficial Owner of more than 15% of the outstanding Common Shares (the
Close of Business on the earlier of such dates being the "Distribution Date"),
(x) the Rights will be evidenced by the certificates for Common Shares
registered in the names of the holders thereof and not by separate Right
Certificates and (y) the Rights, including the right to receive Right
Certificates, will be transferable only in connection with transfer of Common
Shares. The Company shall give the Rights Agent prompt notice of the
Distribution Date. As soon as practicable after the Distribution Date and
receipt of notice of the Distribution Date from the Company,
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<PAGE> 8
the Rights Agent will send, by first-class, postage-prepaid mail, to each record
holder of Common Shares as of the Distribution Date, at the address of such
holder shown on the records of the Company, a Right Certificate evidencing one
whole Right for each Common Share (or for the number of Common Shares with which
one whole Right is then associated if the number of Rights per Common Share held
by such record holder has been adjusted in accordance with the proviso in
Section 3(a)). If the number of Rights associated with each Common Share has
been adjusted in accordance with the proviso in Section 3(a), at the time of
distribution of the Right Certificates the Company may make any necessary and
appropriate rounding adjustments so that Right Certificates representing only
whole numbers of Rights are distributed and cash is paid in lieu of any
fractional Right in accordance with Section 15(a). As of and after the
Distribution Date, the Rights will be evidenced solely by such Right
Certificates.
(c) With respect to any certificate for Common Shares, until the earliest
of the Distribution Date, the Redemption Date or the Expiration Date, the Rights
associated with the Common Shares represented by any such certificate shall be
evidenced by such certificate alone, the registered holders of the Common Shares
shall also be the registered holders of the associated Rights and the surrender
for transfer of any such certificate shall also constitute the transfer of the
Rights associated with the Common Shares represented thereby.
(d) Certificates issued for Common Shares after the Record Date (including,
without limitation, upon transfer or exchange of outstanding Common Shares), but
prior to the earliest of the Distribution Date, the Redemption Date or the
Expiration Date, shall have printed on, written on or otherwise affixed to them
the following legend:
This certificate also evidences and entitles the holder hereof to
certain Rights as set forth in a Rights Agreement dated as of September ,
1997, as it may be amended from time to time (the "Rights Agreement"),
between ITT Destinations, Inc. (the "Company") and The Bank of New York, as
Rights Agent (the "Rights Agent"), the terms of which are hereby
incorporated herein by reference and a copy of which is on file at the
principal executive offices of the Company. Under certain circumstances, as
set forth in the Rights Agreement, such Rights will be evidenced by
separate certificates and will no longer be evidenced by this certificate.
The Rights Agent will mail to the holder of this certificate a copy of the
Rights Agreement without charge after receipt of a written request
therefor. Rights beneficially owned by Acquiring Persons or their
Affiliates or Associates (as such terms are defined in the Rights
Agreement) and by any subsequent holder of such Rights are null and void
and nontransferable.
Notwithstanding this paragraph (d), the omission of a legend shall not
affect the enforceability of any part of this Rights Agreement or the rights of
any holder of Rights.
SECTION 4. Form of Right Certificates. The Right Certificates (and the
form of election to purchase and form of assignment to be printed on the reverse
side thereof) shall be in substantially the form set forth as Exhibit B and may
have such marks of identification or designation and such legends, summaries or
endorsements printed thereon as the Company may deem appropriate and as are not
inconsistent with the provisions of this Rights Agreement, including, without
limitation, in respect of any gaming law or rule or regulation made pursuant
thereto, or as may be required to comply with any applicable law or with any
rule or regulation made pursuant thereto, or with any rule or regulation of any
stock exchange on which the Rights may from time to time be listed, or to
conform to usage. The Right Certificates shall be in a machine printable format
and in a form reasonably satisfactory the Rights Agent. Subject to the
provisions of Sections 7, 11 and 23, the Right Certificates, whenever issued,
shall be dated as of the Distribution Date, and on their face shall entitle the
holders thereof to purchase such number of Preferred Shares as shall be set
forth therein for the Purchase Price set forth therein, subject to adjustment
from time to time as herein provided.
SECTION 5. Execution, Countersignature and Registration. (a) The Right
Certificates shall be executed on behalf of the Company by the Chairman of the
Board, the Chief Executive Officer, the President, the Chief Operating Officer,
the Treasurer or a Vice President (whether preceded by any additional title) of
the Company, either manually or by facsimile signature, and have affixed hereto
the Company's seal or a facsimile thereof which shall be attested by the
Secretary, an Assistant Secretary or a Vice President (whether preceded by any
additional title, provided that such Vice President shall not have also executed
the Right
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<PAGE> 9
Certificates) of the Company, either manually or by facsimile signature. The
Right Certificates shall be manually countersigned by the Rights Agent and shall
not be valid or obligatory for any purpose unless so countersigned. In case any
officer of the Company who shall have signed any of the Right Certificates shall
cease to be such an officer of the Company before countersignature by the Rights
Agent and issuance and delivery by the Company, such Right Certificates may
nevertheless be countersigned by the Rights Agent and issued and delivered by
the Company with the same force and effect as though the person who signed such
Right Certificates had not ceased to be such an officer of the Company; and any
Right Certificate may be signed on behalf of the Company by any person who, at
the actual date of execution of such Right Certificate, shall be a proper
officer of the Company to sign such Right Certificate, although at the date of
execution of this Rights Agreement any such person was not such an officer of
the Company.
(b) Following the Distribution Date, the Rights Agent will keep or cause to
be kept, at its designated office in New York, New York, books for registration
and transfer of the Right Certificates issued hereunder. Such books shall show
the names and addresses of the respective holders of the Right Certificates, the
number of Rights evidenced by each of the Right Certificates, the Certificate
number of each of the Right Certificates and the date of each of the Right
Certificates.
SECTION 6. Transfer, Split-Up, Combination and Exchange of Right
Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates;
Uncertificated Rights. (a) Subject to the provisions of Section 7(e) and 15, at
any time after the Distribution Date, and at or prior to the Close of Business
on the earlier of the Redemption Date or the Expiration Date, any Right
Certificate or Right Certificates may be transferred, split up, combined or
exchanged for another Right Certificate or Right Certificates representing, in
the aggregate, the same number of Rights as the Right Certificate or Right
Certificates surrendered then represented. Any registered holder desiring to
transfer, split up, combine or exchange any Right Certificate shall make such
request in writing delivered to the Rights Agent and shall surrender the Right
Certificate or Right Certificates to be transferred, split up, combined or
exchanged at the designated office of the Right Agent; provided, however, that
neither the Rights Agent nor the Company shall be obligated to take any action
whatsoever with respect to the transfer of any Right Certificate surrendered for
transfer until the registered holder shall have completed and signed the
certification contained in the form of assignment on the reverse side of such
Right Certificate and shall have provided such additional evidence of the
identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or
Associates thereof as the Company shall reasonably request. Thereupon the Rights
Agent shall, subject to Sections 7(e) and 15, countersign and deliver to the
Person entitled thereto a Right Certificate or Right Certificates, as the case
may be, as so requested. The Company may require payment by the holders of
Rights of a sum sufficient to cover any tax or governmental charge that may be
imposed in connection with any transfer, split-up, combination or exchange of
Right Certificates.
(b) Upon receipt by the Company or the Rights Agent of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of a valid
Right Certificate, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to them, and, at the Company's request,
reimbursement to the Company and the Rights Agent of all reasonable expenses
incidental thereto, and upon surrender to the Rights Agent and cancelation of
the Right Certificate if mutilated, the Company will make a new Right
Certificate of like tenor and deliver such new Right Certificate to the Rights
Agent for delivery to the registered owner in lieu of the Right Certificate so
lost, stolen, destroyed or mutilated.
(c) Notwithstanding any other provision thereof, the Company and the Rights
Agent may amend this Rights Agreement to provide for uncertificated Rights in
addition to or in place of Rights evidenced by Right Certificates.
SECTION 7. Exercise of Rights; Expiration Date of Rights. (a) Subject to
Section 7(e) and except as otherwise provided herein (including Section 11),
each Right shall entitle the registered holder thereof, upon exercise thereof as
provided herein, to purchase for the Purchase Price, at any time after the
Distribution Date and at or prior to the earlier of (i) the Close of Business on
the 10th anniversary of the date of this Rights Agreement (the Close of Business
on such date being the "Expiration Date"), or (ii) the Redemption
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<PAGE> 10
Date, one one-thousandths (1/1,000ths) of a Preferred Share, subject to
adjustment from time to time as provided in Sections 11 and 12.
(b) The registered holder of any Right Certificate may exercise the Rights
evidenced thereby (except as otherwise provided herein) in whole or in part at
any time after the Distribution Date, upon surrender of the Right Certificate,
with the form of election to purchase on the reverse side thereof duly executed,
to the Rights Agent at the designated office of the Rights Agent in New York,
New York, together with payment of the Purchase Price for each one
one-thousandths (1/1,000ths) of a Preferred Share as to which the Rights are
exercised, at or prior to the earlier of (i) the Expiration Date or (ii) the
Redemption Date.
(c) Upon receipt of a Right Certificate representing exercisable Rights,
with the form of election to purchase duly executed, accompanied by payment of
the Purchase Price for the Preferred Shares to be purchased together with an
amount equal to any applicable transfer tax, in lawful money of the United
States of America, in cash or by certified check or money order payable to the
order of the Company, the Rights Agent shall thereupon (i) either (A) promptly
requisition from any transfer agent of the Preferred Shares (or make available,
if the Rights Agent is the transfer agent) certificates for the number of
Preferred Shares to be purchased and the Company hereby irrevocably authorizes
its transfer agent to comply with all such requests or (B) if the Company shall
have elected to deposit the Preferred Shares with a depositary agent under a
depositary arrangement, promptly requisition from the depositary agent
depositary receipts representing the number of one one-thousandths (1/1,000ths)
of a Preferred Share to be purchased (in which case certificates for the
Preferred Shares to be represented by such receipts shall be deposited by the
transfer agent with the depositary agent) and the Company will direct the
depositary agent to comply with all such requests, (ii) when appropriate,
promptly requisition from the Company the amount of cash to be paid in lieu of
issuance of fractional shares in accordance with Section 15, (iii) promptly
after receipt of such certificates or depositary receipts, cause the same to be
delivered to or upon the order of the registered holder of such Right
Certificate, registered in such name or names as may be designated by such
holder and (iv) when appropriate, after receipt promptly deliver such cash to or
upon the order of the registered holder of such Right Certificate.
(d) In case the registered holder of any Right Certificate shall exercise
fewer than all the Rights evidenced thereby, a new Right Certificate evidencing
Rights equivalent to the Rights remaining unexercised shall be issued by the
Rights Agent and delivered to the registered holder of such Right Certificate or
to his duly authorized assigns, subject to the provisions of Section 15.
(e) Notwithstanding anything in this Rights Agreement to the contrary, any
Rights that are at any time beneficially owned by an Acquiring Person or any
Affiliate or Associate of an Acquiring Person shall be null and void and
nontransferable, and any holder of any such Right (including any purported
transferee or subsequent holder) shall not have any right to exercise or
transfer any such Right.
(f) Notwithstanding anything in this Rights Agreement to the contrary,
neither the Rights Agent nor the Company shall be obligated to undertake any
action with respect to a registered holder of any Right Certificates upon the
occurrence of any purported exercise as set forth in this Section 7 unless such
registered holder shall have (i) completed and signed the certificate contained
in the form of election to purchase set forth on the reverse side of the Right
Certificate surrendered for such exercise and (ii) provided such additional
evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or
Affiliates or Associates thereof as the Company shall reasonably request.
(g) The Company may temporarily suspend, for a period of time not to exceed
90 calendar days after the Distribution Date, the exercisability of the Rights
in order to prepare and file a registration statement under the Securities Act,
on appropriate form, with respect to the Preferred Shares purchased upon
exercise of the Rights and permit such registration statement to become
effective; provided, however, that no such suspension shall remain effective
after, and the Rights shall without any further action by the Company or any
other Person become exercisable immediately upon, the effectiveness of such
registration statement. Upon any such suspension, the Company shall issue a
public announcement stating that the exercisability of the Rights has been
temporarily suspended and shall issue a further public announcement at such time
as the suspension is no longer in effect. Notwithstanding any provision herein
to the contrary, the Rights shall not be exercisable in
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<PAGE> 11
any jurisdiction if the requisite qualification under the blue sky or securities
laws of such jurisdiction shall not have been obtained or the exercise of the
Rights shall not be permitted under applicable law.
SECTION 8. Cancelation of Right Certificates. All Right Certificates
surrendered or presented for the purpose of exercise, transfer, split-up,
combination or exchange shall, and any Right Certificate representing Rights
that have become null and void and nontransferable pursuant to Section 7(e)
surrendered or presented for any purpose shall, if surrendered or presented to
the Company or to any of its agents, be delivered to the Rights Agent for
cancelation or in canceled form, or, if surrendered or presented to the Rights
Agent, shall be canceled by it, and no Right Certificates shall be issued in
lieu thereof except as expressly permitted by this Rights Agreement. The Company
shall deliver to the Rights Agent for cancelation and retirement, and the Rights
Agent shall so cancel and retire, any Right Certificate purchased or acquired by
the Company. The Rights Agent shall deliver all canceled Right Certificates to
the Company.
SECTION 9. Reservation and Availability of Preferred Shares. (a) The
Company covenants and agrees that it will cause to be reserved and kept
available out of its authorized and unissued Preferred Shares or any authorized
and issued Preferred Shares held in its treasury, free from preemptive rights or
any right of first refusal, a number of Preferred Shares sufficient to permit
the exercise in full of all outstanding Rights.
(b) In the event that there shall not be sufficient Preferred Shares issued
but not outstanding or authorized but unissued to permit the exercise or
exchange of Rights in accordance with Section 11, the Company covenants and
agrees that it will take all such action as may be necessary to authorize
additional Preferred Shares for issuance upon the exercise or exchange of Rights
pursuant to Section 11; provided, however, that if the Company is unable to
cause the authorization of additional Preferred Shares, then the Company shall,
or in lieu of seeking any such authorization, the Company may, to the extent
necessary and permitted by applicable law and any agreements or instruments in
effect prior to the Distribution Date to which it is a party, (A) upon surrender
of a Right, pay cash equal to the Purchase Price in lieu of issuing Preferred
Shares and requiring payment therefor, (B) upon due exercise of a Right and
payment of the Purchase Price for each Preferred Share as to which such Right is
exercised, issue equity securities having a value equal to the value of the
Preferred Shares which otherwise would have been issuable pursuant to Section
11, which value shall be determined by a nationally recognized investment
banking firm selected by the Board of Directors of the Company or (C) upon due
exercise of a Right and payment of the Purchase Price for each Preferred Share
as to which such Right is exercised, distribute a combination of Preferred
Shares, cash and/or other equity and/or debt securities having an aggregate
value equal to the value of the Preferred Shares which otherwise would have been
issuable pursuant to Section 11, which value shall be determined by a nationally
recognized investment banking firm selected by the Board of Directors of the
Company. To the extent that any legal or contractual restrictions (pursuant to
agreements or instruments in effect prior to the Distribution Date to which it
is party) prevent the Company from paying the full amount payable in accordance
with the foregoing sentence, the Company shall pay to holders of the Rights as
to which such payments are being made all amounts which are not then restricted
on a pro rata basis as such payments become permissible under such legal or
contractual restrictions until such payments have been paid in full.
(c) The Company covenants and agrees that it will take all such action as
may be necessary to ensure that all Preferred Shares delivered upon exercise or
exchange of Rights shall, at the time of delivery of the certificates for such
Preferred Shares (subject to payment of the Purchase Price), be duly and validly
authorized and issued and fully paid and nonassessable shares.
(d) So long as the Preferred Shares issuable upon the exercise or exchange
of Rights are to be listed on any national securities exchange, the Company
covenants and agrees to use its best efforts to cause, from and after such time
as the Rights become exercisable or exchangeable, all Preferred Shares reserved
for such issuance to be listed on such securities exchange upon official notice
of issuance upon such exercise or exchange.
(e) The Company further covenants and agrees that it will pay when due and
payable any and all Federal and state transfer taxes and charges which may be
payable in respect of the issuance or delivery of Right Certificates or of any
Preferred Shares or Common Shares or other securities upon the exercise or
exchange of the Rights. The Company shall not, however, be required to pay any
transfer tax which may be
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payable in respect of any transfer or delivery of Right Certificates to a Person
other than, or in respect of the issuance or delivery of certificates for the
Preferred Shares or Common Shares or other securities, as the case may be, in a
name other than that of, the registered holder of the Right Certificate
evidencing Rights surrendered for exercise or exchange or to issue or deliver
any certificates for Preferred Shares or Common Shares or other securities, as
the case may be, upon the exercise or exchange of any Rights until any such tax
shall have been paid (any such tax being payable by the holder of such Right
Certificate at the time of surrender) or until it has been established to the
Company's satisfaction that no such tax is due.
SECTION 10. Preferred Shares Record Date. Each Person in whose name any
certificate for Preferred Shares or Common Shares or other securities is issued
upon the exercise or exchange of Rights shall for all purposes be deemed to have
become the holder of record of the Preferred Shares or Common Shares or other
securities, as the case may be, represented thereby on, and such certificate
shall be dated, the date upon which the Right Certificate evidencing such Rights
was duly surrendered and payment of any Purchase Price (and any applicable
transfer taxes) was made; provided, however, that, if the date of such surrender
and payment is a date upon which the transfer books of the Company for the
Preferred Shares or Common Shares or other securities, as the case may be, are
closed, such Person shall be deemed to have become the record holder of such
Preferred Shares or Common Shares or other securities, as the case may be, on,
and such certificate shall be dated, the next succeeding Business Day on which
the transfer books of the Company for the Preferred Shares or Common Shares or
other securities, as the case may be, are open.
SECTION 11. Adjustments in Rights After There Is an Acquiring Person;
Exchange of Rights for Shares; Business Combinations. (a) Upon a Person
becoming an Acquiring Person, proper provision shall be made so that each holder
of a Right, except as provided in Section 7(e), shall thereafter have a right to
receive, upon exercise thereof for the Purchase Price in accordance with the
terms of this Rights Agreement, such number of one one-thousandths (1/1,000ths)
of a Preferred Share as shall equal the result obtained by multiplying the
Purchase Price by a fraction, the numerator of which is the number of one
one-thousandths (1/1,000ths) of a Preferred Share for which a Right is then
exercisable and the denominator of which is 50% of the Market Value of the
Common Shares on the date on which a Person becomes an Acquiring Person. As soon
as practicable after a Person becomes an Acquiring Person (provided the Company
shall not have elected to make the exchange permitted by Section 11(b)(I) for
all outstanding Rights), the Company covenants and agrees to use its best
efforts to:
(I) prepare and file a registration statement under the Securities
Act, on an appropriate form, with respect to the Preferred Shares
purchasable upon exercise of the Rights;
(II) cause such registration statement to become effective as soon as
practicable after such filing;
(III) cause such registration statement to remain effective (with a
prospectus at all times meeting the requirements of the Securities Act)
until the Expiration Date; and
(IV) qualify or register the Preferred Shares purchasable upon
exercise of the Rights under the blue sky or securities laws of such
jurisdictions as may be necessary or appropriate.
(b)(I) The Board of Directors of the Company may, at its option, at any
time after a Person becomes an Acquiring Person, mandatorily exchange all or
part of the then outstanding and exercisable Rights (which shall not include
Rights that shall have become null and void and nontransferable pursuant to the
provisions of Section 7(e)) for consideration per Right consisting of either
one-half of the securities that would be issuable at such time upon the exercise
of one Right in accordance with Section 11(a) or, if applicable, Section 9(b)(B)
or (C) or, if applicable the cash consideration specified in Section 9(b)(A)
(the consideration issuable per Right pursuant to this Section 11(b)(I) being
the "Exchange Consideration"). The Board of Directors of the Company may, at its
option, issue, in substitution for Preferred Shares, Common Shares in an amount
per Preferred Share equal to the Formula Number (as defined in the Certificate
of Designation) if there are sufficient Common Shares issued but not outstanding
or authorized but unissued. If the Board of Directors of the Company elects to
exchange all the Rights for Exchange Consideration pursuant to this Section
11(b)(I) prior to the physical distribution of the Rights Certificates, the
Corporation may distribute the Exchange Consideration in lieu of distributing
Right Certificates, in which case for purposes of this Rights
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Agreement holders of Rights shall be deemed to have simultaneously received and
surrendered for exchange Right Certificates on the date of such distribution.
(II) Any action of the Board of Directors of the Company ordering the
exchange of any Rights pursuant to Section 11(b)(I) shall be irrevocable and,
immediately upon the taking of such action and without any further action and
without any notice, the right to exercise any such Right pursuant to Section
11(a) shall terminate and the only right thereafter of a holder of such Right
shall be to receive the Exchange Consideration in exchange for each such Right
held by such holder or, if the Exchange Consideration shall not have been paid
or issued, to exercise any such Right pursuant to Section 11(c)(I). The Company
shall promptly give public notice of any such exchange; provided, however, that
the failure to give, or any defect in, such notice shall not affect the validity
of such exchange. The Company promptly shall mail a notice of any such exchange
to all holders of such Rights at their last addresses as they appear upon the
registry books of the Rights Agent. Any notice which is mailed in the manner
herein provided shall be deemed given, whether or not the holder receives the
notice. Each such notice of exchange will state the method by which the exchange
of the Rights for the Exchange Consideration will be effected and, in the event
of any partial exchange, the number of Rights which will be exchanged. Any
partial exchange shall be effected pro rata based on the number of Rights (other
than Rights which shall have become null and void and nontransferable pursuant
to the provisions of Section 7(e)) held by each holder of Rights.
(c)(I) In the event that, following a Distribution Date, directly or
indirectly, any transactions specified in the following clause (i), (ii) or
(iii) of this Section 11(c) (each such transaction being a "Business
Combination") shall be consummated:
(i) the Company shall consolidate with, or merge with and into, any
Acquiring Person or any Affiliate or Associate of an Acquiring Person;
(ii) any Acquiring Person or any Affiliate or Associate of an
Acquiring Person shall merge with and into the Company and, in connection
with such merger, all or part of the Common Shares shall be changed into or
exchanged for capital stock or other securities of the Company or of any
Acquiring Person or Affiliate or Associate of an Acquiring Person or cash
or any other property; or
(iii) the Company shall sell, lease, exchange or otherwise transfer or
dispose of (or one or more of its Subsidiaries shall sell, lease, exchange
or otherwise transfer or dispose of), in one or more transactions, the
Major Part of the assets of the Company and its Subsidiaries (taken as a
whole) to any Acquiring Person or any Affiliate or Associate of any
Acquiring Person,
then, in each such case, proper provision shall be made so that each holder of a
Right, except as provided in Section 7(e), shall thereafter have the right to
receive, upon the exercise thereof for the Purchase Price in accordance with the
terms of this Rights Agreement, the securities specified below (or, at such
holder's option, the securities specified in Section 11(a)):
(A) If the Principal Party in such Business Combination has Registered
Common Shares outstanding, each Right shall thereafter represent the right
to receive, upon the exercise thereof for the Purchase Price in accordance
with the terms of this Rights Agreement, such number of Registered Common
Shares of such Principal Party, free and clear of all liens, encumbrances
or other adverse claims, as shall have an aggregate Market Value equal to
the result obtained by multiplying the Purchase Price by two;
(B) If the Principal Party involved in such Business Combination does
not have Registered Common Shares outstanding, each Right shall thereafter
represent the right to receive, upon the exercise thereof for the Purchase
Price in accordance with the terms of this Rights Agreement, at the
election of the holder of such Right at the time of the exercise thereof,
any of:
(1) such number of Common Shares of the Surviving Person in such
Business Combination as shall have an aggregate Book Value immediately
after giving effect to such Business Combination equal to the result
obtained by multiplying the Purchase Price by two;
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<PAGE> 14
(2) such number of Common Shares of the Principal Party in such
Business Combination (if the Principal Party is not also the Surviving
Person in such Business Combination) as shall have an aggregate Book
Value immediately after giving effect to such Business Combination equal
to the result obtained by multiplying the Purchase Price by two; or
(3) if the Principal Party in such Business Combination is an
Affiliate of one or more Persons which has Registered Common Shares
outstanding, such number of Registered Common Shares of whichever of
such Affiliates of the Principal Party has Registered Common Shares with
the greatest aggregate Market Value on the date of consummation of such
Business Combination as shall have an aggregate Market Value on the date
of such Business Combination equal to the result obtained by multiplying
the Purchase Price by two.
(II) The Company shall not consummate any Business Combination unless each
issuer of Common Shares for which Rights may be exercised, as set forth in this
Section 11(c), shall have sufficient authorized Common Shares that have not been
issued or reserved for issuance (and which shall, when issued upon exercise
thereof in accordance with this Rights Agreement, be validly issued, fully paid
and nonassessable and free of preemptive rights, rights of first refusal or any
other restrictions or limitations on the transfer or ownership thereof) to
permit the exercise in full of the Rights in accordance with this Section 11(c)
and unless prior thereto:
(i) a registration statement under the Securities Act on an
appropriate form, with respect to the Rights and the Common Shares of such
issuer purchasable upon exercise of the Rights, shall be effective under
the Securities Act; and
(ii) the Company and each such issuer shall have:
(A) executed and delivered to the Rights Agent a supplemental
agreement providing for the assumption by such issuer of the obligations
set forth in this Section 11(c) (including the obligation of such issuer
to issue Common Shares upon the exercise of Rights in accordance with
the terms set forth in Sections 11(c)(I) and 11(c)(III)) and further
providing that such issuer, at its own expense, will use its best
efforts to:
(1) cause a registration statement under the Securities Act on
an appropriate form, with respect to the Rights and the Common Shares
of such issuer purchasable upon exercise of the Rights, to remain
effective (with a prospectus at all times meeting the requirements of
the Securities Act) until the Expiration Date;
(2) qualify or register the Rights and the Common Shares of such
issuer purchasable upon exercise of the Rights under the blue sky or
securities laws of such jurisdictions as may be necessary or
appropriate; and
(3) list the Rights and the Common Shares of such issuer
purchasable upon exercise of the Rights on each national securities
exchange on which the Common Shares were listed prior to the
consummation of the Business Combination or, if the Common Shares
were not listed on a national securities exchange prior to the
consummation of the Business Combination, on a national securities
exchange;
(B) furnish to the Rights Agent a written opinion of independent
counsel stating that such supplemental agreement is a valid, binding and
enforceable agreement of such issuer; and
(C) filed with the Rights Agent a certificate of a nationally
recognized firm of independent accountants setting forth the number of
Common Shares of such issuer which may be purchased upon the exercise of
each Right after the consummation of such Business Combination.
(III) After consummation of any Business Combination and subject to the
provisions of Section 11(c)(II), (i) each issuer of Common Shares for which
Rights may be exercised as set forth in this Section 11(c) shall be liable for,
and shall assume, by virtue of such Business Combination, all the obligations
and duties of the Company pursuant to this Rights Agreement, (ii) the term
"Company" shall thereafter be
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<PAGE> 15
deemed to refer to such issuer, (iii) each such issuer shall take such steps in
connection with such consummation as may be necessary to assure that the
provisions hereof (including the provisions of Sections 11(a) and 11(c)) shall
thereafter be applicable, as nearly as reasonably may be, in relation to its
Common Shares thereafter deliverable upon the exercise of the Rights, and (iv)
the number of Common Shares of each such issuer thereafter receivable upon
exercise of any Right shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions of
Sections 11 and 12 and the provisions of Sections 7, 9 and 10 with respect to
the Preferred Shares shall apply, as nearly as reasonably may be, on like terms
to any such Common Shares.
SECTION 12. Certain Adjustments. (a) To preserve the actual or potential
economic value of the Rights, if at any time after the date of this Rights
Agreement there shall be any change in the Common Shares or the Preferred
Shares, whether by reason of stock dividends, stock splits, recapitalizations,
mergers, consolidations, combinations or exchanges of securities, split-ups,
split-offs, spin-offs, liquidations, other similar changes in capitalization,
any distribution or issuance of cash, assets, evidences of indebtedness or
subscription rights, options or warrants to holders of Common Shares or
Preferred Shares, as the case may be (other than distribution of the Rights or
regular quarterly cash dividends) or otherwise, then, in each such event the
Board of Directors of the Company shall make such appropriate adjustments in the
number of Preferred Shares (or the number and kind of other securities) issuable
upon exercise of each Right, the Purchase Price and Redemption Price in effect
at such time and the number of Rights outstanding at such time (including the
number of Rights or fractional Rights associated with each Common Share) such
that following such adjustment such event shall not have had the effect of
reducing or limiting the benefits the holders of the Rights would have had
absent such event.
(b) If, as a result of an adjustment made pursuant to Section 12(a), the
holder of any Right thereafter exercised shall become entitled to receive any
securities other than Preferred Shares, thereafter the number of such securities
so receivable upon exercise of any Right shall be subject to adjustment from
time to time in a manner and on terms as nearly equivalent as practicable to the
provisions of Sections 11 and 12 and the provisions of Sections 7, 9 and 10 with
respect to the Preferred Shares shall apply, as nearly as reasonably may be, on
like terms to any such other securities.
(c) All Rights originally issued by the Company subsequent to any
adjustment made to the amount of Preferred Shares or other securities relating
to a Right shall evidence the right to purchase, for the Purchase Price, the
adjusted number and kind of securities purchasable from time to time hereunder
upon exercise of the Rights, all subject to further adjustment as provided
herein.
(d) Irrespective of any adjustment or change in the Purchase Price or the
number of Preferred Shares or number or kind of other securities issuable upon
the exercise of the Rights, the Right Certificates theretofore and thereafter
issued may continue to express the terms which were expressed in the initial
Right Certificates issued hereunder.
(e) In any case in which action taken pursuant to Section 12(a) requires
that an adjustment be made effective as of a record date for a specified event,
the Company may elect to defer until the occurrence of such event the issuing to
the holder of any Right exercised after such record date the Preferred Shares
and/or other securities, if any, issuable upon such exercise over and above the
Preferred Shares and/or other securities, if any, issuable before giving effect
to such adjustment; provided, however, that the Company shall deliver to such
holder a due bill or other appropriate instrument evidencing such holder's right
to receive such additional securities upon the occurrence of the event requiring
such adjustment.
SECTION 13. Certificate of Adjustment. Whenever an adjustment is made as
provided in Section 11 or 12, the Company shall (a) promptly prepare a
certificate setting forth such adjustment and a brief statement of the facts
accounting for such adjustment, (b) promptly file with the Rights Agent and with
each transfer agent for the Preferred Shares a copy of such certificate and (c)
mail a brief summary thereof to each holder of a Right Certificate (or, prior to
the Distribution Date, of the Common Shares) in accordance with Section 25. The
Rights Agent shall be fully protected in relying on any such certificate and on
any adjustment therein contained and shall not be deemed to have knowledge of
such adjustment unless and until it shall have received such certificate.
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SECTION 14. Additional Covenants. (a) Notwithstanding any other provision
of this Rights Agreement, no adjustment to the number of Preferred Shares (or
fractions of a share) or other securities for which a Right is exercisable or
the number of Rights outstanding or associated with each Common Share or any
similar or other adjustment shall be made or be effective if such adjustment
would have the effect of reducing or limiting the benefits the holders of the
Rights would have had absent such adjustment, including, without limitation, the
benefits under Sections 11 and 12, unless the terms of this Rights Agreement are
amended so as to preserve such benefits.
(b) The Company covenants and agrees that, after the Distribution Date,
except as permitted by Section 26, it will not take (or permit any Subsidiary of
the Company to take) any action if at the time such action is taken it is
intended or reasonably foreseeable that such action will reduce or otherwise
limit the benefits the holders of the Rights would have had absent such action,
including, without limitation, the benefits under Sections 11 and 12. Any action
taken by the Company during any period after any Person becomes an Acquiring
Person but prior to the Distribution Date shall be null and void unless such
action could be taken under this Section 14(b) from and after the Distribution
Date. The Company shall not consummate any Business Combination if any issuer of
Common Shares for which Rights may be exercised after such Business Combination
in accordance with Section 11(c) shall have taken or contemplated taking any
action that reduces or otherwise limits the benefits the holders of the Rights
would have had absent such action, including, without limitation, the benefits
under Sections 11 and 12.
SECTION 15. Fractional Rights and Fractional Shares. (a) The Company may,
but shall not be required to, issue fractions of Rights or distribute Right
Certificates which evidence fractional Rights. In lieu of such fractional
Rights, the Company may pay to the registered holders of the Right Certificates
with regard to which such fractional Rights would otherwise be issuable an
amount in cash equal to the same fraction of the current market value of a whole
Right. For purposes of this Section 15(a), the current market value of a whole
Right shall be the closing price of the Rights (as determined pursuant to the
second and third sentences of the definition of Market Value contained in
Section 1) for the Trading Day immediately prior to the date on which such
fractional Rights would have been otherwise issuable.
(b) The Company may, but shall not be required to, issue fractions of
Preferred Shares upon exercise of the Rights or distribute certificates which
evidence fractional Preferred Shares. In lieu of fractional Preferred Shares,
the Company may elect to (i) utilize a depository arrangement as provided by the
terms of the Preferred Shares or (ii) in the case of a fraction of a Preferred
Share (other than one one-thousandths (1/1,000ths) of a Preferred Share or any
integral multiple thereof), pay to the registered holders of Right Certificates
at the time such Rights are exercised as herein provided an amount in cash equal
to the same fraction of the current market value of one Preferred Share, if any
are outstanding and publicly traded (or the Formula Number times the current
market value of one Common Share if the Preferred Shares are not outstanding and
publicly traded). For purposes of this Section 15(b), the current market value
of a Preferred Share (or Common Share) shall be the closing price of a Preferred
Share (or Common Share) (as determined pursuant to the second and third
sentences of the definition of Market Value contained in Section 1) for the
Trading Day immediately prior to the date of such exercise. If, as a result of
an adjustment made pursuant to Section 12(a), the holder of any Right thereafter
exercised shall become entitled to receive any securities other than Preferred
Shares, the provisions of this Section 15(b) shall apply, as nearly as
reasonably may be, on like terms to such other securities.
(c) The Company may, but shall not be required to, issue fractions of
Common Shares upon exchange of Rights pursuant to Section 11(b), or to
distribute certificates which evidence fractional Common Shares. In lieu of such
fractional Common Shares, the Company may pay to the registered holders of the
Right Certificates with regard to which such fractional Common Shares would
otherwise be issuable an amount in cash equal to the same fraction of the
current Market Value of one Common Share as of the date on which a Person became
an Acquiring Person.
(d) The holder of Rights by the acceptance of the Rights expressly waives
his right to receive any fractional Rights or any fractional shares upon
exercise of a Right except as provided in this Section 15.
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SECTION 16. Rights of Action. (a) All rights of action in respect of this
Rights Agreement are vested in the respective registered holders of the Right
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Shares); and any registered holder of any Right Certificate (or, prior to
the Distribution Date, of the Common Shares), without the consent of the Rights
Agent or of the holder of any other Right Certificate (or, prior to the
Distribution Date, of the Common Shares) may, in his own behalf and for his own
benefit, enforce, and may institute and maintain any suit, action or proceeding
against the Company to enforce, or otherwise act in respect of, his right to
exercise the Rights evidenced by such Right Certificate in the manner provided
in such Right Certificate and in this Rights Agreement. Without limiting the
foregoing or any remedies available to the holders of Rights, it is specifically
acknowledged that the holders of Rights would not have an adequate remedy at law
for any breach of this Rights Agreement and shall be entitled to specific
performance of the obligations of any Person under, and injunctive relief
against actual or threatened violations of the obligations of any Person subject
to, this Rights Agreement.
(b) Any holder of Rights who prevails in an action to enforce the
provisions of this Rights Agreement shall be entitled to recover the reasonable
costs and expenses, including attorneys' fees, incurred in such action.
SECTION 17. Transfer and Ownership of Rights and Right Certificates. (a)
Prior to the Distribution Date, the Rights will be transferable only in
connection with the transfer of the Common Shares and the Rights associated with
the Common Shares shall be automatically transferred upon the transfer of the
Common Shares.
(b) After the Distribution Date, the Right Certificates will be
transferable, subject to Section 7(e), only on the registry books of the Rights
Agent if surrendered at the principal office of the Rights Agent, duly endorsed
or accompanied by a proper instrument of transfer.
(c) The Company and the Rights Agent may deem and treat the Person in whose
name a Right Certificate (or, prior to the Distribution Date, the associated
Common Shares certificate) is registered as the absolute owner thereof and of
the Rights evidenced thereby (notwithstanding any notations of ownership or
writing on the Right Certificates or the associated certificate for Common
Shares made by anyone other than the Company or the Rights Agent) for all
purposes whatsoever, and neither the Company nor the Rights Agent shall be
affected by any notice to the contrary.
SECTION 18. Right Certificate Holder Not Deemed a Stockholder. No holder,
as such, of any Right Certificate shall be entitled to vote or receive dividends
or be deemed, for any purpose, the holder of the Preferred Shares or of any
other securities of the Company which may at any time be issuable on the
exercise of the Rights represented thereby, nor shall anything contained herein
or in any Right Certificate be construed to confer upon the holder of any Right
Certificate, as such, any of the rights of a stockholder of the Company,
including, without limitation, any right to vote for the election of directors
or upon any matter submitted to stockholders at any meeting thereof, or to give
or withhold consent to any corporate action, or to receive notice of meetings or
other actions affecting stockholders, or to receive dividends or other
distributions or subscription rights, or otherwise, until the Right or Rights
evidenced by such Right Certificate shall have been exercised in accordance with
the provisions hereof.
SECTION 19. Concerning the Rights Agent. (a) The Company agrees to pay to
the Rights Agent, as shall be agreed to in writing between the Company and the
Rights Agent, compensation for all services rendered by it hereunder from time
to time and its reasonable expenses and counsel fees and expenses and other
disbursements incurred in the administration and execution of this Rights
Agreement and the exercise and performance of its duties hereunder. The
provisions of this Section 19(a) shall survive the expiration of the Rights and
the termination of this Agreement.
(b) The Rights Agent shall be protected and shall incur no liability for or
in respect of any action taken, suffered or omitted by it in connection with its
administration of this Rights Agreement in reliance upon any Right Certificate
or certificate for the Common Shares or for other securities of the Company,
instrument of assignment or transfer, power of attorney, endorsement, affidavit,
letter, notice, opinion, instruction, direction,
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consent, certificate, statement, or other paper or document believed by it to be
genuine and to be signed and executed by the proper Person or Persons.
SECTION 20. Merger or Consolidation or Change of Rights Agent. (a) Any
corporation into which the Rights Agent or any successor Rights Agent may be
merged or with which it may be consolidated, or any corporation resulting from
any merger or consolidation to which the Rights Agent or any successor Rights
Agent shall be a party, or any corporation succeeding to all or substantially
all the stock transfer or corporate trust business of the Rights Agent or any
successor Rights Agent, shall be the successor to the Rights Agent under this
Rights Agreement without the execution or filing of any paper or any further act
on the part of any of the parties hereto; provided that such corporation would
be eligible for appointment as a successor Rights Agent under the provisions of
Section 22. In case, at the time such successor Rights Agent shall succeed to
the agency created by this Rights Agreement, any of the Right Certificates shall
have been countersigned but not delivered, any such successor Rights Agent may
adopt the countersignature of the predecessor Rights Agent and deliver such
Right Certificates so countersigned; and, in case at that time any of the Right
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Right Certificates either in the name of the predecessor Rights
Agent or in the name of the successor Rights Agent; and in all such cases such
Right Certificates shall have the full force provided in the Right Certificates
and in this Rights Agreement.
(b) In case at any time the name of the Rights Agent shall be changed and
at such time any of the Right Certificates shall have been countersigned but not
delivered, the Rights Agent may adopt the countersignature under its prior name
and deliver Right Certificates so countersigned; and, in case at that time any
of the Rights Certificates shall not have been countersigned, the Rights Agent
may countersign such Rights Certificates either in its prior name or in its
changed name; and in all such cases such Right Certificates shall have the full
force provided in the Right Certificates and in this Rights Agreement.
SECTION 21. Duties of Rights Agent. The Rights Agent undertakes the
duties and obligations imposed by this Rights Agreement upon the following terms
and conditions, by all of which the Company and the holders of Right
Certificates (or, prior to the Distribution Date, of the Common Shares), by
their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel satisfactory to it
(who may be legal counsel for the Company), and the opinion of such counsel
shall be full and complete authorization and protection to the Rights Agent
as to any action taken, suffered or omitted by it in good faith and in
accordance with such opinion.
(b) Whenever in the performance of its duties under this Rights
Agreement the Rights Agent shall deem it necessary or desirable that any
fact or matter (including, without limitation, the identity of any
Acquiring Person) be proved or established by the Company prior to taking,
refraining from taking or suffering any action hereunder, such fact or
matter (unless other evidence in respect thereof be herein specifically
prescribed) may be deemed to be conclusively proved and established by a
certificate signed by any one of the Chairman of the Board, the Chief
Executive Officer, the President, the Chief Operating Officer, the Chief
Financial Officer, a Vice President (whether preceded by any additional
title), the Treasurer or the Secretary of the Company and delivered to the
Rights Agent or by the directors of the Company whose vote would be
sufficient to redeem the Rights under Section 24. Such certificate shall be
full authorization to the Rights Agent for any action taken or suffered in
good faith by it under the provisions of this Rights Agreement in reliance
upon such certificate. In the event any such certificate signed by such
directors is inconsistent with any other such certificate, the certificate
signed by such directors shall control.
(c) The Rights Agent shall be liable hereunder only for its own gross
negligence, bad faith or wilful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of
the statements of fact or recitals contained in this Rights Agreement or in
the Right Certificates (except as to its countersignature
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thereof) or be required to verify the same, but all such statements and
recitals are and shall be deemed to have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility in respect
of the validity of this Rights Agreement or the execution and delivery
hereof (except the due execution hereof by the Rights Agent) or in respect
of the validity or execution of any Right Certificate (except its
countersignature thereof); nor shall it be responsible for any breach by
the Company of any covenant or condition contained in this Rights Agreement
or in any Right Certificate; nor shall it be responsible for any adjustment
required under the provisions of Section 11 or 12 or responsible for the
manner, method or amount of any such adjustment or the ascertaining of the
existence of facts that would require any such adjustment (except with
respect to the exercise of Rights evidenced by Right Certificates after
actual notice of any such adjustment); nor shall it by any act hereunder be
deemed to make any representation or warranty as to the authorization or
reservation of any Preferred Shares or Common Shares to be issued pursuant
to this Rights Agreement or any Right Certificate or as to whether any
Preferred Shares or Common Shares will, when so issued, be validly
authorized and issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all
such further and other acts, instruments and assurances as may reasonably
be required by the Rights Agent for the carrying out or performing by the
Rights Agent of the provisions of this Rights Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from
any one of the Chairman of the Board, the Chief Executive Officer, the
President, the Chief Operating Officer, a Vice President (whether preceded
by any additional title), the Secretary or the Treasurer of the Company or
from the directors of the Company whose vote would be sufficient to redeem
the Rights under Section 24, and to apply to such officers or directors for
advice and instructions in connection with its duties and it shall not be
liable for any action taken or suffered to be taken by it in good faith in
accordance with instructions of any such officers or directors or for any
delay in acting while waiting for those instructions. Any application by
the Rights Agent for written instructions from the Company may, at the
option of the Rights Agent, set forth in writing any action proposed to be
taken or omitted by the Rights Agent under this Agreement and the date on
and/or after which such action shall be taken or such omission shall be
effective. The Rights Agent shall not be liable for any action taken by, or
omission of, the Rights Agent in accordance with a proposal included in
such application on or after the date specified in such application (which
date shall not be less than three Business Days after the date any officer
of the Company actually receives such application, unless any such officer
shall have consented in writing to any earlier date) unless, prior to
taking any such action (or the effective date in the case of an omission),
the Rights Agent shall have received written instructions in response to
such application specifying the action to be taken or omitted.
(h) The Rights Agent and any stockholder, director, officer, employee
or affiliate of the Rights Agent may buy, sell or deal in any of the Rights
or other securities of the Company or become pecuniarily interested in any
transaction in which the Company may be interested, or contract with or
lend money to the Company or otherwise act as fully and freely as though it
were not the Rights Agent under this Rights Agreement. Nothing herein shall
preclude the Rights Agent from acting in any other capacity for the Company
or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or
by or through its attorneys or agents, and the Rights Agent shall not be
answerable or accountable for any act, default, neglect or misconduct of
any such attorneys or agents or for any loss to the Company resulting from
any such act, default, neglect or misconduct provided reasonable care was
exercised in the selection thereof.
(j) The Company agrees to indemnify and to hold the Rights Agent
harmless against any loss, liability, damage or expense (including
reasonable fees and expenses of legal counsel) which the Rights Agent may
incur in connection with this Rights Agreement; provided, however, that the
Rights Agent shall not be indemnified or held harmless with respect to any
such loss, liability, damage or expense
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incurred by the Rights Agent as a result of, or arising out of, its own
gross negligence, bad faith or wilful misconduct. If any action, proceeding
(including, but not limited to, any governmental investigation), claim or
dispute (collectively, a "Proceeding") in respect of which indemnity may be
sought is brought or asserted against the Rights Agent, the Rights Agent
shall promptly (and in no event more than ten (10) days after receipt of
written notice of such Proceeding) notify the Company of such Proceeding.
The failure of the Rights Agent to so notify the Company shall not impair
the Rights Agent's ability to seek indemnification from the Company (but
only for costs, expenses and liabilities incurred after such notice) unless
such failure adversely affects the Company's ability to adequately oppose
or defend such Proceeding. Upon receipt of such notice from the Rights
Agent, the Company shall be entitled to participate in such Proceeding and,
to the extent that it shall so desire and provided no conflict of interest
exists as specified in (b) below or there are no other defenses available
to the Rights Agent as specified in (d) below, to assume the defense
thereof with counsel reasonably satisfactory to the Rights Agent (in which
case all attorney's fees and expenses shall be borne by the Company and the
Company shall in good faith defend the Rights Agent). The Rights Agent
shall have the right to employ separate counsel in any such Proceeding and
to participate in the defense thereof, but the fees and expenses of such
counsel shall be borne by the Rights Agent unless (a) the Company agrees in
writing to pay such fees and expenses, (b) the Rights Agent shall have
reasonably and in good faith concluded that there is a conflict of interest
between the Company and the Rights Agent in the conduct of the defense of
such action, (c) the Company fails, within ten (10) days prior to the date
the first response or appearance is required to be made in such Proceeding,
to assume the defense of such Proceeding with counsel reasonably
satisfactory to the Rights Agent or (d) there are legal defenses available
to the Rights Agent that are different from or are in addition to those
available to the Company. No compromise or settlement of such Proceeding
may be effected by either party without the other party's consent unless
(i) there is no finding or admission of any violation of law and no effect
on any other claims that may be made against such other party and (ii) the
sole relief provided is monetary damages that are paid in full by the party
seeking the settlement. Neither party shall have any liability with respect
to any compromise or settlement effected without its consent, which consent
shall not be unreasonably withheld. The Company shall have no obligation to
indemnify and hold harmless the Rights Agent from any loss, expense or
liability incurred by the Rights Agent as a result of a default judgment
entered against the Rights Agent unless such judgment was entered after the
Company agreed, in writing, to assume the defense of such Proceeding.
The provisions of this Section 21(j) shall survive expiration of the
Rights and the termination of this Agreement.
(k) The Rights Agent shall be under no obligation to institute any
action, suit or legal proceeding or to take any other action likely to
involve expense unless the Company or one or more registered holders of
Right Certificates shall furnish the Rights Agent with security and
indemnity to its satisfaction for any costs and expenses which may be
incurred.
(l) The Rights Agent shall not be liable for failure to perform any
duties except as specifically set forth herein and no implied covenants or
obligations shall be read into this Agreement against the Rights Agent,
whose duties and obligations are ministerial and shall be determined solely
by the express provisions hereof.
(m) The Company agrees to give the Rights Agent prompt notice of any
event or ownership which would prohibit the exercise or transfer of the
Right Certificates.
SECTION 22. Change of Rights Agent. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Rights
Agreement upon 30 days' notice in writing mailed to the Company and to each
transfer agent of the Common Shares and the Preferred Shares by registered or
certified mail. The Company may remove the Rights Agent or any successor Rights
Agent upon 30 days' notice in writing, mailed to the Rights Agent or successor
Rights Agent, as the case may be, and to each transfer agent of the Common
Shares and the Preferred Shares by registered or certified mail. If the Rights
Agent shall resign or be removed or shall otherwise become incapable of acting,
the Company shall appoint a successor to
18
<PAGE> 21
the Rights Agent. If the Company shall fail to make such appointment within a
period of 30 days after giving notice of such removal or after it has been
notified in writing of such resignation or incapacity by the resigning or
incapacitated Rights Agent or by the holder of a Right Certificate (or, prior to
the Distribution Date, of the Common Shares) (who shall, with such notice,
submit his Right Certificate or, prior to the Distribution Date, the certificate
representing his Common Shares, for inspection by the Company), then the Rights
Agent or the registered holder of any Right Certificate (or, prior to the
Distribution Date, of the Common Shares) may apply to any court of competent
jurisdiction for the appointment of a new Rights Agent. Any successor Rights
Agent, whether appointed by the Company or by such a court, shall be a
corporation organized and doing business under the laws of the United States or
of the State of New York (or of any other state of the United States so long as
such corporation is authorized to conduct a stock transfer or corporate trust
business in the State of New York), in good standing, having a principal office
in the State of New York, which is authorized under such laws to exercise stock
transfer or corporate trust powers and is subject to supervision or examination
by Federal or state authority and which has at the time of its appointment as
Rights Agent a combined capital and surplus of at least $50,000,000; provided
that the principal transfer agent for the Common Shares shall in any event be
qualified to be the Rights Agent. After appointment, the successor Rights Agent
shall be vested with the same powers, rights, duties and responsibilities as if
it had been originally named as Rights Agent without further act or deed; but
the predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Not later
than the effective date of any such appointment, the Company shall file notice
thereof in writing with the predecessor Rights Agent and each transfer agent of
the Common Shares and the Preferred Shares, and mail a notice thereof in writing
to the registered holders of the Right Certificates (or, prior to the
Distribution Date, of the Common Shares). Failure to give any notice provided
for in this Section 22, however, or any defect therein shall not affect the
legality or validity of the resignation or removal of the Rights Agent or the
appointment of the successor Rights Agent, as the case may be.
SECTION 23. Issuance of Additional Rights and Right Certificates.
Notwithstanding any of the provisions of this Rights Agreement or of the Rights
to the contrary, the Company may, at its option, issue new Right Certificates
evidencing Rights in such form as may be approved by its Board of Directors to
reflect any adjustment or change made in accordance with the provisions of this
Rights Agreement. In addition, in connection with the issuance or sale of Common
Shares following the Distribution Date and prior to the earlier of the
Redemption Date and the Expiration Date, the Company (a) shall, with respect to
Common Shares so issued or sold pursuant to the exercise of stock options or
under any employee plan or arrangement, or upon the exercise, conversion or
exchange of securities, notes or debentures issued by the Company, and (b) may,
in any other case, if deemed necessary or appropriate by the Board of Directors
of the Company, issue Right Certificates representing the appropriate number of
Rights in connection with such issuance or sale; provided, however, that (i) no
such Right Certificate shall be issued if, and to the extent that, the Company
shall be advised by counsel that such issuance would create a significant risk
of material adverse tax consequences to the Company or the Person to whom such
Right Certificate would be issued, and (ii) no such Right Certificate shall be
issued if, and to the extent that, appropriate adjustment shall otherwise have
been made in lieu of the issuance thereof.
SECTION 24. Redemption and Termination. (a) The Board of Directors of the
Company may, at its option, at any time prior to the earlier of (i) such time as
a Person becomes an Acquiring Person and (ii) the Expiration Date, order the
redemption of all, but not fewer than all, the then outstanding Rights at the
Redemption Price (the date of such redemption being the "Redemption Date"), and
the Company, at its option, may pay the Redemption Price either in cash or
Common Shares or other securities of the Company deemed by the Board of
Directors of the Company, in the exercise of its sole discretion, to be at least
equivalent in value to the Redemption Price.
(b) Immediately upon the action of the Board of Directors of the Company
ordering the redemption of the Rights, and without any further action and
without any notice, the right to exercise the Rights will terminate and the only
right thereafter of the holders of Rights shall be to receive the Redemption
Price. Within 10 Business Days after the action of the Board of Directors of the
Company ordering the redemption of
19
<PAGE> 22
the Rights, the Company shall give notice of such redemption to the holders of
the then outstanding Rights by mailing such notice to all such holders at their
last addresses as they appear upon the registry books of the Rights Agent or,
prior to the Distribution Date, on the registry books of the transfer agent for
the Common Shares. Each such notice of redemption will state the method by which
payment of the Redemption Price will be made. The notice, if mailed in the
manner herein provided, shall be conclusively presumed to have been duly given,
whether or not the holder of Rights receives such notice. In any case, failure
to give such notice by mail, or any defect in the notice, to any particular
holder of Rights shall not affect the sufficiency of the notice to other holders
of Rights.
SECTION 25. Notices. Notices or demands authorized by this Agreement to
be given or made by the Rights Agent or by the holder of a Right Certificate
(or, prior to the Distribution Date, of the Common Shares) to or on the Company
shall be sufficiently given or made if sent by first-class mail, postage
prepaid, addressed (until another address is filed in writing with the Rights
Agent) as follows:
ITT Destinations, Inc.
1330 Avenue of the Americas
New York, NY 10019
Attn: Executive Vice President and
General Counsel
Subject to the provisions of Section 22, any notice or demand authorized by this
Rights Agreement to be given or made by the Company or by the holder of a Right
Certificate (or, prior to the Distribution Date, of the Common Shares) to or on
the Rights Agent shall be sufficiently given or made if sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing with
the Company) as follows:
The Bank of New York
101 Barclay Street, 12W
New York, New York 10286
Attn: Stock Transfer Administration
Notices or demands authorized by this Rights Agreement to be given or made by
the Company or the Rights Agent to any holder of a Right Certificate (or, prior
to the Distribution Date, of the Common Shares) shall be sufficiently given or
made if sent by first-class mail, postage prepaid, addressed to such holder at
the address of such holder as shown on the registry books of the Rights Agent
or, prior to the Distribution Date, on the registry books of the transfer agent
for the Common Shares.
SECTION 26. Supplements and Amendments. At any time prior to the
Distribution Date and subject to the last sentence of this Section 26, the
Company may, and the Rights Agent shall if the Company so directs, supplement or
amend any provision of this Rights Agreement (including, without limitation, the
date on which the Distribution Date shall occur, the definition of "Acquiring
Person", the time during which the Rights may be redeemed pursuant to Section 24
or any provision of the Certificate of Designation) without the approval of any
holder of the Rights. From and after the Distribution Date and subject to
applicable law, the Company may, and the Rights Agent shall if the Company so
directs, amend this Rights Agreement without the approval of any holders of
Right Certificates (i) to cure any ambiguity or to correct or supplement any
provision contained herein which may be defective or inconsistent with any other
provision of this Rights Agreement or (ii) to make any other provisions in
regard to matters or questions arising hereunder which the Company may deem
necessary or desirable and which shall not adversely affect the interests of the
holders of Right Certificates (other than an Acquiring Person or an Affiliate or
Associate of an Acquiring Person). Any supplement or amendment adopted during
any period after any Person has become an Acquiring Person but prior to the
Distribution Date shall be null and void unless such supplement or amendment
could have been adopted under the prior sentence from and after the Distribution
Date. Any supplement or amendment to this Rights Agreement duly approved by the
Company that does not amend Sections 19, 20, 21 or 22 in a manner adverse to the
Rights Agent shall become effective immediately upon execution by the Company,
whether or not also executed by the Rights Agent. The Rights Agent shall receive
prompt written notice from the Company of any amendment hereunder. In addition,
notwithstanding anything to the contrary contained in this Rights Agreement, no
supplement or amendment to this Rights Agreement shall be made which
20
<PAGE> 23
(a) reduces the Redemption Price (except as required by Section 12(a)) or (b)
provides for an earlier Expiration Date. Upon the delivery of a certificate from
an appropriate officer of the Company which states that the proposed supplement
or amendment is in compliance with the terms of this Section, the Rights Agent
shall execute such supplement or amendment. Notwithstanding any other provision
hereof, the Rights Agent's consent must be obtained regarding any amendment or
supplement pursuant to this Section 26 which alters the Rights Agent's rights or
duties.
SECTION 27. Successors. All the covenants and provisions of this Rights
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
SECTION 28. Benefits of Rights Agreement; Determinations and Actions by
the Board of Directors, etc. (a) Nothing in this Rights Agreement shall be
construed to give to any Person other than the Company, the Rights Agent and the
registered holders of the Right Certificates (and, prior to the Distribution
Date, of the Common Shares) any legal or equitable right, remedy or claim under
this Rights Agreement; but this Rights Agreement shall be for the sole and
exclusive benefit of the Company, the Rights Agent and the registered holders of
the Right Certificates (and, prior to the Distribution Date, of the Common
Shares).
(b) Except as explicitly otherwise provided in this Rights Agreement, the
Board of Directors of the Company shall have the exclusive power and authority
to administer this Rights Agreement and to exercise all rights and powers
specifically granted to the Board of Directors of the Company or to the Company,
or as may be necessary or advisable in the administration of this Rights
Agreement, including, without limitation, the right and power to (i) interpret
the provisions of this Rights Agreement and (ii) make all determinations deemed
necessary or advisable for the administration of this Rights Agreement
(including, without limitation, a determination to redeem or not redeem the
Rights or to amend this Rights Agreement and whether there is an Acquiring
Person).
(c) Nothing contained in this Rights Agreement shall be deemed to be in
derogation of the obligation of the Board of Directors of the Company to
exercise its fiduciary duty. Without limiting the foregoing, nothing contained
herein shall be construed to suggest or imply that the Board of Directors shall
not be entitled to reject any tender offer, or to recommend that holders of
Common Shares reject any tender offer or other acquisition proposal, or to take
any other action (including, without limitation, the commencement, prosecution,
defense or settlement of any litigation and the submission of additional or
alternative offers or other proposals) with respect to any tender offer or other
acquisition proposal that the Board of Directors believes is necessary or
appropriate in the exercise of such fiduciary duty.
SECTION 29. Severability. If any term, provision, covenant or restriction
of this Rights Agreement is held by a court of competent jurisdiction or other
authority to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Rights Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated.
SECTION 30. GOVERNING LAW. THIS RIGHTS AGREEMENT AND EACH RIGHT
CERTIFICATE ISSUED HEREUNDER SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAW
OF THE STATE OF NEVADA AND FOR ALL PURPOSES SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAW OF SUCH STATE APPLICABLE TO CONTRACTS TO BE MADE AND
PERFORMED ENTIRELY WITHIN SUCH STATE; PROVIDED, HOWEVER, THAT THE RIGHTS AND
OBLIGATIONS OF THE RIGHTS AGENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICTS OF LAWS
PRINCIPLES OF SUCH STATE.
SECTION 31. Counterparts; Effectiveness. This Rights Agreement may be
executed in any number of counterparts and each of such counterparts shall for
all purposes be deemed to be an original, and all such counterparts shall
together constitute but one and the same instrument. This Rights Agreement shall
be effective as of the Close of Business on the date hereof.
21
<PAGE> 24
SECTION 32. Descriptive Headings. Descriptive headings of the several
Sections of this Rights Agreement are inserted for convenience only and shall
not control or affect the meaning or construction of any of the provisions of
this Rights Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Rights Agreement to
be duly executed as of the day and year first above written.
ITT DESTINATIONS, INC.,
by
--------------------------------------
Name:
Title:
THE BANK OF NEW YORK, as Rights Agent,
by
--------------------------------------
Name:
Title:
22
<PAGE> 25
EXHIBIT A
CERTIFICATE OF THE DESIGNATIONS, VOTING POWERS,
PREFERENCES AND RELATIVE, PARTICIPATING,
OPTIONAL AND OTHER SPECIAL RIGHTS
AND QUALIFICATIONS, LIMITATIONS
OR RESTRICTIONS OF SERIES A
PARTICIPATING CUMULATIVE
PREFERRED STOCK OF
ITT DESTINATIONS, INC.
The undersigned hereby certifies that he is the duly elected and acting
Executive Vice President and Secretary of ITT Destinations, Inc., a Nevada
corporation (the "Corporation"), and pursuant to Chapter 78 of the Nevada
Revised Statutes, as amended, DOES HEREBY CERTIFY:
That, pursuant to the authority conferred upon the Board of Directors of
the Corporation by ARTICLE FOURTH of the Restated Articles of Incorporation of
the Corporation (the "Restated Articles of Incorporation"), the Board of
Directors of the Corporation on , 1997 adopted the following
resolution creating a series of Preferred Stock designated as Series A
Participating Cumulative Preferred Stock:
RESOLVED that pursuant to the authority vested in the Board of
Directors of the Corporation in ARTICLE FOURTH of the Restated Articles of
Incorporation, the designations, voting powers, preferences and relative,
participating, optional and other special rights and qualifications,
limitations or restrictions of a series of Preferred Stock be, and they
hereby are, fixed as follows:
SECTION 1. Designation and Number of Shares. The shares of such series
shall be designated as "Series A Participating Cumulative Preferred Stock" (the
"Series A Preferred Stock"), par value $.01 per share. The number of shares
initially constituting the Series A Preferred Stock shall be 300,000; provided,
however, that, if more than a total of 300,000 shares of Series A Preferred
Stock shall be issuable upon the exercise of Rights (the "Rights") issued
pursuant to that Rights Agreement between the Corporation and The Bank of New
York, a New York banking corporation, as Rights Agent (the "Rights Agreement"),
the Board of Directors of the Corporation, pursuant to Chapter 78 of the Nevada
Revised Statues, as amended, shall direct by resolution or resolutions that a
certificate be properly executed, acknowledged and filed in accordance with the
provisions of Chapter 78 of the Nevada Revised Statutes, as amended, providing
for the total number of shares of Series A Preferred Stock authorized to be
issued to be increased (to the extent that the Restated Articles of
Incorporation then permit) to the largest number of whole shares (rounded up to
the nearest whole number) issuable upon exercise of such Rights.
SECTION 2. Dividends or Distributions. (a) Subject to the prior and
superior rights of the holders of shares of any other series of Preferred Stock
or other class of capital stock of the Corporation ranking prior and superior to
the shares of Series A Preferred Stock with respect to dividends, the holders of
shares of the Series A Preferred Stock shall be entitled to receive, when, as
and if declared by the Board of Directors, out of the assets of the Corporation
legally available therefor, (1) quarterly dividends payable in cash on the last
day of each fiscal quarter in each year, or such other dates as the Board of
Directors of the Corporation shall approve (each such date being referred to
herein as a "Quarterly Dividend Payment Date"), commencing on the first
Quarterly Dividend Payment Date after the first issuance of a share or a
fraction of a share of Series A Preferred Stock, in the amount of $.01 per whole
share (rounded to the nearest cent) less the amount of all cash dividends
declared on the Series A Preferred Stock pursuant to the following clause (2)
since the immediately preceding Quarterly Dividend Payment Date or, with respect
to the first Quarterly Dividend Payment Date, since the first issuance of any
share or fraction of a share of Series A Preferred Stock (the total of which
shall not, in any event, be less than zero) and (2) dividends payable in cash on
the payment date for each cash dividend declared on the Common Stock in an
amount per whole share (rounded to the nearest cent) equal to the Formula Number
(as hereinafter defined) then in effect times the cash dividends then to be paid
on each share of Common Stock. In addition, if the Corporation shall pay any
dividend or make any distribution on the Common Stock payable in assets,
securities or other forms of noncash consideration (other
<PAGE> 26
than dividends or distributions solely in shares of Common Stock), then, in each
such case, the Corporation shall simultaneously pay or make on each outstanding
whole share of Series A Preferred Stock a dividend or distribution in like kind
equal to the Formula Number then in effect times such dividend or distribution
on each share of the Common Stock. As used herein, the "Formula Number" shall be
1,000; provided, however, that, if at any time after the Distribution Record
Date (as defined in that Notice of Special Meeting and Proxy Statement, dated
August 30, 1995, filed with the Securities and Exchange Commission by ITT
Corporation), the Corporation shall (i) declare or pay any dividend on the
Common Stock payable in shares of Common Stock or make any distribution on the
Common Stock in shares of Common Stock, (ii) subdivide (by a stock split or
otherwise) the outstanding shares of Common Stock into a larger number of shares
of Common Stock or (iii) combine (by a reverse stock split or otherwise) the
outstanding shares of Common Stock into a smaller number of shares of Common
Stock, then in each such event the Formula Number shall be adjusted to a number
determined by multiplying the Formula Number in effect immediately prior to such
event by a fraction, the numerator of which is the number of shares of Common
Stock that are outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that are outstanding immediately
prior to such event (and rounding the result to the nearest whole number); and
provided further, that, if at any time after the Distribution Record Date, the
Corporation shall issue any shares of its capital stock in a merger,
reclassification or change of the outstanding shares of Common Stock, then in
each such event the Formula Number shall be appropriately adjusted to reflect
such merger, reclassification or change so that each share of Preferred Stock
continues to be the economic equivalent of a Formula Number of shares of Common
Stock prior to such merger, reclassification or change.
(b) The Corporation shall declare a dividend or distribution on the Series
A Preferred Stock as provided in Section 2(a) immediately prior to or at the
same time it declares a dividend or distribution on the Common Stock (other than
a dividend or distribution solely in shares of Common Stock); provided, however,
that, in the event no dividend or distribution (other than a dividend or
distribution in shares of Common Stock) shall have been declared on the Common
Stock during the period between any Quarterly Dividend Payment Date and the next
subsequent Quarterly Dividend Payment Date, a dividend of $.0l per share on the
Series A Preferred Stock shall nevertheless be payable on such subsequent
Quarterly Dividend Payment Date. The Board of Directors may fix a record date
for the determination of holders of shares of Series A Preferred Stock entitled
to receive a dividend or distribution declared thereon, which record date shall
be the same as the record date for any corresponding dividend or distribution on
the Common Stock.
(c) Dividends shall begin to accrue and be cumulative on outstanding shares
of Series A Preferred Stock from and after the Quarterly Dividend Payment Date
next preceding the date of original issue of such shares of Series A Preferred
Stock; provided, however, that dividends on such shares which are originally
issued after the record date for the determination of holders of shares of
Series A Preferred Stock entitled to receive a quarterly dividend and on or
prior to the next succeeding Quarterly Dividend Payment Date shall begin to
accrue and be cumulative from and after such Quarterly Dividend Payment Date.
Notwithstanding the foregoing, dividends on shares of Series A Preferred Stock
which are originally issued prior to the record date for the determination of
holders of shares of Series A Preferred Stock entitled to receive a quarterly
dividend on the first Quarterly Dividend Payment Date shall be calculated as if
cumulative from and after the last day of the fiscal quarter next preceding the
date of original issuance of such shares. Accrued but unpaid dividends shall not
bear interest. Dividends paid on the shares of Series A Preferred Stock in an
amount less than the total amount of such dividends at the time accrued and
payable on such shares shall be allocated pro rata on a share-by-share basis
among all such shares at the time outstanding.
(d) So long as any shares of the Series A Preferred Stock are outstanding,
no dividends or other distributions shall be declared, paid or distributed, or
set aside for payment or distribution, on the Common Stock unless, in each case,
the dividend required by this Section 2 to be declared on the Series A Preferred
Stock shall have been declared.
(e) The holders of the shares of Series A Preferred Stock shall not be
entitled to receive any dividends or other distributions except as provided
herein.
2
<PAGE> 27
SECTION 3. Voting Rights. The holders of shares of Series A Preferred
Stock shall have the following voting rights:
(a) Each holder of Series A Preferred Stock shall be entitled to a
number of votes equal to the Formula Number then in effect, for each share
of Series A Preferred Stock held of record on each matter on which holders
of the Common Stock or stockholders generally are entitled to vote,
multiplied by the maximum number of votes per share which any holder of the
Common Stock or stockholders generally then have with respect to such
matter (assuming any holding period or other requirement to vote a greater
number of shares is satisfied).
(b) Except as otherwise provided herein or by applicable law, the
holders of shares of Series A Preferred Stock and the holders of shares of
Common Stock shall vote together as one class for the election of directors
of the Corporation and on all other matters submitted to a vote of
stockholders of the Corporation.
(c) If, at the time of any annual meeting of stockholders for the
election of directors, the equivalent of six quarterly dividends (whether
or not consecutive) payable on any share or shares of Series A Preferred
Stock are in default, the number of directors constituting the Board of
Directors of the Corporation shall be increased by two. In addition to
voting together with the holders of Common Stock for the election of other
directors of the Corporation, the holders of record of the Series A
Preferred Stock, voting separately as a class to the exclusion of the
holders of Common Stock, shall be entitled at said meeting of stockholders
(and at each subsequent annual meeting of stockholders), unless all
dividends in arrears have been paid or declared and set apart for payment
prior thereto, to vote for the election of two directors of the
Corporation, the holders of any Series A Preferred Stock being entitled to
cast a number of votes per share of Series A Preferred Stock equal to the
Formula Number. Until the default in payments of all dividends which
permitted the election of said directors shall cease to exist, any director
who shall have been so elected pursuant to the next preceding sentence may
be removed at any time, either with or without cause, only by the
affirmative vote of the holders of the shares of Series A Preferred Stock
at the time entitled to cast a majority of the votes entitled to be cast
for the election of any such director at a special meeting of such holders
called for that purpose, and any vacancy thereby created may be filled by
the vote of such holders. If and when such default shall cease to exist,
the holders of the Series A Preferred Stock shall be divested of the
foregoing special voting rights, subject to revesting in the event of each
and every subsequent like default in payments of dividends. Upon the
termination of the foregoing special voting rights, the terms of office of
all persons who may have been elected directors pursuant to said special
voting rights shall forthwith terminate, and the number of directors
constituting the Board of Directors shall be reduced by two. The voting
rights granted by this Section 3(c) shall be in addition to any other
voting rights granted to the holders of the Series A Preferred Stock in
this Section 3.
(d) Except as provided herein, in Section 11 or by applicable law,
holders of Series A Preferred Stock shall have no special voting rights and
their consent shall not be required (except to the extent they are entitled
to vote with holders of Common Stock as set forth herein) for authorizing
or taking any corporate action.
SECTION 4. Certain Restrictions. (a) Whenever quarterly dividends or
other dividends or distributions payable on the Series A Preferred Stock as
provided in Section 2 are in arrears, thereafter and until all accrued and
unpaid dividends and distributions, whether or not declared, on shares of Series
A Preferred Stock outstanding shall have been paid in full, the Corporation
shall not
(i) declare or pay dividends on, make any other distributions on, or
redeem or purchase or otherwise acquire for consideration any shares of
stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Preferred Stock;
(ii) declare or pay dividends on or make any other distributions on
any shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Preferred Stock,
except dividends paid ratably on the Series A Preferred Stock and all such
parity stock on which
3
<PAGE> 28
dividends are payable or in arrears in proportion to the total amounts to
which the holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration shares
of any stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Preferred Stock;
provided that the Corporation may at any time redeem, purchase or otherwise
acquire shares of any such parity stock in exchange for shares of any stock
of the Corporation ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Preferred Stock; or
(iv) purchase or otherwise acquire for consideration any shares of
Series A Preferred Stock, or any shares of stock ranking on a parity with
the Series A Preferred Stock, except in accordance with a purchase offer
made in writing or by publication (as determined by the Board of Directors)
to all holders of such shares upon such terms as the Board of Directors,
after consideration of the respective annual dividend rates and other
relative rights and preferences of the respective series and classes, shall
determine in good faith will result in fair and equitable treatment among
the respective series or classes.
(b) The Corporation shall not permit any subsidiary of the Corporation to
purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under paragraph (a) of this Section 4,
purchase or otherwise acquire such shares at such time and in such manner.
SECTION 5. Liquidation Rights. Upon the liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, no distribution
shall be made (1) to the holders of shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the Series A
Preferred Stock unless, prior thereto, the holders of shares of Series A
Preferred Stock shall have received an amount equal to the accrued and unpaid
dividends and distributions thereon, whether or not declared, to the date of
such payment, plus an amount equal to the greater of (x) $.0l per whole share or
(y) an aggregate amount per share equal to the Formula Number then in effect
times the aggregate amount to be distributed per share to holders of Common
Stock or (2) to the holders of stock ranking on a parity (either as to dividends
or upon liquidation, dissolution or winding up) with the Series A Preferred
Stock, except distributions made ratably on the Series A Preferred Stock and all
other such parity stock in proportion to the total amounts to which the holders
of all such shares are entitled upon such liquidation, dissolution or winding
up; provided that in no event shall the amount or amounts, if any, exceed $100
per share plus accrued dividends in the case of involuntary liquidation,
dissolution or winding up of the Corporation.
SECTION 6. Consolidation, Merger, etc. In case the Corporation shall
enter into any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock or
securities, cash or any other property, then in any such case the then
outstanding shares of Series A Preferred Stock shall at the same time be
similarly exchanged or changed into an amount per share equal to the Formula
Number then in effect times the aggregate amount of stock, securities, cash or
any other property (payable in kind), as the case may be, into which or for
which each share of Common Stock is exchanged or changed. In the event both this
Section 6 and Section 2 appear to apply to a transaction, this Section 6 will
control.
SECTION 7. No Redemption; No Sinking Fund. (a) The shares of Series A
Preferred Stock shall not be subject to redemption by the Corporation or at the
option of any holder of Series A Preferred Stock; provided, however, that the
Corporation may purchase or otherwise acquire outstanding shares of Series A
Preferred Stock in the open market or by offer to any holder or holders of
shares of Series A Preferred Stock.
(b) The shares of Series A Preferred Stock shall not be subject to or
entitled to the operation of a retirement or sinking fund.
SECTION 8. Ranking. The Series A Preferred Stock shall rank junior to all
other series of Preferred Stock of the Corporation, unless the Board of
Directors shall specifically determine otherwise in fixing the powers,
preferences and relative, participating, optional and other special rights of
the shares of such series and the qualifications, limitations or restrictions
thereof.
4
<PAGE> 29
SECTION 9. Fractional Shares. The Series A Preferred Stock shall be
issuable upon exercise of the Rights issued pursuant to the Rights Agreement in
whole shares or in any fraction of a share that is one one-thousandths
(1/1,000ths) of a share or any integral multiple of such fraction which shall
entitle the holder, in proportion to such holder's fractional shares, to receive
dividends, exercise voting rights, participate in distributions and to have the
benefit of all other rights of holders of Series A Preferred Stock. In lieu of
fractional shares, the Corporation, prior to the first issuance of a share or a
fraction of a share of Series A Preferred Stock, may elect (1) to make a cash
payment as provided in the Rights Agreement for fractions of a share other than
one one-thousandths (1/1,000ths) of a share or any integral multiple thereof or
(2) to issue depository receipts evidencing such authorized fraction of a share
of Series A Preferred Stock pursuant to an appropriate agreement between the
Corporation and a depository selected by the Corporation; provided that such
agreement shall provide that the holders of such depository receipts shall have
all the rights, privileges and preferences to which they are entitled as holders
of the Series A Preferred Stock.
SECTION 10. Reacquired Shares. Any shares of Series A Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and canceled promptly after the acquisition thereof. All such
shares shall upon their cancelation become authorized but unissued shares of
Preferred Stock, without designation as to series until such shares are once
more designated as part of a particular series by the Board of Directors
pursuant to the provisions of ARTICLE FOURTH of the Restated Articles of
Incorporation.
SECTION 11. Amendment. None of the powers, preferences and relative,
participating, optional and other special rights of the Series A Preferred Stock
as provided herein or in the Restated Articles of Incorporation shall be amended
in any manner which would alter or change the powers, preferences, rights or
privileges of the holders of Series A Preferred Stock so as to affect them
adversely without the affirmative vote of the holders of at least 66 2/3% of the
outstanding shares of Series A Preferred Stock, voting as a separate class;
provided, however, that no such amendment approved by the holders of at least
66 2/3% of the outstanding shares of Series A Preferred Stock shall be deemed to
apply to the powers, preferences, rights or privileges of any holder of shares
of Series A Preferred Stock originally issued upon exercise of a Right after the
time of such approval without the approval of such holder. Subject to the
immediately preceding sentence, the Board of Directors of the Corporation may
amend the powers, preferences and relative, participating, optional and other
special rights of the Series A Preferred Stock as provided herein without the
vote of stockholders.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be duly
executed in its corporate name on this th day of , 1997.
ITT DESTINATIONS, INC.,
by
------------------------------------
Name:
Title:
Attest:
- ---------------------------------------------------------
Name:
Title:
5
<PAGE> 30
EXHIBIT B
[FORM OF RIGHT CERTIFICATE]
Certificate No. [R]-
Rights
NOT EXERCISABLE AFTER SEPTEMBER , 2007, OR EARLIER IF REDEEMED BY THE
COMPANY. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE
COMPANY, AT $.01 PER RIGHT, ON THE TERMS SET FORTH IN THE RIGHTS
AGREEMENT. RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR AN
AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED
IN THE RIGHTS AGREEMENT) AND BY ANY SUBSEQUENT HOLDER OF SUCH RIGHTS ARE
NULL AND VOID AND NONTRANSFERABLE.
RIGHT CERTIFICATE
ITT DESTINATIONS, INC.
This certifies that , or registered assigns, is the
registered owner of the number of Rights set forth above, each of which entitles
the owner thereof, subject to the terms, provisions and conditions of the Rights
Agreement dated as of September [ ], 1997 (the "Rights Agreement"), between ITT
Destinations, Inc., a Nevada corporation (the "Company"), and The Bank of New
York, a New York banking corporation, as Rights Agent (the "Rights Agent"),
unless the Rights evidenced hereby shall have been previously redeemed by the
Company, to purchase from the Company at any time after the Distribution Date
(as defined in the Rights Agreement) and prior to 5:00 p.m., New York City time,
on the 10th anniversary of the date of the Rights Agreement (the "Expiration
Date"), at the designated office of the Rights Agent, or its successors as
Rights Agent, in New York, New York, one one-thousandths (1/1,000ths) of a fully
paid, nonassessable share of Series A Participating Cumulative Preferred Stock,
without par value, of the Company (the "Preferred Shares"), at a purchase price
per one one-thousandths (1/1,000ths) of a share equal to $ (the "Purchase
Price") payable in cash, upon presentation and surrender of this Right
Certificate with the Form of Election to Purchase duly executed.
The Purchase Price and the number and kind of shares which may be purchased
upon exercise of each Right evidenced by this Right Certificate, as set forth
above, are the Purchase Price and the number and kind of shares which may be so
purchased as of . As provided in the Rights Agreement, the
Purchase Price and the number and kind of shares which may be purchased upon the
exercise of each Right evidenced by this Right Certificate are subject to
modification and adjustment upon the happening of certain events.
If the Rights evidenced by this Right Certificate are at any time
beneficially owned by an Acquiring Person or an Affiliate or Associate of an
Acquiring Person (as such terms are defined in the Rights Agreement), such
Rights shall be null and void and nontransferable and the holder of any such
Right (including any purported transferee or subsequent holder) shall not have
any right to exercise or transfer any such Right.
This Right Certificate is subject to all the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
reference to the Rights Agreement is hereby made for a full description of the
rights, limitations of rights, obligations, duties and immunities hereunder of
the Rights Agent, the Company and the holders of the Right Certificates. Copies
of the Rights Agreement are on file at the above-mentioned office of the Rights
Agent and are also available from the Company upon written request.
This Right Certificate, with or without other Right Certificates, upon
surrender at the principal stock transfer or corporate trust office of the
Rights Agent, may be exchanged for another Right Certificate or Right
Certificates of like tenor and date evidencing Rights entitling the holder to
purchase a like aggregate number
<PAGE> 31
and kind of shares as the Rights evidenced by the Right Certificate or Right
Certificates surrendered shall have entitled such holder to purchase. If this
Right Certificate shall be exercised in part, the holder shall be entitled to
receive upon surrender hereof another Right Certificate or Right Certificates
for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced by
this Right Certificate may be redeemed by the Company at its option at a
redemption price (in cash or shares of Common Stock or other securities of the
Company deemed by the Board of Directors to be at least equivalent in value) of
$.0l per Right (which amount shall be subject to adjustment as provided in the
Rights Agreement) at any time prior to the earlier of (i) such time as a Person
becomes an Acquiring Person and (ii) the Expiration Date.
The Company may, but shall not be required to, issue fractions of Preferred
Shares or distribute certificates which evidence fractions of Preferred Shares
upon the exercise of any Right or Rights evidenced hereby. In lieu of issuing
fractional shares, the Company may elect to make a cash payment as provided in
the Rights Agreement for fractions of a share other than one one-thousandths
(1/1,000ths) of a share or any integral multiple thereof or to issue
certificates or utilize a depository arrangement as provided in the terms of the
Rights Agreement and the Preferred Shares.
No holder of this Right Certificate shall be entitled to vote or receive
dividends or be deemed for any purpose the holder of the Preferred Shares or of
any other securities of the Company which may at any time be issuable on the
exercise hereof, nor shall anything contained in the Rights Agreement or herein
be construed to confer upon the holder hereof, as such, any of the rights of a
stockholder of the Company, including, without limitation, any right to vote for
the election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting stockholders (except as
provided in the Rights Agreement), or to receive dividends or other
distributions or subscription rights, or otherwise, until the Right or Rights
evidenced by this Right Certificate shall have been exercised as provided in
accordance with the provisions of the Rights Agreement.
This Right Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by an authorized signatory of the Rights
Agent.
WITNESS the facsimile signature of the proper officers of the Company and
its corporate seal.
2
<PAGE> 32
Dated as of:
ITT DESTINATIONS, INC.,
by
--------------------------------------
Name:
Title:
Attest:
- ---------------------------------------------------------
Name:
Title:
Date of countersignature:
Countersigned:
The Bank of New York,
as Rights Agent
by
- -----------------------------------------------------
Authorized Signatory
3
<PAGE> 33
[On Reverse Side of Right Certificate]
FORM OF ELECTION TO PURCHASE
(TO BE EXECUTED BY THE REGISTERED HOLDER IF
SUCH HOLDER DESIRES TO EXERCISE THE RIGHTS
REPRESENTED BY THIS RIGHT CERTIFICATE.)
To the Rights Agent:
The undersigned hereby irrevocably elects to exercise Rights
represented by this Right Certificate to purchase the Preferred Shares (or other
shares) issuable upon the exercise of such Rights and requests that certificates
for such shares be issued in the name of:
Please insert social security
or other identifying number
- --------------------------------------------------------------------------------
(Please print name and address)
- --------------------------------------------------------------------------------
If such number of Rights shall not be all the Rights evidenced by this
Right Certificate, a new Right Certificate for the balance remaining of such
Rights shall be registered in the name of and delivered to:
Please insert social security
or other identifying number
- --------------------------------------------------------------------------------
(Please print name and address)
- --------------------------------------------------------------------------------
Dated: ,
--------------------------------------
Signature
Signature Guaranteed:
4
<PAGE> 34
FORM OF ASSIGNMENT
(TO BE EXECUTED BY THE REGISTERED HOLDER IF SUCH
HOLDER DESIRES TO TRANSFER THE RIGHT CERTIFICATE.)
FOR VALUE RECEIVED
----------------------------------------- hereby sells, assigns and
transfer unto
- --------------------------------------------------------------------------------
(Please print name and address of transferee)
- --------------------------------------------------------------------------------
this Right Certificate, together with all right, title and interest therein, and
does hereby irrevocably constitute and appoint Attorney, to
transfer the within Right Certificate on the books of the within-named
Corporation, with the full power of substitution.
Dated: ,
--------------------------------------
Signature
Signature Guaranteed:
The undersigned hereby certifies that (1) the Rights evidenced by this
Right Certificate are not being sold, assigned or transferred by or on behalf of
a Person who is or was an Acquiring Person or an Affiliate or Associate thereof
(as such terms are defined in the Rights Agreement), (2) this Rights Certificate
is not being sold, assigned or transferred to or on behalf of any such Acquiring
Person, Affiliate or Associate and (3) after inquiry and to the best knowledge
of the undersigned, the undersigned did not acquire the Rights evidenced by this
Right Certificate from any Person who is or was an Acquiring Person or an
Affiliate or Associate thereof (as such terms are defined in the Rights
Agreement).
--------------------------------------
Signature
NOTICE
The signature on the foregoing Form of Election to Purchase or Form of
Assignment must correspond to the name as written upon the face of this Right
Certificate in every particular, without alteration or enlargement or any change
whatsoever.
5
<PAGE> 1
EXHIBIT 10.1
================================================================================
AGREEMENT AND PLAN OF DISTRIBUTION
DATED AS OF SEPTEMBER , 1997
BETWEEN
ITT CORPORATION
AND
ITT DESTINATIONS, INC.
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE I
DEFINITIONS
SECTION 1.01. General.............................................................. 1
SECTION 1.02. References; Interpretation........................................... 8
ARTICLE II
PRELIMINARY TRANSACTIONS
SECTION 2.01. Internal Restructuring............................................... 8
SECTION 2.02. Dividends............................................................ 8
SECTION 2.03. The Rights........................................................... 8
SECTION 2.04. Transfer of Certain Businesses and Assets............................ 8
SECTION 2.05. Assumption of Liabilities............................................ 8
SECTION 2.06. Transfer of Certain Licenses and Permits............................. 9
SECTION 2.07. Transfer and Assumption Documentation................................ 9
SECTION 2.08. Intercompany Accounts................................................ 9
SECTION 2.09. Assignments and Transfers Not Effected Prior to the Distribution..... 9
ARTICLE III
THE DISTRIBUTION
SECTION 3.01. Directors and Employees.............................................. 10
SECTION 3.02. Mechanics of Distribution............................................ 10
SECTION 3.03. Timing of Distribution............................................... 10
ARTICLE IV
MUTUAL RELEASE
SECTION 4.01. Mutual Release, etc.................................................. 11
ARTICLE V
INDEMNIFICATION
SECTION 5.01. Indemnification by the Company....................................... 11
SECTION 5.02. Indemnification by Destinations...................................... 12
SECTION 5.03. Limitations on Indemnification Obligations........................... 12
SECTION 5.04. Procedures for Indemnification of Third Party Claims................. 12
SECTION 5.05. Indemnification Payments............................................. 14
SECTION 5.06. Other Adjustments.................................................... 14
SECTION 5.07. Survival of Indemnities.............................................. 14
ARTICLE VI
COVENANTS
SECTION 6.01. Provision of Corporate Records....................................... 14
SECTION 6.02. Access to Information................................................ 14
SECTION 6.03. Retention of Records................................................. 15
SECTION 6.04. Witness Services..................................................... 15
SECTION 6.05. Reimbursement........................................................ 15
SECTION 6.06. Confidentiality...................................................... 15
SECTION 6.07. Change of Corporate Name............................................. 16
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
SECTION 6.08. Further Assurances................................................... 16
SECTION 6.09. Investment Banking Fee............................................... 16
ARTICLE VII
INSURANCE
SECTION 7.01. Policies and Rights Included Within Assets........................... 16
SECTION 7.02. Post-Distribution Time Claims........................................ 17
SECTION 7.03. Administration; Other Matters........................................ 17
SECTION 7.04. Agreement for Waiver of Conflict and Shared Defense.................. 18
SECTION 7.05. Cooperation.......................................................... 18
SECTION 7.06. Directors and Officers Liability Insurance........................... 18
ARTICLE VIII
CONDITIONS
SECTION 8.01. Conditions to Obligations of the Company............................. 19
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Modification or Amendment............................................ 20
SECTION 9.02. Termination.......................................................... 20
SECTION 9.03. Waiver; Remedies..................................................... 20
SECTION 9.04. Counterparts......................................................... 20
SECTION 9.05. GOVERNING LAW........................................................ 20
SECTION 9.06. Notices.............................................................. 20
SECTION 9.07. Entire Agreement..................................................... 21
SECTION 9.08. Certain Obligations.................................................. 21
SECTION 9.09. Assignment........................................................... 21
SECTION 9.10. Captions............................................................. 21
SECTION 9.11. Specific Performance................................................. 21
SECTION 9.12. Severability......................................................... 21
SECTION 9.13. Third Party Beneficiaries............................................ 22
SECTION 9.14. Fees and Expenses of Enforcement..................................... 22
SECTION 9.15. Expenses............................................................. 22
SECTION 9.16. Exhibits and Schedules............................................... 22
SECTION 9.17. Consent to Jurisdiction.............................................. 22
SECTION 9.18. Ancillary Agreements................................................. 22
SECTION 9.19. Survival of Agreements............................................... 22
SECTION 9.20. Successors and Assigns............................................... 22
Schedule 2.01(b) Miscellaneous Subsidiaries
Schedule 3.01(a) Directors of the Company
Schedule 5.02
Schedule 7.01(a) Company Policies
Exhibit A Employee Benefits Services and Liabilities Agreement
Exhibit B-1 Intellectual Property License and Assignment Agreement
Exhibit B-2 Trade Name and Service Mark License Agreement
Exhibit C Tax Allocation Agreement
Exhibit D Educational Agreement and Plan of Distribution
</TABLE>
<PAGE> 4
AGREEMENT AND PLAN OF DISTRIBUTION dated as of September , 1997,
between ITT CORPORATION, a Nevada corporation (the "Company"), and ITT
DESTINATIONS, INC., a Nevada corporation and a wholly owned subsidiary of
the Company ("Destinations").
W I T N E S S E T H:
WHEREAS the Board of Directors of the Company has approved this Agreement,
pursuant to which and subject to the terms of which (a) all the assets of the
Company, other than the Retained Assets (as hereinafter defined), will be
conveyed or otherwise transferred to Destinations and all the liabilities of the
Company, other than the Retained Liabilities (as hereinafter defined) and other
liabilities specified herein, will be assumed by Destinations and certain other
transactions will be consummated, all as set forth in Article II hereof (the
"Preliminary Transactions"), and (b) the Company will distribute all the issued
and outstanding shares of Common Stock, par value $.01 per share, of
Destinations ("Destinations Common Shares"), together with the associated Rights
(as hereinafter defined), to the holders of record of shares of Common Stock, no
par value per share, of the Company ("Company Common Stock"), other than shares
held in the treasury of the Company, on a share for share basis;
WHEREAS the purpose of the Preliminary Transactions and the Distribution is
to divest the Company of all businesses, operations and liabilities other than
the Retained Business, Retained Assets, Retained Liabilities, Educational
Business, Educational Assets and Educational Liabilities (each as hereinafter
defined) of the Company and its Subsidiaries (as hereinafter defined);
WHEREAS it is the intention of the parties to this Agreement that for
Federal income tax purposes the Distribution (as hereinafter defined) shall
qualify as a tax-free spin off under Section 355 of the Code; and
WHEREAS in order to effect the separation of ownership of the Company and
Destinations, this Agreement sets forth the principal corporate transactions
required to effect the Preliminary Transactions and the Distribution and sets
forth other agreements that will govern certain other matters following the
Distribution.
NOW, THEREFORE, in consideration of the premises, and of the covenants and
agreements set forth herein, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. General. As used in this Agreement, the following terms
shall have the following meanings (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):
"1995 Distribution Agreements" shall mean the Distribution Agreement dated
as of November 1, 1995, among ITT Corporation, a Delaware corporation which has
been renamed "ITT Industries, Inc." ("Industries"), the Company and ITT Hartford
Group, Inc., a Delaware corporation which has been renamed "The Hartford
Financial Services Group, Inc." ("Hartford") and those certain intellectual
property agreements and other agreements entered into in connection with the
transactions contemplated by the foregoing Distribution Agreement, in each case,
as amended, supplemented or otherwise modified prior to the date hereof;
provided, however, that the 1995 Distribution Agreements shall not include the
Tax Allocation Agreement, dated as of November 1, 1995, among Industries,
Hartford and the Company, the Employee Benefit Services and Liability Agreement,
dated as of November 1, 1995, among Industries, Hartford and the Company or any
Liability or transaction contemplated thereby.
"Action" shall mean any action, suit, arbitration, inquiry, proceeding or
investigation by or before any court, any governmental or other regulatory or
administrative agency, body or commission or any arbitration tribunal.
<PAGE> 5
"Affiliate" shall mean, when used with respect to a specified Person,
another Person that directly, or indirectly through one or more intermediaries,
controls or is controlled by or is under common control with the Person
specified.
"Agent" shall mean The Bank of New York, as transfer agent for the Company.
"Amendment" shall have the meaning set forth in Section 6.07(a).
"Ancillary Agreements" shall mean the Employee Benefits Services and
Liability Agreement, the Intellectual Property Agreements and the Tax Allocation
Agreement.
"Assets" shall mean any and all assets, properties and rights, whether
tangible or intangible, whether real, personal or mixed, whether fixed,
contingent or otherwise, and wherever located, including, without limitation,
the following:
(i) real property interests (including leases), land, plants,
buildings and improvements;
(ii) machinery, equipment, tooling, vehicles, furniture and fixtures,
leasehold improvements, repair parts, tools, plant, laboratory and office
equipment and other tangible personal property, together with any rights or
claims arising out of the breach of any express or implied warranty by the
manufacturers or sellers of any of such assets or any component part
thereof;
(iii) inventories, including raw materials, work-in-process, finished
goods, parts, accessories and supplies;
(iv) cash, bank accounts, notes, loans and accounts receivable
(whether current or not current), interests as beneficiary under letters of
credit, advances and performance and surety bonds;
(v) certificates of deposit, banker's acceptances, shares of stock,
bonds, debentures, evidences of indebtedness, certificates of interest or
participation in profit-sharing agreements, collateral-trust certificates,
preorganization certificates or subscriptions, transferable shares,
investment contracts, voting-trust certificates, puts, calls, straddles,
options, swaps, collars, caps and other securities or hedging arrangements
of any kind;
(vi) financial, accounting and operating data and records including,
without limitation, books, records, notes, sales and sales promotional
data, advertising materials, credit information, cost and pricing
information, customer and supplier lists, reference catalogs, payroll and
personnel records, minute books, stock ledgers, stock transfer records and
other similar property, rights and information;
(vii) patents, patent applications, trademarks, trademark applications
and registrations, trade names, service marks, service mark applications
and registrations, service names, copyrights and copyright applications and
registrations, commercial and technical information including engineering,
production and other designs, drawings, specifications, formulae,
technology, computer and electronic data processing programs and software,
inventions, processes, trade secrets, know-how, confidential information
and other proprietary property, rights and interest and all rights thereto;
(viii) agreements, leases, contracts, sale orders, purchase orders,
open bids and other commitments and all rights therein;
(ix) prepaid expenses, deposits and retentions held by third parties;
(x) claims, causes of action, chooses in action, rights under
insurance policies, rights under express or implied warranties, rights of
recovery, rights of set-off, rights of subrogation and all other rights of
any kind;
(xi) licenses, franchises, permits, authorizations and approvals; and
(xii) goodwill and going concern value.
"Assignee" shall have the meaning set forth in Section 2.09.
"Assignor" shall have the meaning set forth in Section 2.09.
2
<PAGE> 6
"Authorized Officer" shall mean the Chief Executive, the President, or any
Executive Vice President or Vice President of the Company.
"BellSouth" shall mean BellSouth Corporation, a Georgia corporation.
"BellSouth Agreement" shall mean the Stock Purchase Agreement dated as of
July 15, 1997, between BellSouth and the Company.
"Broadcasting" shall mean ITT Broadcasting Corp., a Delaware corporation
and a wholly owned subsidiary of the Company.
"Claims Administration" shall mean the processing of claims made under
Company Policies, including, without limitation, the reporting of losses or
claims to insurance carriers (including as a result of reports provided to
Destinations by the Company or Educational), management and defense of claims,
the settlement of claims (except to the extent settlement authority remains with
another party as contemplated by the second proviso to Section 7.03(a)) and
providing for appropriate releases upon settlement of claims.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and the
Treasury regulations promulgated thereunder, including any successor
legislation.
"Company" shall have the meaning set forth in the heading of this
Agreement.
"Company Common Stock" shall have the meaning set forth in the recitals to
this Agreement.
"Company Debt" shall mean all Liabilities of the Company and its
Subsidiaries under or arising from (i) the Credit Agreement dated as of
September , 1997, among ITT Promedia LLC CVA, a Belgian company and a wholly
owned Subsidiary of the Company ("Promedia"), The Chase Manhattan Bank, as
administrative agent, and the Lenders party thereto, (ii) the Credit Agreement
dated as of September , 1997, among ITT Publimedia B.V., a Dutch company and a
wholly owned Subsidiary of the Company ("Publimedia"), The Chase Manhattan Bank,
as administrative agent, and the Lenders party thereto, (iii) [the Senior
Secured Credit Agreement dated as of September , 1997, among the Company, The
Chase Manhattan Bank, Goldman Sachs Credit Partners L.P., Chase Securities Inc.
and Goldman Sachs Credit Partners L.P.], (iv) the DM million % Senior
Subordinated Notes due 2007 issued by Promedia, (v) the $ million % Senior
Subordinated Notes due 2007 issued by Promedia, (vi) the $ million %
Senior Subordinated Notes due 2007 issued by Publimedia and (vii) any debt
securities or other indebtedness issued in exchange for or replacement of, or
the proceeds of which are otherwise directly or indirectly used to repay, any of
the foregoing Liabilities, and any indenture, credit agreement, underwriting
agreement, purchase agreement, security agreement, credit support agreement or
other agreement or document related to any of the foregoing.
"Company Indemnitees" shall mean the Company, each Affiliate of the Company
after the Distribution Date, each of their respective directors, officers,
employees and agents and each of the heirs, executors, successors and assigns of
any of the foregoing.
"Company Policies" shall mean all Policies, current or past, which are or
at any time were maintained by or on behalf of or for the benefit or protection
of the Company or any of its predecessors, or current or past directors,
officers, employees or agents thereof, including, without limitation, the
Policies identified on Schedule 7.01(a) hereto.
"Conveyancing and Assumption Instruments" shall have the meaning set forth
in Section 2.07.
"Debt Tender Offer" shall mean the offer by the Company to purchase $2
billion aggregate principal amount of certain debt securities specified in, and
pursuant to, the Offer to Purchase dated August 11, 1997 and the related Letter
of Transmittal, as each may be amended from time to time.
"Destinations" shall have the meaning set forth in the heading of this
Agreement.
"Destinations Assets" shall mean (a) all the Assets of the Company and its
Subsidiaries, except for (i) the Retained Assets and (ii) the Educational Assets
and (b) the rights of Destinations and its Subsidiaries under this Agreement,
the Educational Distribution Agreement and the Ancillary Agreements.
3
<PAGE> 7
"Destinations Business" shall mean all the businesses, Assets and
operations heretofore, currently or hereafter conducted or owned by the Company
and its Subsidiaries and Affiliates, including all businesses, Assets,
operations or investments conducted or owned by the Company, its Subsidiaries or
Affiliates that have been sold or otherwise disposed of or discontinued except
for (i) the Retained Business and (ii) the Educational Business.
"Destinations Common Shares" shall have the meaning set forth in the
recitals to this Agreement.
"Destinations Indemnitees" shall mean Destinations, each Affiliate of
Destinations after the Distribution Date, each of their respective directors,
officers, employees and agents and each of the heirs, executors, successors and
assigns of any of the foregoing.
"Destinations Liabilities" shall mean, collectively, whenever arising
whether prior to, at or following the Distribution Time, all the Liabilities of
the Company, Destinations and Educational and their respective Subsidiaries or
Affiliates (including, without limitation, Liabilities of the Company under the
Educational Intercompany Agreements or arising primarily out of or relating
primarily to the management or conduct of the Destinations Business), except for
(i) the Retained Liabilities and (ii) the Educational Liabilities.
"Distribution" shall mean the distribution on the Distribution Date to
holders of record as of the Distribution Record Date of shares of Company Common
Stock, other than shares held in the treasury of the Company, of all the
Destinations Common Shares (together with the associated Rights) owned by the
Company on the basis of one Destinations Common Share for each outstanding share
of Company Common Stock.
"Distribution Date" shall mean such date as hereafter may be determined by
the Company's Board of Directors as the date as of which the Distribution shall
be effected.
"Distribution Record Date" shall mean such date as hereafter may be
determined by the Company's Board of Directors as the record date for the
Distribution.
"Distribution Time" shall mean 11:59 p.m., New York City time, on the
Distribution Date.
"Educational" shall mean ITT Educational Services, Inc., a Delaware
corporation and a Subsidiary of the Company.
"Educational Assets" shall mean (a) all the Assets of the Company and its
Subsidiaries relating primarily to, and used or held for use in, the Educational
Business (exclusive of the "ITT" name, mark and logo and any rights relating
thereto), including (i) the Assets included on the unaudited consolidated
balance sheet of Educational as of June 30, 1997, and any assets acquired by the
Company or any of its Subsidiaries relating primarily to the Educational
Business from July 1, 1997 and (ii) all the capital stock owned by the Company
of Educational and the rights of the Company in Subsidiaries of Educational and
(b) the rights of Educational and its Subsidiaries under the Educational
Distribution Agreement and the Ancillary Agreements.
"Educational Business" shall mean all the businesses, Assets (exclusive of
the "ITT" name, mark and logo and any rights relating thereto) and operations
heretofore, currently or hereafter conducted or owned by Educational and its
Subsidiaries, including all businesses, Assets, operations or investments
conducted by Educational or any of its Subsidiaries that have been sold or
otherwise disposed of or discontinued.
"Educational Distribution" shall mean the distribution by the Company to
its stockholders of shares of common stock of Educational pursuant to the
Educational Distribution Agreement.
"Educational Distribution Agreement" shall mean the Agreement and Plan of
Distribution among the Company, Educational and Destinations, substantially in
the form of Exhibit D hereto.
"Educational Intercompany Agreements" shall mean the (i) Registration
Rights Agreement, dated as of December 19, 1994, between Industries and
Educational, (ii) Tax Sharing Agreement, dated as of December 27, 1994, between
Industries and Educational, (iii) Intercompany Agreement, dated as of
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December 19, 1994, between Industries and Educational, (iv) Trade Name and
Service Mark License Agreement, dated as of December 19, 1994, between
Industries and Educational, (v) Employee Benefits and Administrative Services
Agreement, dated as of December 19, 1994, between Industries and Educational and
(vi) Treasury Services and Credit Facilities Agreement, dated as of August 15,
1994, between Industries and Educational, the rights and obligations of
Industries under each of which have been assumed by the Company, each as amended
or supplemented or otherwise modified on or prior to the date hereof.
"Educational Liabilities" shall mean collectively, whenever arising,
whether prior to, at or following the Distribution Time, (i) all Liabilities of
Educational under the Educational Distribution Agreement and any of the
Ancillary Agreements and (ii) all the Liabilities of the Company, Destinations
or Educational, and any of their respective Subsidiaries or Affiliates, arising
primarily out of or relating primarily to the management or conduct of the
Educational Business; provided (i) that Liabilities of Educational or any of its
Subsidiaries under any agreement to which Educational or any of its Subsidiaries
is a party and (ii) Liabilities of the Company related to litigation arising
from or related to the Educational Business (including in connection with
Eldredge, et al. v. ITT Educational Services, Inc. et al. and similar Actions)
shall be Educational Liabilities.
"Employee Benefits Services and Liability Agreement" shall mean the
Employee Benefits Services and Liability Agreement between the Company,
Destinations and Educational, substantially in the form of Exhibit A hereto.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Hilton Litigation" shall mean any actual, threatened or future Action that
has been or may be asserted by or against or otherwise affect the Company or
Destinations or any of their Subsidiaries or Affiliates arising out of or
related to the tender offer for shares of Company Common Stock commenced by HLT
Corporation, a subsidiary of Hilton Hotels Corporation ("Hilton"), on January
31, 1997, or any other business combination involving the Company or
Destinations proposed by Hilton, whether asserted by Hilton or by any other
party (including any shareholder of the Company in connection with any
derivative actions).
"Indemnifiable Losses" shall mean any and all losses (whether or not
arising from third party claims), liabilities, claims, damages, demands, costs
or expenses (including, without limitation, reasonable attorneys' and
accountants' fees and expenses and any and all out-of-pocket expenses)
whatsoever, including all losses, liabilities, claims, damages, demands, costs
or expenses reasonably incurred in investigating, preparing for or defending
against any Actions or potential Actions or in asserting, preserving or
enforcing any rights hereunder or under any Ancillary Agreement.
"Indemnifying Party" shall have the meaning set forth in Section 5.03.
"Indemnitee" shall have the meaning set forth in Section 5.03.
"Information" of a party shall mean any and all information that such party
or any of its Representatives furnish or have furnished to the receiving party
or any of its Representatives whether furnished orally or in writing or by any
other means or gathered by inspection and regardless of whether the same is
specifically marked or designated as "confidential" or "proprietary", together
with any and all notes, memoranda, analyses, compilations, studies or other
documents (whether in hard copy or electronic media) prepared by the receiving
party or any of its Representatives which contain or otherwise reflect such
Information, together with any and all copies, extracts or other reproductions
of any of the same; provided, however, that for the purposes hereof all
information relating to the Retained Business or the Retained Assets in the
possession of Destinations or any of its Subsidiaries at the Distribution Time
shall be deemed to have been furnished by the Company and all information
relating to ITTSC, Destinations, the Destinations Business or the Destinations
Assets in the possession of the Company at the Distribution Time shall be deemed
to have been furnished by Destinations; provided further, however, that the term
"Information" does not include information that:
(a) at the time of disclosure is generally available to and known by
the public (other than as a result of a violation of this Agreement,
directly or indirectly, by a party to this Agreement or any of its
Representatives);
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(b) is available to the receiving party on a non-confidential basis
from a source other than the providing party or its Representatives,
provided that such source is not known by the receiving party to be subject
to a confidentiality agreement regarding such information; or
(c) has been independently acquired or developed by the receiving
party without violation of any of the obligations of the receiving party or
its Representatives under this Agreement.
"Information Statement" shall mean the Information Statement to be sent to
the holders of shares of Company Common Stock in connection with the
Distribution, including any amendment or supplement thereto, which is included
as an exhibit to the registration statement on Form 10 filed by Destinations
under the Exchange Act.
"Insurance Administration" shall mean, with respect to each Company Policy,
the accounting for premiums, retrospectively-rated premiums, defense costs,
indemnity payments, deductibles and retentions, as appropriate, under the terms
and conditions of each such Company Policy, and the distribution of Insurance
Proceeds as contemplated by this Agreement.
"Insurance Proceeds" shall mean those monies (i) received by an insured
from an insurance carrier or (ii) paid by an insurance carrier on behalf of an
insured, in either case net of any applicable premium adjustment,
retrospectively-rated premium, deductible, retention, or cost of reserve paid or
held by or for the benefit of such insured.
"Insured Claims" shall mean those Liabilities that, individually or in the
aggregate, are covered within the terms and conditions of any Company Policy,
whether or not subject to deductibles, co-insurance, uncollectability or
retrospectively-rated premium adjustments, but only to the extent that such
Liabilities are within applicable Company Policy limits, including aggregates.
"Intellectual Property Agreements" shall mean the Intellectual Property
Assignment and License Agreement between Destinations and the Company,
substantially in the form of Exhibit B-1 hereto, and the Trade Name and Service
Mark License Agreement, between Destinations and World Directories,
substantially in the form of Exhibit B-2 hereto.
"Investment Agreement" shall mean the Investment Agreement, dated as of
July 15, 1977, between the Company and CDRV Acquisition, L.L.C., as the same may
be amended from time to time.
"ITTSC" shall mean ITT Sheraton Corporation, a Delaware corporation and a
wholly owned Subsidiary of the Company.
"Liabilities" shall mean any and all debts, liabilities and obligations,
absolute or contingent, matured or unmatured, liquidated or unliquidated,
accrued or unaccrued, known or unknown, whenever arising, including, without
limitation, those debts, liabilities and obligations arising under any law,
rule, regulation, Action, threatened Action, order or consent decree of any
court, any governmental or other regulatory or administrative agency or
commission or any award of any arbitration tribunal, and those arising under any
contract, guarantee, commitment or undertaking.
"Name Fee" shall have the meaning set forth in Section 6.07(b).
"NGCL" shall mean Chapter 78, Private Corporations, of the Nevada Revised
Statutes.
"Nonassignable Contract" shall have the meaning set forth in Section 2.09.
"NYSE" shall mean the New York Stock Exchange, Inc.
"Person" shall mean any natural person, corporation, business trust,
limited liability company, joint venture, association, company, partnership or
government, or any agency or political subdivision thereof.
"Policies" shall mean insurance policies and insurance contracts of any
kind (other than life and benefits policies or contracts), including, without
limitation, primary, excess and umbrella policies, commercial general liability
policies, fiduciary liability, automobile, aircraft, property and casualty,
workers' compensation and
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employee dishonesty insurance policies, bonds and self-insurance and captive
insurance company arrangements, together with the rights, benefits and
privileges thereunder.
"Preliminary Transactions" shall have the meaning set forth in the recitals
to this Agreement.
"Reincorporation Merger" shall have the meaning set forth in Section
2.01(a).
"Representatives" of either party shall mean such party's Affiliates,
directors, officers, partners, employees, agents or other representatives
(including attorneys, accountants and financial advisors).
"Retained Assets" shall mean (a) all the Assets of the Company and its
Subsidiaries relating primarily to, and used or held for use in, the Retained
Business (exclusive of the "ITT" name, mark and logo and any rights relating
thereto), including (i) the Assets included on the unaudited consolidated
balance sheet of World Directories as of June 30, 1997, and any assets acquired
by the Company or any of its Subsidiaries relating primarily to the Retained
Business from July 1, 1997, (ii) all the capital stock of World Directories and
the rights of the Company in Subsidiaries of World Directories and (iii) equity
interests owned by World Directories, directly or indirectly, in Persons that do
not constitute Subsidiaries and (b) the rights of the Company and its
Subsidiaries under this Agreement, the Educational Distribution Agreement, the
Investment Agreement and the Ancillary Agreements.
"Retained Business" shall mean all the businesses, Assets (exclusive of the
"ITT" name, mark and logo and any rights relating thereto) and operations
heretofore, currently or hereafter conducted or owned by World Directories and
its Subsidiaries and Persons in which it has an equity interest, including all
businesses, Assets, operations or investments conducted or owned by World
Directories or any of its Subsidiaries and Affiliates and Persons in which it
has an equity interest that have been sold or otherwise disposed of or
discontinued.
"Retained Liabilities" shall mean collectively, whenever arising, whether
prior to, at or following the Distribution Time, (i) all the Liabilities of the
Company and its Subsidiaries under this Agreement, the Educational Distribution
Agreement and any of the Ancillary Agreements, (ii) all the Liabilities of the
Company, Destinations or Educational and any of their respective Subsidiaries or
Affiliates arising primarily out of or relating primarily to the management or
conduct of the Retained Business and (iii) the Company Debt.
"Rights" shall mean the preferred stock purchase rights associated with the
Destinations Common Shares issued pursuant to the Rights Agreement.
"Rights Agreement" shall mean the Rights Agreement dated as of September
, 1997, between Destinations and The Bank of New York, as Rights Agent.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Stockholders Meeting" shall have the meaning set forth in Section 6.07(a).
"Stock Tender Offer" shall mean the offer by the Company to purchase up to
30 million shares of Company Common Stock pursuant to the Offer to Purchase
dated July 17, 1997 and the related Letter of Transmittal, as each may be
amended from time to time.
"Subsidiary" shall mean any corporation, partnership, joint venture or
other entity of which another entity (i) owns, directly or indirectly, ownership
interests sufficient to elect a majority of the Board of Directors (or persons
performing similar functions) (irrespective of whether at the time any other
class or classes of ownership interests of such corporation, partnership, joint
venture or other entity shall or might have such voting power upon the
occurrence of any contingency) or (ii) is a general partner or an entity
performing similar functions (e.g., a trustee or managing member). For purposes
of this Agreement, ITT-Dow Jones Television and its Subsidiaries shall be deemed
to be Subsidiaries of Destinations and the interest of World Directories in
Persons conducting business in South Africa, Japan and Portugal shall be deemed
to be a Subsidiary of the Company.
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"Tax" shall mean all Federal, state, local and foreign taxes and
assessments, including all interest, penalties and additions imposed with
respect to such amounts.
"Tax Allocation Agreement" shall mean the Tax Allocation Agreement between
Destinations, the Company and Educational, substantially in the form of Exhibit
C hereto, as and to the extent amended and restated as of the closing of the
transactions contemplated by the Investment Agreement.
"Third Party Claim" shall have the meaning set forth in Section 5.04.
"World Directories" shall mean ITT World Directories, Inc., a Delaware
corporation and a wholly owned Subsidiary of the Company.
SECTION 1.02. References; Interpretation. References to an "Exhibit" or
to a "Schedule" are, unless otherwise specified, to one of the Exhibits or
Schedules attached to this Agreement, and references to a "Section" or "Article"
are, unless otherwise specified, to one of the Sections and Articles of this
Agreement. Any time the word "including" is used herein it means "including
without limitation".
ARTICLE II
PRELIMINARY TRANSACTIONS
SECTION 2.01. Internal Restructuring. (a) Merger of ITTSC and
Destinations. Prior to the Distribution Time, the Company shall cause ITTSC to
merge with and into Destinations, with Destinations as the surviving corporation
(the "Reincorporation Merger"). In the Reincorporation Merger, all the shares of
common stock of ITTSC held by the Company shall be converted into, in the
aggregate, 80,000,000. All such Destinations Common Shares shall be owned
beneficially and of record by the Company.
(b) Certain Transfers. Following the Reincorporation Merger and prior to
the Distribution Time, the Company shall transfer or otherwise convey to
Destinations all its right, title and interest in and to all the shares of
capital stock or assets of (i) each of the Subsidiaries listed on Schedule
2.01(b), (ii) Sheraton on the Park Pty, Ltd. and (iii) Broadcasting.
SECTION 2.02. Dividends. (a) Stock Dividend. Prior to the Distribution
Time, Destinations shall issue to the Company as a stock dividend a number of
Destinations Common Shares that, when added to the number of Destinations Common
Shares received in the Reincorporation Merger and owned by the company at such
time, is sufficient to consummate the Distribution, as certified by the Agent.
(b) Cash Dividend. Prior to the Distribution Time, Destinations shall pay
to the Company as a cash dividend an amount determined by an Authorized Officer
of the Company to be sufficient, in combination with cash held by the Company,
to consummate the Stock Tender Offer and the Debt Tender Offer.
SECTION 2.03. The Rights. Prior to the Distribution Time, Destinations
and the Rights Agent shall execute the Rights Agreement and Destinations shall
issue one Right for each Destinations Common Share distributed in the
Distribution.
SECTION 2.04. Transfer of Certain Businesses and Assets. Effective as of
the Distribution Time and except as otherwise expressly provided in this
Agreement or any of the Ancillary Agreements, (i) the Company, on behalf of
itself and its Subsidiaries, hereby contributes, grants, conveys, assigns,
transfers and delivers to Destinations all the Company's and its Subsidiaries'
right, title and interest in and to (a) the business and legal entities and
other Assets that comprise the Destinations Business and (b) the Destinations
Assets and (ii) Destinations, on behalf of itself and its Subsidiaries, hereby
contributes, grants, conveys, assigns, transfers and delivers to the Company all
Destinations' and its Subsidiaries' right, title and interest in and to (x) the
business and legal entities and other Assets that comprise the Retained Business
and the Educational Business and (y) the Retained Assets and the Educational
Assets.
SECTION 2.05. Assumption of Liabilities. Effective as of the Distribution
Time and except as otherwise specifically provided in this Agreement, the
Educational Distribution Agreement or any of the Ancillary Agreements, (i)
Destinations hereby unconditionally assumes and undertakes to pay, perform and
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discharge when due in accordance with their terms, on behalf of itself and its
Subsidiaries, all the Destinations Liabilities and (ii) the Company hereby
retains, and Destinations and its Subsidiaries do not assume and will have no
liability hereunder with respect to, all the Retained Liabilities and the
Educational Liabilities.
SECTION 2.06. Transfer of Certain Licenses and Permits. (a) In
furtherance of the contribution, grant, conveyance, assignment, transfer and
delivery of the Destinations Assets and the Destinations Business and the
assumption of the Destinations Liabilities set forth in this Article II, at or
prior to the Distribution Time, all transferrable licenses, permits and
authorizations issued by governmental or regulatory entities which relate to the
Destinations Business but which are held in the name of the Company or any of
its Subsidiaries (other than Destinations, ITTSC or their respective
Subsidiaries), or any of their respective Representatives, or otherwise shall be
duly and validly transferred by the Company or such Subsidiary or Representative
to Destinations or the appropriate Subsidiary of Destinations.
(b) In furtherance of the contribution, grant, conveyance, assignment,
transfer and delivery of the Destinations Assets and the Destinations Business
and the assumption of the Destinations Liabilities set forth in this Article II,
at or prior to the Distribution Time, all transferrable licenses, permits and
authorizations issued by governmental or regulatory entities which relate to the
Retained Business or the Educational Business but which are held in the name of
Destinations or ITTSC or any of their respective Subsidiaries, or any of their
respective Representatives, or otherwise shall be duly and validly transferred
by Destinations or ITTSC or such Subsidiary or Representative to the Company or
the appropriate Subsidiary of the Company.
SECTION 2.07. Transfer and Assumption Documentation. In furtherance of
the contribution, grant, conveyance, assignment, transfer and delivery of the
Destinations Assets, the Destinations Business and the assumption of the
Destinations Liabilities set forth in this Article II, at or prior to the
Distribution Time, (i) the parties hereto shall execute and deliver, and cause
their respective Subsidiaries to execute and deliver, such deeds, bills of sale,
stock powers, certificates of title, assignments of leases and contracts and
other instruments of contribution, grant, conveyance, assignment, transfer and
delivery necessary to evidence such contribution, grant, conveyance, assignment,
transfer and delivery (collectively, the "Conveyancing Instruments") and (ii)
each party hereto or the appropriate Subsidiary of such party shall execute and
deliver such instruments of assumption (together with the Conveyancing
Instruments, the "Conveyancing and Assumption Instruments") as and to the extent
necessary to evidence such assumption.
SECTION 2.08. Intercompany Accounts. All intercompany receivables,
payables and loans (other than receivables, payables and loans otherwise
specifically provided for in any of the Ancillary Agreements or hereunder)
between Destinations, ITTSC or any of their respective Subsidiaries, on the one
hand, and the Company or any of its Subsidiaries (other than Destinations, ITTSC
or any of their respective Subsidiaries), on the other hand, including, without
limitation, in respect of any cash balances, any cash balances representing
deposited checks or drafts for which only a provisional credit has been allowed
or any cash held in any centralized cash management system, shall, as of the
Distribution Time, be settled or otherwise eliminated. Prior to or on the
Distribution Date, Destinations will pay to Educational, by wire transfer of
immediately available funds, an amount equal to the amount in the Cash Invested
With ITT account of ITT Educational as of the date of such payment, including
all accrued interest as of such payment date.
SECTION 2.09. Assignments and Transfers Not Effected Prior to the
Distribution. Anything contained herein to the contrary notwithstanding, (a)
this Agreement shall not constitute an agreement to assign any agreement,
contract, lease, license, sales order, purchase order, open bid or other
commitment if an assignment or attempted assignment of the same without the
consent of a third party would constitute a breach thereof or in any way impair
the rights of Destinations or the Company or any of their respective
Subsidiaries thereunder (any such item being referred to as a "Nonassignable
Contract") and (b) nothing herein shall be deemed to require the transfer of any
Assets or the assumption of any Liabilities which by their terms or operation of
law cannot be transferred. To the extent that any assignments or transfers
contemplated by this Article II shall not have been consummated at or prior to
the Distribution Time, the parties hereto and their respective Subsidiaries
shall cooperate and use reasonable best efforts to obtain any necessary consents
or approvals for the assignment of all Nonassignable Contracts and the transfer
of all Assets and Liabilities contemplated to be assigned or transferred
pursuant to this Article II and shall otherwise cooperate and use
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reasonable best efforts to effect any such assignments or transfers as promptly
following the Distribution Time as shall be practicable. In the event that any
consent required with respect to a Nonassignable Contract is not obtained or an
attempted assignment thereof would be ineffective or would impair either party's
rights under any such Nonassignable Contract, then the party obligated to assign
such Nonassignable Contract (the "Assignor") will promptly pay or cause to be
paid to the assignee thereof (the "Assignee"), when received, all monies
received by the Assignor with respect to any such Nonassignable Contract and in
consideration thereof the Assignee shall pay, perform and discharge on behalf of
the Assignor all the Assignor's debts, liabilities, obligations and commitments
thereunder in a timely manner and in accordance with the terms thereof. In the
event that any such transfer of Assets or Liabilities has not been consummated,
from and after the Distribution Time the party retaining such Asset or Liability
shall hold such Asset in trust for the use and benefit of the party entitled
thereto (at the expense of the party entitled thereto) or retain such Liability
for the account of the party by whom such Liability is to be assumed pursuant
hereto, as the case may be. The parties hereto will take such other action as
may be reasonably requested by the Assignee or party to whom such Asset is to be
transferred, or by whom such Liability is to be assumed, as the case may be, in
order to place such party, insofar as is reasonably possible, in the same
position as would have existed had such Nonassignable Contract been assigned, or
such Asset or Liability been transferred, as contemplated hereby. As and when
any required consent to the assignment of a Nonassignable Contract is obtained
or any such Asset or Liability becomes transferable, such assignment or transfer
shall be effected forthwith. The parties agree that, as of the Distribution
Time, each party hereto shall be deemed to have acquired complete and sole
beneficial ownership over all Assets, together with all rights, powers and
privileges incident thereto, and shall be deemed to have assumed all
Liabilities, and all duties, obligations and responsibilities incident thereto,
which such party is entitled to acquire or required to assume pursuant to the
terms of this Agreement or any of the Ancillary Agreements.
ARTICLE III
THE DISTRIBUTION
SECTION 3.01. Directors and Employees. (a) Directors. Prior to the
Distribution Time, the Board of Directors of the Company and the Company shall
take all necessary action to cause the Board of Directors of the Company to be
constituted, effective as of the Distribution Time, by the individuals
identified on Schedule 3.01(a).
(b) Employees. Destinations shall cause all those individuals who will be
officers of Destinations immediately after the Distribution Time to resign,
effective as of the Distribution Time, from all positions with the Company in
which they serve.
SECTION 3.02. Mechanics of Distribution. (a) Delivery of Shares to
Agent. The Company shall deliver to the Agent the share certificates
representing all the Destinations Common Shares (and the associated Rights) held
by the Company following consummation of the transactions contemplated by
Sections 2.01, 2.02 and 2.03 and shall instruct the Agent to distribute such
Destinations Common Shares (and associated Rights) to holders of record of
shares of Company Common Stock on the Distribution Record Date upon notice from
the Company that the conditions to the obligation of the Company to consummate
the Distribution have been satisfied or waived and that the Agent is authorized
to proceed with the distribution of Destinations Common Shares (and associated
Rights). Immediately following the Distribution, the Company shall not own any
capital stock of Destinations.
(b) The Distribution shall be effected by the distribution to each holder
of record of Company Common Stock, as of the Distribution Record Date, of
certificates representing one Destinations Common Share (together with one
associated Right) for each share of Company Common Stock. The Company shall
instruct the Agent to distribute the Destinations Common Shares as promptly as
practicable after the Distribution Time.
SECTION 3.03. Timing of Distribution. The Board of Directors of the
Company shall, or shall authorize certain officers of the Company to, formally
declare the Distribution and shall authorize the
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Company to pay it at the Distribution Time, subject to the satisfaction or
waiver of the conditions set forth in Article VIII. The Distribution shall be
deemed to be effective upon notification by the Company to the Agent that the
conditions to the obligations of the Company to consummate the Distribution have
been satisfied or waived and that the Agent is authorized to proceed with the
distribution of Destinations Common Shares (and associated Rights).
ARTICLE IV
MUTUAL RELEASE
SECTION 4.01. Mutual Release, etc. Effective as of the Distribution Time
and except as otherwise specifically set forth in this Agreement or any of the
Ancillary Agreements, each of Destinations, on the one hand, and the Company, on
the other hand, on its own behalf and on behalf of each of its respective
Subsidiaries, releases and forever discharges the other and its Subsidiaries,
and its and their respective officers, directors, agents, Affiliates, record and
beneficial security holders (including, without limitation, trustees and
beneficiaries of trusts holding such securities), advisors and Representatives
(in their respective capacities as such) and their respective heirs, executors,
administrators, successors and assigns, of and from all debts, demands, actions,
causes of action, suits, accounts, covenants, contracts, agreements, damages,
claims and Liabilities whatsoever of every name and nature, both in law and in
equity, which the releasing party has or ever had, which arise out of or relate
to events, circumstances or actions taken by such other party, occurring or
failing to occur, or any conditions existing, on or prior to the Distribution
Time; provided, however, that the foregoing general release shall not apply to
(i) any Liabilities (including Liabilities with respect to indemnification)
assumed, transferred, assigned, allocated or arising under this Agreement, the
Educational Distribution Agreement or any of the Ancillary Agreements and shall
not affect any party's right to enforce this Agreement, the Educational
Distribution Agreement or any Ancillary Agreement in accordance with its terms
or (ii) any Liability the release of which would result in the release of any
Person other than a Person released pursuant to this Section 4.01 (provided that
the parties agree not to bring suit or permit any of their Subsidiaries to bring
suit against any Person with respect to any Liability to the extent such Person
would be released with respect to such Liabilities by this Section 4.01 but for
the proviso to this clause (ii)). Each party understands and agrees that, except
as otherwise specifically provided in this Agreement, the Educational
Distribution Agreement or the Ancillary Agreements, neither party is, in this
Agreement or the Ancillary Agreements or otherwise, representing or warranting
in any way as to the Assets, business or Liabilities transferred, assumed or
retained as contemplated hereby or as to any consents or approvals required in
connection with the consummation of the transactions contemplated by this
Agreement, the Educational Distribution Agreement or the Ancillary Agreements,
it being agreed and understood that each party shall take or keep all of its
Assets "as is" and that it shall bear the economic and legal risk that
conveyance of such Assets shall prove to be insufficient or that the title to
any Assets shall be other than good and marketable and free from encumbrances of
any nature whatsoever.
ARTICLE V
INDEMNIFICATION
SECTION 5.01. Indemnification by the Company. Except as otherwise
specifically set forth in any provision of this Agreement or of any Ancillary
Agreement, the Company shall indemnify, defend and hold harmless the
Destinations Indemnitees from and against, and pay or reimburse the Destinations
Indemnitees for, any and all Indemnifiable Losses, as incurred, of the
Destinations Indemnitees arising out of, relating to or resulting from (i) the
Retained Liabilities, the Retained Assets or the Retained Business, (ii) any
Conveyancing and Assumption Instrument delivered after the Distribution Time for
the benefit of Destinations or any of its Subsidiaries and (iii) the breach by
the Company or any of its Subsidiaries of any provision of this Agreement or of
any Ancillary Agreement, in each case, whether such Indemnifiable Losses relate
to or arise from events, occurrences, actions, omissions, facts or circumstances
occurring, existing or asserted at, before or after the Distribution Time.
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SECTION 5.02. Indemnification by Destinations. Except as otherwise
specifically set forth in any provision of this Agreement or of any Ancillary
Agreement, Destinations shall indemnify, defend and hold harmless the Company
Indemnitees from and against, and pay or reimburse the Company Indemnitees for,
any and all Indemnifiable Losses, as incurred, of the Company Indemnitees
arising out of, relating to or resulting from (i) the Destinations Liabilities,
the Destinations Assets or the Destinations Business, (ii) the breach by
Destinations or any of its Subsidiaries of any provision of this Agreement or of
any Ancillary Agreement, (iii) any Conveyancing and Assumption Instrument
delivered for the benefit of the Company or any of its Subsidiaries, (iv) the
1995 Distribution Agreements, (v) the Hilton Litigation, (vi) the BellSouth
Agreement (but only in respect of actions or omissions by the Company prior to
or at the Distribution Time), (vii) the Stock Tender Offer, (viii) the Debt
Tender Offer, (ix) any indebtedness of the Company in existence at the
Distribution Time (other than the Retained Liabilities and the Educational
Liabilities), (x) any transaction identified on Schedule 5.02 hereto, (xi) any
governmental or regulatory filing (including with the SEC and in respect of the
Company's gaming operations) made by the Company or any of its Subsidiaries
prior to the Distribution Time in connection with the Distribution, the
Educational Distribution, the Stock Tender Offer, the Debt Tender Offer, the
Hilton Litigation or any of the transactions identified on Schedule 5.02, (xii)
any agreement to which the Company is a party that is breached by any action of
the Company prior to the Distribution Time (including by the Distribution) and
(xiii) Liabilities of the Company under the Educational Intercompany Agreements,
in each case, whether such Indemnifiable Losses relate to or arise from events,
occurrences, actions, omissions, facts or circumstances occurring, existing or
asserted at, before or after the Distribution Time; provided, however, that
Destinations shall have no obligation to indemnify any of the Company
Indemnitees for any Indemnifiable Losses arising out of or resulting from (x)
the gross negligence or bad faith of the Company after the Distribution Time or
(y) the Company's failure to perform its obligations under any agreement in
accordance with the terms of such agreement after the Distribution Time.
SECTION 5.03. Limitations on Indemnification Obligations. (a) The amount
that any party (an "Indemnifying Party") is or may be required to pay to any
other Person (an "Indemnitee") pursuant to Section 5.01 or Section 5.02, as
applicable, shall be reduced (retroactively or prospectively) by any Insurance
Proceeds or other amounts actually recovered by or on behalf of such Indemnitee
in respect of the related Indemnifiable Loss. If an Indemnitee shall have
received the payment required by this Agreement from an Indemnifying Party in
respect of an Indemnifiable Loss and shall subsequently actually receive
Insurance Proceeds or other amounts in respect of such Indemnifiable Loss, then
such Indemnitee shall pay to such Indemnifying Party a sum equal to the amount
of such Insurance Proceeds or other amounts actually received, up to the
aggregate amount of any payments made by such Indemnifying Party pursuant to
this Agreement in respect of such Indemnifiable Loss.
(b) Destinations shall not have any liability under Section 5.02 for
Indemnifiable Losses unless the aggregate of all such Indemnifiable Losses for
which Destinations would, but for this Section 5.03(b), be liable under Section
5.02 exceeds on a cumulative pre-Tax basis an amount equal to $2.5 million;
provided, however, that this limitation shall not apply to Indemnifiable Losses
arising under clauses (iv) through (xiii) of Section 5.02.
SECTION 5.04. Procedures for Indemnification of Third Party Claims. If a
claim or demand is made against an Indemnitee by any person who is not a party,
or an Affiliate of a party, to this Agreement or any of the Ancillary Agreements
(a "Third Party Claim") as to which such Indemnitee is entitled to
indemnification pursuant to this Agreement, such Indemnitee shall notify the
Indemnifying Party in writing, and in reasonable detail, of the Third Party
Claim promptly (and in any event within 10 business days) after receipt by such
Indemnitee of written notice of the Third Party Claim; provided, however, that
failure to give such notification shall not affect the indemnification provided
hereunder except to the extent that the defense or conduct of such Third Party
Claim by the Indemnifying Party shall have been actually and materially
prejudiced as a result of such failure (except that the Indemnifying Party shall
not be liable for any expenses incurred during the period in which the
Indemnitee failed to give such notice); provided, however, in no event shall
such failure to notify the Indemnifying Party (i) constitute prejudice suffered
by the Indemnifying Party if it has otherwise received notice of the Third Party
Claim or (ii) relieve it from any liability or obligation that it may
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otherwise have to such Indemnitee. Thereafter, the Indemnitee shall deliver to
the Indemnifying Party, promptly (and in any event within 10 business days)
after the Indemnitee's receipt thereof, copies of all notices and documents
(including court papers) received by the Indemnitee relating to the Third Party
Claim.
If a Third Party Claim is made against an Indemnitee, the Indemnifying
Party shall be entitled to participate in the defense thereof and, if it so
chooses and acknowledges in writing its obligation to indemnify the Indemnitee
therefor, to assume the defense thereof with counsel selected by the
Indemnifying Party; provided that such counsel is not reasonably objected to by
the Indemnitee. Destinations shall assume the defense of any Third Party Claim
for which indemnification is available under clauses (iv) through (ix) and (xi)
through (xiii) of Section 5.02 with counsel selected by Destinations. Should the
Indemnifying Party so elect or be obligated to assume the defense of a Third
Party Claim, the Indemnifying Party shall not be liable to the Indemnitee for
legal or other expenses subsequently incurred by the Indemnitee in connection
with the defense thereof. If the Indemnifying Party assumes such defense, the
Indemnitee shall have the right to participate in the defense thereof and to
employ counsel, at its own expense, separate from the counsel employed by the
Indemnifying Party, it being understood that the Indemnifying Party shall have
full control of such defense. The Indemnifying Party shall be liable for the
reasonable fees and expenses of counsel employed by the Indemnitee for any
period during which the Indemnifying Party has failed to assume the defense
thereof.
If the Indemnifying Party so elects or is obligated to assume the defense
of any Third Party Claim, all of the Indemnitees shall cooperate with the
Indemnifying Party in the defense or prosecution thereof. Such cooperation shall
include the retention and (upon the Indemnifying Party's request) the provision
to the Indemnifying Party of records and information which are reasonably
relevant to such Third Party Claim and making employees available on a mutually
convenient basis to provide additional information regarding any material
provided hereunder.
Whether or not the Indemnifying Party shall have assumed the defense of a
Third Party Claim, in no event will the Indemnitee admit any liability with
respect to, or settle, compromise or discharge, such Third Party Claim without
the Indemnifying Party's prior written consent (which consent shall not be
unreasonably withheld); provided, however, that the Indemnitee shall have the
right to settle, compromise or discharge such Third Party Claim without the
consent of the Indemnifying Party if the Indemnitee releases in writing the
Indemnifying Party from its indemnification obligation hereunder with respect to
such Third Party Claim and such settlement, compromise or discharge would not
otherwise adversely affect the Indemnifying Party. If the Indemnifying Party
shall have assumed the defense of a Third Party Claim, the Indemnitee will agree
to any settlement, compromise or discharge of a Third Party Claim that the
Indemnifying Party may recommend and that by its terms does not obligate the
Indemnitee to pay any of the liability in connection with such Third Party
Claim, releases the Indemnitee completely and unconditionally in connection with
such Third Party Claim and does not provide for injunctive or other nonmonetary
relief effecting the Indemnitee.
Notwithstanding the foregoing, the Indemnifying Party shall not be entitled
to assume the defense of any Third Party Claim (and shall be liable for the
reasonable fees and expenses of counsel incurred by the Indemnitee in defending
such Third Party Claim) if the Third Party Claim seeks an order, injunction or
other equitable relief or relief for other than money damages against the
Indemnitee which the Indemnitee reasonably determines, after conferring with its
counsel, cannot be separated from any related claim for money damages. If such
equitable relief or other relief portion of the Third Party Claim can be so
separated from that for money damages, the Indemnifying Party shall be entitled
to assume the defense of the portion relating to money damages.
Notwithstanding the foregoing, the Indemnifying Party shall not be entitled
to assume the defense of any Third Party Claim (and shall be liable for the
reasonable fees and expenses of counsel incurred by the Indemnitee in defending
such Third Party Claim) if the Indemnitee determines in good faith, based on
written opinion of counsel, that the Indemnitee has available to it one or more
defenses or counterclaims that are inconsistent with one or more of those that
may be available to the Indemnifying Party in respect of such Third Party Claim.
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SECTION 5.05. Indemnification Payments. Indemnification required by this
Article V shall be made by periodic payments of the amount thereof during the
course of the investigation, preparation or defense, as and when bills are
received or loss, liability, claim, damage, cost or expense is incurred.
SECTION 5.06. Other Adjustments. (i) The amount of any Indemnifiable Loss
shall be (x) increased to take into account any net Tax cost actually incurred
by the Indemnitee arising from any payments received from the Indemnifying Party
(grossed up for such increase) and (y) reduced to take account of any net Tax
benefit actually realized by the Indemnitee arising from the incurrence or
payment of any such Indemnifiable Loss. In computing the amount of such Tax cost
or Tax benefit, the Indemnitee shall be deemed to recognize all other items of
income, gain, loss, deduction or credit before recognizing any item arising from
the receipt of any payment with respect to an Indemnifiable Loss or the
incurrence or payment of any Indemnifiable Loss.
(ii) In addition to any adjustments required pursuant to Section 5.03(a)
hereof or clause (i) of this Section 5.06, if the amount of any Indemnifiable
Loss shall, at any time subsequent to the payment required by this Agreement, be
reduced by recovery, settlement or otherwise, the amount of such reduction, less
any expenses incurred in connection therewith, shall promptly be repaid by the
Indemnitee to the Indemnifying Party, up to the aggregate amount of any payments
received from such Indemnifying Party pursuant to this Agreement in respect of
such Indemnifiable Loss.
SECTION 5.07. Survival of Indemnities. The obligations of the parties
under this Article V shall survive the sale or other transfer by either of them
of any Assets or businesses or the assignment by any of them of any Liabilities,
with respect to any Indemnifiable Loss of any Indemnitee related to such Assets,
businesses or Liabilities.
ARTICLE VI
COVENANTS
SECTION 6.01. Provision of Corporate Records. (a) Subject to Section
6.01(b), prior to or as promptly as practicable after the Distribution Time the
Company shall deliver to Destinations (at the expense of Destinations) copies of
(i) all minute books and other records of meetings of the Board of Directors,
committees of the Board of Directors, stockholders and security owners of the
Company and its predecessors and their respective Subsidiaries (other than
Subsidiaries engaged in the Directories Business or in the Educational
Business), (ii) all stockholder and security owner records of the Company and
its predecessors and their respective Subsidiaries (other than Subsidiaries
engaged in the Directories Business or in the Educational Business) and (iii)
all other corporate books and records of the Company and its predecessors and
their respective Subsidiaries (other than Subsidiaries engaged in the
Directories Business or in the Educational Business), including, in each case,
all agreements, litigation files and government filings, whether or not active.
From and after the Distribution Time, all such copies shall be the property of
Destinations.
(b) Prior to or as promptly as practicable after the Distribution Time,
Destinations shall deliver to the Company copies of, or, if in the possession of
the Company or any of its Subsidiaries (other than Destinations, ITTSC or any of
their respective Subsidiaries), the Company shall retain, all corporate books
and records and the relevant portions (or copies thereof) of all corporate books
and records relating directly and primarily to the Retained Assets, the Retained
Business, the Retained Liabilities, the Educational Assets, the Educational
Business or the Educational Liabilities, including, in each case, all
agreements, litigation files and government filings, whether or not active. From
and after the Distribution Time, all such books, records and other items or such
copies thereof shall be the property of the Company.
SECTION 6.02. Access to Information. From and after the Distribution Time
each party hereto shall afford to the other and its authorized accountants,
counsel and other designated representatives reasonable access and duplicating
rights (at such other party's expense) during normal business hours and upon
reasonable advance notice, subject to the confidentiality provisions hereof and
any additional appropriate restrictions for classified, privileged or
confidential Information, to all Information within the possession or control of
such party or to which it has access relating to the business, Assets or
Liabilities of such other party
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as they existed prior to the Distribution Time or relating to or arising in
connection with the relationship between the Retained Business or the
Educational Business, on the one hand, and the Destinations Business, on the
other hand, on or prior to the Distribution Time, insofar as such access is
reasonably required for a reasonable purpose. Without limiting the foregoing,
Information may be requested under this Section 6.02 for audit, accounting,
claims, litigation and Tax purposes, as well as for purposes of fulfilling
disclosure and reporting obligations.
SECTION 6.03. Retention of Records. Except as provided in this Agreement
or any of the Ancillary Agreements or as otherwise agreed in writing, if any
Information relating to the business, Assets or Liabilities of a party hereto,
as they existed prior to the Distribution Time or as they are transferred,
assumed or imposed pursuant to this Agreement, is retained by the other party,
the party retaining such Information shall, and shall cause its Subsidiaries to,
retain all such Information in such party's possession or under its control
until such Information is at least ten years old except that if, prior to the
expiration of such period, the party retaining such information wishes to
destroy or dispose of any such Information that is at least three years old,
prior to destroying or disposing of any of such Information, (a) such party
shall provide no less than 30 days' prior written notice to the other party,
specifying the Information proposed to be destroyed or disposed of and (b) if,
prior to the scheduled date for such destruction or disposal, the other party
requests in writing that any of the Information proposed to be destroyed or
disposed of be delivered to such other party, the party proposing to dispose of
or destroy such Information shall arrange for the delivery of the requested
Information to a location specified by, and at the expense of, the requesting
party.
SECTION 6.04. Witness Services. From and after the Distribution Time,
each of the parties hereto shall use commercially reasonable efforts to make
available to each other party hereto, upon reasonable written request, its and
its Subsidiaries' officers, directors, employees and agents as witnesses to the
extent that (i) such persons may reasonably be required in connection with the
prosecution, investigation or defense of any Action or threatened Action in
which the requesting party may from time to time be involved and (ii) there is
no conflict in the Action or threatened Action between the requesting party and
the other party.
SECTION 6.05. Reimbursement. Except to the extent otherwise contemplated
by any Ancillary Agreement, a party providing books and records, access to
Information or witness services to the other party under this Article VI shall
be entitled to receive from the recipient, upon the presentation of invoices
therefor, payments for such amounts, relating to supplies, disbursements and
other out-of-pocket expenses and direct and indirect costs of employees, as may
be reasonably incurred in providing such books and records, access to
Information or witness services.
SECTION 6.06. Confidentiality. (a) Each party hereto shall keep, and
shall cause its Representatives to keep, the other party's Information strictly
confidential and will disclose such Information only to such of its
Representatives who need to know such Information and who agree to be bound by
this Section 6.06 and not to disclose such Information to any other Person or
entity. Without the prior written consent of the other party, each party and its
Representatives shall not disclose the other party's Information to any Person
or entity except as may be required by law or judicial process or in connection
with the enforcement of its rights under this Agreement or any of the Ancillary
Agreements and, in each case, in accordance with this Section 6.06. Each party
agrees to be responsible for any breach of this confidentiality provision by any
of its Representatives.
(b) In the event that either party or any of its Representatives becomes
legally compelled (by deposition, interrogatory, request for documents,
subpoena, civil investigative demand or similar process), or determines that it
is necessary in connection with the enforcement of its rights under this
Agreement or any of the Ancillary Agreements, to disclose all or any part of the
other party's Information, the receiving party or its Representatives shall
promptly notify the other party of such compulsion or determination in writing,
and consult with and assist the other party in seeking a protective order or
request for other appropriate remedy. In the event that such protective order or
other remedy is not obtained or the other party waives compliance with the terms
hereof, such receiving party or its Representatives, as the case may be, shall
disclose only that portion of the Information which, in the opinion of the
receiving party's outside counsel, is legally required to be disclosed, and
shall exercise its reasonable best efforts to assure that confidential treatment
will be accorded
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such Information by the Persons or entities receiving such Information. The
providing party shall be given an opportunity to review the Information prior to
disclosure.
SECTION 6.07. Change of Corporate Name. (a) The Company agrees that at
the first meeting of its stockholders following the Distribution Date (the
"Stockholders Meeting") it shall submit a resolution to its stockholders for
their approval in accordance with the Company's Restated Articles of
Incorporation and Amended and Restated By-laws and the NGCL providing for the
adoption of an amendment to the Company's Restated Articles of Incorporation
(the "Amendment") to effect the change of the Company's corporate name from "ITT
Corporation" to "ITT Information Services, Inc." and, if the Amendment is
approved by stockholders, to duly and promptly file the Amendment and any other
certificates or documents necessary to effect such name change. The Company
agrees to prepare a proxy statement and solicit proxies in support of the
Amendment from its stockholders in accordance with the rules and regulations
under the Exchange Act.
(b) The Company agrees that if the Amendment is not adopted at the
Stockholders Meeting or the corporate name "ITT Corporation" is not changed to
"ITT Information Services, Inc.," the Company shall pay to Destinations an
amount equal to one-half of one percent (1/2 of 1%) of all gross revenues
generated by the Company from December 1, 1997 until the Amendment is duly
adopted and the Company changes its corporate name from "ITT Corporation" to
"ITT Information Services, Inc." (the "Name Fee"). The Name Fee shall be payable
on a monthly basis in arrears on the 20th day of the succeeding month. The
Company shall forward to Destinations, on or before the 20th day of each month,
true statements of all revenues generated by the Company during the preceding
month and shall pay, by wire transfer of immediately available funds to an
account specified by Destinations, the Name Fee payable in connection therewith.
The Company shall keep full, true and accurate books and records containing such
particulars as may be necessary for the purpose of calculating the Name Fee.
Destinations shall have the right to review all such books and records. In the
event that any subsequent adjustment shall be made to the Company's gross
revenues as reported in its audited financial statements, any Name Fee paid by
the Company to Destinations based upon such gross revenues shall be equitably
adjusted in accordance with such adjustment.
(c) Notwithstanding the foregoing, from and after the Distribution Time,
the Company agrees to conduct its business using the name ITT Information
Services, Inc. and shall use the name ITT Corporation only to the extent legally
required.
SECTION 6.08. Further Assurances. In case at any time after the
Distribution Time any further action is reasonably necessary or desirable to
carry out the purposes of this Agreement and the Ancillary Agreements, the
proper officers at such time of each party to this Agreement shall promptly take
all such action. Without limiting the foregoing, the Company and Destinations or
their respective Subsidiaries, as appropriate, shall use commercially reasonable
efforts to obtain all consents and approvals, to enter into all agreements and
to make all filings and applications that may be required or are reasonably
necessary for the consummation of the transactions contemplated by this
Agreement and the Ancillary Agreements, including, without limitation, all
applicable governmental and regulatory filings.
SECTION 6.09. Investment Banking Fee. Destinations agrees to pay to the
Company one-third of the fee ultimately paid by the Company to Deutsche Morgan
Grenfell for services provided by such firm in connection with the investigation
of a proposed transaction between the Company and Seat S.p.A.; provided that
Destinations shall not be liable for more than an aggregate of $1 million under
this Section 6.09.
ARTICLE VII
INSURANCE
SECTION 7.01. Policies and Rights Included Within Assets. (a) The
Retained Assets shall include any and all rights of a named or named additional
insured party under each of the Company Policies set forth on Schedule 7.01(a)
hereto and all predecessor Policies thereto, subject to the terms of such
Policies and any limitations or obligations of the Company contemplated by this
Article VII or Schedule 7.01(a), specifically including rights of indemnity and
the right to be defended by or at the expense of the insurer, with respect to
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all claims, suits, actions, proceedings, injuries, losses, liabilities, damages
and expenses incurred or claimed to have been incurred prior to the Distribution
Time by any Person in or in connection with the conduct of the Retained Business
or the Educational Business or, to the extent any claim is made against the
Company or any of its Subsidiaries, the conduct of the Destinations Business,
and which claims, suits, actions, proceedings, injuries, losses, liabilities,
damages and expenses may arise out of an insured or insurable occurrence under
one or more of such Company Policies; provided, however, that nothing in this
clause shall be deemed to constitute (or to reflect) an assignment of such
Company Policies, or any of them, to the Company.
(b) The Destinations Assets shall include any and all rights of a named or
named additional insured party under each Policy where the Company is a named or
named additional insured party and all predecessor Policies thereto, subject to
the terms of such Policies and any limitations or obligations of Destinations
contemplated by this Article VII or Schedule 7.01(a), specifically including
rights of indemnity and the right to be defended by or at the expense of the
insurer, with respect to all claims, suits, actions, proceedings, injuries,
losses, liabilities, damages and expenses incurred or claimed to have been
incurred prior to the Distribution Time by any Person in or in connection with
the conduct of the Destinations Business or, to the extent any claim is made
against Destinations or any of its Subsidiaries, the conduct of the Retained
Business or the Educational Business, and which claims, suits, actions,
proceedings, injuries, losses, liabilities, damages and expenses may arise out
of an insured or insurable occurrence under either such Policy; provided,
however, that nothing in this clause shall be deemed to constitute (or to
reflect) an assignment of such Policies to Destinations.
SECTION 7.02. Post-Distribution Time Claims. If, subsequent to the
Distribution Time, any Person shall assert a claim against the Company or any of
its Subsidiaries (including, without limitation, where the Company or any of its
Subsidiaries is a joint defendant with other persons) with respect to any claim,
suit, action, proceeding, injury, loss, liability, damage or expense incurred or
claimed to have been incurred prior to the Distribution Time in or in connection
with the conduct of the Retained Business or the Educational Business or, to the
extent any claim is made against the Company or any of its Subsidiaries
(including, without limitation, where the Company or any of its Subsidiaries is
a joint defendant with other persons), the conduct of the Destinations Business,
and which claim, suit, action, proceeding, injury, loss, liability, damage or
expense may arise out of an insured or insurable occurrence under one or more of
the Company Policies, Destinations shall, at the time such claim is asserted, to
the extent any such Policy may require that Insurance Proceeds thereunder be
collected directly by the party against whom the Insured Claim is asserted, be
deemed to designate, without need of further documentation, the Company as the
agent and attorney-in-fact to assert and to collect any related Insurance
Proceeds under such Company Policy, and shall further be deemed to assign,
without need of further documentation, to the Company any and all rights of an
insured party under such Company Policy with respect to such asserted claim,
specifically including rights of indemnity and the right to be defended by or at
the expense of the insurer and the right to any applicable Insurance Proceeds
thereunder; provided, however, that nothing in this Section 7.02 shall be deemed
to constitute (or to reflect) an assignment of the Company Policies, or any of
them, to the Company; provided further, however, that, with respect to those
Company Policies set forth on Schedule 7.01(a) hereto for which the Company has
payment obligations as reflected on such Schedule, the Company and its
Subsidiaries shall only have the rights set forth under this Section 7.02 with
respect to such Company Policies if such payment obligations have been satisfied
by the Company at the relevant time as contemplated by Schedule 7.01(a).
SECTION 7.03. Administration; Other Matters. (a) Administration. Except
as otherwise provided in Section 7.02 hereof, from and after the Distribution
Time, Destinations shall be responsible for (i) Insurance Administration of the
Company Policies and (ii) Claims Administration under such Company Policies with
respect to the Destinations Liabilities, the Retained Liabilities and the
Educational Liabilities; provided that the retention of such responsibilities by
Destinations is in no way intended to limit, inhibit or preclude any right to
insurance coverage for any Insured Claim of a named insured under such Policies
as contemplated by the terms of this Agreement; and provided further that
Destinations' retention of the administrative responsibilities for the Company
Policies shall not relieve the party submitting any Insured Claim of the primary
responsibility for reporting such Insured Claim accurately, completely and in a
timely manner (it being understood that the Company shall report Insured Claims
to the relevant carrier through
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Destinations) or of such party's authority to settle (within the periods
specified in Schedule 7.01(a) in the cases of the Company Policies numbered 1, 3
and 4 on Schedule 7.01(a)) any such Insured Claim. Destinations may discharge
its administrative responsibilities under this Section 7.03 by contracting for
the provision of services by independent parties. Except as contemplated by
Schedule 7.01(a) hereto or this Agreement, each of the parties hereto shall
administer and pay any costs relating to defending its respective Insured Claims
under Company Policies to the extent such defense costs are not covered under
such Policies and shall be responsible for obtaining or reviewing the
appropriateness of releases upon settlement of its respective Insured Claims
under Company Policies. The disbursements, out-of-pocket expenses and direct and
indirect costs of employees or agents of Destinations relating to Claims
Administration and Insurance Administration contemplated by this Section 7.03(a)
shall be the responsibility of Destinations.
(b) Access to Specified Policies. Where Retained Liabilities are
specifically covered under the Company Policies set forth on Schedule 7.01(a)
hereto numbered 20, 21 and 22 for periods prior to the Distribution Time, or
under any such Company Policy covering claims made after the Distribution Time
with respect to an occurrence prior to the Distribution Time, then from and
after the Distribution Time, the Company may claim coverage for Insured Claims
under such Company Policy as and to the extent that such insurance is available
up to the full extent of the applicable limits of liability of such Company
Policy (and may receive any Insurance Proceeds with respect thereto as
contemplated by Section 7.02 or Section 7.03(d) hereof).
(c) Liability Limitation. Except as specifically contemplated by lettered
items under Schedule 7.01(a) or as specifically provided in this Agreement, the
Educational Distribution Agreement or any Ancillary Agreement, the Company and
Destinations shall not be liable to one another for claims not reimbursed by
insurers for any reason not within the control of the Company or Destinations,
as the case may be, including, without limitation, coinsurance provisions,
deductibles, quota share deductibles, exhaustion of aggregates, self-insured
retentions, bankruptcy or insolvency of an insurance carrier, Company Policy
limitations or restrictions, any coverage disputes, any failure to timely claim
by the Company or Destinations or any defect in such claim or its processing.
(d) Allocation of Insurance Proceeds. Except as otherwise provided in
Section 7.02, Insurance Proceeds received with respect to claims, costs and
expenses under the Company Policies shall be paid to Destinations in trust, and
Destinations shall thereafter administer the Company Policies by paying the
Insurance Proceeds, as appropriate, to the Company in accordance with this
Article VII. Payment of the allocable portions of indemnity costs of Insurance
Proceeds resulting from such Policies will be made by Destinations to the
appropriate party upon receipt from the insurance carrier. In the event that the
aggregate limits on any Company Policies are exceeded by the aggregate of
outstanding Insured Claims by the parties hereto, the parties shall agree on an
equitable allocation of Insurance Proceeds based upon their respective bona fide
claims (it being understood that the foregoing shall have no effect on the
obligation of any party under Article V or any Ancillary Agreement). The parties
agree to use commercially reasonable efforts to maximize available coverage
under those Company Policies applicable to it, and to take all commercially
reasonable steps to recover from all other responsible parties in respect of an
Insured Claim to the extent coverage limits under a Company Policy have been
exceeded or would be exceeded as a result of such Insured Claim.
SECTION 7.04. Agreement for Waiver of Conflict and Shared Defense. In the
event that Insured Claims of Destinations and the Company exist relating to the
same occurrence, the parties shall jointly defend and, to the extent it is
reasonable to do so, waive any conflict of interest necessary to the conduct of
the joint defense. Nothing in this Section 7.04 shall be construed to limit or
otherwise alter in any way the obligations of the parties to this Agreement,
including those created by this Agreement, by operation of law or otherwise.
SECTION 7.05. Cooperation. The parties agree to use commercially
reasonable efforts to cooperate with respect to the various insurance matters
contemplated by this Agreement (including, without limitation, in connection
with Policies where Destinations is a named or named additional insured party).
SECTION 7.06. Directors and Officers Liability Insurance. Destinations
agrees that, from and after the Distribution Time to the seventh anniversary of
the Distribution Date, it will maintain in full force and
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effect at its expense the Company Policies numbered 20 and 21 on Schedule
7.01(a) hereto (or, through the purchase of extended discovery, the full
benefits and coverage of such Company Policy) and shall not amend the terms of
such Policy in a manner adverse to any persons covered by such insurance. The
provisions of this Section 7.06 are intended for the benefit of, and shall be
enforceable by, each of the persons covered by the Company Policies numbered 20
and 21 on Schedule 7.01(a) hereto.
ARTICLE VIII
CONDITIONS
SECTION 8.01. Conditions to Obligations of the Company. The obligation of
the Company to consummate the Distribution hereunder shall be subject to the
satisfaction or waiver of each of the following conditions:
(a) All of the transactions contemplated by Article II hereof to occur
prior to the Distribution Time shall have been consummated.
(b) The Destinations Common Shares and the associated Rights to be
issued in the Distribution shall have been approved for listing on the
NYSE, subject only to official notice of issuance.
(c) All filings required to be made prior to the Distribution Time
with, and all consents, approvals and authorizations required to be
obtained prior to the Distribution Time from, any government or any court,
arbitral tribunal, administrative agency or commission or other regulatory
authority, agency or commission, governmental or otherwise, in connection
with the consummation of the Preliminary Transactions, the Distribution and
any other transaction contemplated hereby shall have been made or obtained,
except where the failure to make or obtain the same would not, individually
or in the aggregate, have a material adverse effect on the business,
properties, results of operations or financial condition of the Company,
ITTSC, Destinations or any of their respective Subsidiaries, or on the
ability of any thereof to consummate the transactions contemplated hereby,
or to perform its obligations under this Agreement or any of the Ancillary
Agreements to which it is or will be a party.
(d) Each of the Ancillary Agreements shall have been executed and
delivered by each of the parties thereto and shall be in full force and
effect in accordance with its terms.
(e) Each of the registration statements on Form 10 under the Exchange
Act and the registration statement on Form S-1 under the Securities Act
filed with the SEC by Destinations in connection with the Distribution
shall have become effective under the Exchange Act, no stop order
suspending the effectiveness thereof shall have been issued and no
proceedings for that purpose shall have been initiated by the SEC; and the
Information Statement shall have been or shall be simultaneously mailed to
holders of Destinations Common Stock in accordance with the rules,
regulations and policies of the SEC.
(f) No statute, rule or regulation or temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition shall be in
effect that prohibits consummation of the Preliminary Transactions or the
Distribution.
(g) All conditions to the Stock Tender Offer and the Debt Tender Offer
shall have been satisfied or waived by the Company, and the Stock Tender
Offer and the Debt Tender Offer shall have been consummated prior to or on
the Distribution Date.
(h) The Company shall have received from Cravath, Swaine & Moore,
counsel to the Company, an opinion in form and substance reasonably
satisfactory to the Company, stating that the Distribution and the
Educational Distribution will qualify as tax-free spin-offs under Section
355 of the Code and that an acquisition of the Company, Educational or
Destinations after the Distribution and the Educational Distribution by
Hilton should not adversely affect the tax-free status of the Distribution
and the Educational Distribution. In rendering such opinion, such counsel
shall be entitled to rely upon representations provided by the Company
contained in a certain representation letter.
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<PAGE> 23
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Modification or Amendment. Subject to the terms of Section
9.02 hereof, this Agreement may not be modified or amended except by an
agreement in writing signed by the parties.
SECTION 9.02. Termination. This Agreement (including Article V and
Section 7.06 hereof) may be terminated and the Distribution may be amended,
modified or abandoned at any time prior to the Distribution Time by and in the
sole discretion of the Company without the approval of Destinations or any other
Person. In the event of such termination, no party hereto shall have any
liability of any kind to the other party. After the Distribution Time, this
Agreement may not be terminated except by an agreement in writing signed by the
parties; provided, however, that Article V and Section 7.06 shall not be
terminated or amended after the Distribution Time in respect of the third party
beneficiaries thereto without the consent of such persons.
SECTION 9.03. Waiver; Remedies. The conditions to the Company's
obligation to consummate the Distribution are for the sole benefit of the
Company and may be waived by the Company in whole or in part in its sole
discretion. No delay on the part of the Company or Destinations in exercising
any right, power or privilege hereunder will operate as a waiver thereof, nor
will any waiver on the part of either the Company or Destinations of any right,
power or privilege hereunder operate as a waiver of any other right, power or
privilege hereunder, nor will any single or partial exercise of any right, power
or privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, power or privilege hereunder. Unless otherwise
provided, the rights and remedies herein provided are cumulative and are not
exclusive of any rights or remedies which the parties may otherwise have at law
or in equity.
SECTION 9.04. Counterparts. For the convenience of the parties, this
Agreement may be executed in any number of separate counterparts, each such
counterpart being deemed to be an original instrument, and all such counterparts
shall together constitute the same agreement.
SECTION 9.05. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK
APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE,
WITHOUT REGARD TO THE CONFLICTS OF LAW PRINCIPLES OF SUCH STATE.
SECTION 9.06. Notices. Any notice, request, instruction or other
communication to be given hereunder by any party to another shall be in writing
and shall be deemed to have been duly given (i) on the date of delivery if
delivered personally, or by telefacsimile, upon confirmation of receipt, (ii) on
the first business day following the date of dispatch if delivered by Federal
Express or other nationally reputable next-day courier service, or (iii) on the
third business day following the date of mailing if delivered by registered or
certified mail, return receipt requested, postage prepaid. All notices hereunder
shall be delivered as set forth below, or pursuant to such other instructions as
may be designated in writing by the party to receive such notice.
(a) If to Destinations:
ITT Destinations, Inc.
1330 Avenue of the Americas
New York, New York 10019-5490
Attention: Richard S. Ward, Esq.
Telefacsimile: (212) 258-1463
with copies to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019
Attention: George W. Bilicic, Jr., Esq.
Telefacsimile: (212) 474-3700
20
<PAGE> 24
(b) if to the Company:
ITT World Directories, Inc.
1330 Avenue of the Americas
New York, New York 10019-5490
Attention: Victor M. Berger, Esq.
Telefacsimile: (212) 258-5038
with copies to:
Wilmer, Cutler & Pickering
2445 M Street, N.W.
Washington, D.C. 20037
Attention: Eric R. Markus, Esq.
Telefacsimile: (202) 663-6363
SECTION 9.07. Entire Agreement. This Agreement, the Educational
Distribution Agreement and the Ancillary Agreements (including Exhibits, Annexes
and Schedules hereto and thereto) constitute the entire agreement, and supersede
all other prior agreements, understandings, representations and warranties, both
written and oral, between the parties, with respect to the subject matter hereof
and thereof.
SECTION 9.08. Certain Obligations. Whenever any Ancillary Agreement
requires any of the Subsidiaries of any party to take any action, this Agreement
will be deemed to include an undertaking on the part of such party to cause such
Subsidiary to take such action.
SECTION 9.09. Assignment. This Agreement shall be assignable in whole in
connection with a merger or consolidation or the sale of all or substantially
all the Assets of a party hereto so long as the resulting, surviving or
transferee entity assumes all the obligations of the relevant party hereto by
operation of law or pursuant to an agreement in form and substance reasonably
satisfactory to the other party. Otherwise, this Agreement shall not be
assignable, in whole or in part, directly or indirectly, by any party hereto
without the prior written consent of the other party, and any attempt to assign
any rights or obligations arising under this Agreement without such consent
shall be void.
SECTION 9.10. Captions. The Article, Section and paragraph captions
herein are for convenience of reference only, do not constitute part of this
Agreement and shall not be deemed to limit or otherwise affect any of the
provisions hereof.
SECTION 9.11. Specific Performance. In the event of any actual or
threatened default in, or breach of, any of the terms, conditions and provisions
of this Agreement or any of the Ancillary Agreements, the party or parties who
are or are to be thereby aggrieved shall have the right of specific performance
and injunctive relief giving effect to its or their rights under such agreement,
in addition to any and all other rights and remedies at law or in equity, and
all such rights and remedies shall be cumulative. The parties agree that the
remedies at law for any breach or threatened breach, including monetary damages,
are inadequate compensation for any loss and that any defense in any action for
specific performance that a remedy at law would be adequate is waived.
SECTION 9.12. Severability. If any provision of this Agreement or any of
the Ancillary Agreements or the application thereof to any person or
circumstance is determined by a court of competent jurisdiction to be invalid,
void or unenforceable, the remaining provisions thereof, or the application of
such provision to persons or circumstances other than those as to which it has
been held invalid or unenforceable, shall remain in full force and effect and
shall in no way be affected, impaired or invalidated thereby, so long as the
economic or legal substance of the transactions contemplated thereby is not
affected in any manner adverse to any party. Upon any such determination, the
parties shall negotiate in good faith in an effort to agree upon a suitable and
equitable substitute provision to effect the original intent of the parties.
21
<PAGE> 25
SECTION 9.13. Third Party Beneficiaries. Except as provided in Article V
relating to Indemnitees and in Section 7.06 relating to directors and officers
liability insurance, this Agreement is solely for the benefit of the parties
hereto and their respective Subsidiaries and Affiliates and should not be deemed
to confer upon third parties any remedy, claim, liability, reimbursement, claim
of action or other right in excess of those existing without reference to this
Agreement.
SECTION 9.14. Fees and Expenses of Enforcement. A party in breach of this
Agreement shall, on demand, indemnify and hold harmless the other party hereto
for and against all reasonable out-of-pocket expenses, including, without
limitation, legal fees and expenses, incurred by such other party by reason of
the enforcement and protection of its rights under this Agreement. The payment
of such expenses is in addition to any other relief to which such other party
may be entitled hereunder or otherwise.
SECTION 9.15. Expenses. Except as otherwise set forth in this Agreement
or any Ancillary Agreement, all costs and expenses incurred on or prior to the
Distribution Time (whether or not paid on or prior to the Distribution Time) in
connection with the preparation, execution, delivery and implementation of this
Agreement and any Ancillary Agreement, the Information Statement and the
Distribution and the consummation of the transactions contemplated thereby shall
be charged to and paid by Destinations. Except as otherwise set forth in this
Agreement or any Ancillary Agreement, each party shall bear its own costs and
expenses incurred after the Distribution Time.
SECTION 9.16. Exhibits and Schedules. The Exhibits and Schedules to this
Agreement shall be construed with and as an integral part of this Agreement to
the same extent as if the same had been set forth verbatim herein.
SECTION 9.17. Consent to Jurisdiction. Each of the parties irrevocably
submits to the exclusive jurisdiction of (a) the Supreme Court of the State of
New York, New York County and (b) the United States District Court for the
Southern District of New York, for the purposes of any suit, action or other
proceeding arising out of this Agreement or any transaction contemplated hereby.
Each of the parties agrees to commence any action, suit or proceeding relating
hereto either in the United States District Court for the Southern District of
New York or if such suit, action or other proceeding may not be brought in such
court for jurisdictional reasons, in the Supreme Court of the State of New York,
New York County. Each of the parties further agrees that service of any process,
summons, notice or document by U.S. registered mail to such party's respective
address set forth above shall be effective service of process for any action,
suit or proceeding in New York with respect to any matters to which it has
submitted to jurisdiction in this Section 9.17. Each of the parties irrevocably
and unconditionally waives any objection to the laying of venue of any action,
suit or proceeding arising out of this Agreement or the transactions
contemplated hereby in (i) the Supreme Court of the State of New York, New York
County or (ii) the United States District Court for the Southern District of New
York, and hereby further irrevocably and unconditionally waives and agrees not
to plead or claim in any such court that any such action, suit or proceeding
brought in any such court has been brought in an inconvenient forum.
SECTION 9.18. Ancillary Agreements. This Agreement is not intended to
address, and should not be interpreted to address, the matters specifically and
expressly covered by the Ancillary Agreements.
SECTION 9.19. Survival of Agreements. Except as otherwise contemplated by
this Agreement, all covenants and agreements of the parties contained in this
Agreement shall survive the Distribution Time.
SECTION 9.20. Successors and Assigns. The provisions of this Agreement
shall be binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors and permitted assigns.
22
<PAGE> 26
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the day and year first above written.
ITT CORPORATION,
by
------------------------------------
Name: Robert A. Bowman
Title: President and Chief Operating
Officer
ITT DESTINATIONS, INC.,
by
------------------------------------
Name: Richard S. Ward
Title: Executive Vice President and
General Counsel
23
<PAGE> 27
EXHIBIT A
EMPLOYEE BENEFITS SERVICES AND LIABILITIES AGREEMENT
This EMPLOYEE BENEFITS SERVICES AND LIABILITIES AGREEMENT (the "Benefits
Agreement") dated as of , 1997 by and among ITT CORPORATION, a Nevada
corporation ("ITT"), and ITT Destinations, Inc., a Nevada corporation
("Destinations"), and ITT Educational Services, Inc., a Delaware corporation
("ESI") pursuant to the respective agreements and plans of distribution each
dated as of [ ], 1997 (the "Distribution Agreements") between ITT and
Destinations on the one hand (the "Destinations Distribution"), and ITT and ESI
on the other hand (the "ESI Distribution")(collectively, the "Distributions").
WHEREAS, the Board of Directors of ITT has determined that it is
appropriate and desirable to distribute to the holders of shares of common
stock, par value $1.00 per share, of ITT (the "ITT Common Stock") all of the
outstanding shares of common stock of Destinations (the "Destinations Common
Stock") and all of the outstanding shares of common stock of ESI held by ITT
(the "ESI Common Stock"); and
WHEREAS, each of ITT, ESI and Destinations has determined that it is
necessary and desirable to allocate and assign responsibility for certain
employee benefit liabilities in respect of the activities of the businesses of
such entities on and following the Distribution Dates (as defined herein).
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, ITT, ESI and Destinations agree as follows:
1. PURPOSE AND DEFINITIONS.
a. Purpose. The purpose of this Benefits Agreement is to set forth the
agreement of ITT, Destinations and ESI regarding the allocation and assignment
of the respective rights and obligations of ITT, Destinations and ESI before and
after the Distributions with respect to their current and former employees and
with respect to benefits and compensation matters pertaining thereto.
b. Definitions. In addition to the terms defined in the text hereof, as
used in this Benefits Agreement, the following terms shall have the following
meanings (applicable to both the singular and plural forms of the terms
defined):
Applicable Distribution Date: means (A) with respect to,
respectively, ITT and ITT Individuals and Destinations and Destinations
Individuals, the Destinations Distribution Date, and (B) with respect to
ESI and ESI Individuals, the Earlier Distribution Date.
Code: means the Internal Revenue Code of 1986, as amended.
Destinations Distribution Date: means the date as of which
Destinations Common Stock is distributed by ITT to shareholders of ITT.
Destinations Employee: means an individual who is employed (including
an individual who is not actively employed due to an approved disability,
lay-off with right of recall or an authorized leave of absence (or who is
receiving salary continuation severance payments)) by Destinations or any
of Destinations' subsidiaries immediately prior to the Destinations
Distribution. The term "Destinations Employee" will also include all
headquarters staff employees of ITT immediately prior to the Destinations
Distribution other than those whose names are set forth on Schedule A
hereto.
Destinations Former Employee: means a former headquarters staff
employee of ITT (other than an ITT Former Employee) or an employee of
Destinations or any of Destinations' subsidiaries whose employment
terminated prior to the Destinations Distribution.
Destinations Individual: means each Destinations Employee and
Destinations Former Employee.
Distribution Dates: means the Destinations Distribution Date and ESI
Distribution Date.
<PAGE> 28
Earlier Distribution Date: means the ESI Distribution Date or the
Destinations Distribution Date, whichever first occurs.
ERISA: means the Employee Retirement Income Security Act of 1974, as
amended.
ESI Distribution Date: means the date as of which ESI Common Stock is
distributed by ITT to shareholders of ITT.
ESI Employee: means an individual who is employed (including an
individual who is not actively employed due to an approved disability,
lay-off with right of recall or an authorized leave of absence (or who is
receiving salary continuation severance payments)) by ESI or any of ESI's
subsidiaries immediately prior to the ESI Distribution Date.
ESI Former Employee: means a former employee of ESI whose employment
with ESI terminated prior to the ESI Distribution Date.
ESI Individual: means each ESI Employee and ESI Former Employee.
ESI Stand-Alone Plan: means each benefit or compensation plan,
program, policy or arrangement maintained for the exclusive benefit of all
or some ESI Individuals including, but not limited to, those set forth on
Schedule B hereto.
ITT Employee: means an individual who is employed (including an
individual who is not actively employed due to an approved disability,
lay-off with right of recall or an authorized leave of absence (or who is
receiving salary continuation severance payments)) by WD or any of WD's
subsidiaries immediately prior to the Destinations Distribution. The term
"ITT Employee" will also include those headquarters staff employees of ITT
immediately prior to the Destinations Distribution whose principal duties
relate to WD and its subsidiaries and whose names are set forth on Schedule
A hereto.
ITT Former Employee: means a former employee of WD or its
subsidiaries whose employment with WD or any of WD's subsidiaries
terminated prior to the Destinations Distribution.
ITT Individual: means each ITT Employee and ITT Former Employee.
1995 Agreement: means the Employee Benefits Services and Liability
Agreement, dated as of November 1, 1995, among ITT Corporation, a Delaware
corporation ("Industries"), ITT Destinations, Inc., a Nevada corporation
(the predecessor to ITT), and ITT Hartford Group, Inc., a Delaware
corporation ("Hartford").
1995 Agreement Novation: means the amendment of the 1995 Agreement
pursuant to which the parties thereto agree that, upon the Destinations
Distribution, (i) Destinations will become the successor to ITT's rights
and obligations under the 1995 Agreement, (ii) with respect to its
obligations under Section 1 of the 1995 Agreement, Industries will continue
to credit future service of ITT Employees, ESI Employees and Destinations
Employees for vesting and eligibility purposes under the ITT Industries
Salaried Retirement Plan, (iii) Industries and Hartford will release ITT
and ESI from the guarantees and indemnities which would otherwise be
provided by ITT and ESI to Industries and Hartford under Section 3(c) of
the 1995 Agreement to the extent that either ITT and/or ESI would be deemed
a successor to ITT under the 1995 Agreement, and (iv) Industries will
indemnify Destinations for pension liabilities retained by Industries under
the 1995 Agreement with respect to ITT Individuals, ESI Individuals and
Destinations Individuals.
Retiree-Eligible: means (A) an ITT Individual or Destinations
Individual who, as of the Destinations Distribution Date, and (B) an ESI
Individual who, as of the ESI Distribution Date, would have satisfied the
eligibility requirements for post-retirement medical benefits under ITT's
medical plan for salaried retirees (the "Destinations -- Assumed Salaried
Retiree Medical Plan") if he or she were then to retire.
WD: means ITT World Directories, Inc., a Delaware corporation, and a
wholly-owned subsidiary of ITT.
2
<PAGE> 29
WD Stand-Alone Plan: means each benefit or compensation plan,
program, policy or arrangement maintained for the exclusive benefit of all
or some ITT Individuals (including, but not limited to, those plans,
programs, policies or arrangements set forth on Schedule C hereto).
2. EMPLOYEES. Effective as of the Applicable Distribution Date, (a) ITT
Employees shall remain employees of ITT or its subsidiaries and ESI Employees
shall remain employees of ESI, and (b) Destinations Employees shall remain or
become (as applicable) employees of Destinations or its subsidiaries. If the
Destinations Distribution Date occurs prior to the ESI Distribution Date, ESI
Employees and employees hired on or after the Destinations Distribution Date but
prior to the ESI Distribution Date shall remain employees of ESI. Nothing
contained in this Section 2 shall confer on any ITT Employee, any Destinations
Employee or any ESI Employee any right to continued employment, whether before
or after the Applicable Distribution Date.
3. GENERAL PRINCIPLES. Except as otherwise provided in this Benefits
Agreement, as of the Applicable Distribution Date:
a. Except as expressly provided herein, Destinations or its subsidiaries
will assume or maintain sponsorship of, and all liability under, all employee
benefit plans (as such term is defined in Section 3(3) of ERISA), and all other
plans, programs, policies and arrangements sponsored by ITT and its subsidiaries
(including all funding vehicles), which include (but are not limited to) those
set forth on Schedule D hereto. ITT will assume, or one of its subsidiaries will
retain, sponsorship of all WD Stand-Alone Plans and any plans, programs,
policies and arrangements of ITT and its subsidiaries (other than those set
forth on Schedule D hereto) that predominantly cover ITT Individuals. ESI will
retain or assume (as applicable) sponsorship of all ESI Stand-Alone Plans and
any plans, programs, policies and arrangements (other than those set forth on
Schedule D hereto), if any, that predominantly cover ESI Individuals.
b. Except as otherwise specifically provided herein, ITT, ESI and
Destinations each will have in effect, as of the Applicable Distribution Date,
benefit and compensation plans, programs, policies and arrangements for ITT
Individuals, ESI Individuals and Destinations Individuals, respectively, which
are comparable, in the aggregate, to those made available to such individuals
immediately prior to the Applicable Distribution Date.
c. ITT, Destinations and ESI each will be allocated liability for
employment-related claims regardless of when filed (including, but not limited
to, harassment and discrimination) based upon whether the claimant was at the
time the claim arose, respectively, an ITT Individual, Destinations Individual
or ESI Individual.
d. Except as specifically provided herein, as of the Applicable
Distribution Date, all benefit liabilities relating to (i) ITT Former Employees
which presently are ITT or WD liabilities will be retained by ITT, (ii) ESI
Former Employees which presently are ITT or ESI liabilities will be retained or
assumed by ESI, as applicable, and (iii) Destinations Former Employees which
presently are ITT liabilities will be assumed by Destinations.
e. Except to the extent recognition of past service credit would result in
a duplication of benefits, ITT, Destinations and ESI each will give past service
credit under its applicable benefit plans, programs, policies and arrangements
to participants therein to the extent their past service credit was recognized
under the comparable benefit plan, program, policy or arrangement of ITT or its
subsidiaries in which the individual participated immediately prior to the
Applicable Distribution Date.
f. Unless otherwise specifically provided herein, no provision of this
Benefits Agreement will be construed as requiring Destinations, ESI or ITT to
continue any plan, program, policy or arrangement for any period of time after
the Distributions.
g. Subject to the execution of the 1995 Agreement Novation, Destinations
will assume all of the rights and obligations of ITT under the 1995 Agreement.
ITT will use its reasonable best efforts prior to the Destinations Distribution
Date to cause the 1995 Agreement Novation to be executed by ITT, Industries and
Hartford and, if such 1995 Agreement Novation is not executed prior to the
Destinations Distribution Date, the parties hereto shall use their reasonable
best efforts to cause such 1995 Novation Agreement to be executed as soon as
practicable thereafter. If the 1995 Agreement Novation is not executed, ITT
(and, to the
3
<PAGE> 30
extent applicable, its subsidiaries following both of the Distributions) will
retain all of the rights and obligations of ITT under the 1995 Agreement, but as
between ITT and Destinations, Destinations shall indemnify and pay or reimburse
ITT for any and all losses, liabilities, claims, damages, demands, costs or
expenses (including without limitation, reasonable attorneys' fees and any and
all out-of-pocket expenses) incurred by ITT arising out of, by reason of, or
otherwise in connection with the 1995 Agreement. Destinations will have
subrogation rights from ITT against Industries and Hartford to the extent it
make any payments to ITT in accordance with this Section 3(g). ESI and ITT will
provide such information to Destinations as shall be reasonably necessary for
Destinations to exercise its rights and privileges and to satisfy its
obligations under the 1995 Agreement and/or the 1995 Agreement Novation.
h. Each party hereto will amend its respective plans, programs, policies
and arrangements (whether newly established, assumed or retained) to the extent
necessary to reflect the provisions of this Benefits Agreement.
i. Any ITT Employee, ESI Employee or Destinations Employee who continues in
employment with ITT, ESI or Destinations or any related subsidiaries following
the Applicable Distribution Date shall not be deemed to have terminated
employment solely as a result of the Destinations Distribution or ESI
Distribution, as applicable, for purposes of any benefit or compensation plan,
program, policy or arrangement maintained by ITT, ESI or Destinations.
4. PENSION PLANS -- QUALIFIED RETIREMENT PLAN AND EXCESS PENSION PLANS.
a. Qualified Pension Plans/Transfer of Assets and Liabilities.
i. Effective as of the Destinations Distribution Date, Destinations
will assume sponsorship of the ITT Corporation Salaried Retirement Plan
(the "Destinations-Assumed Retirement Plan") and its related trust (the
"Destinations-Assumed Retirement Plan Trust"). ITT Employees will cease to
accrue further benefits under the Destinations-Assumed Retirement Plan as
of the Destinations Distribution Date and ESI Employees will cease to
accrue further benefits under the Destinations-Assumed Retirement Plan as
of the Earlier Distribution Date. ITT will, before the Applicable
Distribution Date, provide any notices that may be required with respect to
such cessation under Section 204(h) of ERISA.
ii. Effective as of the Applicable Distribution Date, ITT and ESI each
will establish a new defined benefit plan intended to be tax-qualified
under Section 401(a) of the Code for the benefit of ITT Employees and ESI
Employees, respectively (the "ITT Retirement Plan" and the "ESI Retirement
Plan"). The ESI Retirement Plan will recognize all service for benefit
eligibility and vesting purposes rendered by such ESI Employees including
service prior to the Applicable Distribution Date (such service prior to
such Distribution Date to be as determined under the Destinations-Assumed
Retirement Plan as in effect on such Distribution Date). The ITT Retirement
Plan will (A) recognize all service for benefit eligibility, vesting and
benefit accrual purposes rendered by such ITT Employees prior to the
Destinations Distribution Date (such service prior to the Destinations
Distribution Date to be as determined under the Destinations-Assumed
Retirement Plan as in effect on the Destinations Distribution Date) and all
service for benefit eligibility and vesting purposes on and after the
Distribution Date and (B) provide an offset of any benefit payable with
respect to service recognized under a qualified defined benefit plan
maintained by Industries or Hartford (or one of their respective
subsidiaries) under the 1995 Agreement covering the same period of service.
iii. Upon receipt by ITT of a favorable determination letter from the
Internal Revenue Service to the effect that the ITT Retirement Plan meets
the requirements for qualification under Section 401(a) of the Code (or an
opinion of counsel for ITT to such effect in a form satisfactory to
Destinations), Destinations shall cause to be transferred from the
Destinations-Assumed Retirement Plan Trust to the trust established under
the ITT Retirement Plan assets having a fair market value equal to the
aggregate present value of the accrued benefit obligation attributable to
ITT Employees under the Destinations-Assumed Retirement Plan, calculated as
of the Destinations Distribution Date on a plan termination basis in
accordance with actuarial assumptions and procedures consistent with Code
sec. 414(l), plus interest from the Destinations Distribution Date to the
date of such transfer at the interest yield reflected
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<PAGE> 31
in the three-month Treasury Bill Auction average, as published in the
Federal Reserve Statistical Release H.15 for the last such auction
immediately prior to the Destinations Distribution Date, and reduced by
distributions to ITT Employees from the Destinations-Assumed Retirement
Plan during the period commencing on the Destinations Distribution Date and
ending on the date of such transfer. Such calculation shall be made by
Towers Perrin, the enrolled actuary currently retained to value the
Destinations-Assumed Retirement Plan ("Pension Actuary"). Upon such
transfer of assets, the ITT Retirement Plan will assume the liabilities
related to the assets transferred to it.
iv. Destinations will retain all assets and accrued liabilities under
the Destinations-Assumed Retirement Plan attributable to (A) ESI
Individuals, (B) ITT Former Employees for benefits accrued prior to the
Earlier Distribution Date and (C) Destinations Individuals. Under the
Destinations-Assumed Retirement Plan, Destinations will (A) continue to
credit service (using the eligibility service definition set forth in the
Destinations-Assumed Retirement Plan as in effect on the Destinations
Distribution Date) of ESI Employees with ESI following the Destinations
Distribution Date solely for benefit eligibility and vesting purposes (but
not for benefit accrual purposes), and (B) not recognize any compensation
paid to ESI Employees on and after the Earlier Distribution Date.
Destinations will provide the benefits to ESI Individuals which had accrued
as of the Earlier Distribution Date under the Destinations-Assumed
Retirement Plan upon their retirement or other termination of employment
with ESI or its subsidiaries in accordance with the terms of the
Destinations-Assumed Retirement Plan.
b. Excess Pension Plans.
i. Except as provided below in this Section 4.b., effective as of the
Destinations Distribution Date, Destinations will assume all liabilities
accrued as of the Destinations Distribution Date under the ITT Corporation
Excess Pension Plan I-A, ITT Corporation Excess Pension Plan I-B and ITT
Corporation Excess Pension Plan II (the "Excess Pension Plans") and assets
under the grantor trust established with respect thereto by ITT with
Bankers Trust Company as trustee (the "Excess Pension Trust").
ii. Effective as of the Earlier Distribution Date, ESI will establish
a new excess pension plan and grantor trust. The new excess pension plan
established by ESI for ESI Employees shall recognize all service for
benefit eligibility, vesting and benefit accrual purposes rendered by such
ESI Employees including service prior to the Earlier Distribution Date
(such service prior to the Earlier Distribution Date to be as determined
under the Excess Pension Plans as in effect on the Earlier Distribution
Date). ITT may establish, as of the Destinations Distribution Date, a new
excess pension plan and grantor trust. The new excess pension plan, if any,
established by ITT for ITT Employees shall (A) recognize all service for
benefit eligibility, vesting and benefit accrual purposes rendered by such
ITT Employees including service prior to the Destinations Distribution Date
(such service prior to the Destinations Distribution Date to be as
determined under the Excess Pension Plans as in effect on the Destinations
Distribution Date) and (B) provide for an offset of any benefit payable
with respect to service recognized under the Destinations-Assumed Excess
Pension Plans covering the same period of service.
iii. Destinations will retain all assets and accrued liabilities under
the Excess Pension Plans attributable to Destinations Individuals. Subject
to the execution of the 1995 Agreement Novation, Destinations will retain
all assets and accrued liabilities under the Excess Pension Plans
attributable to ITT Individuals and will continue to credit service of ITT
Employees with ITT or its successors following the Destinations
Distribution Date solely for vesting purposes (but not for early retirement
benefit eligibility or benefit accrual purposes) under the Excess Pension
Plans. Destinations will provide the benefits to ITT Individuals which have
accrued as of the Destinations Distribution Date under the Excess Pension
Plans upon their retirement or other termination of employment with ITT or
its subsidiaries in accordance with the respective terms of the Excess
Pension Plans.
iv. As soon as practicable following the Earlier Distribution Date,
Destinations or ITT, as applicable (whichever entity is then sponsor of the
Excess Pension Plans), will cause to be transferred from the Excess Pension
Trusts to one or more grantor trusts to be established by ESI, assets on
behalf of ESI Individuals. The determination of the amount of assets to be
transferred in respect of such accrued benefit obligations shall be
performed by the Pension Actuary and shall be equal to the reserve set
forth
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on the books of ITT attributable to ESI Individuals as of the prior
year-end adjusted for accruals up to the Earlier Distribution Date.
v. Effective upon the transfer of assets from the Excess Pension
Trusts to the excess pension trust established by ESI, as described in
Section 4.b.iv. above, ESI will assume all liabilities accrued under the
Excess Pension Plans in respect of ESI Individuals. The transfer of assets
from the Excess Pension Plan Trust to a newly established plan and grantor
trust of ESI will be contingent upon waiver, to the extent deemed necessary
by ITT or Destinations, as applicable (whichever entity is then sponsor of
such plan) by ESI Individuals who are participants in the Excess Pension
Plans of their respective rights under the Excess Pension Plans and Excess
Pension Trust.
vi. If the 1995 Agreement Novation is not executed by December 31,
1997, the foregoing provisions of Section 4.b.iv. and 4.b.v. shall be
extended to also apply to ITT and ITT Individuals such that ITT will accept
a transfer of assets and liabilities from the Excess Pension Plans and
Excess Pension Trust attributable to ITT Individuals. If ITT files for
bankruptcy protection under chapter 7 of the United States Bankruptcy Code
(or any similar state bankruptcy law) at any time within five years
following the Destinations Distribution Date, Destinations will be
contingently liable for the benefits accrued under the Excess Pension Plans
by ITT Individuals from December 19, 1995, through the Destinations
Distribution Date (the "Interim Liabilities") to the extent that any
portion of the Interim Liabilities are not fully paid by ITT, Industries or
Hartford. Destinations will have subrogation rights against such parties to
the extent that it makes any payments to or in respect of ITT Individuals
as a result of such contingent liability.
5. SAVINGS PLAN.
a. Qualified 401(k) Plan.
i. Effective on the Destinations Distribution Date, Destinations will
assume sponsorship of the ITT 401(k) Retirement Savings Plan (the "401(k)
Plan") and related trust and will retain liability for benefits of
Destinations Individuals, ITT Former Employees and ESI Former Employees.
ii. Effective as of the Earlier Distribution Date, the 401(k) Plan
shall be converted by ITT or Destinations, as applicable (whichever entity
is then sponsor of such plan), into a multiple employer plan within the
meaning of Section 413(c) of the Code and such plan shall be maintained as
a multiple employer plan and shall accept contributions from ITT, ESI and
Destinations, and their respective employees, until such time as the
transfers described in Section 5.a.iv. hereof are effectuated, but in no
event later than December 31, 1997; it being understood that certain
limitations on the investment and reinvestment of employer securities may
be imposed by Bankers Trust Company, as trustee of the 401(k) Plan during
the period that the 401(k) Plan is maintained as a multiple employer plan.
iii. Effective no later than January 1, 1998, ITT and ESI each will
establish, or cause to be established, a new qualified 401(k) plan and
related trust to be sponsored, respectively, by ITT and ESI.
iv. Upon receipt by ITT and ESI of favorable determination letters
from the Internal Revenue Service to the effect that their respective newly
established plan meets the requirements for qualification under Section
401(a) of the Code (or an opinion of counsel for ITT and ESI, as
applicable, to such effect in a form satisfactory to Destinations),
Destinations will cause to be transferred to the trusts established under
the newly-established 401(k) plans sponsored by ITT and ESI, the respective
account balances (including any loans and qualified domestic relations
orders pertaining thereto) of ITT Employees and the ESI Employees, and will
cause to be transferred the funds related thereto to the trusts established
under such plans. Upon such transfer, ITT and ESI will assume the related
liabilities.
b. Excess Savings Plan.
i. Except as provided below in this Section 5.b, effective as of the
Destinations Distribution Date, Destinations will assume sponsorship of the
ITT Corporation Excess Savings Plan (the "Excess Savings Plan") and the
related grantor trust established with Bankers Trust Company as trustee
(the "Excess Savings Plan Trust").
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<PAGE> 33
ii. Effective as of the Earlier Distribution Date, ESI will establish,
or cause to be established, a new excess savings plan ("ESI Excess Savings
Plan") and related grantor trust ("ESI Excess Savings Plan Trust") to be
sponsored by ESI. Effective as of the Destinations Distribution Date, ITT
may establish, or cause to be established, a new excess savings plan and
related grantor trust to be sponsored by ITT.
iii. Destinations will retain all assets and accrued liabilities under
the Excess Savings Plan attributable to Destinations Individuals and ITT
Individuals and the hypothetical accounts attributable to such individuals
will continue to be credited with interest in accordance with such plan.
Destinations will continue to credit service of ITT Employees with ITT or
its successors following the Destinations Distribution Date solely for
vesting purposes under the Excess Savings Plan. Destinations will pay the
value of the hypothetical accounts under the Excess Savings Plan, including
earnings thereon in accordance with the terms of such plan, to ITT
Individuals who, on or before the Destinations Distribution Date,
participated in the Excess Savings Plan upon their retirement or other
termination of employment with ITT or its subsidiaries in accordance with
the terms of such plan.
iv. As soon as practicable following the Earlier Distribution Date,
ITT or Destinations, as applicable (whichever entity is then sponsor of the
Excess Savings Plan), will cause to be transferred to the ESI Excess
Savings Plan Trust, assets equal to the hypothetical account balances of
ESI Individuals as determined by the recordkeeper of the Excess Savings
Plan as of the Earlier Distribution Date.
v. Effective upon the transfer of assets from the Excess Savings Plan
Trust to the ESI Excess Savings Plan Trust, as described in Section 5.b.iv.
above, ESI will assume all liabilities accrued under the Excess Savings
Plan in respect of ESI Individuals. The transfer of assets from the Excess
Savings Plan Trust to the ESI Excess Savings Plan and the ESI Excess
Savings Trust will be contingent upon waiver, to the extent deemed
necessary by ITT or Destinations, as applicable (whichever entity is then
sponsor of the Excess Savings Plan) by ESI Individuals who are participants
in the Excess Savings Plan of their respective rights under the Excess
Savings Plan and the Excess Savings Plan Trust.
6. DEFERRED COMPENSATION PLAN.
a. Effective as of the Destinations Distribution Date, Destinations will
assume sponsorship of, and, except as provided in Section 6.b. below, be solely
responsible for all liabilities under, the ITT Corporation Deferred Compensation
Plan (the "Deferred Compensation Plan").
b. Effective as of the Destinations Distribution Date, Destinations will
assume all company-owned life insurance policies which were purchased by ITT at
any time prior to the Destinations Distribution Date in order to finance the
obligations arising under the Deferred Compensation Plan. As of the Earlier
Distribution Date, ESI will assume liability for the obligation under the
Deferred Compensation Plan relating to ESI Employees and Destinations will
transfer assets (which could include cash through settlement of the inter-
company account) to ESI equal to this obligation.
7. MEDICAL AND LIFE INSURANCE PLANS.
a. Pre-Retirement Medical.
i. Effective as of the Destinations Distribution Date, Destinations
will assume sponsorship of all ITT medical (including dental) plans and
arrangements for Destinations Employees, ITT Employees and ESI Employees
(except WD Stand-Alone Plans and ESI Stand-Alone Plans) (the "ITT Health
Plans").
ii. ITT and ESI each will be required to establish medical plans and
arrangements, respectively, for ITT Employees and ESI Employees and their
eligible dependents, such plans to be in effect as of the Applicable
Distribution Date. To the extent permitted under any applicable indemnity,
health maintenance organization or stop-loss contracts, the newly
established ITT and ESI health plans will waive waiting periods,
pre-existing conditions to the extent waived or satisfied under the
applicable ITT Health Plan, and credit deductible/copayments satisfied by
ITT Employees and ESI Employees and their eligible dependents as of the
Applicable Distribution Date. If requested by ITT or ESI, Destinations will
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<PAGE> 34
assist in the development of appropriate administrative procedures to be
implemented in connection with ITT's and ESI's newly established medical
plans and arrangements.
iii. Destinations will assume liability for all eligible claims and
expenses incurred prior to the respective required establishment dates set
forth in Section 7.a.ii. hereof by Destinations Individuals, ITT
Individuals and their respective eligible dependents under the ITT Health
Plans provided that such claims are timely filed in accordance with the
terms of the ITT Health Plans. Destinations will assume or retain
responsibility for continuation health coverage under ITT Health Plans
under ERISA Section 601 et. seq. with respect to ITT Former Employees and
their dependents. ITT shall retain responsibility for such continuation
coverage with respect to dependents of ITT Employees.
iv. ESI will be responsible for all claims and expenses under the ITT
Health Plans incurred by ESI Individuals whether prior to or on or
following the ESI Distribution Date. ESI shall assume responsibility for
continuation coverage under ERISA Section 601 et. seq. with respect to ESI
Individuals. As soon as possible after the ESI Distribution Date,
Destinations will settle up with ESI with respect to claims incurred prior
to the ESI Distribution Date in the manner normally used in connection with
such settlements with respect to ITT and ESI. For administrative purposes,
the end of the month preceding the ESI Distribution Date may be used in
lieu of the ESI Distribution Date in this Section 7.a.iv. As of the
Applicable Distribution Date, ITT will transfer to ESI the reserves set
forth on the books of ITT for medical benefits for disabled ESI
Individuals.
b. Post-Retirement Medical.
i. As of the Destinations Distribution Date, Destinations will assume
sponsorship of, and liability for, all post-retirement medical obligations
under the ITT Salaried Retiree Medical Plan for Destinations Individuals,
ITT Former Employees (except as provided in section 7.b.iii. below) and ESI
Former Employees unless such liabilities were allocated to a party, other
than ITT, under the 1995 Agreement.
ii. As of the Applicable Distribution Date, ITT will retain liability
for, and ESI will assume liability for, all future post-retirement medical
plan and arrangement obligations attributable to ITT Employees and ESI
Employees, respectively, including those ITT Employees and ESI Employees
who are Retiree-Eligible.
iii. It is expressly understood that the medical plan in effect for
ITT Individuals who are or were employed by WD or any of WD's subsidiaries
in Puerto Rico is a WD Stand-Alone Plan and thus ITT will retain liability
for all obligations thereunder, including to ITT Former Employees.
iv. If ITT files for bankruptcy protection under chapter 7 of the
United States Bankruptcy Code (or any similar state bankruptcy law) at any
time within five years following the Destinations Distribution Date and, as
a result thereof, ITT is unable to provide the post-retirement medical
benefits to ITT Employees who are Retiree-Eligible (and their eligible
dependents), then Destinations will be secondarily liable for providing
such post-retirement medical benefits for any such ITT Employee (and his or
her eligible dependents) provided that (A) Destinations is then providing
such post-retirement benefits to its retirees and (B) ITT has provided
continuous post-retirement medical benefits to its retirees comparable to
those provided by Destinations to its retirees from the date of the
Destinations Distribution Date through the date it has filed for bankruptcy
protection. For purposes hereof, Destinations' obligations shall not
pertain to any coverage required to be provided by any party, other than
ITT (then known as ITT Destinations, Inc.), to the 1995 Agreement. ITT, or
any successor thereto, will indemnify Destinations for any amount paid by
Destinations to or in respect of ITT Employees (and their eligible
dependents) under this Section 7.b.iv. As of the Applicable Distribution
Date, ITT will transfer to ESI the reserves set forth on the books of ITT
for medical benefits for disabled ESI Individuals.
v. If within five years of the Destinations Distribution Date, ITT
proves, to the reasonable satisfaction of Destinations, that as a result of
a reduction of employment in the number of ITT Employees, ITT is unable to
obtain or continue a group medical policy providing post-retirement medical
benefits to then retired ITT Employees who are Retiree-Eligible (and their
eligible dependents), Destinations will use its best efforts to include
such individuals under its group policy provided that the
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<PAGE> 35
conditions in clauses (A) and (B) of Section 7.b.iv are satisfied except
that the date on which it is unable to obtain or continue a group policy
shall be substituted for the date on which it filed for bankruptcy
protection in clause (B).
c. Retiree Life.
i. As of the Destinations Distribution Date, Destinations will assume
liability for retiree life insurance coverage for Destinations Individuals
and ITT Former Employees and ITT will assume liability for such insurance
coverage for ITT Employees and, as of the Earlier Distribution Date, ESI
will assume liability for such insurance coverage for ESI Individuals,
respectively, who are not otherwise covered under the 1995 Agreement.
ii. As of the Destinations Distribution Date, Destinations will assume
sponsorship of the VEBA sponsored by ITT prior to the Destinations
Distribution Date (the "Destinations-Assumed VEBA").
iii. As soon as practicable following the Destinations Distribution
Date, Destinations will transfer an allocable share of the assets held
under the Destinations-Assumed VEBA attributable to retiree life benefits
of ITT Employees and of ESI Individuals to newly established VEBAs of ITT,
if any, and ESI, respectively, or to an insurance company that will be
providing such retiree life insurance benefits. Coopers & Lybrand will in
good faith determine the allocable shares to be apportioned from the
Destinations-Assumed VEBA. Any determination by Coopers & Lybrand will be
binding on the parties hereto (subject only to correction for mathematical
and other clerical errors).
8. LONG-TERM DISABILITY PLANS.
a. As of the Destinations Distribution Date, Destinations will assume
sponsorship of the ITT Salaried Employees Long-Term Disability Plan and, in
connection therewith, shall be responsible for long-term disability benefits
coverage for all Destinations Individuals not otherwise covered by ITT
Industries pursuant to the 1995 Agreement.
b. As of the Applicable Distribution Date, ITT and ESI will adopt long-term
disability plans covering eligible ITT Employees and ESI Employees who are not
otherwise covered by ITT Industries pursuant to the 1995 Agreement. ITT and ESI
each will be allocated a proportionate share of any assets under the VEBA
attributable thereto, including any assets (and any related liability) for
incurred but unreported claims and Destinations will transfer such amounts to
newly established VEBAs of ITT and ESI, respectively or to an insurance company
that will be providing such long-term disability coverage. Metropolitan Life
Insurance Company will determine, in good faith, the allocation of such assets
among Destinations, ITT and ESI and such determination based on such actuarial
factors as it deems appropriate, shall be binding on the parties hereto (subject
only to correction for mathematical and other clerical errors).
9. SPLIT-DOLLAR INSURANCE. Effective as of the Destinations Distribution Date,
Destinations will assume all obligations and funding arrangements under a
certain split dollar insurance arrangement for the benefit of Rand V. Araskog
originally dated on or about March 7, 1995 and assumed by ITT on March 26, 1997
(but effective as of December 19, 1995).
10. COMPANY-PAID DEATH BENEFITS. Effective as of the Destinations Distribution
Date, Destinations will assume all liability under the ITT Corporation Executive
Death Benefit Program (the "Death Benefit Program") and shall assume sponsorship
of the related grantor trust with Bankers Trust Company as trustee which was
funded to cover future premium payment obligations under the Death Benefit
Program.
11. DIRECTORS' BENEFITS.
a. Effective as of the Destinations Distribution Date, Destinations will
assume all liabilities and assets under the Retirement Benefit Plan for
Non-Management Directors of ITT Corporation.
b. Effective as of the Destinations Distribution Date, Destinations will
assume liability under the group life insurance program of ITT and the ITT Group
Accident Program.
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12. SEVERANCE. Effective upon the Applicable Distribution Date:
a. ITT, Destinations and ESI each will be liable for any severance pay and
benefits (including salary continuation) owing, as of the Applicable
Distribution Date, to ITT Individuals, Destinations Individuals and ESI
Individuals, respectively.
b. For a period of twenty-four months following the Applicable Distribution
Date, ITT, Destinations and ESI agree that they will each provide severance
benefits to ITT Employees, Destinations Employees and ESI Employees,
respectively, on a basis no less favorable than the standard severance (without
regard to any special severance paid in connection with ITT's 1997 restructuring
or in the event of a change in control) in effect on the date hereof. Nothing
herein shall be construed as limiting any individual's rights under any
applicable law or any existing severance plan, policy, program, arrangement or
employment contract (including, but not limited to, any special severance
benefits provided pursuant to ITT's 1997 restructuring) with ITT, Destinations
and ESI.
13. ANNUAL SERVICE RECOGNITION/BONUS AWARDS. ITT, Destinations and ESI will
each be responsible for providing any accrued annual service recognition awards
and bonus compensation to which individuals would otherwise be entitled in
respect of the 1997 calendar year and thereafter to persons who are their
respective employees immediately following the Applicable Distribution Date, and
will make appropriate adjustments to any currently outstanding awards and any
applicable performance criteria thereunder as deemed necessary to equitably
reflect the effect of the Distributions.
14. STOCK OPTIONS.
a. ITT stock options ("ITT Options") granted under the 1995 ITT Corporation
Incentive Stock Plan (the "ITT Stock Plan") which are held immediately prior to
the Destinations Distribution by Destinations Individuals, ITT Former Employees
and current and former directors of ITT will be assumed by Destinations under a
newly established stock option plan to be sponsored by Destinations and will be
converted into options to purchase Destinations stock ("Destinations Options").
b. ITT stock options granted under the ITT Stock Plan which are held by ESI
Individuals immediately prior to the ESI Distribution will be assumed by ESI and
converted into options to purchase ESI stock ("ESI Options").
c. ITT will retain the ITT Stock Plan and the obligations under that plan
with respect to stock options granted thereunder that are held by or in respect
of ITT Employees.
d. The number of Destinations Options and ESI Options into which such ITT
stock options will be converted and the number of ITT Options retained by ITT
Employees, and the respective exercise prices thereof, will be adjusted as
necessary to preserve the economic value of such options inherent in such
options immediately prior to the Destinations Distribution Date or ESI
Distribution Date, respectively, and any option grant in respect of Destinations
or ESI common stock held, respectively, by a Destinations Individual or an ESI
Individual will expressly provide that it is being granted in full satisfaction
of, and in substitution for, any and all ITT stock options outstanding at the
Applicable Distribution Date.
15. RESTRICTED STOCK.
a. ITT will retain the 1996 Restricted Stock Plan for Non-Employee
Directors (the "1996 Restricted Stock Plan"). All liability for restricted
shares of ITT Common Stock held by Destinations Individuals and by current and
former directors of ITT immediately prior to the Destinations Distribution Date
under the 1996 Restricted Stock Plan will be assumed by Destinations under its
newly established stock incentive plan (the "Destinations Restricted Stock
Plan").
b. Destinations will adjust the number of restricted shares of Destinations
Common Stock held by Destinations Individuals and by current and former
directors of ITT to preserve the economic value of such restricted shares
inherent in such restricted stock immediately prior to the Destinations
Distribution Date and any award of Destinations restricted common stock made in
respect thereof under the Destinations Restricted
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Stock Plan will expressly provide that it is being made in full satisfaction of,
and in substitution for, any and all shares of ITT restricted stock awards
outstanding under the 1996 Restricted Stock Plan at the Applicable Distribution
Date.
16. FOREIGN PLANS.
Subject to applicable local law requirements and to the extent practicable,
the respective rights and obligations of ITT, ESI and Destinations (and their
respective subsidiaries) with respect to plans maintained by ITT and its
subsidiaries immediately prior to the Applicable Distribution Date outside of
the United States will be treated in a manner consistent with the general
principles described in Section 3 of this Benefits Agreement; provided, however,
that nothing herein shall be construed so as to (A) modify the terms and
conditions of employment of any ITT Employee, ESI Employee or Destinations
Employee who is employed outside of the United States (a "Foreign Employee") or
(B) constitute an actual or constructive termination of any Foreign Employee's
employment with ITT, ESI, Destinations or any of their respective subsidiaries,
as applicable.
17. COOPERATION.
a. Destinations, ESI and ITT will cooperate in providing each other and
other necessary parties with such data as may be necessary to administer their
respective benefit plans in accordance with the terms of this Agreement, the
1995 Agreement and, if executed, the 1995 Agreement Novation.
b. ITT, ESI and Destinations agree to cooperate in completing all necessary
filings with the Internal Revenue Service, Department of Labor and Pension
Benefit Guaranty Corporation with respect to the matters provided herein and
will apprise the other parties hereto of any written or oral communication to or
from any such agency with respect thereto which may bear on such other parties'
interests hereunder.
18. NO THIRD PARTY BENEFICIARIES. Notwithstanding anything to the contrary
herein, this Benefits Agreement is solely for the benefit of ITT, ESI and
Destinations. There shall be no third party beneficiaries under this Benefits
Agreement, including, without limitation, any Destinations Individual, ESI
Individual or ITT Individual.
19. INCORPORATION BY REFERENCE. This Benefits Agreement is part of the
Distribution Agreements, and shall be incorporated by reference into the
Distribution Agreements as if set forth fully therein. Without limiting the
generality of the foregoing, the parties acknowledge and agree that all
provisions of the applicable Distribution Agreement relating to indemnities
shall be applicable with respect to the matters described herein as if such
terms were incorporated herein and a part hereof.
20. DISPUTE RESOLUTION. In the event of a controversy, dispute or claim
arising out of, in connection with, or in relation to the interpretation,
performance, nonperformance, validity or breach of this Benefits Agreement or
otherwise arising out of, or in any way related to this Agreement, including,
without limitation, any claim based on contract, tort, statute or constitution
(collectively, "Agreement Disputes"), the general counsels of the relevant
parties shall negotiate in good faith for a reasonable period of time to settle
such Agreement Dispute.
If after such reasonable period such general counsels are unable to settle
such Agreement Dispute (and in any event after 60 days have elapsed from the
time the relevant parties began such negotiations), such Agreement Dispute shall
be determined, at the request of any relevant party, by arbitration conducted in
New York City, before and in accordance with the then-existing Rules for
Commercial Arbitration of the American Arbitration Association (the "Rules"),
and any judgment or award rendered by the arbitrator shall be final, binding and
nonappealable (except upon grounds specified in 9 U.S.C. sec.10(a) as in effect
on the date hereof), and judgment may be entered by any state or Federal court
having jurisdiction thereof in accordance with Section 21(o) hereof. Unless the
arbitrator otherwise determines, the pre-trial discovery of the then-existing
Federal Rules of Civil Procedure and the then-existing Rules 46 and 47 of the
Civil Rules for the United States District Court for the Southern District of
New York shall apply to any arbitration hereunder. Any
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controversy concerning whether an Agreement Dispute is an arbitrable Agreement
Dispute, whether arbitration has been waived, whether an assignee of this
Benefits Agreement is bound to arbitrate, or as to the interpretation of
enforceability of this Section 20 shall be determined by the arbitrator. The
arbitrator shall be a retired or former judge of any United States District
Court or Court of Appeals or such other qualified person as the relevant parties
may agree to designate, provided such individual has had substantial
professional experience with regard to settling sophisticated commercial
disputes. The parties intend that the provisions to arbitrate set forth herein
be valid, enforceable and irrevocable. The designation of a situs or a governing
law for this Benefits Agreement or the arbitration shall not be deemed an
election to preclude application of the Federal Arbitration Act, if it would be
applicable. In his award the arbitrator shall allocate, in his discretion, among
the parties to the arbitration all costs of the arbitration, including, without
limitation, the fees and expenses of the arbitrator and reasonable attorneys'
fees, costs and expert witness expenses of the parties. The undersigned agree to
comply with any award made in any such arbitration proceedings that has become
final in accordance with the Rules and agree to the entry of a judgment in any
jurisdiction upon any award rendered in such proceedings becoming final under
the Rules. The arbitrator shall be entitled, if appropriate, to award any remedy
in such proceedings, including, without limitation, monetary damages, specific
performance and all other forms of legal and equitable relief; provided,
however, the arbitrator shall not be entitled to award punitive damages.
21. MISCELLANEOUS.
a. Complete Agreement; Construction. This Benefits Agreement, including
all Schedules attached hereto, shall constitute the entire agreement between the
parties with respect to the subject matter hereof and shall supersede all
previous negotiations, commitments and writings with respect to such subject
matter.
b. Supersession. In the event of any conflict between any of the terms of
this Benefits Agreement and the terms of either Distribution Agreement, the
terms of this Benefits Agreement will govern.
c. Counterparts. This Benefits Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more such counterparts have been signed by
each of the parties and delivered to the other parties.
d. Survival of Agreements. Except as otherwise contemplated by this
Benefits Agreement, all covenants and agreements of the parties contained in
this Benefits Agreement shall survive the Destinations Distribution Date and ESI
Distribution Date.
e. Notices. All notices and other communications hereunder shall be in
writing and hand delivered or mailed by registered or certified mail (return
receipt requested) or sent by any means of electronic message transmission with
delivery confirmed (by voice or otherwise) to the parties at the following
addresses (or at such other addresses for a party as shall be specified by like
notice) and will be deemed given on the date on which such notice is received:
<TABLE>
<S> <C>
To ITT: 1330 Avenue of the Americas New York, NY 10019
Attn: General Counsel
To ESI: 5975 Castle Creek Parkway -- North Drive Indianapolis, IN
46250
Attn: General Counsel
To Destinations: 1330 Avenue of the Americas New York, NY 10019
Attn: General Counsel
</TABLE>
f. Waivers. The failure of either party to require strict performance by
the other party of any provision in this Benefits Agreement will not waive or
diminish that party's right to demand strict performance thereafter of that or
any other provision thereof.
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g. Amendments. This Benefits Agreement may be amended and restated in its
entirety by Destinations in connection with the acquisition by CDRV Acquisition,
L.L.C., a Delaware limited liability company ("CDRV"), of shares of stock of ITT
pursuant to an Investment Agreement dated as of July 15, 1997 by and between ITT
and CDRV (the "Equity Investment") and prior to the Equity Investment without
the consent of ESI or ITT; provided, however, that if any amendment effected
thereby would have a materially adverse effect on ESI, then Destinations will
obtain the consent of ESI (which consent will not be unreasonably withheld) with
respect to such amendment; provided further that if the amendments effected
thereby would in the aggregate have a materially adverse effect on ITT, then
Destinations shall obtain the consent of ITT (which consent will not be
unreasonably withheld) with respect to such amendments.
h. Assignment. This Benefits Agreement shall be assignable in whole in
connection with a merger or consolidation or the sale of all or substantially
all the assets of a party hereto so long as the resulting, surviving or
transferee entity assumes all the obligations of the relevant party hereto by
operation of law or pursuant to an agreement in form and substance reasonably
satisfactory to the other parties to this Benefits Agreement. Otherwise this
Benefits Agreement shall not be assignable, in whole or in part, directly or
indirectly, by any party hereto without the prior written consent of the others,
and any attempt to assign any rights or obligations arising under this Agreement
without such consent shall be void.
i. Successors and Assigns. The provisions of this Benefits Agreement shall
be binding upon, inure to the benefit of and be enforceable by the parties and
their respective permitted successors and permitted assigns.
j. Termination. This Agreement may not be terminated except by an
agreement in writing signed by the parties hereto.
k. Subsidiaries. Each of the parties hereto shall cause to be performed,
and hereby guarantees the performance of, all actions, agreements and
obligations set forth herein to be performed by any subsidiary of such party or
by any entity that is contemplated to be a subsidiary of such party on and after
the respective Distributions.
l. Attorney Fees. Except as contemplated by the third to the last sentence
of Section 20 hereof, a party in breach of this Benefits Agreement shall, on
demand, indemnify and hold harmless the other parties hereto for and against all
out-of-pocket expenses, including, without limitation, legal fees, incurred by
such other party by reason of the enforcement and protection of its rights under
this Benefits Agreement. The payment of such expenses is in addition to any
other relief to which such party may be entitled hereunder or otherwise.
m. Titles and Headings. Titles and headings to sections herein are
inserted for the convenience of reference only and are not intended to be a part
of or to affect the meaning or interpretation of this Benefits Agreement.
n. Specific Performance. Each of the parties hereto acknowledges that
there is no adequate remedy at law for failure by such parties to comply with
the provisions of this Benefits Agreement and that such failure would cause
immediate harm that would not be adequately compensable in damages, and
therefore agree that their agreements contained herein may be specifically
enforced without the requirement of posting a bond or other security, in
addition to all other remedies available to the parties hereto under this
Benefits Agreement.
o. Consent to Jurisdiction. Without limiting the provisions of Section 20
hereof, each of the parties irrevocably submits to the exclusive jurisdiction of
(a) the Supreme Court of the State of New York, New York County, and (b) the
United States District Court for the Southern District of New York, for the
purposes of any suit, action or other proceeding arising out of this Agreement
or any transaction contemplated hereby. Each of the parties agrees to commence
any action, suit or proceeding relating hereto either in the United States
District Court for the Southern District of New York or if such suit, action or
other proceeding may not be brought in such court for jurisdictional reasons, in
the Supreme Court of the State of New York, New York County. Each of the parties
further agrees that service of any process, summons, notice or document by U.S.
registered mail to such party's respective address set forth above shall be
effective service of process for any action, suit or proceeding in New York with
respect to any matters to which it has submitted to jurisdiction in this Section
21(o). Each of the parties irrevocably and unconditionally waives any objection
to the laying of venue of any action, suit or proceeding arising out of this
Agreement or the transactions
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contemplated herein in (i) the Supreme Court of the State of New York, New York
County, or (ii) the United States District Court for the Southern District of
New York, and hereby further irrevocably and unconditionally waives and agrees
not to plead or claim in any such court that any such action, suit or proceeding
brought in any such court has been brought in an inconvenient forum.
p. Severability. In the event any one or more of the provisions contained
in this Benefits Agreement should be held invalid, illegal or unenforceable in
any respect, the validity, legality and enforceability of the remaining
provisions contained herein and therein shall not in any way be affected or
impaired thereby. The parties shall endeavor in good-faith negotiations to
replace the invalid, illegal or unenforceable provisions with valid provisions,
the economic effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.
q. Effectiveness. This Agreement shall be effective as of the Destinations
Distribution Date, subject to the consummation of the Destinations Distribution.
22. OTHER ACTIONS. The parties hereto shall take such other and further
actions as may be necessary or appropriate to carry out this Benefits Agreement.
23. GOVERNING LAW. This Benefits Agreement and the legal relations between the
parties hereto shall be governed by and construed in accordance with the
internal laws of the State of New York and without regard to conflict of laws
principles.
IN WITNESS WHEREOF, the parties have caused this Benefits Agreement to be
executed by their duly authorized officers as of the day and year first written
above.
ITT CORPORATION
By:
------------------------------------
Name:
Title:
ITT DESTINATIONS, INC.
By:
------------------------------------
Name:
Title:
EDUCATIONAL SERVICES, INC.
By:
------------------------------------
Name:
Title:
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EXHIBIT B-1
INTELLECTUAL PROPERTY LICENSE AND ASSIGNMENT AGREEMENT
INTELLECTUAL PROPERTY LICENSE AND ASSIGNMENT AGREEMENT ("IP Agreement")
dated as of September , 1997, between and among ITT CORPORATION, a Nevada
corporation ("ITT Corporation"), ITT DESTINATIONS INC., a Nevada corporation
("ITT Destinations"), ITT WORLD DIRECTORIES, INC., a Delaware corporation ("ITT
World Directories"), and ITT SHERATON CORPORATION, a Delaware corporation ("ITT
Sheraton") (collectively the "Parties").
RECITALS
WHEREAS, ITT Sheraton is the owner of the trade name "ITT" and of the
trademark and the service mark "ITT", and of all rights worldwide in such name
and marks and the goodwill associated therewith;
WHEREAS, ITT Sheraton is party to Trade Name and Trademark License
Agreements with the Hartford Financial Services Groups, Inc. (formerly ITT
Hartford Group, Inc.), (the "Hartford License Agreement") and with ITT
Manufacturing Enterprises, Inc. (the "Industries License Agreement"), both dated
November 1, 1995, concerning their continued right and license to use the ITT
Name and ITT Marks (as hereinafter defined);
WHEREAS, ITT Corporation is the owner of certain intellectual property and
the licensee of certain other intellectual property as more fully set forth in
the 1995 License Agreement (as hereinafter defined) and other Intellectual
Property (as hereinafter defined);
WHEREAS, ITT Corporation and ITT Destinations have entered into the
Agreement and Plan of Distribution dated as of September , 1997 (the
"Destinations Distribution Agreement") pursuant to which the holders of shares
of Common Stock of ITT Corporation at the close of business on the Record Date
(as defined in the Destinations Distribution Agreement) will receive all the
outstanding shares of Common Stock of ITT Destinations;
WHEREAS, ITT Corporation (as hereinafter defined) currently has the right
to use and desires to continue to have the right, after the Destinations
Distribution Date, to use "ITT" as part of its company name and trade name in
connection with conducting the Information Services Business (as hereinafter
defined);
WHEREAS, ITT Sheraton will be merged with and into ITT Destinations in
connection with the Destinations Distribution with ITT Destinations as the
surviving corporation (the "Sheraton Merger"):
WHEREAS, ITT Sheraton is willing to enter into this formal license
agreement with ITT Corporation to continue to use the ITT Name (as hereinafter
defined) after the Destinations Distribution Date in connection with conducting
the Information Services Business;
WHEREAS, ITT Corporation and its Subsidiaries currently have the right to
use, and ITT Destinations and its Subsidiaries desire to have the right to use
after the Destinations Distribution Date, certain intellectual property
allocated and licensed under the 1995 License Agreement and the other
intellectual property in connection with conducting the ITT Destinations
Business (as hereinafter defined);
WHEREAS, ITT Corporation is willing to assign to ITT Destinations certain
intellectual property rights and to enter into this formal license agreement
with ITT Destinations to exchange grants of certain rights and assignment and to
continue to use the intellectual property to conduct their respective businesses
as set forth herein; and
WHEREAS, capitalized terms used but not otherwise defined herein shall have
the same meanings assigned thereto in the Destinations Distribution Agreement.
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NOW, THEREFORE, in connection with and to carry out the Destination
Distribution and in consideration of the premises and mutual agreements and
covenants herein, the Parties hereto hereby agree as follows:
ARTICLE I. DEFINITIONS
Section 1.01. General. As used in this IP Agreement, the following terms
shall have the following meanings (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):
(a) "Change in Control" shall mean as it relates to ITT Information
Services the occurrence of any one of the following events:
(i) a report on Schedule 13D shall be filed with the Securities and
Exchange Commission pursuant to Section 13(d) of the Securities Exchange
Act of 1934 (the "Act") disclosing that any person (within the meaning of
Section 13(d) of the Act) other than CDRV Acquisition L.L.C., ITT
Information Services or a Subsidiary of ITT Information Services or any
employee benefit plan sponsored by ITT Information Services or a Subsidiary
of ITT Information Services is the beneficial owner directly or indirectly
of twenty percent (20%) or more of the outstanding Common Stock of ITT
Information Services ;
(ii) any person (within the meaning of Section 13(d) of the Act) other
than CDRV Acquisition L.L.C., ITT Information Services or a Subsidiary of
ITT Information Services or any employee benefit plan sponsored by ITT
Information Services or a Subsidiary of ITT Information Services shall
purchase shares pursuant to a tender offer or exchange offer to acquire any
Common Stock of ITT Information Services (or securities convertible into
such Common Stock), for cash, securities or any other consideration,
provided that after consummation of the offer, the person in question is
the beneficial owner (as such term is defined in Rule 13d-3 under the Act)
directly or indirectly of twenty percent (20%) or more of the outstanding
Stock of ITT Information Services (calculated as provided in paragraph(d)
of Rule 13d-3 under the Act in the case of rights to acquire Common Stock);
(iii) the stockholders of ITT Information Services shall approve (a)
any consolidation or merger of ITT Information Services in which ITT
Information Services is not the continuing or surviving corporation or
pursuant to which shares of Common Stock of ITT Information Services would
be converted into cash, securities or other property, other than a merger
of ITT Information Services in which holders of Common Stock of ITT
Information Services immediately prior to the merger have the same
proportionate ownership of common stock of the surviving corporation
immediately after the merger as immediately before, or (b) any sale, lease,
exchange or other transfer (in one transaction or a series of related
transactions) of all or substantially all the assets of ITT Information
Services ; or
(iv) there shall have been a change in a majority of the members of
the Board of Directors of ITT Information Services within a 12-month period
unless (x) each new director joining such Board during such 12-month period
was nominated or elected by the vote of a majority of the directors then
still in office who were directors at the beginning of such 12-month
period, or (y) the election to such Board of each new director during such
12-month period was endorsed by a majority of such directors.
(v) ITT Information Services shall no longer own ITT World Directories
or any Information Services Subsidiary.
(b) "Closely Related Business" shall mean the business described in Exhibit
A hereto.
(c) "Destinations Distribution Agreement" shall mean the Agreement and Plan
of Distribution dated as of September , 1997 between ITT Corporation and ITT
Destinations.
(d) "Distribution Date" shall have the meaning set forth in the
Destinations Distribution Agreement.
(e) "Information Services Subsidiary" shall mean ITT Information Services,
ITT World Directories, or any of their Subsidiaries, provided that such
Subsidiary is engaged solely in the Information Services Business.
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(f) "Intellectual Property" shall mean inventions, invention disclosures,
patents, patent applications, computer programs (including source code, object
code and data), trademarks, copyrights, copyright registrations, copyright
registration applications, mask works, designs, technical information,
proprietary information, Trademarks, trade secrets, manufacturing processes,
formulas, algorithms, data, and all other kinds of intellectual property
protected or protectable under state, federal or foreign law (1) owned by or (2)
having a right to license a Party or its Subsidiaries as of the Distribution
Date, except the ITT Name and ITT Marks.
(g) "1995 License Agreement" shall mean the Intellectual Property License
Agreement dated November 1, 1995 between and among ITT Industries, ITT Sheraton
and ITT Hartford Group, Inc.
(h) "Information Services Business" shall mean the Retained Business as
defined in the Destinations Distribution Agreement, and, in addition, shall also
mean Closely Related Businesses described in Exhibit A hereto, provided that
Information Services Business does not include the ITT Industries Business or
the ITT Hartford Business as defined in the Hartford License Agreement and the
Industries License Agreement.
(i) "ITT Corporation" shall mean ITT Corporation, a Nevada corporation.
(j) "ITT Destinations" shall mean ITT Destinations, Inc., a Nevada
corporation.
(k) "ITT Destinations Business" shall mean all business not specifically
included within the Retained Business.
(l) "Distribution Time" shall have the meaning set forth in the
Destinations Distribution Agreement.
(m) "ITT Information Services" shall mean (a) ITT Corporation, a Nevada
corporation after the Destinations Distribution or (b) ITT Information Services,
Inc., after ITT Corporation changes its corporate name in accordance with
Section 6.07 of the Destinations Distribution Agreement and Section 2.02 of this
IP Agreement.
(n) "ITT Name" shall mean the worldwide rights to that portion of any
company and trade name consisting of the letters "ITT" and the goodwill
associated therewith.
(o) "ITT Marks" shall mean the worldwide rights to all trademarks and
service marks consisting of the letters "ITT", either alone or in combination
with other words, together with all registrations thereof and all applications
thereof now or hereafter filed or obtained, and the goodwill associated
therewith.
(p) "ITT Sheraton" shall mean, prior to the Sheraton Merger, ITT Sheraton,
and upon consummation of the Sheraton Merger, ITT Destinations, or any successor
to ITT Destinations.
(q) "Permitted Manner of Use" shall mean use of the ITT Name and the ITT
Marks in accordance with all legal requirements and also with ITT Sheraton's
policy and style standards as currently existing and as may be reasonably
amended from time to time by ITT Sheraton.
(r) "Phaseout Period" shall mean a period of three (3) months from the
termination of that portion of this IP Agreement relating to the ITT Name and
ITT Marks during which period all use of the ITT Name and ITT Marks by ITT
Information Services and its Subsidiaries, as the case may be, shall be phased
out in accordance with the provisions of this IP Agreement.
(s) "Retained Business" shall have the meaning set forth in the
Destinations Distribution Agreement.
(t) "Service Mark License Agreement" shall mean the Trade Name and Service
Mark License Agreement that forms Exhibit B-2 of the Destinations Distribution
Agreement and executed contemporaneously with this IP Agreement.
(u) "Subsidiary" shall mean any corporation, partnership or other entity of
which another entity (i) owns, directly or indirectly, ownership interests
sufficient to elect a majority of the Board of Directors (or persons performing
similar functions) (irrespective of whether at the time any other class or
classes of ownership interests of such corporation, partnership or other entity
shall or might have such voting power upon the occurrence of any contingency) or
(ii) is a general partner or an entity performing similar functions (e.g.,
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a trustee or managing member). For purposes of this Agreement, ITT-Dow Jones
Television and its Subsidiaries shall be deemed to be Subsidiaries of ITT
Destinations.
(v) "Trademarks" shall mean and include trademarks, trade names, company
names, service marks, trade dress, the registrations thereof, the applications
therefor and the goodwill associated therewith, exclusive of the ITT Name and
ITT Marks.
(w) "ITT World Directories" shall mean ITT World Directories, Inc., a
Delaware corporation.
Any time the word "including" is used in this IP Agreement, it shall be
deemed to mean "including, without limitation".
ARTICLE II. ITT NAME LICENSE
Section 2.01. Grant of License to Use the ITT Name. ITT Sheraton hereby
grants to ITT Information Services, for the Term of this IP Agreement (as
defined in Section 8.02 hereof), a personal, non-assignable (except as otherwise
provided in this IP Agreement), non-transferable worldwide license to use in
accordance with the Permitted Manner of Use the ITT Name solely as part of the
corporate name "ITT Corporation" (subject to Sections 2.02 and 2.03 hereof) on a
non-exclusive basis, and solely as part of the corporate and/or company trade
name "ITT Information Services, Inc." on an exclusive basis; provided, however,
(i) that ITT Information Service remains a non-operating, holding company of
entities solely in the Information Services Business, and (ii) that any use of
the ITT Name and/or the ITT Marks by ITT Information Services and Information
Services Subsidiaries in connection with the operation of the Information
Services Business, or any other business as may be authorized shall be solely
under license from ITT World Directories pursuant to the terms of the Service
Mark License Agreement. ITT Sheraton during the Term of this IP Agreement will
not use, nor grant a license to any third party to use the trade name "ITT
Information Services", subject to all other provisions of this IP Agreement.
Except as specifically provided herein, ITT Information Services and Information
Services Subsidiaries shall not have the right to use "ITT Corporation" or any
name substantially identical thereto as a trade name, service mark or trademark.
Section 2.02. Change of Corporate Name. ITT Information Services will, at
the first meeting of its stockholders following the Distribution Date (the
"Stockholders Meeting"), submit a resolution to its stockholders for their
approval in accordance with ITT Information Services' Articles of Incorporation
and By-laws providing for the adoption of an amendment to ITT Information
Services' Articles of Incorporation (the "Amendment") to effect the change of
ITT Information Services' corporate name from "ITT Corporation" to "ITT
Information Services, Inc." and will, if the Amendment is approved by its
stockholders, duly and promptly file the Amendment and any other certificates or
documents necessary to effect such name change. ITT Information Services shall
prepare a proxy statement and solicit proxies in support of the Amendment from
its stockholders in accordance with the rules and regulations under the Exchange
Act.
Section 2.03. Payment on Failure to Change Name. ITT Information Services
will, if the Amendment is not adopted at the Stockholders Meeting or the
corporate name "ITT Corporation" is not changed to "ITT Information Services,
Inc.," pay to ITT Sheraton on a monthly basis from the date of the Stockholders
Meeting until the Amendment is adopted and it changes its corporate name from
"ITT Corporation" to "ITT Information Services, Inc." an amount equal to one
half of one percent ( 1/2 of 1%) of all gross revenues received by ITT
Information Services and the Information Services Subsidiaries during the
preceding calendar month (or such shorter period). ITT Information Services will
forward to ITT Sheraton, on or before the 20th day of each month, true
statements of all revenues received by it and the Information Services
Subsidiaries during the preceding month and the payment provided for in this
Section 2.03 (the "Name Fee"). ITT Information Services and the Information
Services Subsidiaries will keep full, true and accurate books of account
containing such particulars as may be necessary for the purpose of calculating
the Name Fee. ITT Sheraton will have the right to review all books and accounts
containing records of revenues which are subject to such payments. In the event
that any subsequent adjustment shall be made to ITT Information Services and the
Information Services Subsidiaries' gross revenues as reported in their audited
financial statements, then the Name Fee paid thereon based upon such gross
revenue shall be adjusted in accordance with such adjustment.
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Section 2.04. Prohibited Uses of ITT Name and ITT Marks. Neither ITT
Information Services, nor any Subsidiaries of ITT Information Services shall use
the ITT Name or the ITT Marks with or for any entity, outside the scope of the
Information Services Business.
Section 2.05. Reduction of Licenses. In the event ITT Information
Services and/or any Subsidiary of ITT Information Services shall abandon its use
of the ITT Name for all or a portion of the Information Services Business, then
the scope of the rights granted in Section 2.01 with respect to such abandoned
ITT Name shall be reduced by an amount equal to the scope of the Information
Services Business so abandoned. For purpose of this Section 2.05, abandonment
shall mean the failure of ITT Information Services or any Subsidiary of ITT
Information Services to use the ITT Name for a period of two (2) years in all or
such portion of the Information Services Business, any such period to commence
only after the Distribution Date.
Section 2.06. Quality Standards. In view of the status of the Parties
immediately prior to the Distribution Date as affiliated companies, each Party's
intimate knowledge with standards and procedures for assuring consistent
quality, ITT Sheraton's knowledge of the standards and procedures used by ITT
Information Services in the Retained Business, the integrity of the Retained
Business and its history of trouble-free goods and services, ITT Sheraton
recognizes the Retained Business current quality standards as acceptable
standards, and ITT Information Services and the Information Services
Subsidiaries agree to maintain such standards and procedures to assure the
consistent quality of its goods and services. ITT Information Services and the
Information Services Subsidiaries shall not materially lower such quality
standards without the prior written approval of ITT Sheraton.
Section 2.07. Inspections and Samples. Should ITT Sheraton have reason to
believe based on information available to it that the quality standards referred
to in Section 2.06 have not been maintained, at the request of ITT Sheraton, ITT
Information Services shall, and shall cause the Information Services
Subsidiaries to, permit a knowledgeable independent expert or consultant
retained by ITT Sheraton to have reasonable access to their premises and
personnel during normal working hours and shall furnish or permit inspection of,
at ITT Sheraton's request and without charge to ITT Sheraton or to such expert
or consultant, product samples, cartons, containers, packaging, wrapping and
service materials bearing or used in connection with the ITT Name and/or the ITT
Marks for the purpose of ensuring that ITT Information Services and the
Information Services Subsidiaries are complying with such quality standards. The
selection of the independent expert shall be subject to the approval of ITT
Information Services, which approval shall not be unreasonably delayed or
withheld. Any information obtained during such inspection and provided to ITT
Sheraton shall be limited to that which is necessary to ensure compliance with
such quality standards and shall be kept confidential by ITT Sheraton and its
Subsidiaries.
Section 2.08. Advertising, Packaging and Labels. ITT Information Services
shall, and shall cause the Information Services Subsidiaries to, furnish, at ITT
Sheraton's request and without charge, to ITT Sheraton or to its authorized
designee(s) samples of promotional and advertising material or the like to be
used in connection with any products or services offered by ITT Information
Services and any of its Subsidiaries and bearing or used in connection with the
ITT Name and ITT Marks.
Section 2.09. Third Party Rights. ITT Information Services acknowledges
that the rights granted by ITT Sheraton under Section 2.01 are subject to all
pre-existing third party rights, obligations, and restrictions as of the
Distribution Date.
Section 2.10. Rights to Enter Businesses. Nothing in this IP Agreement
shall preclude ITT Information Services, or any of its Subsidiaries or
affiliates, from operating in any business outside of the Information Services
Business provided the ITT Name or the ITT Marks are not used in such business.
ARTICLE III. INTELLECTUAL PROPERTY ASSIGNMENTS AND LICENSES
Section 3.01. Intellectual Property Under 1995 License Agreement.
(a) ITT Corporation hereby transfers and assigns, without charge to ITT
Destinations, and ITT Destinations hereby accepts such transfer and assignment,
effective as of the Distribution Time, all rights and obligations under the 1995
License Agreement, except that the Intellectual Property rights and obligations
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under the 1995 License Agreement primarily or exclusively used in the Retained
Business shall not be so transferred.
(b) ITT Corporation hereby transfers and assigns, without charge to ITT
World Directories, and ITT World Directories hereby accepts such transfer and
assignment, effective as of the Distribution Time, all rights and obligations
under the 1995 License Agreement primarily or exclusively used in the Retained
Business.
Section 3.02. Assignment of Intellectual Property
(a) ITT Corporation hereby transfers and assigns to ITT Destinations and
ITT Destinations hereby accepts such transfer and assignment of, effective as of
the Distribution Time, all right, title and interest in and to all Intellectual
Property owned or controlled by ITT Corporation except the Intellectual Property
primarily or exclusively used in the Retained Business.
(b) ITT Corporation hereby transfers and assigns, without charge to ITT
World Directories, and ITT World directories hereby accepts such transfer and
assignment, effective as of the Distribution Time, all right, title, and
interest in and to all Intellectual Property owned or controlled by ITT
Corporation that is primarily or exclusively used in the Retained Business.
Section 3.03. Third Party Rights. The rights transferred and assigned by
ITT Corporation under Sections 3.01 and 3.02 are subject to all pre-existing
third party rights, obligations and restrictions as of the Distribution Date.
Section 3.04. No Future Technical Obligations. Except as otherwise
specifically provided for in this IP Agreement or the Destinations Distribution
Agreement, the Parties shall not be obligated to the other to provide any
technical assistance, or to transfer any technical information or documentation
associated therewith.
ARTICLE IV. INDEMNIFICATION
Section 4.01. Defense of Infringement Claims. ITT Sheraton agrees to
indemnify, defend and hold harmless ITT Information Services and/or any
applicable Information Services Subsidiary and their respective employees,
officers, directors and agents from and against, and pay or reimburse them for,
any and all Indemnifiable Losses, which arise solely out of an assertion or
claim by a third party that the use of the ITT Name or ITT Marks by ITT
Information Services or any of the Information Services Subsidiaries pursuant to
the terms of this IP Agreement infringes the trade names or trademarks of such
third party. The costs associated with any such defense shall be borne equally
by ITT Sheraton and ITT Information Services. ITT Sheraton shall have no
obligation to indemnify ITT Information Services, or any Information Services
Subsidiary, or their respective employees, officers, directors, or agents for
any indemnifiable losses that relate to any use of the ITT Name or ITT Marks
that is not expressly permitted by this IP Agreement.
Section 4.02. Limitations on Indemnification Obligations. The amount that
any party (an "Indemnifying Party") is or may be required to pay to any other
person (an "Indemnitee") pursuant to Section 4.01, as applicable, shall be
reduced (retroactively or prospectively) by any Insurance Proceeds or other
amounts actually recovered by or on behalf of such Indemnitee in respect of the
related Indemnifiable Loss. If an Indemnitee shall have received the payment
required by this Agreement from an Indemnifying Party in respect of an
Indemnifiable Loss and shall subsequently actually receive Insurance Proceeds or
other amounts in respect of such Indemnifiable Loss, then such Indemnitee shall
pay to such Indemnifying Party a sum equal to the amount of such Insurance
Proceeds or other amounts actually received, up to the aggregate amount of any
payments received from such Indemnifying Party pursuant to this IP Agreement in
respect of such Indemnifiable Loss.
Section 4.03. Procedures for Indemnification. Any Indemnitee entitled to
indemnification pursuant to this IP Agreement shall notify the Indemnifying
Party in writing, and in reasonable detail, of the applicable Third Party Claim
promptly (and in any event within 10 business days) after receipt by such
Indemnitee of written notice of the Third Party Claim; provided, however, that
failure to give such notification shall not affect the indemnification provided
hereunder except to the extent the Indemnifying Party shall have been
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actually prejudiced as a result of such failure (except that the Indemnifying
Party shall not be liable for any expenses incurred during the period in which
the Indemnitee failed to give such notice). Thereafter, the Indemnitee shall
deliver to the Indemnifying Party, promptly (and in any event within 10 business
days) after the Indemnitee's receipt thereof, copies of all notices and
documents (including court papers) received by the Indemnitee relating to the
Third Party Claim.
If a Third Party Claim is made against an Indemnitee, the Indemnifying
Party shall be entitled to participate in the defense thereof and, if it so
chooses and acknowledges in writing its obligation to indemnify the Indemnitee
therefor, to assume the defense thereof with counsel selected by the
Indemnifying Party; provided that such counsel is not reasonably objected to by
the Indemnitee. Should the Indemnifying Party so elect to assume the defense of
a Third Party Claim, the Indemnifying Party shall not be liable to the
Indemnitee for legal or other expenses subsequently incurred by the Indemnitee
in connection with the defense thereof. If the Indemnifying Party assumes such
defense, the Indemnitee shall have the right to participate in the defense
thereof and to employ counsel, at its own expense, separate from the counsel
employed by the Indemnifying Party, it being understood that the Indemnifying
Party shall have full control of such defense. The Indemnifying Party shall be
liable for the fees and expenses of counsel employed by the Indemnitee for any
period during which the Indemnifying Party has failed to assume the defense
thereof (other than during the period prior to the time the Indemnitee shall
have given notice of the Third Party Claim as provided above).
If the Indemnifying Party so elects to assume the defense of any Third
Party Claim, all of the Indemnitees shall cooperate with the Indemnifying Party
in the defense or prosecution thereof. Such cooperation shall include the
retention and (upon the Indemnifying Party's request) the provision to the
Indemnifying Party of records and information which are reasonably relevant to
such Third Party Claim and making employees available on a mutually convenient
basis to provide additional information of any material provided hereunder.
Whether or not the Indemnifying Party shall have assumed the defense of a
Third Party Claim, in no event will the Indemnitee admit any liability with
respect to, or settle, compromise or discharge, such Third Party Claim without
the Indemnifying Party's prior written consent (which consent shall not be
unreasonably withheld); provided, however, that the Indemnitee shall have the
right to settle, compromise or discharge such Third Party Claim without the
consent of the Indemnifying Party if the Indemnitee releases in writing the
Indemnifying Party from its indemnification obligation hereunder with respect to
such Third Party Claim and such settlement, compromise or discharge would not
otherwise adversely affect the Indemnifying Party. If the Indemnifying Party
shall have assumed the defense of a Third Party Claim, the Indemnitee will agree
to any settlement, compromise or discharge of a Third Party Claim that the
Indemnifying Party may recommend and that by its terms obligates the
Indemnifying Party to pay the full amount of the liability in connection with
such Third Party Claim and releases the Indemnitee completely in connection with
such Third Party Claim.
Notwithstanding the foregoing, the Indemnifying Party shall not be entitled
to assume the defense of any Third Party Claim (and shall be liable for the fees
and expenses of counsel incurred by the Indemnitee in defending such Third Party
Claim) if the Third Party Claim seeks an order, injunction or other equitable
relief or relief for other than money damages against the Indemnitee which the
Indemnitee reasonably determines, after conferring with its counsel, cannot be
separated from any related Third Party Claim for money damages. If such
equitable relief or other relief portion of the Third Party Claim can be so
separated from that for money damages, the Indemnifying Party shall be entitled
to assume the defense of the portion relating to money damages.
Section 4.04. Other Adjustments.
(a) The amount of any Indemnifiable Loss shall be (x) increased to take
into account any net Tax cost actually incurred by the Indemnitee arising from
any payments received from the Indemnifying Party (grossed up for such increase)
and (y) reduced to take account of any net Tax benefit actually realized by the
Indemnitee arising from the incurrence or payment of any such Indemnifiable
Loss. In computing the amount of such Tax cost or Tax benefit, the Indemnitee
shall be deemed to recognize all other items of income, gain,
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loss, deduction or credit before recognizing any item arising from the receipt
of any payment with respect to an Indemnifiable Loss or the incurrence or
payment of any Indemnifiable Loss.
(b) In addition to any adjustments required pursuant to Section 4.02 hereof
or clause (i) of this Section 4.04, if the amount of any Indemnifiable Loss
shall, at any time subsequent to the payment required by this IP Agreement, be
reduced by recovery, settlement or otherwise, the amount of such reduction, less
any expenses incurred in connection therewith, shall promptly be repaid by the
Indemnitee to the Indemnifying Party, up to the aggregate amount of any payments
received from such Indemnifying Party pursuant to this IP Agreement in respect
of such Indemnifiable Loss.
ARTICLE V. UNDERTAKINGS
Section 5.01. Phase-Out. ITT Sheraton shall not grant a license to any
third party to use the ITT Name in the field of activity of the Retained
Business during the Term of this IP Agreement and any Phaseout Period after any
termination of this IP Agreement, except in the case of an abandonment as
specified in the last sentence of Section 2.05 herein.
Section 5.02. Absence of Interest in ITT Marks. ITT Information Services
acknowledges that nothing in this IP Agreement shall give it or any Information
Services Subsidiary any right, title or interest in the ITT Name apart from the
rights to use, and to sublicense the use, granted or to be granted hereunder,
and to retain any remuneration resulting therefrom, all such right, title and
interest, including but not limited to rights of registration, maintenance and
enforcement, being solely with ITT Sheraton. The ITT Name and the ITT Marks are
the sole property of ITT Sheraton, and any and all uses by ITT Information
Services of the ITT Name or of the ITT Marks shall inure to the benefit of ITT
Sheraton. In no event shall such use be deemed or construed to have created or
vested any right, title or interest whatsoever in and to ITT Information
Services. To the extent that any jurisdiction shall find for any reason as a
matter of law or otherwise that such use has vested in ITT Information Services
or any of its Subsidiaries any right, title or interest in or to the ITT Name or
the ITT Marks, ITT Information Services upon the request of ITT Sheraton, shall,
and shall cause any applicable Subsidiary of ITT Information Services to,
execute and deliver to ITT Sheraton, without charge, appropriate assignments to
vest such rights, title and interest in ITT Sheraton.
Section 5.03. ITT Name and ITT Marks Not Contested. ITT Information
Services agrees that neither it, nor any of its Subsidiaries, shall raise or
cause to be raised any questions concerning or objections to the validity of the
ITT Name or the ITT Marks in any jurisdiction, or to any registrations thereof
or applications therefor, or to the sole proprietary rights of ITT Sheraton
thereto, on any grounds whatsoever.
Section 5.04. Filing, Registration or Use of Names, Trademarks and Service
Marks. ITT Information Services agrees that neither it nor any of its
Subsidiaries shall:
(a) file, apply to register or register the ITT Name or the ITT Marks,
alone or in combination with any other word or device or symbol or any
name, mark, term, script or device colorably similar thereto, except if,
as, when, and to the extent approved in writing in advance by ITT Sheraton
in specific instances;
(b) use the ITT Name in conjunction or in combination with any other
name, mark, term, script or device whatever, except as specifically set
forth in Article II, or if, as and to the extent approved in writing in
advance by ITT Sheraton; or
(c) use the ITT Name in any jurisdiction, or any name, mark, term,
script or device colorably similar thereto, except as specifically
permitted under this IP Agreement.
At the request of ITT Information Services, ITT Sheraton shall file
registration applications and maintain any such applications and registrations
issued thereon for the ITT Name and ITT Marks for activities within the ITT
Information Services Business. Any expenses incurred by, or on behalf of, ITT
Sheraton in connection with registering or maintaining registrations of the ITT
Name and ITT Marks for the Information Services Business shall be reimbursed by
ITT Information Services promptly upon receipt of written notice thereof.
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Section 5.05. Other ITT Sheraton Licenses. Subject to Section 2.01,
nothing in this IP Agreement shall be construed to limit the right of ITT
Sheraton to use, or to grant a license to any entity or person to use, the ITT
Name or the ITT Marks anywhere for any products or services, or in connection
with any activities outside the Retained Business even if such entity or person
competes with ITT Information Services or any of the Information Services
Subsidiaries, or its products or services are shipped, sold or offered in the
same channels of trade as those of ITT Information Services or any of the
Information Services Subsidiaries.
Section 5.06. Execution of Documents. At ITT Sheraton's request, ITT
Information Services and the Information Services Subsidiaries shall assist ITT
Sheraton in the procurement or maintenance of any filings or registrations for
the ITT Name in any jurisdiction by providing any information available from ITT
Information Services and the Information Services Subsidiaries and executing any
documents necessary therefor. The rights granted or to be granted hereunder to
ITT Information Services or any Information Services Subsidiary shall be
recorded in any jurisdiction where such recordation is required by statute or in
the sole discretion of ITT Sheraton is advisable, and ITT Information Services
and the Information Services Subsidiaries shall extend to ITT Sheraton their
full cooperation in filing and completing any such recordation.
Section 5.07. Intellectual Property Violations. To the extent that the
transfer of intellectual property rights and licenses under Article III herein
would violate or be prohibited by any agreement with a third party, and such
Intellectual Property is actually used by the grantee Party, then the granting
Party undertakes to use reasonable efforts to obtain the necessary consent(s)
from such third party so as to be permitted to make such grants.
Section 5.08. No Representation or Warranty. Each of the Parties hereto
understands and agrees that no party hereto is, in this IP Agreement or in any
other agreement or document contemplated by this IP Agreement or otherwise,
making any representation or warranty whatsoever. It is also agreed and
understood that any and all intellectual property assets either transferred or
licensed to or retained by the Parties, as the case may be, shall be "as is,
where is".
ARTICLE VI. INFRINGEMENT BY THIRD PARTIES
Section 6.01. Infringement by Third Parties. Upon discovery by ITT
Information Services or by any Subsidiary, Affiliate, or representative of ITT
Information Services, ITT Information Services shall notify ITT Sheraton of any
adverse uses confusingly similar or otherwise damaging to the ITT Name, but
shall take no other action of any kind with respect thereto except by the
express prior written authorization of ITT Sheraton. The determination of
whether or not legal action shall be taken in any case shall lie exclusively
with and at the sole discretion of ITT Sheraton, except that if such adverse use
is in the same field of activity as the Retained Business, ITT Information
Services may, by such notice, require that ITT Sheraton institute and reasonably
pursue legal action.
Section 6.02. Costs of Legal Action. In the event that ITT Sheraton is
required to institute legal action pursuant to the notice under Section 6.01,
the costs of any such legal action shall be borne by ITT Information Services.
In the event that ITT Sheraton is not so required, but decides to institute
legal action and such confusingly similar or otherwise damaging use is primarily
or exclusively within the field of activity of the Retained Business, the costs
of any such legal action shall be shared equally by ITT Information Services and
by ITT Sheraton. In all such circumstances, ITT Sheraton may bring suit in its
own name and in the name of ITT Information Services with choice of counsel and
control of the legal action by ITT Sheraton in close coordination and
consultation with ITT Information Services. All other legal actions for third
party infringements instituted by ITT Sheraton shall be at the expense and under
the control of ITT Sheraton. ITT Information Services shall cooperate with and
assist ITT Sheraton in any such suit by promptly providing any reasonably
requested documents in their possession, custody, or control, and by making
their personnel familiar with the facts available to ITT Sheraton and otherwise,
without charge. ITT Information Services agrees to reimburse ITT Sheraton for
all costs and expenses, as incurred, associated with any actions taken by ITT
Sheraton under this Article VI.
Section 6.03. Resolution of Legal Action. In the event that threatened or
actual legal action by ITT Sheraton for infringement of the ITT Name in the
field of the Information Services Business results in a
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settlement or resolution that provides damages or other monies to ITT Sheraton,
ITT Information Services or any of the Information Services Subsidiaries, such
monies shall first be used to reimburse ITT Sheraton for the costs of such legal
action. Any remaining damages or other monies after reimbursement of the
aforesaid costs and expenses shall be retained by ITT Sheraton, except that any
remaining damages assessed as lost profits of ITT Information Services or any
Information Services Subsidiary shall be paid to ITT Information Services and
any remaining damages assessed as royalties shall be shared equally by ITT
Information Services and ITT Sheraton.
ARTICLE VII. CHANGE OF CONTROL AND FAILURE TO MAKE PAYMENTS
Section 7.01. Change of Control. In the event that there is a Change of
Control, then the licenses granted to ITT Information Services to use the ITT
Name under Section 2.01 may be terminated by ITT Sheraton following ninety (90)
days advance notice by ITT Sheraton. The Strategic Investment in ITT Information
Services by CDRV Acquisition, L.L.C. ("CDRV") under the terms of the Investment
Agreement dated July 15, 1997 between ITT Corporation and CDRV shall not be
considered a Change in Control for purposes of this IP Agreement.
Section 7.02. Failure to Make Payments. In the event that ITT Information
Services fails to change its name and fails to make the payments provided for in
Section 2.03 hereof, then the licenses granted to ITT Information Services to
use the ITT Name under Section 2.01 may be terminated by ITT Sheraton.
ARTICLE VIII. TERM AND EFFECT OF TERMINATION
Section 8.01. Termination Prior to Distribution. This IP Agreement may be
terminated by ITT Corporation at any time prior to the Destinations Distribution
by and in the sole discretion of ITT Corporation without the approval of the
shareholders of any Party. In the event of such termination, no party shall have
any liability of any kind to any other party.
Section 8.02. Term. This IP Agreement shall be effective as of the
Distribution Time and shall continue to , except that the rights of
ITT Information Services and the Information Services Subsidiaries rights to use
the ITT Name may be terminated at any time pursuant to Sections 2.04, 7.01, 7.02
or 8.03 hereof or, unless sooner terminated pursuant to Section 8.01 hereof, by
giving written notice of an intent to terminate that portion of this IP
Agreement effective three (3) months thereafter (the effective date of such
notice, the "Termination Date").
Section 8.03. Termination By Breach. If ITT Information Services or any
Information Services Subsidiary shall fail, fully and faithfully to observe or
perform any of the terms of this IP Agreement, ITT Sheraton shall have the right
to terminate the rights to use the ITT Name granted pursuant to Section 2.01
hereof by giving notice in writing, and such notice of termination shall become
effective thirty (30) days thereafter unless ITT Information Services shall,
within such thirty (30) day period, completely remedy such failure and satisfy
ITT Sheraton that such violation has been remedied and will not occur again.
Section 8.04. Effect of Termination. Upon the termination of this IP
Agreement or the license grants to ITT Information Services, except in the case
of termination for abandonment pursuant to Section 2.05, ITT Information
Services and the Information Services Subsidiaries during the Phase-out Period
shall phase out all use of the ITT Name and the ITT Marks. By the end of the
Phase-out Period ITT Information Services and the Information Services
Subsidiaries shall fully discontinue all use of the ITT Name and ITT Marks. By
the end of the Phase-out Period, ITT Information Services will cease the use of
the ITT Name and ITT Marks and will eliminate the use of any other designation
indicating affiliation after the Termination Date provided, however, that ITT
Information Services shall be entitled to sell and use all inventories of
finished goods on hand as of the Termination Date, and provided, further that
with respect to stationery, checks, contracts, purchase orders, customer
agreements and other business forms which can result in a legal commitment of
ITT Sheraton, ITT Information Services will cease immediately after the
Termination Date any use of the designation "ITT" and any other designation
indicating affiliation after the Termination Date with ITT Destinations (by
stickering the ITT Information Services name over such designation or by such
other method as ITT Information Services shall select).
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Insofar as catalogues are concerned, placement on the covers thereof of a
prominent legend negating affiliation with ITT Destinations shall be deemed
compliance with the requirements of this Section with respect to catalogues on
hand as of the Termination Date which are used or distributed by ITT Information
Services for a period of one year following the Termination Date.
Following termination of this Agreement, ITT Information Services and the
Information Services Subsidiaries shall:
(a) continue, without any time limitation, to retain all obligations
of this Agreement, including its obligations under Sections 4.01, 5.02,
5.03, 5.04, 5.06, 9.10, and 9.16; and
(b) within thirty (30) days after the Termination Date, account to ITT
Sheraton and make any compensation payments as may be due or called for
under Section 2.03 hereof up to and including the Termination Date.
ARTICLE IX. MISCELLANEOUS
Section 9.01. Modification or Amendment. This IP Agreement may not be
modified or amended except by an agreement in writing signed by the parties.
Section 9.02. Waiver; Remedies. No delay on the part of ITT Information
Services or ITT Sheraton in exercising any right, power or privilege hereunder
will operate as a waiver thereof, nor will any waiver on the part of either ITT
Information Services or ITT Sheraton of any right, power or privilege hereunder
operate as a waiver of any other right, power or privilege hereunder, nor will
any single or partial exercise of any right, power or privilege hereunder
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege hereunder. Unless otherwise provided, the rights and
remedies herein provided are cumulative and are not exclusive of any rights or
remedies which the parties may otherwise have at law or in equity.
Section 9.03. Counterparts. For the convenience of the parties, this IP
Agreement may be executed in any number of separate counterparts, each such
counterpart being deemed to be an original instrument, and all such counterparts
shall together constitute the same agreement.
SECTION 9.04. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK
APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE,
WITHOUT REGARD TO THE CONFLICTS OF LAW PRINCIPLES OF SUCH STATE.
Section 9.05. Notices. Any notice, request, instruction or other
communication to be given hereunder by any party to another shall be in writing
and shall be deemed to have been duly given (i) on the date of delivery if
delivered personally, or by telecopy or telefacsimile, upon confirmation of
receipt, (ii) on the first business day following the date of dispatch if
delivered by Federal Express or other nationally reputable next-day courier
service, or (iii) on the third business day following the date of mailing if
delivered by registered or certified mail, return receipt requested, postage
prepaid. All notices hereunder shall be delivered as set forth below, or
pursuant to such other instructions as may be designated in writing by the party
to receive such notice.
(a) If to ITT Destinations:
ITT Destinations, Inc.
1330 Avenue of the Americas
New York, New York 10019-5490
Attention: General Counsel
Telefacsimile: (212) 258-1463
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with copies to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019
Attention: George W. Bilicic, Jr., Esq.
Telefacsimile: (212) 474-3700
(b) if to ITT Information Services:
ITT Information Services, Inc.
1330 Avenue of the Americas
New York, New York 10019-5490
Attention: General Counsel
Telefacsimile: (212) 258-5038
with copies to:
Wilmer, Cutler & Pickering
2445 M Street, N.W.
Washington, D.C. 20037
Attention: Eric R. Markus, Esq.
Telefacsimile: (202) 663-6363
(c) if to ITT Sheraton:
ITT Sheraton Corporation
Sixty State Street
Boston, Massachusetts 02109
Attention: General Counsel
Telefacsimile:
with copies to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019
Attention: George W. Bilicic, Jr., Esq.
Telefacsimile: (212) 474-3700
Section 9.06. Entire Agreement. This IP Agreement (including Exhibits,
Annexes and Schedules hereto) constitutes the entire agreement, and supersedes
all other prior agreements, understandings, representations and warranties, both
written and oral, among the parties, with respect to the subject matter hereof.
Notwithstanding any other provisions in this IP Agreement to the contrary, in
the event and to the extent that there shall be a conflict between the
provisions of this IP Agreement as it relates to the ITT Name and ITT Marks, and
the provisions of the Reorganization Agreements, this IP Agreement shall
control.
Section 9.07. Certain Obligations. Whenever this IP Agreement requires
any of the Subsidiaries of any party to take any action, this IP Agreement will
be deemed to include an undertaking on the part of such party to cause such
Subsidiary to take such action.
Section 9.08. Assignment.
(a) Except for the rights granted in Article II, and subject to Article
VII, this IP Agreement shall be assignable in whole in connection with a merger
or consolidation or the sale of all or substantially all the assets of a Party
hereto or in part in connection with a Party's sale or other divestiture of a
Subsidiary whose field of
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activity is within the scope of rights granted to such Party by this IP
Agreement. Otherwise this IP Agreement shall not be assignable, in whole or in
part, directly or indirectly, by any Party hereto without the prior written
consent of the others, and any attempt to assign any rights or obligations
arising under this IP Agreement without such consent shall be void.
(b) That portion of this IP Agreement granting rights to the ITT Name and
ITT Marks shall be assigned with the transfer by ITT Sheraton of the ownership
of the ITT Name and ITT Marks.
Section 9.09. Captions. The Article, Section and paragraph captions
herein are for convenience of reference only, do not constitute part of this IP
Agreement and shall not be deemed to limit or otherwise affect any of the
provisions hereof.
Section 9.10. Specific Performance. In the event of any actual or
threatened default in, or breach of, any of the terms, conditions and provisions
of this IP Agreement, the party or parties who are or are to be thereby
aggrieved shall have the right of specific performance and injunctive relief
giving effect to its or their rights under this IP Agreement, in addition to any
and all other rights and remedies at law or in equity, and all such rights and
remedies shall be cumulative. The parties agree that the remedies at law for any
breach or threatened breach, including monetary damages, are inadequate
compensation for any loss and that any defense in any action for specific
performance that a remedy at law would be adequate is waived. ITT Information
Services acknowledges that should ITT Information Services and/or the
Information Services Subsidiaries upon any termination in whole or in part of
this IP Agreement fail to cease use of the ITT Name or the ITT Marks, as
appropriate, in accordance with the provisions of Article VIII hereof, such
failure will result in immediate and irreparable injury to ITT Sheraton and ITT
Destinations and, in addition to any provable damages and the right to the costs
and expenses of any litigation, ITT Sheraton and/or ITT Destinations shall be
entitled to equitable relief by way of temporary and permanent restraining
orders and injunctions and such other further relief as any court with
jurisdiction may deem just and proper without the necessity of posting a bond.
Section 9.11. Severability. If any provision of this IP Agreement or the
application thereof to any person or circumstance is determined by a court of
competent jurisdiction to be invalid, void or unenforceable, the remaining
provisions hereof, or the application of such provision to persons or
circumstances other than those as to which it has been held invalid or
unenforceable, shall remain in full force and effect and shall in no way be
affected, impaired or invalidated thereby, so long as the economic or legal
substance of the transactions contemplated thereby is not affected in any manner
adverse to any party. Upon any such determination, the Parties shall negotiate
in good faith in an effort to agree upon a suitable and equitable substitute
provision to effect the original intent of the Parties.
Section 9.12. Third Party Beneficiaries. Except as provided in Article IV
relating to Indemnitees, this IP Agreement is solely for the benefit of the
parties hereto and their respective Subsidiaries and Affiliates and should not
be deemed to confer upon third parties any remedy, claim, liability,
reimbursement, claim of action or other right in excess of those existing
without reference to this IP Agreement.
Section 9.13. Fees and Expenses of Enforcement. A party in breach of this
IP Agreement shall, on demand, indemnify and hold harmless the other party
hereto for and against all out-of-pocket expenses, including, without
limitation, legal fees, incurred by such other party by reason of the
enforcement and protection of its rights under this Agreement. The payment of
such expenses is in addition to any other relief to which such other party may
be entitled hereunder or otherwise.
Section 9.14. Expenses. Except as otherwise set forth in this IP
Agreement, all costs and expenses incurred on or prior to the Distribution Time
(whether or not paid on or prior to the Distribution Time) in connection with
the preparation, execution, delivery and implementation of this IP Agreement and
the consummation of the transactions contemplated hereby shall be charged to and
paid by ITT Information Services. Except as otherwise set forth in this IP
Agreement, each party shall bear its own costs and expenses incurred after the
Distribution Time.
Section 9.15. Exhibits. The Exhibits to this IP Agreement shall be
construed with and as an integral part of this IP Agreement to the same extent
as if the same had been set forth verbatim herein.
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Section 9.16. Consent to Jurisdiction. Each of the Parties irrevocably
submits to the exclusive jurisdiction of (a) the Supreme Court of the State of
New York, New York County and (b) the United States District Court for the
Southern District of New York, for the purposes of any suit, action or other
proceeding arising out of this IP Agreement or any transaction contemplated
hereby. Each of the Parties agrees to commence any action, suit or proceeding
relating hereto either in the United States District Court for the Southern
District of New York or if such suit, action or other proceeding may not be
brought in such court for jurisdictional reasons, in the Supreme Court of the
State of New York, New York County. Each of the Parties further agrees that
service of any process, summons, notice or document by U.S. registered mail to
such Party's respective address set forth above shall be effective service of
process for any action, suit or proceeding in New York with respect to any
matters to which it has submitted to jurisdiction in this Section 9.16. Each of
the Parties irrevocably and unconditionally waives any objection to the laying
of venue of any action, suit or proceeding arising out of this IP Agreement or
the transactions contemplated hereby in (i) the Supreme Court of the State of
New York, New York County or (ii) the United States District Court for the
Southern District of New York, and hereby further irrevocably and
unconditionally waives and agrees not to plead or claim in any such court that
any such action, suit or proceeding brought in any such court has been brought
in an inconvenient forum.
Section 9.17. Other Agreements. This IP Agreement is not intended to
address, and should not be interpreted to address, the matters specifically and
expressly covered by the Distribution Agreement and the other Ancillary
Agreements.
Section 9.18. Survival of IP Agreements. Except as otherwise contemplated
by this IP Agreement, all covenants and agreements of the parties contained in
this IP Agreement shall survive the Distribution Time.
Section 9.19. Successors and Assigns. The provisions of this IP Agreement
shall be binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors and permitted assigns.
Section 9.20. Further Assurances. In case at any time after the
Distribution Time any further action is reasonably necessary or desirable to
carry out the purposes of this IP Agreement, the proper officers at such time of
each party to this IP Agreement shall take all such action. Without limiting the
foregoing, ITT Information Services, ITT Sheraton and ITT Destinations or their
respective Subsidiaries, as appropriate, shall use commercially reasonable
efforts to obtain all consents and approvals, to enter into all agreements and
to make all filings and applications that may be required or are reasonably
necessary for the consummation of the transactions contemplated by this IP
Agreement, including, without limitation, all applicable governmental filings.
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IN WITNESS WHEREOF, the Parties have caused this IP Agreement to be duly
executed.
ITT CORPORATION
By
--------------------------------------
Name:
Title:
ITT DESTINATIONS, INC.
By
--------------------------------------
Name:
Title:
ITT SHERATON CORPORATION
By
--------------------------------------
Name:
Title:
ITT WORLD DIRECTORIES, INC.
By
--------------------------------------
Name:
Title:
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EXHIBIT B-2
TRADE NAME AND SERVICE MARK LICENSE AGREEMENT
TRADE NAME AND SERVICE MARK LICENSE AGREEMENT ("Service Mark License
Agreement") dated as of September , 1997, between ITT SHERATON CORPORATION, a
Delaware corporation ("ITT Sheraton"), ITT CORPORATION, a Nevada corporation,
("ITT Corporation"), and ITT WORLD DIRECTORIES, INC, a Delaware corporation
("ITT World Directories") (collectively the "Parties").
RECITALS
WHEREAS, ITT Sheraton is the owner of the trade name "ITT" and of the
trademark and the service mark "ITT", and of all rights worldwide in such name
and marks and the goodwill associated therewith;
WHEREAS, ITT Sheraton is party to Trade Name and Trademark License
Agreements with The Hartford Financial Services Group, Inc. (formerly "ITT
Hartford Group, Inc.") (the "Hartford License Agreement") and with ITT
Manufacturing Enterprises, Inc. (the "Industries License Agreement"), both dated
November 1, 1995, concerning their continued right and license to use the ITT
Name and Marks (as hereinafter defined);
WHEREAS, ITT Corporation is the owner of certain intellectual property and
the licensee of certain other intellectual property as more fully set forth in
the 1995 License Agreement (as hereinafter defined) and other Intellectual
Property (as hereinafter defined);
WHEREAS, ITT Corporation and ITT Destinations, Inc., a Nevada corporation
("ITT Destinations") have entered into the Agreement and Plan of Distribution
dated as of September , 1997 (the "Destinations Distribution Agreement")
pursuant to which the holders of shares of Common Stock of ITT Corporation at
the close of business on the Record Date (as defined in the Destinations
Distribution Agreement) will receive all the outstanding shares of Common Stock
of ITT Destinations;
WHEREAS, ITT World Directories, a wholly owned subsidiary of ITT
Corporation will remain a Subsidiary of ITT Corporation following the
Destinations Distribution and owns all the Intellectual Property (exclusive of
the ITT Name and ITT Marks (as hereinafter defined)) used to operate the
Retained Business (as defined in the Destinations Distribution Agreement);
WHEREAS, ITT World Directories and the Information Services Subsidiaries
(as hereinafter defined) currently have the right to use and desire to continue
to have the right, after the Destinations Distribution Date, to use "ITT" as
part of their company names and trade names and as a trademark and service mark
in connection with conducting the Information Services Business (as hereinafter
defined);
WHEREAS, ITT World Directories and the Information Services Subsidiaries
currently own or have the right and license to use the intellectual property
referred to in the 1995 License Agreement and the other Intellectual Property;
WHEREAS, ITT Sheraton will be merged with and into ITT Destinations in
connection with the Destinations Distribution with ITT Destinations as the
surviving corporation (the "Sheraton Merger");
WHEREAS, ITT Sheraton is willing to enter into this formal license
agreement with ITT World Directories, to continue to use the ITT Name and Marks
after the Destinations Distribution Date in connection with conducting the
Information Services Business;
WHEREAS, capitalized terms used but not otherwise defined herein shall have
the same meanings assigned thereto in the Destinations Distribution Agreement.
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NOW, THEREFORE, in connection with and to carry out the Destination
Distribution and in consideration of the premises and mutual agreements and
covenants herein, the Parties hereto hereby agree as follows:
ARTICLE I. DEFINITIONS
Section 1.01. General. As used in this Service Mark License Agreement,
the following terms shall have the following meanings (such meanings to be
equally applicable to both the singular and plural forms of the terms defined):
(a) "Change in Control" as it relates to ITT Information Services shall
mean the occurrence of any one of the following events:
(i) a report on Schedule 13D shall be filed with the Securities and
Exchange Commission pursuant to Section 13(d) of the Securities Exchange
Act of 1934 (the "Act") disclosing that any person (within the meaning of
Section 13(d) of the Act) other than CDRV Acquisition L.L.C., ITT
Information Services or a Subsidiary of ITT Information Services or any
employee benefit plan sponsored by ITT Information Services or a Subsidiary
of ITT Information Services is the beneficial owner directly or indirectly
of twenty percent (20%) or more of the outstanding Common Stock of ITT
Information Services;
(ii) any person (within the meaning of Section 13(d) of the Act) other
than CDRV Acquisition L.L.C., ITT Information Services or a Subsidiary of
ITT Information Services or any employee benefit plan sponsored by ITT
Information Services or a Subsidiary of ITT Information Services shall
purchase shares pursuant to a tender offer or exchange offer to acquire any
Common Stock of ITT Information Services (or securities convertible into
such Common Stock), for cash, securities or any other consideration,
provided that after consummation of the offer, the person in question is
the beneficial owner (as such term is defined in Rule 13d-3 under the Act)
directly or indirectly of twenty percent (20%) or more of the outstanding
Stock of ITT Information Services (calculated as provided in paragraph (d)
of Rule 13d-3 under the Act in the case of rights to acquire Common Stock);
(iii) the stockholders of ITT Information Services shall approve
(a) any consolidation or merger of ITT Information Services in which ITT
Information Services is not the continuing or surviving corporation or
pursuant to which shares of Common Stock of ITT Information Services would
be converted into cash, securities or other property, other than a merger
of ITT Information Services in which holders of Common Stock of ITT
Information Services immediately prior to the merger have the same
proportionate ownership of common stock of the surviving corporation
immediately after the merger as immediately before, or (b) any sale, lease,
exchange or other transfer (in one transaction or a series of related
transactions) of all or substantially all the assets of ITT Information
Services; or
(iv) there shall have been a change in a majority of the members of
the Board of Directors of ITT Information Services within a 12-month period
unless (x) each new director joining such Board during such 12-month period
was nominated or elected by the vote of a majority of the directors then
still in office who were directors at the beginning of such 12-month
period, or (y) the election to such Board of each new director during such
12-month period was endorsed by a majority of such directors.
(v) ITT Information Services shall no longer own ITT World Directories
or any Information Services Subsidiary.
(b) "Affiliate" shall mean any direct or indirect affiliate of a Party in
which a Party owns at least 40% of such affiliate if the remaining ownership is
held by a single third party or at least 25% of such affiliate if the remaining
ownership is held by more than one third party and in which the Party, through
its control, can exercise a veto over major decisions of such affiliate.
(c) "Closely Related Business" shall mean the business described in Exhibit
B hereto.
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(d) "Destinations Distribution Agreement" shall mean the Agreement and Plan
of Distribution dated as of September , 1997 between ITT Corporation and ITT
Destinations.
(e) "Distribution Date" shall have the meaning set forth in the
Destinations Distribution Agreement.
(f) "Distribution Time" shall have the meaning set forth in the
Destinations Distribution Agreement.
(g) "Information Services Subsidiary" shall mean ITT Information Services,
ITT World Directories and their Subsidiaries, provided that such Subsidiary is
engaged solely in the Information Services Business and that ITT World
Directories grants a formal sublicense to such Subsidiary pursuant to Section
2.03 hereof.
(h) "Information Services Affiliate" shall mean an Affiliate of ITT
Information Services, provided such Affiliate is engaged solely in the
Information Services Business.
(i) "Intellectual Property" shall mean inventions, invention disclosures,
patents, patent applications, computer programs (including source code, object
code and data), trademarks, copyrights, copyright registrations, copyright
registration applications, mask works, designs, technical information,
proprietary information, Trademarks, trade secrets, manufacturing processes,
formulas, algorithms, data, and all other kinds of intellectual property
protected or protectable under state, federal or foreign law (1) owned by or (2)
having a right to license a Party or its Subsidiaries as of the Distribution
Date, except the ITT Name and ITT Marks.
(j) "Information Services Business" shall mean the Retained Business as
defined in the Destinations Distribution Agreement, and, in addition, shall also
mean Closely Related Businesses described in Exhibit B hereto, provided that
Information Services Business does not include the 1995 ITT Industries Business,
or the 1995 ITT Hartford Business.
(k) "IP Agreement" shall mean the Intellectual Property License and
Assignment Agreement that forms Exhibit B-1 of the Destinations Distribution
Agreement and executed contemporaneously with this Trademark and Service Mark
License Agreement.
(l) "ITT Corporation" shall mean ITT Corporation, a Nevada corporation.
(m) "ITT Destinations" shall mean a newly formed Nevada corporation.
(n) "ITT Destinations Business" shall mean all businesses not specifically
included within the Retained Business.
(o) "1995 ITT Destinations Business" shall mean the ITT Destinations
Business as defined in the Industries License Agreement.
(p) "1995 ITT Hartford Business" shall mean the ITT Hartford Business as
defined in the Hartford License Agreement.
(q) "1995 ITT Industries Business" shall mean the ITT Industries Business
defined in the Industries License Agreement.
(r) "ITT Information Services" shall mean (i) ITT Corporation, a Nevada
corporation after the Destinations Distribution or (ii) ITT Information
Services, Inc., after ITT Corporation changes its corporate name in accordance
with Section 6.07 of the Destinations Distribution Agreement and Section 2.02 of
this IP Agreement.
(s) "ITT Logo" shall mean the worldwide rights to the stylized "ITT"
trademark and service mark together with all registrations thereof and all
applications thereof now or hereafter filed or obtained, and the goodwill
associated therewith.
(t) "ITT Marks" shall mean the worldwide rights to (i) the ITT Logo; and
(ii) all other trademarks and service marks consisting of the letters "ITT",
together with all registrations thereof and all applications thereof now or
hereafter filed or obtained, and the goodwill associated therewith.
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(u) "ITT Name" shall mean the worldwide rights to that portion of any
company and trade name consisting of the letters "ITT" and the goodwill
associated therewith.
(v) "ITT Sheraton" shall mean, prior to the Sheraton Merger, ITT Sheraton,
and upon consummation of the Sheraton Merger, ITT Destinations, or any successor
to ITT Destinations.
(w) "ITT World Directories" shall mean ITT World Directories, Inc., a
Delaware corporation.
(x) "ITT World Directories Sublicensee" shall mean ITT Information
Services, and any Subsidiary of ITT Information Services in existence as of, or
acquired or formed after, the Distribution Date, provided that the business of
any such Subsidiary is solely within the field of the ITT Information Services
Business and that ITT World Directories grants a formal sublicense to such
Subsidiary pursuant to Section 2.03 hereof.
(y) "1995 License Agreement" shall mean the Intellectual Property License
Agreement dated November 1, 1995 between and among ITT Industries, Inc., ITT
Sheraton Corporation and ITT Hartford Group, Inc.
(z) "Permitted Manner of Use" shall mean use of the ITT Name and ITT Marks
in accordance with all legal requirements and also with ITT Sheraton's policy
and style standards as currently existing and as may be reasonably amended from
time to time by ITT Sheraton.
(aa) "Phaseout Period" shall mean a period of three (3) months from the
termination of that portion of this Service Mark License Agreement relating to
the ITT Name and Marks during which period all use of the ITT Name and ITT Marks
by ITT Information Services, ITT World Directories and/or their Subsidiaries, as
the case may be, shall be phased out in accordance with the provisions of this
Service Mark License Agreement.
(bb) "Retained Business" shall have the meaning set forth in the
Destinations Distribution Agreement.
(cc) "Retained Intellectual Property" shall mean the Intellectual Property
(i) owned by ITT World Directories and used in the Retained Business as of, or
immediately preceding, the Distribution Date, and (ii) transferred to ITT World
Directories pursuant to Article III of the IP Agreement.
(dd) "Subsidiary" shall mean any corporation, partnership or other entity
of which another entity (i) owns, directly or indirectly, ownership interests
sufficient to elect a majority of the Board of Directors (or persons performing
similar functions) (irrespective of whether at the time any other class or
classes of ownership interests of such corporation, partnership or other entity
shall or might have such voting power upon the occurrence of any contingency) or
(ii) is a general partner or an entity performing similar functions (e.g., a
trustee or managing member). For purposes of this Agreement, ITT-Dow Jones
Television and its Subsidiaries shall be deemed to be Subsidiaries of ITT
Destinations.
(ee) "Trademarks" shall mean and include trademarks, trade names, company
names, service marks, trade dress, the registrations thereof, the applications
therefor and the goodwill associated therewith, exclusive of the ITT Name and
ITT Marks.
Any time the word "including" is used in this Service Mark License
Agreement, it shall be deemed to mean "including, without limitation".
ARTICLE II. ITT NAME AND MARK LICENSES
Section 2.01. Grant of Licenses to Use the ITT Marks. ITT Sheraton hereby
grants to ITT World Directories, during the Term of this Service Mark License
Agreement (as defined in Section 8.02 hereof), a personal, non-exclusive,
non-assignable (except as otherwise provided in this Service Mark License
Agreement), non-transferable worldwide license to use, with the right to grant
sublicenses solely to Information Services Subsidiaries as provided for in
Section 2.03 hereof, to use the ITT Marks in accordance with the applicable
Permitted Manner of Use (i) on an exclusive basis for the Retained Business, and
(ii) on a non-exclusive basis for the Closely Related Business.
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Section 2.02. Grant of Licenses to Use the ITT Name. ITT Sheraton hereby
grants to ITT World Directories, for the Term of this Service Mark License
Agreement, a personal, non-exclusive, non-assignable (except as otherwise
provided in this Service Mark License Agreement), non-transferable worldwide
license to use, with the right to grant sublicenses solely to Information
Services Subsidiaries as provided for in Section 2.03 hereof to use, the ITT
Name solely as part of the company trade name "ITT World Directories, Inc." and
in the company names set forth in Exhibit A and in their trade or popular names
as of the Distribution Date in accordance with the Permitted Manner of Use
solely for use in the Information Services Business. ITT Sheraton during the
Term of this Service Mark License Agreement will not use, nor grant a license to
any third party to use, these company names in the exact form listed in Exhibit
A annexed hereto subject to all other provisions of this Service Mark License
Agreement. The form of using the ITT Name in the company and trade names as set
forth in Exhibit A annexed hereto is hereby approved for purposes of granting
the aforementioned sublicenses. ITT World Directories and Information Services
Subsidiaries shall not have the right to use "ITT Corporation" or any name or
mark substantially identical thereto as a trade name, service mark or trademark.
The form of using the ITT Name in the company and trade names of an Information
Services Sublicensee which is acquired or formed after the Distribution Date
shall be subject to ITT Sheraton's approval, which approval shall not be
unreasonably withheld. Proposed company names and/or trade names will not be
approved if the company name and/or trade name proposed for use in conjunction
with the ITT Name is (i) objectionable from a legal standpoint, (ii) likely to
create confusion with a field of business within the scope of the 1995 ITT
Industries Business, the 1995 ITT Hartford Business, or the 1995 ITT
Destinations Business (exclusive of the Retained Business), or (iii) likely to
create confusion with a name used by Hartford Financial Services Group, Inc., or
ITT Industries, Inc.
Section 2.03. Sublicenses. Each sublicense granted by ITT World
Directories to an Information Services Subsidiary pursuant to Sections 2.01 and
2.02 shall:
(a) be in writing;
(b) specifically require such Information Services Subsidiary to agree
to comply with and observe the terms and conditions of this Service Mark
License Agreement; and
(c) require ITT World Directories and such Information Services
Subsidiary to acknowledge and agree that: (i) ITT World Directories is
guaranteeing to ITT Sheraton the Information Services Subsidiary's
performance of the terms and conditions in this Service Mark License
Agreement; (ii) the rights granted to it under the sublicense are: (x)
personal, non-assignable, and non-transferable, (y) do not include the
right to grant sublicenses, and (z) may be restricted or terminated
pursuant to the terms of this Service Mark License Agreement; and (iii) ITT
Sheraton and ITT Destinations are intended third party beneficiaries of
these commitments by such Information Services Subsidiary required under
this Section 2.03, and that such provisions may not be waived or amended
without the prior written consent of ITT Sheraton and ITT Destinations.
ITT World Directories shall cause each Information Services Subsidiary to
whom a sublicense is granted to comply with and observe the terms and conditions
of this Service Mark License Agreement by executing an agreement in the form
annexed hereto as Exhibit C, which will then be forwarded to ITT Sheraton.
Section 2.04. Prohibited Uses of ITT Name and ITT Marks. Neither ITT
World Directories, nor any of the Information Services Subsidiaries shall use
the ITT Name or the ITT Marks for any product or service, or with or for any
entity, outside the scope of the Information Services Business.
Section 2.05. Reduction of Licenses. In the event ITT World Directories
and/or any Information Services Subsidiary shall abandon its use of the ITT Name
or the ITT Marks for all or a portion of the Information Services Business, then
the scope of the rights granted in Sections 2.01 and 2.02 with respect to such
abandoned ITT Name or ITT Marks shall be reduced by an amount equal to the scope
of the Information Services Business so abandoned. For purpose of this Section
2.05, abandonment shall mean the failure of ITT World Directories or any
Information Services Subsidiary to use the ITT Name or the ITT Marks for a
period of two (2) years all or such portion of the Information Services
Business, any such period to commence only after the Distribution Date.
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Section 2.06. Quality Standards. In view of the status of the Parties
immediately prior to the Distribution Date as affiliated companies, each Party's
intimate knowledge with standards and procedures for assuring consistent
quality, ITT Sheraton's knowledge of the standards and procedures used by ITT
World Directories in the Retained Business, the integrity of the Retained
Business and its history of trouble-free goods and services, ITT Sheraton
recognizes the Retained Business current quality standards as acceptable
standards, and ITT World Directories and the Information Services Subsidiaries
agree to maintain such standards and procedures to assure the consistent quality
of its goods and services. ITT World Directories and the Information Services
Subsidiaries shall not materially lower such quality standards without the prior
written approval of ITT Sheraton.
Section 2.07. Inspections and Samples. Should ITT Sheraton have reason to
believe based on information available to it that the quality standards referred
to in Section 2.06 have not been maintained, at the request of ITT Sheraton, ITT
World Directories shall, and shall cause the Information Services Subsidiaries
to, permit a knowledgeable independent expert or consultant retained by ITT
Sheraton to have reasonable access to their premises and personnel during normal
working hours and shall furnish or permit inspection of, at ITT Sheraton's
request and without charge to ITT Sheraton or to such expert or consultant,
product samples, cartons, containers, packaging, wrapping and service materials
bearing or used in connection with the ITT Name and/or the ITT Marks for the
purpose of ensuring that ITT World Directories and the Information Services
Subsidiaries are complying with such quality standards. The selection of the
independent expert shall be subject to the approval of ITT World Directories,
which approval shall not be unreasonably delayed or withheld. Any information
obtained during such inspection and provided to ITT Sheraton shall be limited to
that which is necessary to ensure compliance with such quality standards and
shall be kept confidential by ITT Sheraton and its Subsidiaries.
Section 2.08. Advertising, Packaging and Labels. ITT World Directories
shall, and shall cause the Information Services Subsidiaries to, furnish, at ITT
Sheraton's request and without charge, to ITT Sheraton or to its authorized
designee(s) samples of promotional and advertising material or the like to be
used in connection with any products or services offered by ITT World
Directories and the Information Services Subsidiaries and bearing or used in
connection with the ITT Name and ITT Marks.
Section 2.09. Third Party Rights. ITT World Directories acknowledges that
the rights granted by ITT Sheraton under Sections 2.01, 2.02 and 2.03 are
subject to all pre-existing third party rights, obligations, and restrictions as
of the Distribution Date.
Section 2.10. Rights to Enter Businesses. Nothing in this Service Mark
License Agreement shall preclude ITT World Directories, or any of its
Subsidiaries or affiliates, from operating in any business outside of the
Information Services Business provided neither the ITT Name nor the ITT Marks
are used in such business.
ARTICLE III. INTELLECTUAL PROPERTY LICENSES
Section 3.01. ITT Destinations Grant of Licenses. ITT Destinations, on
behalf of itself and its Subsidiaries, hereby grants effective as of the
Distribution Date to ITT World Directories, without the right to grant
sublicenses except to Information Services Subsidiaries and ITT Information
Services Affiliates, a non-assignable, worldwide, perpetual, paid-up,
royalty-free, license under Intellectual Property owned by or transferred to,
ITT Destinations or its Subsidiaries as of the Distribution Date to manufacture,
have manufactured, use, offer to sell and sell any and all methods, processes,
and products, and offer and provide any services (i) on an exclusive basis
within the field of the Retained Business, and (ii) a non-exclusive basis within
the field of the Closely Related Business. However, in no event shall such
license be interpreted to extent to include any of the fields of the 1995 ITT
Industries Business or the 1995 ITT Hartford Business.
Section 3.02. ITT World Directories Grant of Licenses. ITT World
Directories, on behalf of itself and the ITT Information Services Subsidiaries,
hereby grants effective as of the Distribution Date to ITT Destinations, without
the right to grant sublicenses except to Subsidiaries and Affiliates of ITT
Destinations, a non-assignable, worldwide, perpetual, paid-up, royalty-free,
non-exclusive license, under Intellectual Property owned by, or transferred to,
ITT World Directories or the ITT Information Services Subsidiaries, as of the
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Distribution Date to manufacture, use, offer to sell, and sell any and all
methods, processes, and products, and offer and provide any services within the
field of ITT Destinations Business.
Section 3.03. Retained Intellectual Property. Nothing in this Article III
shall be construed to restrict the right of ITT World Directories to use or
license (subject to Section 3.02) any retained Intellectual Property in any
field of business, except in the fields of the 1995 ITT Hartford Business, the
1995 ITT Industries Business, and the 1995 ITT Destinations Business (exclusive
of the Retained Business).
Section 3.04. Pre-Existing Rights. The rights granted by the Parties
under Sections 3.01 and 3.02 are subject to all pre-existing third party rights,
obligations and restrictions as of the Distribution Date.
Section 3.05. Disclaimer. Each of the Parties hereto understands and
agrees that, except as otherwise expressly provided, no party hereto is, in this
Service Mark License Agreement or in any other agreement or document
contemplated by this Service Mark License Agreement or otherwise, making any
representation or warranty whatsoever, including, without limitation, as to
title, value or legal sufficiency. It is also agreed and understood that any and
all assets either transferred or licensed to or retained or licensed by the
Parties, as the case may be, shall be "as is, where is".
Section 3.06. Third Party Rights. To the extent that the grants of
Intellectual Property rights and licenses under this Article III herein would
violate or be prohibited by any agreement with a third party, and such
Intellectual Property is actually used by the grantee Party, then the granting
Party undertakes to use reasonable efforts to obtain the necessary consent(s)
from such third party so as to be permitted to make such grants. However, each
Party hereto understands and agrees that no Party hereto is, in this Service
Mark License Agreement or in any other agreement or document contemplated by
this Service Mark License Agreement or otherwise, representing or warranting in
any way that the obtaining of any consents or approvals, the execution and
delivery of any amendatory agreements and the making of any filings or
applications possible contemplated by this Service Mark License Agreement will
satisfy the provisions of any and all applicable agreements or the requirements
of any or all applicable laws or judgments.
Section 3.07. Advice and Consultation. To the extent a Party or its
Subsidiaries shall require, advice and consultation in connection with their
respective businesses, then that advice and assistance shall be provided
pursuant to a separate agreement entered into by the Parties pursuant to terms
agreed to by the Parties and subject to reasonably available resources.
ARTICLE IV. INDEMNIFICATION
Section 4.01. Defense of Infringement Claims. ITT Sheraton agrees to
indemnify, defend and hold harmless ITT World Directories and/or any applicable
Information Services Subsidiary and their respective employees, officers,
directors and agents from and against, and pay or reimburse them for, any and
all Indemnifiable Losses, which arise solely out of an assertion or claim by a
third party that the use of the ITT Name or ITT Marks by ITT World Directories
or any of the Information Services Subsidiaries in the Retained Business
pursuant to the terms of this Service Mark License Agreement infringes the trade
names or trademarks of such third party. The costs associated with any such
defense shall be borne equally by ITT Sheraton and ITT World Directories. ITT
Sheraton shall have no obligation to indemnify ITT World Directories, or any
Information Services Subsidiary, or their respective employees, officers,
directors, or agents for any indemnifiable losses that relate to any use of the
ITT Name or ITT Marks that is not expressly permitted by this Service Mark
License Agreement.
Section 4.02. Limitations on Indemnification Obligations. The amount that
any party (an "Indemnifying Party") is or may be required to pay to any other
person (an "Indemnitee") pursuant to Section 3.01, as applicable, shall be
reduced (retroactively or prospectively) by any Insurance Proceeds or other
amounts actually recovered by or on behalf of such Indemnitee in respect of the
related Indemnifiable Loss. If an Indemnitee shall have received the payment
required by this Agreement from an Indemnifying Party in respect of an
Indemnifiable Loss and shall subsequently actually receive Insurance Proceeds or
other amounts in respect of such Indemnifiable Loss, then such Indemnitee shall
pay to such Indemnifying Party a sum equal to the amount of such Insurance
Proceeds or other amounts actually received, up to the aggregate amount of
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any payments received from such Indemnifying Party pursuant to this Service Mark
License Agreement in respect of such Indemnifiable Loss.
Section 4.03. Procedures for Indemnification. Any Indemnitee entitled to
indemnification pursuant to this Service Mark License Agreement shall notify the
Indemnifying Party in writing, and in reasonable detail, of the applicable Third
Party Claim promptly (and in any event within 10 business days) after receipt by
such Indemnitee of written notice of the Third Party Claim; provided, however,
that failure to give such notification shall not affect the indemnification
provided hereunder except to the extent the Indemnifying Party shall have been
actually prejudiced as a result of such failure (except that the Indemnifying
Party shall not be liable for any expenses incurred during the period in which
the Indemnitee failed to give such notice). Thereafter, the Indemnitee shall
deliver to the Indemnifying Party, promptly (and in any event within 10 business
days) after the Indemnitee's receipt thereof, copies of all notices and
documents (including court papers) received by the Indemnitee relating to the
Third Party Claim.
If a Third Party Claim is made against an Indemnitee, the Indemnifying
Party shall be entitled to participate in the defense thereof and, if it so
chooses and acknowledges in writing its obligation to indemnify the Indemnitee
therefor, to assume the defense thereof with counsel selected by the
Indemnifying Party; provided that such counsel is not reasonably objected to by
the Indemnitee. Should the Indemnifying Party so elect to assume the defense of
a Third Party Claim, the Indemnifying Party shall not be liable to the
Indemnitee for legal or other expenses subsequently incurred by the Indemnitee
in connection with the defense thereof. If the Indemnifying Party assumes such
defense, the Indemnitee shall have the right to participate in the defense
thereof and to employ counsel, at its own expense, separate from the counsel
employed by the Indemnifying Party, it being understood that the Indemnifying
Party shall have full control of such defense. The Indemnifying Party shall be
liable for the fees and expenses of counsel employed by the Indemnitee for any
period during which the Indemnifying Party has failed to assume the defense
thereof (other than during the period prior to the time the Indemnitee shall
have given notice of the Third Party Claim as provided above).
If the Indemnifying Party so elects to assume the defense of any Third
Party Claim, all of the Indemnitees shall cooperate with the Indemnifying Party
in the defense or prosecution thereof. Such cooperation shall include the
retention and (upon the Indemnifying Party's request) the provision to the
Indemnifying Party of records and information which are reasonably relevant to
such Third Party Claim and making employees available on a mutually convenient
basis to provide additional information of any material provided hereunder.
Whether or not the Indemnifying Party shall have assumed the defense of a
Third Party Claim, in no event will the Indemnitee admit any liability with
respect to, or settle, compromise or discharge, such Third Party Claim without
the Indemnifying Party's prior written consent (which consent shall not be
unreasonably withheld); provided, however, that the Indemnitee shall have the
right to settle, compromise or discharge such Third Party Claim without the
consent of the Indemnifying Party if the Indemnitee releases in writing the
Indemnifying Party from its indemnification obligation hereunder with respect to
such Third Party Claim and such settlement, compromise or discharge would not
otherwise adversely affect the Indemnifying Party. If the Indemnifying Party
shall have assumed the defense of a Third Party Claim, the Indemnitee will agree
to any settlement, compromise or discharge of a Third Party Claim that the
Indemnifying Party may recommend and that by its terms obligates the
Indemnifying Party to pay the full amount of the liability in connection with
such Third Party Claim and releases the Indemnitee completely in connection with
such Third Party Claim.
Notwithstanding the foregoing, the Indemnifying Party shall not be entitled
to assume the defense of any Third Party Claim (and shall be liable for the fees
and expenses of counsel incurred by the Indemnitee in defending such Third Party
Claim) if the Third Party Claim seeks an order, injunction or other equitable
relief or relief for other than money damages against the Indemnitee which the
Indemnitee reasonably determines, after conferring with its counsel, cannot be
separated from any related Third Party Claim for money damages. If such
equitable relief or other relief portion of the Third Party Claim can be so
separated from that for money damages, the Indemnifying Party shall be entitled
to assume the defense of the portion relating to money damages.
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Section 4.04. Other Adjustments.
(a) The amount of any Indemnifiable Loss shall be (x) increased to take
into account any net Tax cost actually incurred by the Indemnitee arising from
any payments received from the Indemnifying Party (grossed up for such increase)
and (y) reduced to take account of any net Tax benefit actually realized by the
Indemnitee arising from the incurrence or payment of any such Indemnifiable
Loss. In computing the amount of such Tax cost or Tax benefit, the Indemnitee
shall be deemed to recognize all other items of income, gain, loss, deduction or
credit before recognizing any item arising from the receipt of any payment with
respect to an Indemnifiable Loss or the incurrence or payment of any
Indemnifiable Loss.
(b) In addition to any adjustments required pursuant to Section 3.01 hereof
or clause (i) of this Section 4.04, if the amount of any Indemnifiable Loss
shall, at any time subsequent to the payment required by this Service Mark
License Agreement, be reduced by recovery, settlement or otherwise, the amount
of such reduction, less any expenses incurred in connection therewith, shall
promptly be repaid by the Indemnitee to the Indemnifying Party, up to the
aggregate amount of any payments received from such Indemnifying Party pursuant
to this Intellectual Property Agreement in respect of such Indemnifiable Loss.
ARTICLE V. UNDERTAKINGS
Section 5.01. Phase-Out. ITT Sheraton shall not grant a license to any
third party to use the ITT Name or the ITT Marks in the field of activity of the
Directories Business during any Phaseout Period after any termination of this
Service Mark License Agreement, except in the case of an abandonment as
specified in the last sentence of Section 2.05 herein.
Section 5.02. Absence of Interest in ITT Marks. ITT World Directories
acknowledges that nothing in this Service Mark License Agreement shall give it
or any Information Services Subsidiary any right, title or interest in the ITT
Name or the ITT Marks apart from the rights to use, and to sublicense the use,
granted or to be granted hereunder, and to retain any remuneration resulting
therefrom, all such right, title and interest, including but not limited to
rights of registration, maintenance and enforcement, being solely with ITT
Sheraton. The ITT Name and the ITT Marks are the sole property of ITT Sheraton,
and any and all uses by ITT World Directories of the ITT Name or of the ITT
Marks shall inure to the benefit of ITT Sheraton. In no event shall such use be
deemed or construed to have created or vested any right, title or interest
whatsoever in and to ITT World Directories. To the extent that any jurisdiction
shall find for any reason as a matter of law or otherwise that such use has
vested in ITT World Directories or any of its Subsidiaries any right, title or
interest in or to the ITT Name or the ITT Marks, ITT World Directories upon the
request of ITT Sheraton, shall, and shall cause any applicable Subsidiary of ITT
World Directories to, execute and deliver to ITT Sheraton, without charge,
appropriate assignments to vest such rights, title and interest in ITT Sheraton.
Section 5.03. ITT Name and ITT Marks Not Contested. ITT World Directories
agrees that neither it, nor any of the Information Services Subsidiaries, shall
raise or cause to be raised any questions concerning or objections to the
validity of the ITT Name or the ITT Marks in any jurisdiction, or to any
registrations thereof or applications therefor, or to the sole proprietary
rights of ITT Sheraton thereto, on any grounds whatsoever.
Section 5.04. Filing, Registration or Use of Names, Trademarks and Service
Marks. ITT World Directories agrees that neither it nor any of the Information
Services Subsidiaries shall:
(a) file, apply to register or register the ITT Name or the ITT Marks,
alone or in combination with any other word or device or symbol or any
name, mark, term, script or device colorably similar thereto, except if,
as, when, and to the extent approved in writing in advance by ITT Sheraton
in specific instances;
(b) use the ITT Name or the ITT Marks in conjunction or in combination
with any other name, mark, term, script or device whatever, except as
specifically set forth in Article II, or if, as and to the extent approved
in writing in advance by ITT Sheraton; or
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(c) use the ITT Name or the ITT Marks in any jurisdiction, or any
name, mark, term, script or device colorably similar thereto, except as
specifically permitted under this Service Mark License Agreement.
At the request of ITT World Directories, ITT Sheraton shall file
registration applications and maintain any such applications and registrations
issued thereon for the ITT Name and ITT Marks for activities within the ITT
Information Services Business. Any expenses incurred by, or on behalf of, ITT
Sheraton in connection with registering or maintaining registrations of the ITT
Name or the ITT Marks for the Information Services Business shall be reimbursed
by ITT World Directories promptly upon receipt of written notice thereof.
Section 5.05. Other ITT Sheraton Licenses. Subject to Section 2.02,
nothing in this Service Mark License Agreement shall be construed to limit the
right of ITT Sheraton to use, or to grant a license to any entity or person to
use, the ITT Name or the ITT Marks anywhere for any products or services, or in
connection with any activities outside the Information Services Business even if
such entity or person competes with ITT World Directories or any of the
Information Services Subsidiaries, or its products or services are shipped, sold
or offered in the same channels of trade as those of ITT World Directories or
any of the Information Services Subsidiaries.
Section 5.06. Execution of Documents. At ITT Sheraton's request, ITT
World Directories and the Information Services Subsidiaries shall assist ITT
Sheraton in the procurement or maintenance of any filings or registrations for
the ITT Name or ITT Marks in any jurisdiction by providing any information
available from ITT World Directories and the Information Services Subsidiaries
and executing any documents necessary therefor. The rights granted or to be
granted hereunder to ITT World Directories or any Information Services
Subsidiary shall be recorded in any jurisdiction where such recordation is
required by statute or in the sole discretion of ITT Sheraton is advisable, and
ITT World Directories and the Information Services Subsidiaries shall extend to
ITT Sheraton their full cooperation in filing and completing any such
recordation.
Section 5.07. Intellectual Property Violations. To the extent that the
grants of intellectual property rights and licenses under Article II herein
would violate or be prohibited by any agreement with a third party, and such
Intellectual Property is actually used by the grantee Party, then the granting
Party undertakes to use reasonable efforts to obtain the necessary consent(s)
from such third party so as to be permitted to make such grants.
Section 5.08. No Representation or Warranty. Each of the Parties hereto
understands and agrees that no party hereto is, in this Service Mark License
Agreement or in any other agreement or document contemplated by this Service
Mark License Agreement or otherwise, making any representation or warranty
whatsoever. It is also agreed and understood that any and all intellectual
property assets either transferred or licensed to or retained by the Parties, as
the case may be, shall be "as is, where is".
ARTICLE VI. INFRINGEMENT BY THIRD PARTIES
Section 6.01. Infringement by Third Parties. Upon discovery by ITT World
Directories or by any Information Services Subsidiary, ITT World Directories
shall notify ITT Sheraton of any adverse uses confusingly similar or otherwise
damaging to the ITT Name and/or ITT Marks, but shall take no other action of any
kind with respect thereto except by the express prior written authorization of
ITT Sheraton. The determination of whether or not legal action shall be taken in
any case shall lie exclusively with and at the sole discretion of ITT Sheraton,
except that if such adverse use is in the same field of activity as the Retained
Business, ITT World Directories may, by such notice, require that ITT Sheraton
institute and reasonably pursue legal action.
Section 6.02. Costs of Legal Action. In the event that ITT Sheraton is
required to institute legal action pursuant to the notice under Section 6.01,
the costs of any such legal action shall be borne by ITT World Directories. In
the event that ITT Sheraton is not so required, but decides to institute legal
action and such confusingly similar or otherwise damaging use is primarily or
exclusively within the field of activity of the ITT World Directories Business,
the costs of any such legal action shall be shared equally by ITT World
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Directories and by ITT Sheraton. In all such circumstances, ITT Sheraton may
bring suit in its own name and in the name of ITT World Directories or the ITT
World Directories Sublicensees, with choice of counsel and control of the legal
action by ITT Sheraton in close coordination and consultation with ITT World
Directories. All other legal actions for third party infringements instituted by
ITT Sheraton shall be at the expense and control of ITT Sheraton. ITT World
Directories and the ITT World Directories Sublicensees shall cooperate with and
assist ITT Sheraton in any such suit by promptly providing any reasonably
requested documents in their possession, custody, or control, and by making
their personnel familiar with the facts available to ITT Sheraton and otherwise,
without charge. ITT World Directories agrees to reimburse ITT Sheraton for all
costs and expenses, as incurred, associated with any actions taken by ITT
Sheraton under this Article VI.
Section 6.03. Resolution of Legal Action. In the event that threatened or
actual legal action by ITT Sheraton for infringement of the ITT Name or ITT Mark
in the field of the Information Services Business results in a settlement or
resolution that provides damages or other monies to ITT Sheraton, ITT World
Directories or any of the Information Services Subsidiaries, such monies shall
first be used to reimburse ITT Sheraton for the costs of such legal action. Any
remaining damages or other monies after reimbursement of the aforesaid costs and
expenses shall be retained by ITT Sheraton, except that any remaining damages
assessed as lost profits of ITT World Directories or any Information Services
Subsidiary shall be paid to ITT World Directories and any remaining damages
assessed as royalties shall be shared equally by ITT World Directories and ITT
Sheraton.
ARTICLE VII. CHANGE OF CONTROL
Section 7.01. Change of Control. In the event that there is a Change of
Control, then the licenses granted to ITT World Directories for the ITT Name and
the ITT Mark under Sections 2.01, 2.02 and 2.03 may be terminated by ITT
Sheraton following ninety (90) days advance notice by ITT Sheraton. The
Strategic Investment in ITT Information Services by CDRV Acquisition, L.L.C.
under the terms of the Investment Agreement dated July 15, 1997 between ITT
Corporation and CDRV shall not be considered a Change in Control for purposes of
this IP Agreement.
Section 7.02. Failure to Make Payments. In the event that ITT Information
Services fails to change its name and fails to make the payments provided for in
the Trade Name License Agreement being executed simultaneously herewith, then
the licenses granted to ITT World Directories for the ITT Name and the ITT Mark
under Sections 2.01, 2.02 and 2.03 may be terminated by ITT Sheraton.
ARTICLE VIII. TERM AND EFFECT OF TERMINATION
Section 8.01. Termination Prior to Distribution. This Service Mark
License Agreement may be terminated by ITT Corporation at any time prior to the
Destinations Distribution by and in the sole discretion of ITT Corporation
without the approval of the shareholders of any Party. In the event of such
termination, no party shall have any liability of any kind to any other party.
Section 8.02. Term. This Service Mark License Agreement shall be
effective as of the Distribution Time and shall continue , except
that the rights of ITT World Directories and the Information Services
Subsidiaries rights to use the ITT Name and ITT Marks may be terminated pursuant
to Sections 2.05, 7.01, 7.02 or 8.03 hereof or, unless sooner terminated
pursuant to Section 8.01 hereof, by giving written notice of an intent to
terminate that portion of this Service Mark License Agreement effective three
(3) months thereafter (the effective date of such notice, the "Termination
Date").
Section 8.03. Termination By Breach. If ITT World Directories or any
Information Services Subsidiary shall fail fully and faithfully to observe or
perform any of the terms of this Service Mark License Agreement, ITT Sheraton
shall have the right to terminate the rights to use the ITT Name and ITT Marks
granted pursuant to Sections 2.01 and 2.02 hereof by giving notice in writing,
and such notice of termination shall become effective thirty (30) days
thereafter unless ITT World Directories shall, within such thirty (30) day
period, completely remedy such failure and satisfy ITT Sheraton that such
violation has been remedied and will not occur again.
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Section 8.04. Effect of Termination. Upon the termination of this Service
Mark License Agreement or the license grants to ITT World Directories, except in
the case of termination for abandonment pursuant to Section 2.05, ITT World
Directories and the Information Services Subsidiaries during the Phaseout Period
shall phase out all use of the ITT Name and the ITT Marks. By the end of the
Phaseout Period ITT World Directories and the Directories Subsidiaries shall
fully discontinue all use of the ITT Marks and the ITT Name. By the end of the
Phase-out Period, ITT World Directories and the Information Services
Subsidiaries will cease the use of the ITT Name and ITT Marks and will eliminate
the use of any other designation indicating affiliation after the Termination
Date; provided, however, that ITT World Directories and ITT Information Services
Subsidiaries shall be entitled to sell and use all inventories of finished goods
on hand as of the Termination Date, and provided, further that with respect to
stationery, checks, contracts, purchase orders, customer agreements and other
business forms which can result in a legal commitment of ITT Destinations, ITT
World Directories and ITT Information Services Subsidiaries will cease
immediately after the Termination Date any use of the designation "ITT" and any
other designation indicating affiliation after the Termination Date with ITT
Destinations (by stickering the ITT World Directories name over such designation
or by such other method as ITT World Directories shall select).
Insofar as catalogues are concerned, placement on the covers thereof of a
prominent legend negating affiliation with ITT Destinations shall be deemed
compliance with the requirements of this Section with respect to catalogues on
hand as of the Termination Date which are used or distributed by ITT World
Directories for a period of one year following the Termination Date.
Following termination of this Agreement, ITT World Directories and the
Information Services Subsidiaries shall:
(a) continue, without any time limitation, to retain all obligations
of this Agreement, including its obligations under Sections 5.02, 5.03,
5.04, 5.06, 9.10, and 9.16; and
(b) within thirty (30) days after the Termination Date, account to ITT
Sheraton and make any compensation payments as may be due or called for
under Section hereof up to and including the Termination Date.
ARTICLE IX. MISCELLANEOUS
Section 9.01. Modification or Amendment. This Service Mark License
Agreement may not be modified or amended except by an agreement in writing
signed by the parties.
Section 9.02. Waiver; Remedies. No delay on the part of ITT World
Directories or ITT Sheraton in exercising any right, power or privilege
hereunder will operate as a waiver thereof, nor will any waiver on the part of
either ITT World Directories or ITT Sheraton of any right, power or privilege
hereunder operate as a waiver of any other right, power or privilege hereunder,
nor will any single or partial exercise of any right, power or privilege
hereunder preclude any other or further exercise thereof or the exercise of any
other right, power or privilege hereunder. Unless otherwise provided, the rights
and remedies herein provided are cumulative and are not exclusive of any rights
or remedies which the parties may otherwise have at law or in equity.
Section 9.03. Counterparts. For the convenience of the parties, this
Service Mark License Agreement may be executed in any number of separate
counterparts, each such counterpart being deemed to be an original instrument,
and all such counterparts shall together constitute the same agreement.
Section 9.04. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK
APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE,
WITHOUT REGARD TO THE CONFLICTS OF LAW PRINCIPLES OF SUCH STATE.
Section 9.05. Notices. Any notice, request, instruction or other
communication to be given hereunder by any party to another shall be in writing
and shall be deemed to have been duly given (i) on the date of delivery if
delivered personally, or by telecopy or telefacsimile, upon confirmation of
receipt, (ii) on the first
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business day following the date of dispatch if delivered by Federal Express or
other nationally reputable next-day courier service, or (iii) on the third
business day following the date of mailing if delivered by registered or
certified mail, return receipt requested, postage prepaid. All notices hereunder
shall be delivered as set forth below, or pursuant to such other instructions as
may be designated in writing by the party to receive such notice.
(a) If to ITT Destinations:
ITT Destinations, Inc.
1330 Avenue of the Americas
New York, New York 10019-5490
Attention: General Counsel
Telefacsimile: (212) 258-1463
with copies to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019
Attention: George W. Bilicic, Jr., Esq.
Telefacsimile: (212) 474-3700
(b) if to ITT World Directories :
ITT World Directories, Inc.
1330 Avenue of the Americas
New York, New York 10019-5490
Attention: General Counsel
Telefacsimile: (212) 258-5038
with copies to:
Wilmer, Cutler & Pickering
2445 M Street, N.W.
Washington, D.C. 20037
Attention: Eric R. Markus, Esq.
Telefacsimile: (202) 663-6363
(c) if to ITT Sheraton:
ITT Sheraton Corporation
Sixty State Street
Boston, Massachusetts 02109
Attention: General Counsel
Telefacsimile:
with copies to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019
Attention: George W. Bilicic, Jr., Esq.
Telefacsimile: (212) 474-3700
Section 9.06. Entire Agreement. This Service Mark License Agreement
(including Exhibits, Annexes and Schedules hereto) constitutes the entire
agreement, and supersedes all other prior agreements, under-
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standings, representations and warranties, both written and oral, among the
parties, with respect to the subject matter hereof. Notwithstanding any other
provisions in this Service Mark License Agreement to the contrary, in the event
and to the extent that there shall be a conflict between the provisions of this
Service Mark License Agreement as it relates to the ITT Name and ITT Marks, and
the provisions of the Destinations Distribution Agreements, this Service Mark
License Agreement shall control.
Section 9.07. Certain Obligations. Whenever this Service Mark License
Agreement requires any of the Subsidiaries of any party to take any action, this
Service Mark License Agreement will be deemed to include an undertaking on the
part of such party to cause such Subsidiary to take such action.
Section 9.08. Assignment.
(a) Except for the rights granted in Article II, and subject to Article
VII, this IP Agreement shall be assignable in whole in connection with a merger
or consolidation or the sale of all or substantially all the assets of a Party
hereto or in part in connection with a Party's sale or other divestiture of a
Subsidiary whose field of activity is within the scope of rights granted to such
Party by this Service Mark License Agreement. Otherwise this Service Mark
License Agreement shall not be assignable, in whole or in part, directly or
indirectly, by any Party hereto without the prior written consent of the others,
and any attempt to assign any rights or obligations arising under this Service
Mark License Agreement without such consent shall be void.
(b) That portion of this Service Mark License Agreement granting rights to
the ITT Name and ITT Marks shall be assigned with the transfer by ITT Sheraton
of the ownership of the ITT Name and ITT Marks.
Section 9.09. Captions. The Article, Section and paragraph captions
herein are for convenience of reference only, do not constitute part of this
Service Mark License Agreement and shall not be deemed to limit or otherwise
affect any of the provisions hereof.
Section 9.10. Specific Performance. In the event of any actual or
threatened default in, or breach of, any of the terms, conditions and provisions
of this Service Mark License Agreement, the party or parties who are or are to
be thereby aggrieved shall have the right of specific performance and injunctive
relief giving effect to its or their rights under this Service Mark License
Agreement, in addition to any and all other rights and remedies at law or in
equity, and all such rights and remedies shall be cumulative. The parties agree
that the remedies at law for any breach or threatened breach, including monetary
damages, are inadequate compensation for any loss and that any defense in any
action for specific performance that a remedy at law would be adequate is
waived. ITT World Directories acknowledges that should ITT World Directories
and/or the Information Services Subsidiaries upon any termination in whole or in
part of this Service Mark License Agreement fail to cease use of the ITT Name or
the ITT Marks, as appropriate, in accordance with the provisions of Article VII
hereof, such failure will result in immediate and irreparable injury to ITT
Sheraton and ITT Destinations and, in addition to any provable damages and the
right to the costs and expenses of any litigation, ITT Sheraton and/or ITT
Destinations shall be entitled to equitable relief by way of temporary and
permanent restraining orders and injunctions and such other further relief as
any court with jurisdiction may deem just and proper without the necessity of
posting a bond.
Section 9.11. Severability. If any provision of this Service Mark License
Agreement or the application thereof to any person or circumstance is determined
by a court of competent jurisdiction to be invalid, void or unenforceable, the
remaining provisions hereof, or the application of such provision to persons or
circumstances other than those as to which it has been held invalid or
unenforceable, shall remain in full force and effect and shall in no way be
affected, impaired or invalidated thereby, so long as the economic or legal
substance of the transactions contemplated thereby is not affected in any manner
adverse to any party. Upon any such determination, the Parties shall negotiate
in good faith in an effort to agree upon a suitable and equitable substitute
provision to effect the original intent of the Parties.
Section 9.12. Third Party Beneficiaries. Except as provided in Article V
relating to Indemnitees, this Service Mark License Agreement is solely for the
benefit of the parties hereto and their respective Subsidiaries and Affiliates
and should not be deemed to confer upon third parties any remedy, claim,
liability, reimbursement, claim of action or other right in excess of those
existing without reference to this Service Mark License Agreement.
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Section 9.13. Fees and Expenses of Enforcement. A party in breach of this
Service Mark License Agreement shall, on demand, indemnify and hold harmless the
other party hereto for and against all out-of-pocket expenses, including,
without limitation, legal fees, incurred by such other party by reason of the
enforcement and protection of its rights under this Agreement. The payment of
such expenses is in addition to any other relief to which such other party may
be entitled hereunder or otherwise.
Section 9.14. Expenses. Except as otherwise set forth in this Service
Mark License Agreement, all costs and expenses incurred on or prior to the
Distribution Time (whether or not paid on or prior to the Distribution Time) in
connection with the preparation, execution, delivery and implementation of this
Service Mark License Agreement and the consummation of the transactions
contemplated hereby shall be charged to and paid by ITT World Directories.
Except as otherwise set forth in this Service Mark License Agreement, each party
shall bear its own costs and expenses incurred after the Distribution Time.
Section 9.15. Exhibits. The Exhibits to this Service Mark License
Agreement shall be construed with and as an integral part of this Service Mark
License Agreement to the same extent as if the same had been set forth verbatim
herein.
Section 9.16. Consent to Jurisdiction. Each of the Parties irrevocably
submits to the exclusive jurisdiction of (a) the Supreme Court of the State of
New York, New York County and (b) the United States District Court for the
Southern District of New York, for the purposes of any suit, action or other
proceeding arising out of this Service Mark License Agreement or any transaction
contemplated hereby. Each of the Parties agrees to commence any action, suit or
proceeding relating hereto either in the United States District Court for the
Southern District of New York or if such suit, action or other proceeding may
not be brought in such court for jurisdictional reasons, in the Supreme Court of
the State of New York, New York County. Each of the Parties further agrees that
service of any process, summons, notice or document by U.S. registered mail to
such Party's respective address set forth above shall be effective service of
process for any action, suit or proceeding in New York with respect to any
matters to which it has submitted to jurisdiction in this Section 8.16. Each of
the Parties irrevocably and unconditionally waives any objection to the laying
of venue of any action, suit or proceeding arising out of this Service Mark
License Agreement or the transactions contemplated hereby in (i) the Supreme
Court of the State of New York, New York County or (ii) the United States
District Court for the Southern District of New York, and hereby further
irrevocably and unconditionally waives and agrees not to plead or claim in any
such court that any such action, suit or proceeding brought in any such court
has been brought in an inconvenient forum.
Section 9.17. Other Agreements. This Service Mark License Agreement is
not intended to address, and should not be interpreted to address, the matters
specifically and expressly covered by the Destinations Distribution Agreement
and the other Ancillary Agreements.
Section 9.18. Survival of Service Mark License Agreements. Except as
otherwise contemplated by this Service Mark License Agreement, all covenants and
agreements of the parties contained in this Service Mark License Agreement shall
survive the Distribution Time.
Section 9.19. Successors and Assigns. The provisions of this Service Mark
License Agreement shall be binding upon, inure to the benefit of and be
enforceable by the parties and their respective successors and permitted
assigns.
Section 9.20. Further Assurances. In case at any time after the
Distribution Time any further action is reasonably necessary or desirable to
carry out the purposes of this Service Mark License Agreement, the proper
officers at such time of each party to this Service Mark License Agreement shall
take all such action. Without limiting the foregoing, ITT World Directories ,
ITT Sheraton or their respective Subsidiaries, as appropriate, shall use
commercially reasonable efforts to obtain all consents and approvals, to enter
into all agreements and to make all filings and applications that may be
required or are reasonably necessary for the consummation of the transactions
contemplated by this Service Mark License Agreement, including, without
limitation, all applicable governmental filings.
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IN WITNESS WHEREOF, the Parties have caused this Service Mark License
Agreement to be duly executed.
ITT WORLD DIRECTORIES, INC.
By
------------------------------------
Name:
Title:
ITT SHERATON CORPORATION
By
------------------------------------
Name:
Title:
ITT CORPORATION
By
------------------------------------
Name:
Title:
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EXHIBIT C
TAX ALLOCATION AGREEMENT, dated as of September , 1997
("Agreement"), among ITT Corporation, a Nevada corporation ("ITT"), ITT
Destinations, Inc., a Nevada corporation ("Destinations"), and ITT
Educational Services, Inc., a Delaware corporation ("ESI"), ITT,
Destinations and ESI are hereinafter jointly referred to as the
"Companies".
WITNESSETH
WHEREAS, ITT is the common parent of an affiliated group of domestic
corporations, including Destinations and ESI, which has elected to file
consolidated Federal income Tax returns;
WHEREAS, ITT proposes to merge Sheraton Corp., a Delaware corporation and a
wholly owned subsidiary of ITT ("Sheraton"), with and into Destinations (the
"Merger");
WHEREAS, immediately after the Merger, ITT proposes to contribute to
Destinations all the shares of stock that it owns, directly or indirectly, of
Sheraton on the Park PTY, Ltd., an Australian corporation ("Sheraton
Australia"), other than shares of stock of Sheraton Australia that are already
owned, directly or indirectly, by Destinations (such contribution, the
"Australia Contribution");
WHEREAS, substantially contemporaneously with the Australia Contribution,
ITT proposes to contribute to Destinations all the shares of stock that it owns,
directly or indirectly, of the companies listed on Schedule A (collectively, the
"Contributed Companies") other than shares of stock of the Contributed Companies
that are already owned, directly or indirectly, by Destinations (such
contribution, the "General Contribution");
WHEREAS, immediately after the Australia Contribution, the General
Contribution and the WBIS Transfer, ITT proposes to distribute all the shares of
stock that it owns in each of ESI (the "ESI Distribution") and Destinations (the
"Destinations Distribution") to its shareholders (collectively, the
"Distributions") and, as a result of the Distributions, Destinations and ESI
will not be included in the consolidated Federal income Tax return of ITT for
the portion of the year following the Distributions or in future years;
WHEREAS, prior to the Distributions ITT will own 100% of each class of the
outstanding shares of stock of ITT World Directories, Inc., a Delaware
corporation ("WD"), and immediately after the Distributions will own no
significant assets other than such shares;
WHEREAS, ITT and Destinations have entered into an agreement, dated as of
September , 1997 (the "Destinations Distribution Agreement"), to, among other
things, allocate and assign responsibility for certain liabilities of the
present ITT and its former subsidiaries; and ITT, Destinations and ESI entered
into an agreement, dated as of September , 1997 (the "ESI Distribution
Agreement"), to, among other things, allocate and assign responsibility for
certain liabilities of the present ITT and its former subsidiaries; and
WHEREAS, pursuant to the Investment Agreement, dated as of July 15, 1997,
by and between ITT and CDRV Acquisition, L.L.C., a Delaware limited liability
company ("CDRV"), CDRV agreed to purchase from ITT, and ITT agreed to sell to
CDRV on the Closing Date newly issued shares of stock of ITT representing 32.9%
of the outstanding shares of stock of ITT as of the Closing Date and warrants to
purchase shares of stock of ITT representing an additional 13.7% of the
outstanding shares of stock of ITT as of the Closing Date (the "Investment
Agreement");
WHEREAS, the Companies desire to allocate the Tax burdens and benefits of
transactions which occurred on or prior to the Distribution Date, and to provide
for certain other Tax matters, including the assignment of responsibility for
the preparation and filing of Tax returns and the prosecution and defense of any
Tax controversies;
<PAGE> 73
NOW, THEREFORE, in consideration of the mutual agreements contained herein,
the Companies (each on its own behalf and on behalf of each of its subsidiaries
as of the Distribution Date) hereby agree as follows:
Section 1. Definitions. As used in this Agreement, the following
terms shall have the following meaning:
"Actually Realized" or "Actually Realizes" shall mean, for purposes of
determining the timing of any Taxes (or any related Tax cost or benefit)
relating to any payment, transaction, occurrence or event (including any
Tax refund), the time at which the amount of Taxes payable by such person
is increased above or reduced below, as the case may be, the amount of
Taxes that such person would be required to pay but for such payment,
transaction, occurrence or event.
"Agreement" shall mean this Amended and Restated Tax Allocation
Agreement.
"Allocable Federal Income Tax Liability" shall mean the Separate
Consolidated Federal Income Tax Liability, as adjusted to reflect (a) any
AMT (but only if there is a consolidated AMT) and (b) any Taxes for which
Destinations is obligated to indemnify the ESI Group and the ITT Group
pursuant to Section 10(c) of this Agreement.
"AMT" shall mean the alternative minimum tax imposed by Section 55 of
the Code.
"Australia Contribution" shall have the meaning assigned to such term
in the recitals to this Agreement.
"Closing" shall have the meaning assigned to such term in the
Investment Agreement.
"Closing Date" shall have the meaning assigned to such term in the
Investment Agreement.
"Code" shall mean the Internal Revenue Code of 1986, as amended, or
any successor statute.
"Companies" shall have the meaning assigned to such term in the
preamble to this Agreement.
"Consolidated Return" shall mean the consolidated federal income Tax
return of ITT for the period commencing on January 1, 1997 and including
the Destinations Group and the ESI Group through and including the
Distribution Date and including the ITT Group through and including
December 31, 1997.
"Contributed Companies" shall have the meaning assigned to such term
in the recitals to this Agreement.
"Controlled Return" shall mean (a) the Consolidated Return, (b) any
Prior Period Consolidated Return and (c) any combined tax returns with
respect to 1997 and all prior years.
"Destinations" shall have the meaning assigned to such term in the
preamble to this Agreement.
"Destinations Distribution" shall have the meaning assigned to such
term in the recitals to this Agreement.
"Destinations Distribution Agreement" shall have the meaning assigned
to such term in the recitals to this Agreement.
"Destinations Group" shall mean Destinations and each Destinations
Subsidiary.
"Destinations Subsidiary" shall mean (a) all of the direct or indirect
subsidiaries of Destinations as of the Distribution Date that have joined
or are eligible to join the Consolidated Return or any Prior Period
Consolidated Return and (b) all other direct or indirect, former
subsidiaries of ITT (other than those included in the ITT Group or the ESI
Group) that have joined or are eligible to join the Consolidated Return or
any Prior Period Consolidated Return.
"Directories Business" shall mean publishing telephone -- alphabetical
and classified -- and specialized directories.
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"Distributing Tax Payee" shall have the meaning assigned to such term
in Section 10(a)(ii) of this Agreement.
"Distributing Tax Payor" shall have the meaning assigned to such term
in Section 10(a)(ii) of this Agreement.
"Distribution Date" shall mean the date on which the Distributions are
effective for U.S. Federal income Tax purposes.
"Distributions" shall have the meaning assigned to such term in the
recitals to this Agreement.
"Distribution Tax" shall have the meaning assigned to such term in
Section 10(a)(i) of this Agreement.
"Education Business" shall mean providing technical postsecondary
education programs, including associate, bachelor, master degree and
non-degree diploma programs.
"Equity Investment" shall mean the acquisition by CDRV of shares of
stock of ITT and warrants to purchase shares of stock of ITT pursuant to
the Investment Agreement.
"ESI" shall have the meaning assigned to such term in the preamble to
this Agreement.
"ESI Distribution" shall have the meaning assigned to such term in the
recitals to this Agreement.
"ESI Distribution Agreement" shall have the meaning assigned to such
term in the recitals to this Agreement.
"ESI Group" shall mean ESI and each ESI Subsidiary.
"ESI Subsidiary" shall mean (a) all the direct or indirect
subsidiaries of ESI as of the Distribution Date that have joined or are
eligible to join the Consolidated Return or any Prior Period Consolidated
Return and (b) all the direct or indirect, former subsidiaries of ITT (or
ITT Industries prior to the 1995 Spin-Off Date) that have ever been
primarily and directly engaged in the Education Business (other than ITT
Federal Services Corporation, a Delaware corporation) and that have joined
or are eligible to join the Consolidated Return or any Prior Period
Consolidated Return.
"ESI Tax Sharing Agreement" shall mean the Tax sharing agreement,
dated as of December 27, 1994, by and between ITT Industries and ESI.
"Final Determination" shall mean the final resolution of liability for
any Tax for any taxable period, including any related interest or
penalties, by or as a result of: (i) a final and unappealable decision,
judgment, decree or other order of a court of competent jurisdiction; (ii)
a closing agreement or accepted offer in compromise under Section 7121 or
7122 of the Code, or comparable agreement under the laws of other
jurisdictions, which resolves the entire Tax liability for any Tax period;
(iii) any allowance of a refund or credit in respect of an overpayment of
Tax, but only after the expiration of all periods during which such refund
may be recovered (including by way of offset) by the applicable Taxing
jurisdiction; or (iv) any other final disposition, including by reason of
the expiration of the applicable statute of limitations.
"FTC" shall mean the foreign tax credit pursuant to Section 27 of the
Code.
"General Contribution" shall have the meaning assigned to such term in
the recitals to this Agreement.
"Group" shall mean the ITT Group, the Destinations Group and/or the
ESI Group, as the context may require.
"Indemnifiable Amount" shall have the meaning assigned to such term in
Section 10(a)(ii) of this Agreement.
"Investment Agreement" shall have the meaning assigned to such term in
the recitals to this Agreement.
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"IRS" shall mean the U.S. Internal Revenue Service.
"ITT" shall have the meaning assigned to such term in the preamble to
this Agreement.
"ITT Group" shall mean ITT and each ITT Subsidiary.
"ITT Industries" shall mean ITT Industries, Inc., an Indiana
corporation (formerly ITT Corporation, a Delaware corporation).
"ITT Subsidiary" shall mean (a) WD and all the direct or indirect
subsidiaries of WD as of the Distribution Date that have joined or are
eligible to join the Consolidated Return or any Prior Period Consolidated
Return and (b) all the direct or indirect, former subsidiaries of ITT (or
ITT Industries prior to the 1995 Spin-Off Date) that have ever been
primarily and directly engaged in the Directories Business and that have
joined or are eligible to join the Consolidated Return or any Prior Period
Consolidated Return.
"ITT Tax Allocation Agreement" shall mean the Tax allocation
agreement, dated as of November 1, 1995, among ITT (then ITT Destinations,
a Nevada corporation), ITT Industries (then ITT Corporation, a Delaware
corporation) and The Hartford Financial Services Group, Inc., a Delaware
corporation (then ITT Hartford Group, Inc., a Delaware corporation).
"L.M. Berry Tax Sharing Agreement" shall mean the Tax sharing
agreement, dated as of January 4, 1998, by and among WD, ITT Industries and
L.M. Berry, a wholly owned subsidiary of BellSouth, a Georgia corporation.
"Merger" shall have the meaning assigned to such term in the recitals
to this Agreement.
"1995 Spin-Off Date" shall mean December 19, 1995.
"1995 Spin-Off Tax Liability" shall mean any payment with respect to
Taxes which ITT is required to make under the ITT Tax Allocation Agreement,
after reduction for any payments that any of the other parties to that
agreement or any of their respective subsidiaries are required to make to
ITT pursuant to the terms of that agreement.
"Prime Rate" shall mean the "prime rate" charged by Citibank, N.A.,
New York, New York, as such rate shall be changed from time to time,
compounded daily on the basis of a year of 365/366 days and actual days
elapsed.
"Prior Period Consolidated Return" shall mean any consolidated Tax
return of (a) the present ITT Corporation, a Nevada corporation, filed, or
to be filed, for taxable years prior to the Consolidated Return year and
(b) the former ITT Corporation, a Delaware corporation (now ITT Industries,
Inc., an Indiana corporation), filed, or to be filed, for taxable years
prior to or including the 1995 Spin-Off Date.
"Separate Consolidated Federal Income Tax Liability" shall mean, with
respect to any year or portion thereof, the Tax liability which a Group
would have incurred if such Group, on a stand alone basis, had been an
affiliated group eligible to file a consolidated return for any portion of
such taxable year during which it is included in the Consolidated Return or
any Prior Period Consolidated Return and had filed a return for such
period, computed without regard to AMT; provided, however, that in
computing the Tax liability of the ITT Group, any Tax Item attributable to
ITT and arising prior to the Distribution Date (determined as if there were
a closing of the books as of such date) shall not be taken into account and
shall be treated as a Tax Item of the Destinations Group; provided further
that any credits of WD and its subsidiaries shall be treated as utilized at
the earlier of the time such credits are utilized (a) in the Consolidated
Return or any Prior Period Consolidated Return or (b) in the computation of
the Separate Consolidated Federal Income Tax Liability of the ITT Group.
"Spin-Off Tax Payee" shall have the meaning assigned to such term in
Section 10(b)(ii) of this Agreement.
"Spin-Off Tax Payor" shall have the meaning assigned to such term in
Section 10(b)(ii) of this Agreement.
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"Tax" or "Taxes" shall mean all forms of taxation, whenever created or
imposed, and whether of the United States or elsewhere, and whether imposed
by a local, municipal, governmental, state, foreign, federal or other body,
and without limiting the generality of the foregoing, shall include income,
sales, use, ad valorem, gross receipts, license, value added, franchise,
transfer, recording, withholding, payroll, wage withholding, employment,
excise, occupation, unemployment insurance, social security, business
license, business organization stamp, environmental, premium and property
taxes, together with any related interest, penalties and additions to any
such tax, or additional amounts imposed by any Taxing Authority (domestic
or foreign) upon the Destinations Group, the ITT Group, the ESI Group or
any of their respective members or divisions or branches or affiliates.
"Tax Administrator" shall mean Allan J. Durst, the Director of Taxes
of Destinations, or such other person as Destinations shall appoint with
the consent of each of ITT and ESI, which consent shall not be unreasonably
withheld or delayed.
"Taxing Authority" shall mean any governmental or quasi-governmental
body exercising any Taxing authority or Tax regulatory authority.
"Tax CPA" shall mean a firm of internationally recognized certified
public accountants selected by Destinations with the consent of the other
Companies, which consent shall not be unreasonably withheld or delayed, and
employed by (and at the expense of) Destinations to prepare and sign the
Consolidated Return and any amendment of the Consolidated Return or any
Prior Period Consolidated Return. The initial Tax CPA shall be Arthur
Andersen LLP.
"Tax Credits" shall include all credits against Tax pursuant to
Subtitle A, Chapter 1, Part IV of the Code.
"Tax Item" shall mean any net operating loss, net capital loss,
deduction or credit (including, but not limited to, any FTC).
"WD" shall have the meaning assigned to such term in the recitals to
this Agreement.
Section 2. Tax Returns to be Filed. (a) Consolidated and Prior Period
Consolidated Returns. (i) Each of the Companies will join, and will cause each
of their respective subsidiaries to join, in the Consolidated Return to the
extent each is eligible to join in such return under the provisions of the Code
and the regulations thereunder. The Tax Administrator will cause the
Consolidated Return to be timely prepared and filed, and will timely prepare and
file any consents and requests for extension of time within which to file the
Consolidated Return or any related information or similar returns. The Tax
Administrator shall make the Consolidated Return available to the Chief
Financial Officers of ITT and ESI for their review prior to filing and shall
furnish them a copy of the return promptly after it is filed.
(ii) ITT and ESI agree that each will cause their respective Chief
Financial Officers to furnish to the Tax Administrator on a timely basis such
information, schedules, analyses and any other items as may be necessary to
prepare the Consolidated Return. Such information, schedules, analyses and other
items will be prepared in a manner consistent with existing practice and in
accordance with the work plan and schedule to be agreed upon among the Tax
Administrator and the Chief Financial Officers of each of ITT and ESI, acting
reasonably, as soon as practicable after the Distribution Date.
(iii) The Companies hereby agree to execute and deliver all documentation
reasonably required (including powers of attorney, if requested) to enable the
Tax Administrator to timely file, and to take all actions necessary or
incidental to the filing of, the Consolidated Return (including, without
limitation, the execution of Treasury Form 1122), or any amendment of the
Consolidated Return or any Prior Period Consolidated Return. The Tax
Administrator shall decide in his sole discretion whether to file an amended
return, and no consent of any Company shall be required for the filing of any
such amended return whether pursuant to Section 905(c) of the Code or otherwise.
ITT agrees that an officer of ITT will timely sign the Consolidated Return (and
any Prior Period Consolidated Return which has not been filed as of the
Distribution Date) and any amendment of the Consolidated Return and any Prior
Period Consolidated Return after (i) receiving a written certification from the
Tax Administrator that the Tax Administrator has reviewed
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such return in consultation with the Tax CPA and that it is in order for filing,
(ii) such officer has reviewed such return and (iii) any reasonable questions
raised by such officer in reviewing such return have been resolved
satisfactorily.
(iv) Taxes with respect to the Consolidated Return or any Prior Period
Consolidated Return shall be paid or caused to be paid by Destinations, which
shall act as agent of the ITT Group and the ESI Group in all Tax matters having
to do with the Consolidated Return or any Prior Period Consolidated Return.
(b) Combined State Tax Returns. The Tax Administrator will cause any
combined state tax returns with respect to 1997 or any prior Tax year and any
amendment of any such returns to be timely prepared, filed and paid, utilizing
procedures substantially similar to those provided in Section 2(a) of this
Agreement with respect to the Consolidated Return and Prior Period Consolidated
Returns.
(c) Other Tax Returns. The Companies and their respective subsidiaries
shall timely prepare and file Tax returns (other than Controlled Returns) in
those jurisdictions in which they are required to do so in a manner consistent
with past practice. Taxes for any return filed by one of the Companies pursuant
to this Section 2(c) shall be paid or caused to be paid by the party responsible
under this Section 2(c) for filing such return. The Tax Administrator shall have
the right to approve any Tax returns filed pursuant to this Section 2(c) prior
to such filing if Destinations could be liable for Taxes due with respect to any
such Tax returns under principles analogous to Treasury regulation sec.
1.1502-6.
Section 3. Consolidated Return Computations of Tax and Payments. (a) On
or before December 14, 1997, the ITT Group and the ESI Group each agree to make
payments to Destinations equal to the excess of their estimated Consolidated
Return year Separate Consolidated Federal Income Tax Liability (as reasonably
determined by the Tax Administrator) over their prior payments, including any
payments with respect to estimated Taxes for the Consolidated Return year, and
Destinations agrees to make payments to the ITT Group and the ESI Group equal to
the excess of their respective prior payments with respect to estimated Taxes
for the Consolidated Return year over each of their estimated Consolidated
Return year Separate Consolidated Federal Income Tax Liability (as reasonably
determined by the Tax Administrator).
(b) On or before March 14, 1998, an interim Tax settlement payment shall be
made to or by Destinations by or to the ITT Group and the ESI Group, as the case
may be, equal to the difference between the Separate Consolidated Federal Income
Tax Liability and the net amounts previously paid with respect to estimated
Taxes for the Consolidated Return year.
(c) Based on computations to be prepared by the affected Group and approved
by the Tax Administrator, an adjusting payment equal to the difference between
the Allocable Federal Income Tax Liability and the net amounts previously paid
with respect to estimated Taxes for the Consolidated Return year, including
payments pursuant to Sections 3(a) and (b) of this Agreement, shall be made to
or by Destinations by or to the ITT Group and the ESI Group, as the case may be,
on or before October 15, 1998 based on the Consolidated Return as filed. Each of
the ITT Group and the ESI Group shall increase their liability for such
adjusting payment by the amount of any AMT credit carryforward allocated to them
under the consolidated return regulations which exceeds the AMT calculated on a
separate consolidated basis.
Section 4. Special Rules. (a) If the Consolidated Return or any Prior
Period Consolidated Return Tax liability (including any interest relating
thereto) exceeds or is less than the total of the three Groups' Allocable
Federal Income Tax Liability (including any interest relating thereto), the cost
or benefit of any net difference shall be allocated to Destinations; provided,
that AMT in an amount equal to any AMT credit carryforward from the Consolidated
Return allocated to a Group shall be charged to and paid by such Group.
(b) Each of the Companies agrees that, unless it obtains consent of the Tax
Administrator, all members of its Group will waive the carryback of any net
operating loss from a Tax period beginning on or after the Distribution Date to
the Consolidated Return or Prior Period Consolidated Return.
Section 5. Tax Benefit Transfer Leases. (a) In computing any ESI payment
to Destinations under this Agreement, ESI and its subsidiaries will determine
their Tax liability as if their Tax benefit transfer leases were not in effect.
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(b) Destinations will indemnify ESI if it is required to make any
termination payments or other payments, including interest and penalties,
resulting from any failure to perform under a Tax benefit transfer lease.
(c) Destinations agrees to continue to provide assistance to ESI in
connection with its Tax benefit transfer leases.
Section 6. Dispute Resolution. In the event of a disagreement between the
Tax Administrator and the ESI Group and/or the ITT Group, all computations or
recomputations of Federal or state and local income and franchise Tax liability,
and all computations or recomputations of any amount or any payment (including,
but not limited to, computations of the amount of the Tax liability, any loss or
credit or deduction, Federal statutory Tax rate change for a year, utilization
of carryback items, interest, penalties, and adjustments) and all determinations
of the amount of payments or repayments, or determinations of any other nature
necessary to carry out the terms of this Agreement will be reviewed by a
mutually satisfactory third party, with the costs of such review being shared
equally by such disputing parties. If any disagreement remains after any such
review, including any disagreement as to the construction, applicability or
binding nature of this Agreement, that disagreement shall be resolved by an
arbitrator with the cost of such arbitration being shared equally by such
disputing parties; provided that such arbitrator shall be a retired or former
judge of the United States Tax Court or such other qualified person as the
relevant parties may agree to designate; provided that, in the event that the
relevant parties agree to designate a qualified person (other than a retired or
former judge of the United States Tax Court), such other qualified person shall
have had substantial experience with regard to settling complex Tax disputes.
The decision of the arbitrator shall be binding on the parties.
Section 7. Survival of Terms. The provisions of this Agreement shall
survive the Distribution Date and remain in full force until all periods of
limitations, including any extension or waiver periods, as well as the ten-year
statute of limitations with respect to FTC redeterminations, for the
Consolidated Return year and any Prior Period Consolidated Return years have
expired and no further carrybacks to such periods are possible. At that time all
remaining payments required under this Agreement shall become immediately due
and payable.
Section 8. Parties to Cooperate. Each of the Companies and their
subsidiaries shall cooperate fully and to the extent reasonably requested by the
other party in connection with the preparation and filing of any return or the
conduct of any audit, dispute, proceeding, suit or action concerning any issues
or any other matter contemplated hereunder. Such cooperation shall include,
without limitation, (i) the retention and provision on demand of books, records,
documentation or other information relating to any Tax matter until the later of
(x) the expiration of the applicable statute of limitation (giving effect to any
extension, waiver, or mitigation thereof) and (y) in the event any claim has
been made under this Agreement for which such information is relevant, until a
Final Determination with respect to such claim, (ii) the provision of additional
information with respect to and explanation of Tax practices (elections,
accounting methods, conventions and principles of taxation) and material
provided under clause (i) of this Section 8; (iii) the execution of any document
that may be necessary or reasonably helpful in connection with the filing of any
Tax return by any member of one of the Groups, or in connection with any audit,
proceeding, suit or action addressed in the preceding sentence; and (iv) the use
by each of the Companies of its reasonable efforts to obtain any documentation
from a governmental authority or a third party that may be necessary or helpful
in connection with the foregoing. Each of the Companies shall make its employees
and facilities available on a mutually convenient basis to facilitate such
cooperation and shall retain as permanent records all documentation necessary to
enable it to determine any obligation under this Agreement. The records
described above will be made available to representatives of any of the
Companies within a reasonable time upon request and may be photocopied on an as
needed basis.
Section 9. Notices. Any notices, payments or other communications
required by this Agreement shall be sent to the attention of the Chief Financial
Officer of the appropriate Company, with a copy to the Tax Administrator.
Section 10. Indemnification. (a) Pre-Distribution & Distribution
Taxes. (i) Destinations Indemnification. Except as otherwise provided in
Section 10(a)(ii) of this Agreement, Destinations shall be liable for
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and shall indemnify, defend and hold the ESI Group and the ITT Group harmless
from and against any Tax liability (except for any payments which ITT makes with
respect to the cost of any additional Taxes paid by ITT shareholders receiving
Destinations and ESI stock in the Distributions, whether or not ITT is legally
obligated to make such payments) that results from, or arises in connection
with, the application of Section 355(d) and/or 355(e) of the Code to the ESI
Distribution and/or the Destinations Distribution or the General Contribution,
Merger, ESI Distribution and/or Destinations Distribution failing to qualify
under Code Sections 368(a)(1)(D), 368(a)(1)(F) and/or 355, by reason of Code
Section 367(e)(1) or otherwise (any such Tax liability, a "Distribution Tax").
(ii) ESI and ITT Indemnification. If ESI or ITT (or any of their
respective subsidiaries) takes or omits any action (including, but not limited
to, a breach of any representation, statement or covenant set forth in Section
13 of this Agreement) on or after the Distribution Date (but after the
Distributions), or if any stock and/or assets of ESI or ITT (or any of their
respective subsidiaries) is acquired and/or disposed of on or after the
Distribution Date (but after the Distributions), and such action, omission,
acquisition or disposition materially contributes to a Final Determination that
the General Contribution, Merger, ESI Distribution and/or Destinations
Distribution results in the recognition of gain to any of the Companies (whether
by reason of the application of Section 355(e) or 355(d) of the Code or by
virtue of the General Contribution, Merger, ESI Distribution and/or Destinations
Distribution failing to qualify under Sections 368(a)(1)(D), 368(a)(1)(F) and/or
355, by reason of Section 367(e)(1) or otherwise) (a Company that takes or omits
any such action, or the stock and/or assets of which is so acquired or disposed
of, a "Distributing Tax Payor"), then such Distributing Tax Payor shall be
liable for and shall indemnify, defend and hold each Company that is not a
Distributing Tax Payor (each such Company, a "Distributing Tax Payee") harmless
from and against any resulting Tax liability that would not otherwise have been
incurred by each such Distributing Tax Payee (including interest and penalties)
except for any resulting payments which each such Distributing Tax Payee makes
to or for ITT shareholders with respect to the cost of additional shareholder
Taxes, whether or not each such Distributing Tax Payee is legally obligated to
make such payments)(such resulting Tax liability, an "Indemnifiable Amount"). If
there is more than one Distributing Tax Payor, then each such Distributing Tax
Payor shall be liable for and shall indemnify, defend and hold a Distributing
Tax Payee harmless from and against an Indemnifiable Amount in proportion to the
relative aggregate fair market values (as reasonably determined by the Tax
Administrator) of the stock of such Distributing Tax Payors outstanding
immediately after the Distributions.
(b) 1995 Spin-Off Tax Liabilities. (i) Except as otherwise provided in
Section 10(b)(ii), 10(b)(iii) or 12(a) of this Agreement, Destinations shall be
liable for and shall indemnify, defend and hold the ESI Group and the ITT Group
harmless from and against any 1995 Spin-Off Tax Liability.
(ii) If ESI or ITT (or any of their respective subsidiaries) takes or omits
any action on or after the Distribution Date (but after the Distributions) which
materially contributes to the incurrence of a 1995 Spin-Off Tax Liability (any
such Company, a "Spin-Off Tax Payor"), then such Spin-Off Tax Payor shall be
liable for and shall indemnify, defend and hold each Company that is not a
Spin-Off Tax Payor (each such Company, a "Spin-Off Tax Payee") harmless from and
against any resulting 1995 Spin-Off Tax Liability (including interest and
penalties). If there is more than one Spin-Off Tax Payor, then each such
Spin-Off Tax Payor shall be liable for and shall indemnify, defend and hold a
Spin-Off Tax Payee harmless from and against any resulting 1995 Spin-Off Tax
Liability in proportion to the relative aggregate fair market values (as
reasonably determined by the Tax Administrator) of the stock of such Spin-Off
Tax Payors outstanding immediately after the Distributions.
(iii) The ESI Group shall be liable for and shall indemnify, defend and
hold the Destinations Group and the ITT Group harmless from and against any 1995
Spin-Off Tax Liability to the extent that such liability is allocated to ESI (or
any of its subsidiaries) under the ESI Tax Sharing Agreement.
(c) Treas. Reg. 1.1502-6 and 1.1502-77. Destinations shall be liable for
and shall indemnify, defend and hold the ITT and ESI Groups harmless from and
against any Federal or state income or franchise Taxes for the Consolidated
Return or any Prior Period Consolidated Return for which the ITT Group or the
ESI
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Group may be liable solely as a result of the operation of Treasury Regulation
Sections 1.1502-6 and 1.1502-77 or any state counterpart statute or regulation.
(d) Intercompany Sales and Distributions. Subject to Section 10(a) of this
Agreement, Destinations shall be liable for and shall indemnify, defend and hold
the ITT and ESI Groups harmless from and against any Taxes which are triggered
in the Consolidated Return and which relate to the intercompany sale or
distribution of stock of a subsidiary or of other property by one Group to
another Group (but not those which relate to the intercompany sale or
distribution of assets within a Group).
(e) Loan Agreements and Offering Memoranda. If actions taken on or before
the Distribution Date cause, or the ESI Distribution and/or the Destinations
Distribution causes, any of the Companies to be liable under the Tax indemnities
contained in the covenants, loan agreements or offering memoranda of any debt
instruments which remain outstanding at the Distribution Date, Destinations
shall be liable for and shall indemnify, defend and hold the ITT and ESI Groups
harmless from and against any cost of any such Tax indemnity.
(f) Gain Recognition Agreement. If ITT (or any of its subsidiaries) takes
or omits to take any action (including, but not limited to, a breach of any
representation, statement or covenant set forth in Section 13(a)(iii) of this
Agreement) on or after the Distribution Date (but after the Distributions), and
any liability for Taxes with respect to any gain recognition agreement entered
into by ITT, ITT Industries or any member of either of their respective
affiliated groups pursuant to Section 367 of the Code with respect to
transactions occurring prior to the Distribution Date arises in connection with
or is otherwise attributable to such action or omission, then the ITT Group
shall be liable for and shall indemnify, defend and hold the ESI Group and the
Destinations Group harmless from and against any such liability for Taxes.
Section 11. Tax Deficiencies and Claims. (a) Except as otherwise provided
in Section 11(b), the Tax Administrator shall control all audits, examinations
and proceedings with respect to Taxes with respect to any Controlled Returns.
The Tax Administrator shall have overall responsibility for obtaining and
coordinating all responses in connection with any such proceedings with respect
to any Controlled Returns. To the extent that any such audit affects one of the
Groups, such Group shall prepare and submit such responses in a manner
consistent with prior practice; provided, however that the Tax Administrator
shall have the right to approve all such responses prior to their submission.
Adjustments affecting solely the taxable income, loss or deductions of, or Tax
credits generated by, any Group may be agreed upon or settled only upon approval
of the that Group, which approval shall not be unreasonably withheld or delayed.
(b) ESI and ITT Claims. Any proposed or actual income Tax deficiencies or
refund claims with respect to the Consolidated Return or any Prior Period
Consolidated Return which arise from the business activities of either the ITT
Group or the ESI Group, and do not otherwise affect any Controlled Return, may
be defended or prosecuted by the ITT Group or the ESI Group, as the case may be,
at its own cost and expense and with counsel and accountants of its own
selection. The Tax Administrator may participate in any such prosecution or
defense at Destinations' cost and expense (in either event such cost or expense
is not to include the amount of any payment of any Tax claim, interest or
penalties, or of any compromise settlement or other disposition thereof). The
ITT Group or the ESI Group, as the case may be, may control the proceedings, but
it may not compromise or settle any such deficiency of Tax or any refund claim
without the prior written consent of the Tax Administrator, which consent shall
not be unreasonably withheld. Notwithstanding the foregoing, neither the ITT
Group nor the ESI Group, as the case may be, shall have a right to an extension
of the statute of limitations beyond the time reasonably necessary to complete
review at the Appeals Division of the IRS or to any waiver of any other
procedural safeguard without the prior written consent of the Tax Administrator.
The limitation expressed in the preceding sentence applies, but is not limited
to, the filing of a petition with the United States Tax Court. If the ITT Group
or the ESI Group, as the case may be, defends or prosecutes an action, it shall
keep the Tax Administrator informed of matters relating to such defense or
prosecution.
(c) Cost of Advisors. In connection with the defense of any audit of any
Controlled Return, except with regard to claims described in Section 11(b) of
this Agreement, the Tax Administrator may retain advisors and charge the
reasonable cost of their services to the appropriate Group or Groups.
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Section 12. Payment of Deficiencies and Refunds. (a) The Allocable
Federal Income Tax Liability and any other Tax liability of the ESI Group and
the ITT Group with respect to any Controlled Returns shall be adjusted in
computations to be prepared by the ESI Group or the ITT Group, as the case may
be, and approved by the Tax Administrator with respect to changes in the taxable
income, loss, deduction or Tax credits of the ESI Group or the ITT Group, as the
case may be:
(i) in each instance when payments are to be made to, or refunds are
received from, the relevant Taxing authority;
(ii) when no payment is to be made or refund is to be received due to
offsetting adjustments, upon filing of an amended return, completion of an
audit and an appellate review by the relevant Taxing authority; and
(iii) to reflect the results of any Final Determination.
ESI and ITT agree to pay to Destinations additional amounts (plus penalties
and additions to Tax, if any) equal to any increases in the Allocable Federal
Income Tax Liability (or any other Tax liability with respect to a Controlled
Return) of the ESI Group or the ITT Group resulting from any such changes, and
Destinations agrees to pay to ESI and ITT amounts equal to any decreases in the
Allocable Federal Income Tax Liability (or any other Tax liability with respect
to a Controlled Return) of the ESI Group or the ITT Group resulting from any
such changes, in each case together with any interest relating thereto. For
purposes of this Agreement, unless specifically provided otherwise, interest
shall be computed at the Federal statutory rate used, pursuant to Section
6621(a) of the Code, by the IRS in computing the interest payable to or by it on
the net balance due to or from the IRS. Any interest under Section 6621(c) of
the Code shall be charged to the Group whose separate deficiency gave rise to
such interest. If the separate deficiencies of more than one Group gave rise to
such interest, then such interest shall be allocated between or among such
Groups. Penalties levied in respect of any Controlled Return shall be charged to
the Group whose separate computations gave rise to such penalty.
(b) Amounts payable to or from Destinations from or to ESI or ITT under
Section 12(a) of this Agreement shall be paid upon written request therefor
approved by the Tax Administrator, together with interest thereon from the
original due date or such other date as may be appropriate under the
circumstances. Any amounts due to or from Destinations from or to ESI or ITT
under Section 12(a) of this Agreement as a result of a payment to a Taxing
authority or the receipt of a refund shall be paid within five working days
after such payment or receipt, together with appropriate interest thereon. If no
payment is to be made or refund is to be received due to offsetting items among
the various Groups, then Tax and interest (computed at the IRS overpayment
rates) shall be paid within 30 calendar days after the completion of each of the
audit and appellate review of the Tax period in question and a Final
Determination. After expiration of the five day period (or, if applicable, 30
day period) any amounts unpaid shall bear interest computed from the date of
payment or receipt (or, if applicable, completion or Final Determination) at the
Prime Rate.
(c) No payment relating to a change in Allocable Federal Income Tax
Liability shall be made by or to any Group with respect to the IRS audit of the
Consolidated Return or a Prior Period Consolidated Return until the audit has
been completed with respect to all Groups, unless such advance payment has been
approved by the Tax Administrator.
Section 13. Certain Post-Distribution Actions. (a)(i) ITT shall comply
with and otherwise not take any action inconsistent with any representation or
statement made, or to be made, by or on behalf of any member of the ITT Group in
connection with this Agreement or to ITT's outside Tax counsel in connection
with such firm's rendering an opinion to ITT, Destinations and ESI as to certain
Tax aspects of the General Contribution, Merger and Distributions.
(ii) Until two years after the Distribution Date, ITT will maintain its
status as a company engaged in the active conduct of a trade or business, as
defined in Section 355(b) of the Code.
(iii) ITT shall timely file all notices required to be filed with respect
to gain recognition agreements entered into by ITT, ITT Industries or any member
of either of their respective affiliated groups pursuant to
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Section 367 of the Code with respect to transactions occurring prior to the
Distribution Date. In addition, not later than March 1 following the end of each
taxable year, ITT shall furnish to the Tax Administrator and to the Director of
Taxes of ITT Industries a letter stating that (A) none of the companies nor the
assets of the companies that are subject to a gain recognition agreement
described in the preceding sentence have been sold or otherwise disposed of
during the period set forth in the relevant gain recognition agreement (taking
into account any extensions) and (B) none of those companies has entered into
any other transaction that would trigger any of those gain recognition
agreements.
(b)(i) Destinations shall comply with and otherwise not take action
inconsistent with each representation and statement made, or to be made, by or
on behalf of any member of the Destinations Group in connection with this
Agreement or to ITT's outside Tax counsel in connection with such firm's
rendering an opinion to ITT, Destinations and ESI as to certain Tax aspects of
the General Contribution, Merger and Distributions.
(ii) Until two years after the Distribution Date, Destinations will
maintain its status as a company engaged in the active conduct of a trade or
business, as defined in Section 355(b) of the Code.
(c)(i) ESI shall comply with and otherwise not take action inconsistent
with each representation and statement made, or to be made, by or on behalf of
any member of the ESI Group in connection with this Agreement or to ITT's
outside Tax counsel in connection with such firm's rendering an opinion to ITT,
Destinations and ESI as to certain Tax aspects of the General Contribution,
Merger and Distributions.
(ii) Until two years after the Distribution Date, ESI will maintain its
status as a company engaged in the active conduct of a trade or business, as
defined in Section 355(b) of the Code.
(d) If any of the Companies or any of their respective subsidiaries takes
any action within two years of the Distribution Date that, if such action had
been taken on the date of any of the General Contribution, the Merger, the ESI
Distribution or the Destinations Distribution, would have been inconsistent with
any of the representations or statements made, or to be made, by or on behalf of
any such Company or subsidiary in connection with this Agreement or to ITT's
outside Tax counsel in connection with such firm's rendering an opinion to ITT,
Destinations and ESI as to certain Tax aspects of the General Contribution, the
Merger, the ESI Distribution or the Destinations Distribution, and such action
or omission materially contributes to a Final Determination that the General
Contribution, Merger, ESI Distribution and/or Destinations Distribution, as the
case may be, results in the recognition of gain to any of the Companies (a
Company which takes any such action, a "Breaching Company"), such Breaching
Company shall be treated for purposes of this Agreement as having actually
violated any such representation or statement.
Section 14. Rights under the ITT Tax Allocation Agreement. ITT hereby
appoints the Tax Administrator as its attorney-in-fact for purposes of
exercising any rights (other than any rights to repayment from the other parties
(including any of their respective subsidiaries) to that agreement) that ITT or
the Director of Taxes of ITT might otherwise have pursuant to the terms of the
ITT Tax Allocation Agreement.
Section 15. Choice of Law; Successors and Assigns. This Agreement shall
be governed and construed in accordance with the laws of the State of New York
applicable to contracts executed in and to be performed in that state. This
Agreement shall be binding on the successors and assignees of the Companies.
Section 16. Entire Agreement. This Agreement contains the entire
agreement among the Companies with respect to the subject matter hereof and
supersedes all prior written Tax sharing or Tax allocation agreements,
memoranda, negotiations and oral understandings, if any, and may not be amended,
supplemented or discharged except by performance or by an instrument in writing
signed by all of the Companies.
Section 17. Counterparts. This Agreement may be executed simultaneously
in two or more counterparts, each of which shall be deemed an original, but
which together shall constitute one and the same instrument.
SECTION 18. Amendments. This Agreement may be amended and restated in its
entirety by Destinations in connection with the Equity Investment and prior to
the Equity Investment without the consent of ESI or ITT; provided, however, that
if any amendment effected thereby would have a materially adverse
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effect on ESI, then Destinations shall obtain the consent of ESI (which consent
shall not be unreasonably withheld) with respect to such amendment; provided
further that if the amendments effected thereby would in the aggregate have a
materially adverse effect on ITT, then Destinations shall obtain the consent of
ITT (which consent shall not be unreasonably withheld) with respect to such
amendments.
SECTION 19. Effectiveness. This Agreement shall be effective as of the
Distribution Date and upon becoming effective shall replace and supersede the
L.M. Berry Tax Sharing Agreement, which thereafter shall have no further force
or effect.
IN WITNESS WHEREOF, the Companies have duly executed this Agreement as of
the date first above written.
ITT CORPORATION,
by
------------------------------------
Name:
Title:
[Seal]
Attest:
ITT DESTINATIONS, INC.,
by
------------------------------------
Name:
Title:
[Seal]
Attest:
EDUCATIONAL SERVICES, INC.,
by
------------------------------------
Name:
Title:
[Seal]
Attest:
12
<PAGE> 84
EXHIBIT D
================================================================================
AGREEMENT AND PLAN OF DISTRIBUTION
DATED AS OF SEPTEMBER , 1997
AMONG
ITT CORPORATION,
ITT EDUCATIONAL SERVICES, INC.
AND
ITT DESTINATIONS, INC.
================================================================================
<PAGE> 85
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
ARTICLE I
DEFINITIONS
SECTION 1.01. General............................................................... 1
SECTION 1.02. References; Interpretation............................................ 7
ARTICLE II
CERTAIN TRANSACTIONS
SECTION 2.01. Transfer of Certain Businesses and Assets............................. 7
SECTION 2.02. Assumption of Liabilities............................................. 7
SECTION 2.03. Transfer of Certain Licenses and Permits.............................. 7
SECTION 2.04. Transfer and Assumption Documentation................................. 8
SECTION 2.05. Intercompany Accounts................................................. 8
SECTION 2.06. Assignments and Transfers Not Effected Prior to the Distribution...... 8
SECTION 2.07. Educational Intercompany Agreements................................... 9
ARTICLE III
THE DISTRIBUTION
SECTION 3.01. Mechanics of Distribution............................................. 9
SECTION 3.02. Fractional Shares..................................................... 9
SECTION 3.03. Timing of Distribution................................................ 9
ARTICLE IV
MUTUAL RELEASE
SECTION 4.01. Mutual Release, etc. ................................................. 10
ARTICLE V
INDEMNIFICATION
SECTION 5.01. Indemnification by the Company........................................ 10
SECTION 5.02. Indemnification by Educational........................................ 10
SECTION 5.03. Limitations on Indemnification Obligations............................ 11
SECTION 5.04. Procedures for Indemnification of Third Party Claims.................. 11
SECTION 5.05. Indemnification Payments.............................................. 12
SECTION 5.06. Other Adjustments..................................................... 12
SECTION 5.07. Survival of Indemnities............................................... 12
ARTICLE VI
COVENANTS
SECTION 6.01. Provision of Corporate Records........................................ 12
SECTION 6.02. Access to Information................................................. 13
SECTION 6.03. Retention of Records.................................................. 13
SECTION 6.04. Witness Services...................................................... 13
SECTION 6.05. Reimbursement......................................................... 13
SECTION 6.06. Confidentiality....................................................... 14
SECTION 6.07. Further Assurances.................................................... 14
</TABLE>
i
<PAGE> 86
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
ARTICLE VII
INSURANCE
SECTION 7.01. Policies and Rights Included Within Assets............................ 14
SECTION 7.02. Post-Distribution Time Claims......................................... 14
SECTION 7.03. Administration; Other Matters......................................... 15
SECTION 7.04. Agreement for Waiver of Conflict and Shared Defense................... 16
SECTION 7.05. Cooperation........................................................... 16
SECTION 7.06. Directors and Officers Liability Insurance............................ 16
ARTICLE VIII
CONDITIONS
SECTION 8.01. Conditions to Obligations of the Company.............................. 16
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Modification or Amendment............................................. 17
SECTION 9.02. Termination........................................................... 17
SECTION 9.03. Waiver; Remedies...................................................... 17
SECTION 9.04. Counterparts.......................................................... 17
SECTION 9.05. GOVERNING LAW......................................................... 18
SECTION 9.06. Notices............................................................... 18
SECTION 9.07. Entire Agreement...................................................... 19
SECTION 9.08. Certain Obligations................................................... 19
SECTION 9.09. Assignment............................................................ 19
SECTION 9.10. Captions.............................................................. 19
SECTION 9.11. Specific Performance.................................................. 19
SECTION 9.12. Severability.......................................................... 19
SECTION 9.13. Third Party Beneficiaries............................................. 19
SECTION 9.14. Fees and Expenses of Enforcement...................................... 19
SECTION 9.15. Expenses.............................................................. 20
SECTION 9.16. Exhibits and Schedules................................................ 20
SECTION 9.17. Consent to Jurisdiction............................................... 20
SECTION 9.18. Ancillary Agreements.................................................. 20
SECTION 9.19. Survival of Agreements................................................ 20
SECTION 9.20. Successors and Assigns................................................ 20
Schedule 7.01(a) Company Policies
Exhibit A Employee Benefits Services and Liability Agreement
Exhibit C Tax Allocation Agreement
</TABLE>
ii
<PAGE> 87
AGREEMENT AND PLAN OF DISTRIBUTION dated as of September , 1997,
between ITT CORPORATION, a Nevada corporation (the "Company"), ITT
EDUCATIONAL SERVICES, INC., a Delaware corporation ("Educational"), and ITT
DESTINATIONS, INC., a Nevada corporation ("Destinations").
W I T N E S E T H:
WHEREAS the Board of Directors of the Company has approved this Agreement,
pursuant to which and subject to the terms of which the Company will distribute
all the issued and outstanding shares of Common Stock, par value $.01 per share,
of Educational ("Educational Common Shares") owned by the Company, to the
holders of record of shares of Common Stock, no par value per share, of the
Company ("Company Common Stock"), other than shares held in the treasury of the
Company;
WHEREAS the purpose of the Distribution is to divest the Company of all
businesses, operations and assets other than the Retained Business, Retained
Assets and Retained Liabilities (each as hereinafter defined) of the Company and
its Subsidiaries (as hereinafter defined);
WHEREAS it is the intention of the parties to this Agreement that for
Federal income tax purposes the Distribution shall qualify as a tax-free spinoff
under Section 355 of the Code (as hereinafter defined); and
WHEREAS in order to effect the separation of ownership of the Company and
Educational, this Agreement sets forth the principal corporate transactions
required to effect the Distribution and sets forth other agreements that will
govern certain other matters following the Distribution.
NOW, THEREFORE, in consideration of the premises, and of the covenants and
agreements set forth herein, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. General. As used in this Agreement, the following terms
shall have the following meanings (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):
"Action" shall mean any action, suit, arbitration, inquiry, proceeding or
investigation by or before any court, any governmental or other regulatory or
administrative agency, body or commission or any arbitration tribunal.
"Affiliate" shall mean, when used with respect to a specified Person,
another Person that directly, or indirectly through one or more intermediaries,
controls or is controlled by or is under common control with the Person
specified.
"Agent" shall mean The Bank of New York, as transfer agent for the Company.
"Ancillary Agreements" shall mean the Employee Benefits Services and
Liability Agreement and the Tax Allocation Agreement.
"Assets" shall mean any and all assets, properties and rights, whether
tangible or intangible, whether real, personal or mixed, whether fixed,
contingent or otherwise, and wherever located, including, without limitation,
the following:
(i) real property interests (including leases), land, plants,
buildings and improvements;
(ii) machinery, equipment, tooling, vehicles, furniture and fixtures,
leasehold improvements, repair parts, tools, plant, laboratory and office
equipment and other tangible personal property, together with any rights or
claims arising out of the breach of any express or implied warranty by the
manufacturers or sellers of any of such assets or any component part
thereof;
<PAGE> 88
(iii) inventories, including raw materials, work-in-process, finished
goods, parts, accessories and supplies;
(iv) cash, bank accounts, notes, loans and accounts receivable
(whether current or not current), interests as beneficiary under letters of
credit, advances and performance and surety bonds;
(v) certificates of deposit, banker's acceptances, shares of stock,
bonds, debentures, evidences of indebtedness, certificates of interest or
participation in profit-sharing agreements, collateral-trust certificates,
preorganization certificates or subscriptions, transferable shares,
investment contracts, votingtrust certificates, puts, calls, straddles,
options, swaps, collars, caps and other securities or hedging arrangements
of any kind;
(vi) financial, accounting and operating data and records including,
without limitation, books, records, notes, sales and sales promotional
data, advertising materials, credit information, cost and pricing
information, customer and supplier lists, reference catalogs, payroll and
personnel records, minute books, stock ledgers, stock transfer records and
other similar property, rights and information;
(vii) patents, patent applications, trademarks, trademark applications
and registrations, trade names, service marks, service mark applications
and registrations, service names, copyrights and copyright applications and
registrations, commercial and technical information including engineering,
production and other designs, drawings, specifications, formulae,
technology, computer and electronic data processing programs and software,
inventions, processes, trade secrets, know-how, confidential information
and other proprietary property, rights and interest and all rights thereto;
(viii) agreements, leases, contracts, sale orders, purchase orders,
open bids and other commitments and all rights therein;
(ix) prepaid expenses, deposits and retentions held by third parties;
(x) claims, causes of action, choses in action, rights under insurance
policies, rights under express or implied warranties, rights of recovery,
rights of set-off, rights of subrogation and all other rights of any kind;
(xi) licenses, franchises, permits, authorizations and approvals; and
(xii) goodwill and going concern value.
"Assignee" shall have the meaning set forth in Section 2.06.
"Assignor" shall have the meaning set forth in Section 2.06.
"Claims Administration" shall mean the processing of claims made under
Company Policies, including, without limitation, the reporting of losses or
claims to insurance carriers (including as a result of reports provided to
Destinations by the Company or Educational), management and defense of claims,
the settlement of claims (except to the extent settlement authority remains with
another party as contemplated by the second proviso to Section 7.03(a)) and
providing for appropriate releases upon settlement of claims.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and the
Treasury regulations promulgated thereunder, including any successor
legislation.
"Company" shall have the meaning set forth in the heading of this
Agreement.
"Company Common Stock" shall have the meaning set forth in the recitals to
this Agreement.
"Company Debt" shall mean all Liabilities of the Company and its
Subsidiaries under or arising from (i) the Credit Agreement dated as of
September , 1997, among ITT Promedia LLC CVA, a Belgian company and a wholly
owned Subsidiary of the Company ("Promedia"), The Chase Manhattan Bank, as
administrative agent, and the Lenders party thereto, (ii) the Credit Agreement
dated as of September , 1997, among ITT Publimedia B.V., a Dutch company and a
wholly owned Subsidiary of the Company ("Publimedia"), The Chase Manhattan Bank,
as administrative agent, and the Lenders party thereto, (iii) [the Senior
Secured Credit Agreement dated as of September , 1997, among the Company, The
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<PAGE> 89
Chase Manhattan Bank, Goldman Sachs Credit Partners L.P., Chase Securities Inc.
and Goldman Sachs Credit Partners L.P.], (iv) the DM million %
Senior Subordinated Notes due 2007 issued by Promedia, (v) the $
million % Senior Subordinated Notes due 2007 issued by Promedia, (vi) the
$ million % Senior Subordinated Notes due 2007 issued by Publimedia
and (vii) any debt securities or other indebtedness issued in exchange for or
replacement of, or the proceeds of which are otherwise directly or indirectly
used to repay, any of the foregoing Liabilities, and any indenture, credit
agreement, underwriting agreement, purchase agreement, security agreement,
credit support agreement or other agreement or document related to any of the
foregoing.
"Company Indemnitees" shall mean the Company, each Affiliate of the Company
after the Distribution Date, each of their respective directors, officers,
employees and agents and each of the heirs, executors, successors and assigns of
any of the foregoing.
"Company Policies" shall mean all Policies, current or past, which are or
at any time were maintained by or on behalf of or for the benefit or protection
of the Company or any of its predecessors, or current or past directors,
officers, employees or agents thereof, including, without limitation, the
Policies identified on Schedule 7.01(a) hereto.
"Conveyancing and Assumption Instruments" shall have the meaning set forth
in Section 2.04.
"Destinations" shall have the meaning set forth in the heading to this
Agreement.
"Destinations Assets" shall mean (a) all the Assets of the Company and its
Subsidiaries, except for (i) the Retained Assets and (ii) the Educational Assets
and (b) the rights of Destinations and its Subsidiaries under this Agreement,
the Destinations Distribution Agreement and the Ancillary Agreements.
"Destinations Business" shall mean all the businesses, Assets and
operations heretofore, currently or hereafter conducted or owned by the Company
and its Subsidiaries and Affiliates, including all businesses, Assets,
operations or investments conducted or owned by the Company and its Subsidiaries
and Affiliates that have been sold or otherwise disposed of or discontinued
except for (i) the Retained Business and (ii) the Educational Business.
"Destinations Distribution" shall mean the distribution by the Company to
holders of record of Company Common Stock of all the shares of the common stock,
par value $.01 per share, of Destinations, as provided in the Destinations
Distribution Agreement.
"Destinations Distribution Agreement" shall mean the Agreement and Plan of
Distribution dated as of September , 1997, between the Company and
Destinations.
"Destinations Indemnitees" shall mean Destinations, each Affiliate of
Destinations after the Distribution Date, each of their respective directors,
officers, employees and agents and each of the heirs, executors, successors and
assigns of any of the foregoing.
"Destinations Liabilities" shall mean, collectively, whenever arising
whether prior to, at or following the Distribution Time, all the Liabilities of
the Company, Destinations and Educational and their respective Subsidiaries or
Affiliates (including, without limitation, Liabilities of the Company under the
Educational Intercompany Agreements or arising primarily out of or relating
primarily to the management or conduct of the Destinations Business), except for
(i) the Retained Liabilities and (ii) the Educational Liabilities.
"Distribution" shall mean the distribution on the Distribution Date to
holders of record as of the Distribution Record Date of shares of Company Common
Stock, other than shares held in the treasury of the Company, of all the
Educational Common Shares (together with the associated Rights) owned by the
Company on the basis of of an Educational Common Share for each
outstanding share of Company Common Stock.
"Distribution Date" shall mean such date as hereafter may be determined by
the Company's Board of Directors as the date as of which the Distribution shall
be effected.
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"Distribution Fraction" shall mean a fraction the numerator of which is the
number of Educational Common Shares owned by the Company as of the Distribution
Record Date and the denominator of which is the number of shares of Company
Common Stock outstanding (excluding any shares of Company Common Stock held in
the Company's treasury) as of the Distribution Record Date.
"Distribution Record Date" shall mean such date as hereafter may be
determined by the Company's Board of Directors as the record date for the
Distribution.
"Distribution Time" shall mean 11:59 p.m., New York City time, on the
Distribution Date.
"Educational" shall have the meaning set forth in the heading of this
Agreement.
"Educational Assets" shall mean (a) all the Assets of the Company and its
Subsidiaries relating primarily to, and used or held for use in, the Educational
Business (exclusive of the "ITT" name, mark and logo and any rights relating
thereto), including (i) the Assets included on the unaudited consolidated
balance sheet of Educational as of June 30, 1997, and any assets acquired by the
Company or any of its Subsidiaries relating primarily to the Educational
Business from July 1, 1997 and (ii) all the capital stock owned by the Company
of Educational and the rights of the Company in Subsidiaries of Educational and
(b) the rights of Educational and its Subsidiaries under this Agreement, the
Destinations Distribution Agreement and the Ancillary Agreements.
"Educational Business" shall mean all the businesses, Assets (exclusive of
the "ITT" name, mark and logo and any rights relating thereto) and operations
heretofore, currently or hereafter conducted or owned by Educational and its
Subsidiaries, including all businesses, Assets, operations or investments
conducted or owned by Educational or any of its Subsidiaries that have been sold
or otherwise disposed of or discontinued prior to the Distribution Time.
"Educational Common Shares" shall have the meaning set forth in the
recitals to this Agreement.
"Educational Indemnitees" shall mean Educational, each Affiliate of
Educational after the Distribution, each of their respective directors,
officers, employees and agents and each of the heirs, executors, successors and
assigns of any of the foregoing.
"Educational Intercompany Agreements" shall mean the (i) Registration
Rights Agreement, dated as of December 19, 1994, between ITT Corporation, a
Delaware corporation which has been renamed "ITT Industries, Inc."
("Industries") and Educational, (ii) Tax Sharing Agreement, dated as of December
27, 1994, between Industries and Educational, (iii) Intercompany Agreement,
dated as of December 19, 1994, between Industries and Educational, (iv) Trade
Name and Service Mark License Agreement, dated as of December 19, 1994, between
Industries and Educational, (v) Employee Benefits and Administrative Services
Agreement, dated as of December 19, 1994, between Industries and Educational and
(vi) Treasury Services and Credit Facilities Agreement, dated as of August 15,
1994, between Industries and Educational, the rights and obligations of
Industries under each of which have been assumed by the Company, each as amended
or supplemented or otherwise modified on or prior to the date hereof.
"Educational Liabilities" shall mean collectively, whenever arising,
whether prior to, at or following the Distribution Time, (i) all Liabilities of
Educational under this Agreement and any of the Ancillary Agreements and (ii)
all the Liabilities of the Company, Destinations or Educational, and any of
their respective Subsidiaries and Affiliates, arising primarily out of or
relating primarily to the management or conduct of the Educational Business;
provided that (i) Liabilities of Educational or any of its Subsidiaries under
any agreement to which Educational or any of its Subsidiaries is a party and
(ii) Liabilities of the Company related to litigation arising from or related to
the Educational Business (including in connection with Eldredge, et al. v. ITT
Educational Services, Inc., et al. and similar Actions) shall be Educational
Liabilities.
"Employee Benefits Services and Liability Agreement" shall mean the
Employee Benefits Services and Liability Agreement between the Company,
Destinations and Educational, substantially in the form of Exhibit A hereto.
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<PAGE> 91
"Indemnifiable Losses" shall mean any and all losses (whether or not
arising from third party claims), liabilities, claims, damages, demands, costs
or expenses (including, without limitation, reasonable attorneys' and
accountants' fees and expenses and any and all out-of-pocket expenses)
whatsoever, including all losses, liabilities, claims, damages, demands, costs
or expenses reasonably incurred in investigating, preparing for or defending
against any Actions or potential Actions or in asserting, preserving or
enforcing any rights hereunder or under any Ancillary Agreement.
"Indemnifying Party" shall have the meaning set forth in Section 5.03.
"Indemnitee" shall have the meaning set forth in Section 5.03.
"Information" of a party shall mean any and all information that such party
or any of its Representatives furnish or have furnished to the receiving party
or any of its Representatives whether furnished orally or in writing or by any
other means or gathered by inspection and regardless of whether the same is
specifically marked or designated as "confidential" or "proprietary", together
with any and all notes, memoranda, analyses, compilations, studies or other
documents (whether in hard copy or electronic media) prepared by the receiving
party or any of its Representatives which contain or otherwise reflect such
Information, together with any and all copies, extracts or other reproductions
of any of the same; provided, however, that for the purposes hereof all
information relating to the Retained Business or the Retained Assets in the
possession of Educational or any of its Subsidiaries at the Distribution Time
shall be deemed to have been furnished by the Company and all information
relating to Educational, the Educational Business or the Educational Assets in
the possession of the Company at the Distribution Time shall be deemed to have
been furnished by Educational; provided further, however, that the term
"Information" does not include information that:
(a) at the time of disclosure is generally available to and known by
the public (other than as a result of a violation of this Agreement,
directly or indirectly, by a party to this Agreement or any of its
Representatives);
(b) is available to the receiving party on a non-confidential basis
from a source other than the providing party or its Representatives,
provided that such source is not known by the receiving party to be subject
to a confidentiality agreement regarding such information; or
(c) has been independently acquired or developed by the receiving
party without violation of any of the obligations of the receiving party or
its Representatives under this Agreement.
"Information Statement" shall mean the Information Statement to be sent to
the holders of shares of Company Common Stock in connection with the
Distribution, including any amendment or supplement thereto.
"Insurance Administration" shall mean, with respect to each Company Policy,
the accounting for premiums, retrospectively-rated premiums, defense costs,
indemnity payments, deductibles and retentions, as appropriate, under the terms
and conditions of each such Company Policy, and the distribution of Insurance
Proceeds as contemplated by this Agreement.
"Insurance Proceeds" shall mean those monies (i) received by an insured
from an insurance carrier or (ii) paid by an insurance carrier on behalf of an
insured, in either case net of any applicable premium adjustment,
retrospectively-rated premium, deductible, retention, or cost of reserve paid or
held by or for the benefit of such insured.
"Insured Claims" shall mean those Liabilities that, individually or in the
aggregate, are covered within the terms and conditions of any Company Policy,
whether or not subject to deductibles, co-insurance, uncollectability or
retrospectively-rated premium adjustments, but only to the extent that such
Liabilities are within applicable Company Policy limits, including aggregates.
"Investment Agreement" shall mean the Investment Agreement, dated as of
July 15, 1997, between the Company and CDRV Acquisition, L.L.C., as the same may
be amended from time to time.
"Liabilities" shall mean any and all debts, liabilities and obligations,
absolute or contingent, matured or unmatured, liquidated or unliquidated,
accrued or unaccrued, known or unknown, whenever arising, including,
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<PAGE> 92
without limitation, those debts, liabilities and obligations arising under any
law, rule, regulation, Action, threatened Action, order or consent decree of any
court, any governmental or other regulatory or administrative agency or
commission or any award of any arbitration tribunal, and those arising under any
contract, guarantee, commitment or undertaking.
"Nonassignable Contract" shall have the meaning set forth in Section 2.06.
"NYSE" shall mean the New York Stock Exchange, Inc.
"Person" shall mean any natural person, corporation, business trust,
limited liability company, joint venture, association, company, partnership or
government, or any agency or political subdivision thereof.
"Policies" shall mean insurance policies and insurance contracts of any
kind (other than life and benefits policies or contracts), including, without
limitation, primary, excess and umbrella policies, commercial general liability
policies, fiduciary liability, automobile, aircraft, property and casualty,
workers' compensation and employee dishonesty insurance policies, bonds and
self-insurance and captive insurance company arrangements, together with the
rights, benefits and privileges thereunder.
"Representatives" of either party shall mean such party's Affiliates,
directors, officers, partners, employees, agents or other representatives
(including attorneys, accountants and financial advisors).
"Retained Assets" shall mean (a) all the Assets of the Company and its
Subsidiaries relating primarily to, and used or held for use in, the Retained
Business (exclusive of the "ITT" name, mark and logo and any rights relating
thereto), including (i) the Assets included on the unaudited consolidated
balance sheet of World Directories as of June 30, 1997, and any assets acquired
by the Company or any of its Subsidiaries relating primarily to the Retained
Business from July 1, 1997, (ii) all the capital stock of World Directories and
the rights of the Company in Subsidiaries of World Directories and (iii) equity
interests owned by World Directories, directly or indirectly, in Persons that do
not constitute Subsidiaries and (b) the rights of the Company and its
Subsidiaries under this Agreement, the Destinations Distribution Agreement, the
Investment Agreement and the Ancillary Agreements.
"Retained Business" shall mean all the businesses, Assets (exclusive of the
"ITT" name, mark and logo and any rights relating thereto) and operations
heretofore, currently or hereafter conducted or owned by World Directories and
its Subsidiaries and Persons in which it has an equity interest, including all
businesses, Assets, operations or investments conducted or owned by World
Directories or any of its Subsidiaries and Persons in which it has an equity
interest that have been sold or otherwise disposed of or discontinued.
"Retained Liabilities" shall mean collectively, whenever arising, whether
prior to, at or following the Distribution Time, (i) all the Liabilities of the
Company and its Subsidiaries under this Agreement, the Destinations Distribution
Agreement and any of the Ancillary Agreements, (ii) all the Liabilities of the
parties hereto and any of their respective Subsidiaries or Affiliates arising
primarily out of or relating primarily to the management or conduct of the
Retained Business and (iii) the Company Debt.
"SEC" shall mean the Securities and Exchange Commission.
"Subsidiary" shall mean any corporation, partnership or other entity of
which another entity (i) owns, directly or indirectly, ownership interests
sufficient to elect a majority of the Board of Directors (or persons performing
similar functions) (irrespective of whether at the time any other class or
classes of ownership interests of such corporation, partnership, joint venture
or other entity shall or might have such voting power upon the occurrence of any
contingency) or (ii) is a general partner or an entity performing similar
functions (e.g., a trustee or managing member). For purposes of this Agreement,
ITT-Dow Jones Television and its Subsidiaries shall be deemed to be Subsidiaries
of Destinations and the interests of World Directories in Persons conducting
business in South Africa, Japan and Portugal shall be deemed to be a Subsidiary
of the Company.
"Tax" shall mean all Federal, state, local and foreign taxes and
assessments, including all interest, penalties and additions imposed with
respect to such amounts.
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"Tax Allocation Agreement" shall mean the Tax Allocation Agreement between
Destinations, the Company and Educational, substantially in the form of Exhibit
C hereto, as and to the extent amended and restated as of the closing of the
transactions contemplated by the Investment Agreement.
"Third Party Claim" shall have the meaning set forth in Section 5.04.
"World Directories" shall mean ITT World Directories, Inc., a Delaware
corporation and a wholly owned Subsidiary of the Company.
SECTION 1.02. References; Interpretation. References to an "Exhibit" or
to a "Schedule" are, unless otherwise specified, to one of the Exhibits or
Schedules attached to this Agreement, and references to a "Section" or "Article"
are, unless otherwise specified, to one of the Sections and Articles of this
Agreement. Any time the word "including" is used herein it means "including
without limitation".
ARTICLE II
CERTAIN TRANSACTIONS
SECTION 2.01. Transfer of Certain Businesses and Assets. Effective as of
the Distribution Time and except as otherwise expressly provided in this
Agreement or any of the Ancillary Agreements, (i) the Company, on behalf of
itself and its Subsidiaries, hereby contributes, grants, conveys, assigns,
transfers and delivers to Educational all of the Company's and its Subsidiaries'
right, title and interest in and to (a) the business and legal entities and
other Assets that comprise the Educational Business (other than the Educational
Common Shares) and (b) the Educational Assets, (other than the Educational
Common Shares), (ii) Educational, on behalf of itself and its Subsidiaries,
hereby contributes, grants, conveys, assigns, transfers and delivers to the
Company all of Educational's and its Subsidiaries' right, title and interest in
and to (a) the business and legal entities and other Assets that comprise the
Retained Business and (b) the Retained Assets and (iii) Educational, on behalf
of itself and its Subsidiaries, hereby contributes, grants, conveys, assigns,
transfers and delivers to Destinations all of Educational's and its Subsidiaries
right, title and interest in and to (a) the business and legal entities and
other Assets that comprise the Destinations Business and (b) the Destinations
Assets.
SECTION 2.02. Assumption of Liabilities. Effective as of the Distribution
Time and except as otherwise specifically provided in this Agreement or any of
the Ancillary Agreements, (i) Educational hereby unconditionally assumes and
undertakes to pay, perform and discharge when due in accordance with their
terms, on behalf of itself and its Subsidiaries, all the Educational Liabilities
and (ii) each of the Company and Destinations hereby retains, and Educational
and its Subsidiaries do not assume and will have no liability hereunder with
respect to, all the Retained Liabilities and the Destinations Liabilities,
respectively.
SECTION 2.03. Transfer of Certain Licenses and Permits. (a) In
furtherance of the contribution, grant, conveyance, assignment, transfer and
delivery of the Educational Assets and the Educational Business and the
assumption of the Educational Liabilities set forth in this Article II, at or
prior to the Distribution Time, all transferrable licenses, permits and
authorizations issued by governmental or regulatory entities which relate to the
Educational Business but which are held in the name of the Company or any of its
Subsidiaries (other than Educational or its Subsidiaries), or any of their
respective Representatives, or otherwise shall be duly and validly transferred
by the Company or such Subsidiary or Representative to Educational or the
appropriate Subsidiary of Educational.
(b) In furtherance of the contribution, grant, conveyance, assignment,
transfer and delivery of the Educational Assets and the Educational Business and
the assumption of the Educational Liabilities set forth in this Article II, at
or prior to the Distribution Time, (i) all transferrable licenses, permits and
authorizations issued by governmental or regulatory entities which relate to the
Retained Business but which are held in the name of Educational or any of its
Subsidiaries, or any of their respective Representatives, or otherwise shall be
duly and validly transferred by Educational or such Subsidiary or Representative
to the Company or the appropriate Subsidiary of the Company and (ii) all
transferrable licenses, permits and authorizations issued by governmental or
regulatory entities which relate to the Destinations Business but which are held
in the name
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of Educational or any of its Subsidiaries, or any of their respective
Representatives, or otherwise shall be duly and validly transferred by
Educational or such Subsidiary or Representative to Destinations or the
appropriate Subsidiary of Destinations.
SECTION 2.04. Transfer and Assumption Documentation. In furtherance of
the contribution, grant, conveyance, assignment, transfer, delivery and
assumption of the Assets and Liabilities set forth in this Article II, at or
prior to the Distribution Time, (i) the parties hereto shall execute and
deliver, and cause their respective Subsidiaries to execute and deliver, such
deeds, bills of sale, stock powers, certificates of title, assignments of leases
and contracts and other instruments of contribution, grant, conveyance,
assignment, transfer and delivery necessary to evidence such contribution,
grant, conveyance, assignment, transfer and delivery (collectively, the
"Conveyancing Instruments") and (ii) each party hereto or the appropriate
Subsidiary of such party shall execute and deliver such instruments of
assumption (together with the Conveyancing Instruments, the "Conveyancing and
Assumption Instruments") as and to the extent necessary to evidence such
assumption.
SECTION 2.05. Intercompany Accounts. All intercompany receivables,
payables and loans (other than receivables, payables and loans otherwise
specifically provided for in any of the Ancillary Agreements or hereunder)
between any party hereto or any of its Subsidiaries, on the one hand, and any
other party hereto or any of its Subsidiaries, on the other hand, including,
without limitation, in respect of any cash balances, any cash balances
representing deposited checks or drafts for which only a provisional credit has
been allowed or any cash held in any centralized cash management system, shall,
as of the Distribution Time, be settled or otherwise eliminated. Prior to or on
the Distribution Date, Destinations will pay to Educational, by wire transfer of
immediately available funds, an amount equal to the amount in the Cash Invested
With ITT account as of the date of such payment, including all accrued interest
as of such payment date.
SECTION 2.06. Assignments and Transfers Not Effected Prior to the
Distribution. Anything contained herein to the contrary notwithstanding, (a)
this Agreement shall not constitute an agreement to assign any agreement,
contract, lease, license, sales order, purchase order, open bid or other
commitment if an assignment or attempted assignment of the same without the
consent of a third party would constitute a breach thereof or in any way impair
the rights of Educational, the Company or Destinations or any of their
respective Subsidiaries thereunder (any such item being referred to as a
"Nonassignable Contract") and (b) nothing herein shall be deemed to require the
transfer of any Assets or the assumption of any Liabilities which by their terms
or operation of law cannot be transferred. To the extent that any assignments or
transfers contemplated by this Article II shall not have been consummated at or
prior to the Distribution Time, the parties hereto and their respective
Subsidiaries shall cooperate and use reasonable best efforts to obtain any
necessary consents or approvals for the assignment of all Nonassignable
Contracts and the transfer of all Assets and Liabilities contemplated to be
assigned or transferred pursuant to this Article II and shall otherwise
cooperate and use reasonable best efforts to effect any such assignments or
transfers as promptly following the Distribution Time as shall be practicable.
In the event that any consent required with respect to a Nonassignable Contract
is not obtained or an attempted assignment thereof would be ineffective or would
impair either party's rights under any such Nonassignable Contract, then the
party obligated to assign such Nonassignable Contract (the "Assignor") will
promptly pay or cause to be paid to the assignee thereof (the "Assignee"), when
received, all monies received by the Assignor with respect to any such
Nonassignable Contract and in consideration thereof the Assignee shall pay,
perform and discharge on behalf of the Assignor all the Assignor's debts,
liabilities, obligations and commitments thereunder in a timely manner and in
accordance with the terms thereof. In the event that any such transfer of Assets
or Liabilities has not been consummated, from and after the Distribution Time
the party retaining such Asset or Liability shall hold such Asset in trust for
the use and benefit of the party entitled thereto (at the expense of the party
entitled thereto) or retain such Liability for the account of the party by whom
such Liability is to be assumed pursuant hereto, as the case may be. The parties
hereto will take such other action as may be reasonably requested by the
Assignee or party to whom such Asset is to be transferred, or by whom such
Liability is to be assumed, as the case may be, in order to place such party,
insofar as is reasonably possible, in the same position as would have existed
had such Nonassignable Contract been assigned, or such Asset or Liability been
transferred, as contemplated hereby. As and when any required consent to the
assignment of a Nonassignable Contract is
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obtained or any such Asset or Liability becomes transferable, such assignment or
transfer shall be effected forthwith. The parties agree that, as of the
Distribution Time, each party hereto shall be deemed to have acquired complete
and sole beneficial ownership over all Assets, together with all rights, powers
and privileges incident thereto, and shall be deemed to have assumed all
Liabilities, and all duties, obligations and responsibilities incident thereto,
which such party is entitled to acquire or required to assume pursuant to the
terms of this Agreement or any of the Ancillary Agreements.
SECTION 2.07. Educational Intercompany Agreements. Effective as of the
Distribution Time, each of the Educational Intercompany Agreements (other than
the Trade Name and Service Mark License Agreement) shall become null and void
and of no further force or effect; provided, however, that the Trade Name and
Service Mark License Agreement shall stay in full force in accordance with its
terms.
ARTICLE III
THE DISTRIBUTION
SECTION 3.01. Mechanics of Distribution. (a) Delivery of Shares to Agent.
The Company shall deliver to the Agent the share certificates representing all
the Educational Common Shares held by the Company and shall instruct the Agent
to distribute such Educational Common Shares to holders of record of shares of
Company Common Stock on the Distribution Record Date upon notice from the
Company that the conditions to the obligation of the Company to consummate the
Distribution have been satisfied or waived and that the Agent is authorized to
proceed with the distribution of Educational Common Shares. Immediately
following the Distribution, the Company shall not own any capital stock of
Educational.
(b) Subject to Section 3.02, the Distribution shall be effected by the
distribution to each holder of record of Company Common Stock, as of the
Distribution Record Date, of certificates representing, in the aggregate, the
Distribution Fraction of an Educational Common Share for each share of Company
Common Stock (rounded down to the nearest whole Educational Common Share) and
cash in lieu of fractional Educational Common Shares as provided in Section
3.02. The Company shall instruct the Agent to distribute the Educational Common
Shares and cash in lieu of fractional shares as promptly as practicable after
the Distribution Time.
SECTION 3.02. Fractional Shares. No certificate or scrip representing
fractional Educational Common Shares shall be issued as part of the Distribution
and in lieu of receiving fractional Educational Common Shares, each holder of
Company Common Stock who would otherwise be entitled to receive a fractional
Educational Common Share pursuant to the Distribution will receive cash for such
fractional share computed as described below. The Company shall instruct the
Agent to determine the number of whole Educational Common Shares and fractional
Educational Common Shares allocable to each holder of record of Company Common
Stock as of the Distribution Record Date, to aggregate all such fractional
Educational Common Shares into whole shares and sell the whole shares obtained
thereby in the open market at then prevailing prices on behalf of holders who
otherwise would be entitled to receive fractional share interests and to
distribute to each such holder such holder's ratable share of the total net
proceeds of such sale.
SECTION 3.03. Timing of Distribution. The Board of Directors of the
Company shall, or shall authorize certain officers of the Company to, formally
declare the Distribution and shall authorize the Company to pay it at the
Distribution Time, subject to the satisfaction or waiver of the conditions set
forth in Article VIII. The Distribution shall be deemed to be effective upon
notification by the Company to the Agent that the conditions to the obligations
of the Company to consummate the Distribution have been satisfied or waived and
that the Agent is authorized to proceed with the distribution of Educational
Common Shares and cash in lieu of fractional shares.
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ARTICLE IV
MUTUAL RELEASE
SECTION 4.01. Mutual Release, etc. Effective as of the Distribution Time
and except as otherwise specifically set forth in this Agreement or any of the
Ancillary Agreements, each of Educational, the Company and Destinations, on its
own behalf and on behalf of each of its respective Subsidiaries, releases and
forever discharges the others and its Subsidiaries, and its and their respective
officers, directors, agents, Affiliates, record and beneficial security holders
(including, without limitation, trustees and beneficiaries of trusts holding
such securities), advisors and Representatives (in their respective capacities
as such) and their respective heirs, executors, administrators, successors and
assigns, of and from all debts, demands, actions, causes of action, suits,
accounts, covenants, contracts, agreements, damages, claims and Liabilities
whatsoever of every name and nature, both in law and in equity, which the
releasing party has or ever had, which arise out of or relate to events,
circumstances or actions taken by such other party, occurring or failing to
occur, or any conditions existing, on or prior to the Distribution Time;
provided, however, that the foregoing general release shall not apply to (i) any
Liabilities (including Liabilities with respect to indemnification) assumed,
transferred, assigned, allocated or arising under this Agreement, the
Destinations Distribution Agreement or any of the Ancillary Agreements and shall
not affect any party's right to enforce this Agreement, the Destinations
Distribution Agreement or any Ancillary Agreement in accordance with its terms
or (ii) any Liability the release of which would result in the release of any
Person other than a Person released pursuant to this Section 4.01 (provided that
the parties agree not to bring suit or permit any of their Subsidiaries to bring
suit against any Person with respect to any Liability to the extent such Person
would be released with respect to such Liabilities by this Section 4.01 but for
the proviso to this clause (ii)). Each party understands and agrees that, except
as otherwise specifically provided in this Agreement, the Destinations
Distribution Agreement or the Ancillary Agreements, neither party is, in this
Agreement or the Ancillary Agreements or otherwise, representing or warranting
in any way as to the Assets, business or Liabilities transferred, assumed or
retained as contemplated hereby or as to any consents or approvals required in
connection with the consummation of the transactions contemplated by this
Agreement, the Destinations Distribution Agreement or the Ancillary Agreements,
it being agreed and understood that each party shall take or keep all of its
Assets "as is" and that it shall bear the economic and legal risk that
conveyance of such Assets shall prove to be insufficient or that the title to
any Assets shall be other than good and marketable and free from encumbrances of
any nature whatsoever.
ARTICLE V
INDEMNIFICATION
SECTION 5.01. Indemnification by the Company. Except as otherwise
specifically set forth in any provision of this Agreement or of any Ancillary
Agreement, the Company shall indemnify, defend and hold harmless the Educational
Indemnitees from and against, and pay or reimburse the Educational Indemnitees
for, any and all Indemnifiable Losses, as incurred, of the Educational
Indemnitees arising out of, relating to or resulting from (i) the Retained
Liabilities, the Retained Assets or the Retained Business, (ii) any Conveyancing
and Assumption Instrument delivered for the benefit of Educational or any of its
Subsidiaries or (iii) the breach by the Company or any of its Subsidiaries of
any provision of this Agreement or of any Ancillary Agreement, in each case,
whether such Indemnifiable Losses relate to or arise from events, occurrences,
actions, omissions, facts or circumstances occurring, existing or asserted at,
before or after the Distribution Time.
SECTION 5.02. Indemnification by Educational. Except as otherwise
specifically set forth in any provision of this Agreement or of any Ancillary
Agreement, Educational shall indemnify, defend and hold harmless the Company
Indemnitees from and against, and pay or reimburse the Company Indemnitees and
the Destinations Indemnitees for, any and all Indemnifiable Losses, as incurred,
of the Company Indemnitees or the Destinations Indemnitees arising out of or
resulting from (i) the Educational Liabilities, the Educational Assets or the
Educational Business, (ii) any Conveyancing and Assumption Instrument delivered
for the benefit of the Company or Destinations or any of their Subsidiaries or
(iii) the breach by Educational
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or any of its Subsidiaries of any provision of this Agreement or of any
Ancillary Agreement, in each case, whether such Indemnifiable Losses relate to
or arise from events, occurrences, actions, omissions, facts or circumstances
occurring, existing or asserted at, before or after the Distribution Time.
SECTION 5.03. Limitations on Indemnification Obligations. The amount that
any party (an "Indemnifying Party") is or may be required to pay to any other
Person (an "Indemnitee") pursuant to Section 5.01 or Section 5.02, as
applicable, shall be reduced (retroactively or prospectively) by any Insurance
Proceeds or other amounts actually recovered by or on behalf of such Indemnitee
in respect of the related Indemnifiable Loss. If an Indemnitee shall have
received the payment required by this Agreement from an Indemnifying Party in
respect of an Indemnifiable Loss and shall subsequently actually receive
Insurance Proceeds or other amounts in respect of such Indemnifiable Loss, then
such Indemnitee shall pay to such Indemnifying Party a sum equal to the amount
of such Insurance Proceeds or other amounts actually received, up to the
aggregate amount of any payments made by such Indemnifying Party pursuant to
this Agreement in respect of such Indemnifiable Loss.
SECTION 5.04. Procedures for Indemnification of Third Party Claims. If a
claim or demand is made against an Indemnitee by any Person who is not a party,
or an Affiliate of a party, to this Agreement or any of the Ancillary Agreements
(a "Third Party Claim") as to which such Indemnitee is entitled to
indemnification pursuant to this Agreement, such Indemnitee shall notify the
Indemnifying Party in writing, and in reasonable detail, of the Third Party
Claim promptly (and in any event within 10 business days) after receipt by such
Indemnitee of written notice of the Third Party Claim; provided, however, that
failure to give such notification shall not affect the indemnification provided
hereunder except to the extent that the defense or conduct of such Third Party
Claim by the Indemnifying Party shall have been actually and materially
prejudiced as a result of such failure (except that the Indemnifying Party shall
not be liable for any expenses incurred during the period in which the
Indemnitee failed to give such notice); provided, however, in no event shall
such failure to notify the Indemnifying Party (i) constitute prejudice suffered
by the Indemnifying Party if it has otherwise received notice of the Third Party
Claim or (ii) relieve it from any liability or obligation that it may otherwise
have to such Indemnitee. Thereafter, the Indemnitee shall deliver to the
Indemnifying Party, promptly (and in any event within 10 business days) after
the Indemnitee's receipt thereof, copies of all notices and documents (including
court papers) received by the Indemnitee relating to the Third Party Claim.
If a Third Party Claim is made against an Indemnitee, the Indemnifying
Party shall be entitled to participate in the defense thereof and, if it so
chooses and acknowledges in writing its obligation to indemnify the Indemnitee
therefor, to assume the defense thereof with counsel selected by the
Indemnifying Party; provided that such counsel is not reasonably objected to by
the Indemnitee. Should the Indemnifying Party so elect to assume the defense of
a Third Party Claim, the Indemnifying Party shall not be liable to the
Indemnitee for legal or other expenses subsequently incurred by the Indemnitee
in connection with the defense thereof. If the Indemnifying Party assumes such
defense, the Indemnitee shall have the right to participate in the defense
thereof and to employ counsel, at its own expense, separate from the counsel
employed by the Indemnifying Party, it being understood that the Indemnifying
Party shall have full control of such defense. The Indemnifying Party shall be
liable for the fees and expenses of counsel employed by the Indemnitee for any
period during which the Indemnifying Party has failed to assume the defense
thereof.
If the Indemnifying Party so elects to assume the defense of any Third
Party Claim, all of the Indemnitees shall cooperate with the Indemnifying Party
in the defense or prosecution thereof. Such cooperation shall include the
retention and (upon the Indemnifying Party's request) the provision to the
Indemnifying Party of records and information which are reasonably relevant to
such Third Party Claim and making employees available on a mutually convenient
basis to provide additional information regarding any material provided
hereunder.
Whether or not the Indemnifying Party shall have assumed the defense of a
Third Party Claim, in no event will the Indemnitee admit any liability with
respect to, or settle, compromise or discharge, such Third Party Claim without
the Indemnifying Party's prior written consent (which consent shall not be
unreasonably withheld); provided, however, that the Indemnitee shall have the
right to settle, compromise or discharge such Third Party Claim without the
consent of the Indemnifying Party if the Indemnitee releases in writing the
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Indemnifying Party from its indemnification obligation hereunder with respect to
such Third Party Claim and such settlement, compromise or discharge would not
otherwise adversely affect the Indemnifying Party. If the Indemnifying Party
shall have assumed the defense of a Third Party Claim, the Indemnitee will agree
to any settlement, compromise or discharge of a Third Party Claim that the
Indemnifying Party may recommend and that by its terms does not obligate the
Indemnitee to pay any of the liability in connection with such Third Party Claim
and releases the Indemnitee completely and unconditionally in connection with
such Third Party Claim and does not provide for injunctive or other nonmonetary
relief affecting the Indemnitee.
Notwithstanding the foregoing, the Indemnifying Party shall not be entitled
to assume the defense of any Third Party Claim (and shall be liable for the
reasonable fees and expenses of counsel incurred by the Indemnitee in defending
such Third Party Claim) if the Third Party Claim seeks an order, injunction or
other equitable relief or relief for other than money damages against the
Indemnitee which the Indemnitee reasonably determines, after conferring with its
counsel, cannot be separated from any related claim for money damages. If such
equitable relief or other relief portion of the Third Party Claim can be so
separated from that for money damages, the Indemnifying Party shall be entitled
to assume the defense of the portion relating to money damages.
Notwithstanding the foregoing, the Indemnifying Party shall not be entitled
to assume the defense of any Third Party Claim (and shall be liable for the
reasonable fees and expenses of counsel incurred by the Indemnitee in defending
such Third Party Claim) if the Indemnitee determines in good faith, based on
written opinion of counsel, that the Indemnitee has available to it one or more
defenses or counterclaims that are inconsistent with one or more of those that
may be available to the Indemnifying Party in respect of such Third Party Claim.
SECTION 5.05. Indemnification Payments. Indemnification required by this
Article V shall be made by periodic payments of the amount thereof during the
course of the investigation, preparation or defense, as and when bills are
received or loss, liability, claim, damage, cost or expense is incurred.
SECTION 5.06. Other Adjustments. (i) The amount of any Indemnifiable Loss
shall be (x) increased to take into account any net Tax cost actually incurred
by the Indemnitee arising from any payments received from the Indemnifying Party
(grossed up for such increase) and (y) reduced to take account of any net Tax
benefit actually realized by the Indemnitee arising from the incurrence or
payment of any such Indemnifiable Loss. In computing the amount of such Tax cost
or Tax benefit, the Indemnitee shall be deemed to recognize all other items of
income, gain, loss, deduction or credit before recognizing any item arising from
the receipt of any payment with respect to an Indemnifiable Loss or the
incurrence or payment of any Indemnifiable Loss.
(ii) In addition to any adjustments required pursuant to Section 5.03
hereof or clause (i) of this Section 5.06, if the amount of any Indemnifiable
Loss shall, at any time subsequent to the payment required by this Agreement, be
reduced by recovery, settlement or otherwise, the amount of such reduction, less
any expenses incurred in connection therewith, shall promptly be repaid by the
Indemnitee to the Indemnifying Party, up to the aggregate amount of any payments
received from such Indemnifying Party pursuant to this Agreement in respect of
such Indemnifiable Loss.
SECTION 5.07. Survival of Indemnities. The obligations of the parties
under this Article V shall survive the sale or other transfer by any of them of
any Assets or businesses or the assignment by any of them of any Liabilities,
with respect to any Indemnifiable Loss of any Indemnitee related to such Assets,
businesses or Liabilities.
ARTICLE VI
COVENANTS
SECTION 6.01. Provision of Corporate Records. (a) Subject to Section
6.01(b), prior to or as promptly as practicable after the Distribution Time, the
Company shall deliver to Educational (at the expense of Educational) copies of
all corporate books and records in the possession of the Company and its
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Subsidiaries (other than Educational and its Subsidiaries) relating directly and
primarily to the Educational Assets, the Educational Business or the Educational
Liabilities, including, in each case, all agreements, litigation files and
government filings, whether or not active. From and after the Distribution Time,
all such copies shall be the property of Educational.
(b) Prior to or as promptly as practicable after the Distribution Time,
Educational shall deliver to the Company copies of all corporate books and
records in the possession of Educational and its Subsidiaries relating directly
and primarily to the Retained Assets, the Retained Business or the Retained
Liabilities, including, in each case, all agreements, litigation files and
government filings, whether or not active. From and after the Distribution Time,
all such books, records and other items or such copies thereof shall be the
property of the Company.
(c) Prior to or as promptly as practicable after the Distribution Time,
Educational shall deliver to Destinations copies of all corporate books and
records in the possession of Educational and its Subsidiaries relating directly
and primarily to the Destinations Assets, the Destinations Business or the
Destinations Liabilities, including, in each case, all agreements, litigation
files and government filings, whether or not active. From and after the
Distribution Time, all such books, records and other items or such copies
thereof shall be the property of Destinations.
SECTION 6.02. Access to Information. From and after the Distribution Time
each party hereto shall afford to each other party and its respective authorized
accountants, counsel and other designated representatives reasonable access and
duplicating rights (at such other party's expense) during normal business hours
and upon reasonable advance notice, subject to the confidentiality provisions
hereof and any additional appropriate restrictions for classified, privileged or
confidential information, to all Information within the possession or control of
such party or to which it has access relating to the business, Assets or
Liabilities of such other party as they existed prior to the Distribution Time,
insofar as such access is reasonably required for a reasonable purpose. Without
limiting the foregoing, information may be requested under this Section 6.02 for
audit, accounting, claims, litigation and Tax purposes, as well as for purposes
of fulfilling disclosure and reporting obligations.
SECTION 6.03. Retention of Records. Except as provided in this Agreement
or any of the Ancillary Agreements or as otherwise agreed in writing, if any
information relating to the business, Assets or Liabilities of a party hereto,
as they existed prior to the Distribution Time or as they are transferred,
assumed or imposed pursuant to this Agreement, is retained by one of the other
parties, the party retaining such information shall, and shall cause its
Subsidiaries to, retain all such information in such party's possession or under
its control until such information is at least ten years old except that if,
prior to the expiration of such period, the party retaining such information
wishes to destroy or dispose of any such information that is at least three
years old, prior to destroying or disposing of any of such information, (a) such
party shall provide no less than 30 days' prior written notice to the other
party, specifying the information proposed to be destroyed or disposed of and
(b) if, prior to the scheduled date for such destruction or disposal, the other
party requests in writing that any of the information proposed to be destroyed
or disposed of be delivered to such other party, the party proposing to dispose
of or destroy such information shall arrange for the delivery of the requested
information to a location specified by, and at the expense of, the requesting
party.
SECTION 6.04. Witness Services. From and after the Distribution Time,
each of the parties hereto shall use commercially reasonable efforts to make
available to each other party hereto, upon reasonable written request, its and
its Subsidiaries' officers, directors, employees and agents as witnesses to the
extent that (i) such persons may reasonably be required in connection with the
prosecution, investigation or defense of any Action or threatened Action in
which the requesting party may from time to time be involved and (ii) there is
no conflict in the Action or threatened Action between the requesting party and
the other party.
SECTION 6.05. Reimbursement. Except to the extent otherwise contemplated
by any Ancillary Agreement, a party providing books and records, access to
Information or witness services to the other party under this Article VI shall
be entitled to receive from the recipient, upon the presentation of invoices
therefor, payments for such amounts, relating to supplies, disbursements and
other out-of-pocket expenses and direct
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and indirect costs of employees, as may be reasonably incurred in providing such
books and records, access to Information or witness services.
SECTION 6.06. Confidentiality. (a) Each party hereto shall keep, and
shall cause its Representatives to keep, the other party's Information strictly
confidential and will disclose such Information only to such of its
Representatives who need to know such Information and who agree to be bound by
this Section 6.06 and not to disclose such Information to any other Person or
entity. Without the prior written consent of the other party, each party and its
Representatives shall not disclose the other party's Information to any Person
or entity except as may be required by law or judicial process or in connection
with the enforcement of its rights under this Agreement or any of the Ancillary
Agreements and, in each case, in accordance with this Section 6.06. Each party
agrees to be responsible for any breach of this confidentiality provision by any
of its Representatives.
(b) In the event that any party hereto or any of its Representatives
becomes legally compelled (by deposition, interrogatory, request for documents,
subpoena, civil investigative demand or similar process), or determines that it
is necessary in connection with the enforcement of its rights under this
Agreement or any of the Ancillary Agreements, to disclose all or any part of
another party's Information, the receiving party or its Representatives shall
promptly notify the other party of such compulsion or determination in writing,
and consult with and assist the other party in seeking a protective order or
request for other appropriate remedy. In the event that such protective order or
other remedy is not obtained or the other party waives compliance with the terms
hereof, such receiving party or its Representatives, as the case may be, shall
disclose only that portion of the Information which, in the opinion of the
receiving party's outside counsel, is legally required to be disclosed, and
shall exercise its reasonable best efforts to assure that confidential treatment
will be accorded such Information by the Persons or entities receiving such
Information. The providing party shall be given an opportunity to review the
Information prior to disclosure.
SECTION 6.07. Further Assurances. In case at any time after the
Distribution Time any further action is reasonably necessary or desirable to
carry out the purposes of this Agreement and the Ancillary Agreements, the
proper officers at such time of each party to this Agreement shall promptly take
all such action. Without limiting the foregoing, the Company, Destinations and
Educational or their respective Subsidiaries, as appropriate, shall use
commercially reasonable efforts to obtain all consents and approvals, to enter
into all agreements and to make all filings and applications that may be
required or are reasonably necessary for the consummation of the transactions
contemplated by this Agreement and the Ancillary Agreements, including, without
limitation, all applicable governmental and regulatory filings.
ARTICLE VII
INSURANCE
SECTION 7.01. Policies and Rights Included Within Assets. The Educational
Assets shall include any and all rights of a named or named additional insured
party under each of the Company Policies set forth on Schedule 7.01(a) hereto
and all predecessor Policies thereto, subject to the terms of such Policies and
any limitations or obligations of Educational contemplated by this Article VII
or Schedule 7.01(a), specifically including rights of indemnity and the right to
be defended by or at the expense of the insurer, with respect to all claims,
suits, actions, proceedings, injuries, losses, liabilities, damages and expenses
incurred or claimed to have been incurred prior to the Distribution Time by any
Person in or in connection with the conduct of the Educational Business or, to
the extent any claim is made against Educational or any of its Subsidiaries, the
conduct of the Retained Business or the Destinations Business, and which claims,
suits, actions, proceedings, injuries, losses, liabilities, damages and expenses
may arise out of an insured or insurable occurrence under one or more of such
Company Policies; provided, however, that nothing in this clause shall be deemed
to constitute (or to reflect) an assignment of such Company Policies, or any of
them, to Educational.
SECTION 7.02. Post-Distribution Time Claims. If, subsequent to the
Distribution Time, any Person shall assert a claim against Educational or any of
its Subsidiaries (including, without limitation, where Educational or any of its
Subsidiaries is a joint defendant with other persons) with respect to any claim,
suit,
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action, proceeding, injury, loss, liability, damage or expense incurred or
claimed to have been incurred prior to the Distribution Time in or in connection
with the conduct of the Educational Business or, to the extent any claim is made
against Educational or any of its Subsidiaries (including, without limitation,
where Educational or any of its Subsidiaries is a joint defendant with other
persons), the conduct of the Retained Business or the Destinations Business, and
which claim, suit, action, proceeding, injury, loss, liability, damage or
expense may arise out of an insured or insurable occurrence under one or more of
the Company Policies, Destinations shall, at the time such claim is asserted, to
the extent any such Policy may require that Insurance Proceeds thereunder be
collected directly by the party against whom the Insured Claim is asserted, be
deemed to designate, without need of further documentation, Educational as the
agent and attorney-in-fact to assert and to collect any related Insurance
Proceeds under such Company Policy, and shall further be deemed to assign,
without need of further documentation, to Educational any and all rights of an
insured party under such Company Policy with respect to such asserted claim,
specifically including rights of indemnity and the right to be defended by or at
the expense of the insurer and the right to any applicable Insurance Proceeds
thereunder; provided, however, that nothing in this Section 7.02 shall be deemed
to constitute (or to reflect) an assignment of the Company Policies, or any of
them, to Educational; provided further, however, that, with respect to those
Company Policies set forth on Schedule 7.01(a) hereto for which Educational has
payment obligations as reflected on such Schedule, Educational and its
Subsidiaries shall only have the rights set forth under this Section 7.02 with
respect to such Company Policies if such payment obligations have been satisfied
by Educational at the relevant time as contemplated by Schedule 7.01(a).
SECTION 7.03. Administration; Other Matters. (a) Administration. Except
as otherwise provided in Section 7.02 hereof, from and after the Distribution
Time, Destinations shall be responsible for (i) Insurance Administration of the
Company Policies and (ii) Claims Administration under such Company Policies with
respect to the Destinations Liabilities, the Retained Liabilities and the
Educational Liabilities; provided that the retention of such responsibilities by
Destinations is in no way intended to limit, inhibit or preclude any right to
insurance coverage for any Insured Claim of a named insured under such Policies
as contemplated by the terms of this Agreement; and provided further that
Destinations' retention of the administrative responsibilities for the Company
Policies shall not relieve the party submitting any Insured Claim of the primary
responsibility for reporting such Insured Claim accurately, completely and in a
timely manner (it being understood that Educational shall report Insured Claims
to the relevant carrier through Destinations) or of such party's authority to
settle (within the periods specified in Schedule 7.01(a) in the cases of the
Company Policies numbered 1, 3 and 4 on Schedule 7.01(a)) any such Insured
Claim. Destinations may discharge its administrative responsibilities under this
Section 7.03 by contracting for the provision of services by independent
parties. Except as contemplated by Schedule 7.01(a) hereto or this Agreement,
each of the parties hereto shall administer and pay any costs relating to
defending its respective Insured Claims under Company Policies to the extent
such defense costs are not covered under such Policies and shall be responsible
for obtaining or reviewing the appropriateness of releases upon settlement of
its respective Insured Claims under Company Policies. The disbursements,
out-of-pocket expenses and direct and indirect costs of employees or agents of
Destinations relating to Claims Administration and Insurance Administration
contemplated by this Section 7.03(a) shall be the responsibility of
Destinations.
(b) Access to Specified Policies. Where Liabilities are specifically
covered under the Company Policies set forth on Schedule 7.01(a) hereto numbered
20, 21 and 22 for periods prior to the Distribution Time, or under any such
Company Policy covering claims made after the Distribution Time with respect to
an occurrence prior to the Distribution Time, then from and after the
Distribution Time, Educational may claim coverage for Insured Claims under such
Company Policy as and to the extent that such insurance is available up to the
full extent of the applicable limits of liability of such Company Policy (and
may receive any Insurance Proceeds with respect thereto as contemplated by
Section 7.02 or Section 7.03(d) hereof).
(c) Liability Limitation. Except as specifically contemplated by lettered
items under Schedule 7.01(a) or as specifically provided in this Agreement or
any Ancillary Agreement, Educational, the Company and Destinations shall not be
liable to one another for claims not reimbursed by insurers for any reason not
within the control of Educational, the Company or Destinations, as the case may
be, including, without limitation, coinsurance provisions, deductibles, quota
share deductibles, exhaustion of aggregates, self-
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insured retentions, bankruptcy or insolvency of an insurance carrier, Company
Policy limitations or restrictions, any coverage disputes, any failure to timely
claim by Educational, the Company or Destinations or any defect in such claim or
its processing.
(d) Allocation of Insurance Proceeds. Except as otherwise provided in
Section 7.02, Insurance Proceeds received with respect to claims, costs and
expenses under the Company Policies shall be paid to Destinations in trust, and
Destinations shall thereafter administer the Company Policies by paying the
Insurance Proceeds, as appropriate, to Educational in accordance with this
Article VII. Payment of the allocable portions of indemnity costs of Insurance
Proceeds resulting from such Policies will be made by Destinations to the
appropriate party upon receipt from the insurance carrier. In the event that the
aggregate limits on any Company Policies are exceeded by the aggregate of
outstanding Insured Claims by the parties hereto, the parties shall agree on an
equitable allocation of Insurance Proceeds based upon their respective bona fide
claims (it being understood that the foregoing shall have no effect on the
obligation of any party under Article V or any Ancillary Agreement). The parties
agree to use commercially reasonable efforts to maximize available coverage
under those Company Policies applicable to it, and to take all commercially
reasonable steps to recover from all other responsible parties in respect of an
Insured Claim to the extent coverage limits under a Company Policy have been
exceeded or would be exceeded as a result of such Insured Claim.
SECTION 7.04. Agreement for Waiver of Conflict and Shared Defense. In the
event that Insured Claims of Educational, Destinations and/or the Company exist
relating to the same occurrence, the parties shall jointly defend and, to the
extent it is reasonable to do so, waive any conflict of interest necessary to
the conduct of the joint defense. Nothing in this Section 7.04 shall be
construed to limit or otherwise alter in any way the obligations of the parties
to this Agreement, including those created by this Agreement, by operation of
law or otherwise.
SECTION 7.05. Cooperation. The parties agree to use commercially
reasonable efforts to cooperate with respect to the various insurance matters
contemplated by this Agreement (including, without limitation, in connection
with Policies where Destinations, the Company or Educational is a named or named
additional insured party).
SECTION 7.06. Directors and Officers Liability Insurance. Destinations
agrees that, from and after the Distribution Time to the seventh anniversary of
the Distribution Date, it will maintain in full force and effect at its expense
the Company Policies numbered 20 and 21 on Schedule 7.01(a) hereto (or, through
the purchase of extended discovery, the full benefits and coverage of such
Company Policy) and shall not amend the terms of such Policy in a manner adverse
to any persons covered by such insurance. The provisions of this Section 7.06
are intended for the benefit of, and shall be enforceable by, each of the
persons covered by the Company Policies numbered 20 and 21 on Schedule 7.01(a)
hereto.
ARTICLE VIII
CONDITIONS
SECTION 8.01. Conditions to Obligations of the Company. The obligation of
the Company to consummate the Distribution hereunder shall be subject to the
satisfaction or waiver of each of the following conditions:
(a) All of the transactions contemplated by Article II hereof to occur
prior to the Distribution Time shall have been consummated.
(b) The Educational Common Shares and the associated Rights to be
issued in the Distribution shall have been approved for listing on the
NYSE, subject only to official notice of issuance.
(c) All filings required to be made prior to the Distribution Time
with, and all consents, approvals and authorizations required to be
obtained prior to the Distribution Time from, any government or any court,
arbitral tribunal, administrative agency or commission or other regulatory
authority, agency or commission, governmental or otherwise, in connection
with the consummation of the Distribution and
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<PAGE> 103
any other transaction contemplated hereby shall have been made or obtained,
except where the failure to make or obtain the same would not, individually
or in the aggregate, have a material adverse effect on the business,
properties, results of operations or financial condition of the Company,
Educational or any of their respective Subsidiaries, or on the ability of
any thereof to consummate the transactions contemplated hereby, or to
perform its obligations under this Agreement or any of the Ancillary
Agreements to which it is or will be a party.
(d) Each of the Ancillary Agreements shall have been executed and
delivered by each of the parties thereto and shall be in full force and
effect in accordance with its terms.
(e) The Information Statement shall have been or shall be
simultaneously mailed to holders of Company Common Stock in accordance with
the rules, regulations and policies of the SEC.
(f) No statute, rule or regulation or temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition shall be in
effect that prohibits consummation of the Distribution.
(g) All conditions to the Destinations Distribution shall have been
satisfied or waived by the Company and the Destinations Distribution shall
have been, or simultaneously with the Distribution shall be, consummated.
(h) The Company shall have received from Cravath, Swaine & Moore,
counsel to the Company, an opinion in form and substance reasonably
satisfactory to the Company, stating that the Distribution and the
Destinations Distribution will qualify as tax-free spin-offs under Section
355 of the Code and that an acquisition of the Company, Educational or
Destinations after the Distribution and the Destinations Distribution by
Hilton Hotels Corporation should not adversely affect the tax-free status
of the Distribution and the Destinations Distribution. In rendering such
opinion, such counsel shall be entitled to rely upon representations
provided by the Company contained in a certain representation letter.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Modification or Amendment. Subject to the terms of Section
9.02 hereof, this Agreement may not be modified or amended except by an
agreement in writing signed by the parties.
SECTION 9.02. Termination. This Agreement (including Article V) may be
terminated and the Distribution may be amended, modified or abandoned at any
time prior to the consummation of the Destinations Distribution by and in the
sole discretion of the Company without the approval of Educational or any other
Person. In the event of such termination, no party hereto shall have any
liability of any kind to the other party. After the consummation of the
Destination Distribution, this Agreement may not be terminated except by an
agreement in writing signed by each of the parties; provided, however, that, if
such termination is after the Distribution Time, Article V shall not be
terminated or amended after the Distribution Time in respect of the third party
beneficiaries thereto without the consent of such persons.
SECTION 9.03. Waiver; Remedies. No delay on the part of the Company,
Destinations or Educational in exercising any right, power or privilege
hereunder will operate as a waiver thereof, nor will any waiver on the part of
the Company, Destinations or Educational of any right, power or privilege
hereunder operate as a waiver of any other right, power or privilege hereunder,
nor will any single or partial exercise of any right, power or privilege
hereunder preclude any other or further exercise thereof or the exercise of any
other right, power or privilege hereunder. Unless otherwise provided, the rights
and remedies herein provided are cumulative and are not exclusive of any rights
or remedies which the parties may otherwise have at law or in equity.
SECTION 9.04. Counterparts. For the convenience of the parties, this
Agreement may be executed in any number of separate counterparts, each such
counterpart being deemed to be an original instrument, and all such counterparts
shall together constitute the same agreement.
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SECTION 9.05. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK
APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE,
WITHOUT REGARD TO THE CONFLICTS OF LAW PRINCIPLES OF SUCH STATE.
SECTION 9.06. Notices. Any notice, request, instruction or other
communication to be given hereunder by any party to another shall be in writing
and shall be deemed to have been duly given (i) on the date of delivery if
delivered personally, or by telefacsimile, upon confirmation of receipt, (ii) on
the first business day following the date of dispatch if delivered by Federal
Express or other nationally reputable next-day courier service, or (iii) on the
third business day following the date of mailing if delivered by registered or
certified mail, return receipt requested, postage prepaid. All notices hereunder
shall be delivered as set forth below, or pursuant to such other instructions as
may be designated in writing by the party to receive such notice.
(a) If to Educational:
ITT Educational Services, Inc.
5975 Castle Creek Parkway, North Drive
P.O. Box 50466
Indianapolis, IN 46250-0466
Attention: General Counsel
Telefacsimile: (317) 594-4301
with copies to:
Baker & Daniels
300 N. Meridian Street
Suite 2700
Indianapolis, IN 46204
Attention: James A. Aschleman, Esq.
Telefacsimile: (317) 237-1000
(b) if to the Company:
ITT World Directories, Inc.
1330 Avenue of the Americas
New York, New York 10019-5490
Attention: Victor M. Berger, Esq.
Telefacsimile: (212) 258-5038
with copies to:
Wilmer, Cutler & Pickering
2445 M Street, N.W.
Washington, D.C. 20037
Attention: Eric R. Markus, Esq.
Telefacsimile: (202) 663-6363
(c) if to Destinations:
ITT Destinations, Inc.
1330 Avenue of the Americas
New York, NY 10019-5400
Attention: Richard S. Ward, Esq.
Telefacsimile: (212) 258-1463
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<PAGE> 105
with copies to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019
Attention: George W. Bilicic, Jr., Esq.
Telefacsimile: (212) 474-3700
SECTION 9.07. Entire Agreement. This Agreement and the Ancillary
Agreements and, as between the Company and Destinations, the Destinations
Distribution Agreement (including Exhibits, Annexes and Schedules hereto and
thereto) constitute the entire agreement, and supersede all other prior
agreements, understandings, representations and warranties, both written and
oral, among the parties, with respect to the subject matter hereof and thereof.
SECTION 9.08. Certain Obligations. Whenever any Ancillary Agreement
requires any of the Subsidiaries of any party to take any action, this Agreement
will be deemed to include an undertaking on the part of such party to cause such
Subsidiary to take such action.
SECTION 9.09. Assignment. This Agreement shall be assignable in whole in
connection with a merger or consolidation or the sale of all or substantially
all the Assets of a party hereto so long as the resulting, surviving or
transferee entity assumes all the obligations of the relevant party hereto by
operation of law or pursuant to an agreement in form and substance reasonably
satisfactory to the other party. Otherwise, this Agreement shall not be
assignable, in whole or in part, directly or indirectly, by any party hereto
without the prior written consent of the other party, and any attempt to assign
any rights or obligations arising under this Agreement without such consent
shall be void.
SECTION 9.10. Captions. The Article, Section and paragraph captions
herein are for convenience of reference only, do not constitute part of this
Agreement and shall not be deemed to limit or otherwise affect any of the
provisions hereof.
SECTION 9.11. Specific Performance. In the event of any actual or
threatened default in, or breach of, any of the terms, conditions and provisions
of this Agreement or any of the Ancillary Agreements, the party or parties who
are or are to be thereby aggrieved shall have the right of specific performance
and injunctive relief giving effect to its or their rights under such agreement,
in addition to any and all other rights and remedies at law or in equity, and
all such rights and remedies shall be cumulative. The parties agree that the
remedies at law for any breach or threatened breach, including monetary damages,
are inadequate compensation for any loss and that any defense in any action for
specific performance that a remedy at law would be adequate is waived.
SECTION 9.12. Severability. If any provision of this Agreement or any of
the Ancillary Agreements or the application thereof to any person or
circumstance is determined by a court of competent jurisdiction to be invalid,
void or unenforceable, the remaining provisions thereof, or the application of
such provision to persons or circumstances other than those as to which it has
been held invalid or unenforceable, shall remain in full force and effect and
shall in no way be affected, impaired or invalidated thereby, so long as the
economic or legal substance of the transactions contemplated thereby is not
affected in any manner adverse to any party. Upon any such determination, the
parties shall negotiate in good faith in an effort to agree upon a suitable and
equitable substitute provision to effect the original intent of the parties.
SECTION 9.13. Third Party Beneficiaries. Except as provided in Article V
relating to Indemnitees, this Agreement is solely for the benefit of the parties
hereto and their respective Subsidiaries and Affiliates and should not be deemed
to confer upon third parties any remedy, claim, liability, reimbursement, claim
of action or other right in excess of those existing without reference to this
Agreement.
SECTION 9.14. Fees and Expenses of Enforcement. A party in breach of this
Agreement shall, on demand, indemnify and hold harmless the other party hereto
for and against all reasonable out-of-pocket expenses, including, without
limitation, legal fees and expenses, incurred by such other party by reason of
the
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<PAGE> 106
enforcement and protection of its rights under this Agreement. The payment of
such expenses is in addition to any other relief to which such other party may
be entitled hereunder or otherwise.
SECTION 9.15. Expenses. Except as otherwise set forth in this Agreement,
any Ancillary Agreement or in the Destinations Distribution Agreement, all costs
and expenses incurred on or prior to the Distribution Time (whether or not paid
on or prior to the Distribution Time) in connection with the preparation,
execution, delivery and implementation of this Agreement and any Ancillary
Agreement, the Information Statement and the Distribution and the consummation
of the transactions contemplated thereby shall be charged to and paid by the
party incurring such expense. Except as otherwise set forth in this Agreement or
any Ancillary Agreement, each party shall bear its own costs and expenses
incurred after the Distribution Time.
SECTION 9.16. Exhibits and Schedules. The Exhibits and Schedules to this
Agreement shall be construed with and as an integral part of this Agreement to
the same extent as if the same had been set forth verbatim herein.
SECTION 9.17. Consent to Jurisdiction. Each of the parties irrevocably
submits to the exclusive jurisdiction of (a) the Supreme Court of the State of
New York, New York County and (b) the United States District Court for the
Southern District of New York, for the purposes of any suit, action or other
proceeding arising out of this Agreement or any transaction contemplated hereby.
Each of the parties agrees to commence any action, suit or proceeding relating
hereto either in the United States District Court for the Southern District of
New York or if such suit, action or other proceeding may not be brought in such
court for jurisdictional reasons, in the Supreme Court of the State of New York,
New York County. Each of the parties further agrees that service of any process,
summons, notice or document by U.S. registered mail to such party's respective
address set forth above shall be effective service of process for any action,
suit or proceeding in New York with respect to any matters to which it has
submitted to jurisdiction in this Section 9.17. Each of the parties irrevocably
and unconditionally waives any objection to the laying of venue of any action,
suit or proceeding arising out of this Agreement or the transactions
contemplated hereby in (i) the Supreme Court of the State of New York, New York
County or (ii) the United States District Court for the Southern District of New
York, and hereby further irrevocably and unconditionally waives and agrees not
to plead or claim in any such court that any such action, suit or proceeding
brought in any such court has been brought in an inconvenient forum.
SECTION 9.18. Ancillary Agreements. This Agreement is not intended to
address, and should not be interpreted to address, the matters specifically and
expressly covered by the Ancillary Agreements.
SECTION 9.19. Survival of Agreements. Except as otherwise contemplated by
this Agreement, all covenants and agreements of the parties contained in this
Agreement shall survive the Distribution Time.
SECTION 9.20. Successors and Assigns. The provisions of this Agreement
shall be binding upon, inure to the benefit of and be enforceable by the parties
and their respective permitted successors and permitted assigns.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the day and year first above written.
ITT CORPORATION,
by
------------------------------------
Name: Robert A. Bowman
Title: President and Chief
Operating Officer
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<PAGE> 107
ITT EDUCATIONAL SERVICES, INC.,
by
------------------------------------
Name: Rene R. Champagne
Title: President, Chairman and
Chief Executive Officer
ITT DESTINATIONS, INC.,
by
------------------------------------
Name: Richard S. Ward
Title: Executive Vice President
and General Counsel
21
<PAGE> 1
EXHIBIT 10.8
DIRECTOR'S INDEMNIFICATION AGREEMENT
THIS AGREEMENT is made as of between ITT Destinations,
Inc., a Nevada corporation (the "Corporation"), and (the
"Indemnitee").
WITNESSETH THAT:
WHEREAS, it is in the Corporation's best interest to attract and retain
capable directors;
WHEREAS, both the Corporation and the Indemnitee recognize the increased
risk of litigation and other claims being asserted against directors of public
corporations in today's environment;
WHEREAS, it is the policy of the Corporation, as it was the policy of its
predecessor, ITT Corporation, a Nevada corporation ("ITT"), to indemnify the
members of its Board of Directors so as to provide them with the maximum
possible protection available in accordance with applicable law;
WHEREAS, Article IV of the Corporation's Amended and Restated Bylaws
expressly recognizes that the right of indemnification provided therein shall
not be exclusive of any other rights to which any indemnified person may
otherwise be entitled; and
WHEREAS, the Corporation's Amended and Restated Bylaws, its Restated
Articles of Incorporation and applicable law permit contracts between the
Corporation and the members of its Board of Directors covering indemnification;
NOW, THEREFORE, the parties hereto agree as follows:
1. Indemnity. In consideration of the Indemnitee's agreement to
serve or continue to serve as a Director of the Corporation, or, at the
request of the Corporation, as a director, officer, employee, fiduciary or
agent of another corporation, partnership, joint venture, trust or other
enterprise (including, without limitation, any employee benefit plan)
("Designated Director"), for so long as he or she is duly elected and
continues to serve in accordance with the Corporation's Amended and
Restated Bylaws, the Corporation hereby agrees to hold the Indemnitee
harmless and to indemnify the Indemnitee to the fullest extent permitted by
applicable law from and against any and all expenses, liabilities or losses
asserted against or incurred by the Indemnitee in his or her capacity as a
Director of the Corporation or a Designated Director or arising out of his
or her status in either such capacity.
2. Maintenance of Insurance. (a) Subject only to the provisions of
Section 2(b) hereof, the Corporation hereby agrees that, so long as the
Indemnitee shall continue to serve as a Director of the Corporation, and
thereafter so long as the Indemnitee shall be subject to any possible claim
or threatened, pending or completed action, suit or proceeding, whether
civil, criminal or investigative (including an action by or in the right of
the Corporation), by reason of the fact that the Indemnitee was a Director
of the Corporation, the Corporation will provide insurance coverage
comparable to that provided under ITT's Directors' and Officers' Liability
Insurance policies (the "insurance policies") in effect January 1, 1995.
(b) However, the Corporation shall not be required to maintain all or
any of such insurance policies or comparable insurance coverage if, in the
business judgment of the Board of Directors of the Corporation, (i) the
premium cost for such insurance is substantially disproportionate to the
amount of coverage, or (ii) the coverage provided by such insurance is so
limited by exclusions that there is insufficient benefit from such
insurance or (iii) such insurance is otherwise not reasonably available.
3. Additional Indemnity. Subject only to the exclusions set forth in
Section 4 hereof, the Corporation hereby further agrees to hold harmless
and indemnify the Indemnitee:
(1) to the fullest extent provided under Article VII of the
Corporation's Amended and Restated Bylaws as in effect at the date
hereof; and
<PAGE> 2
(2) in the event the Corporation does not maintain in effect the
insurance coverage provided under Section 2 hereof, to the full extent
of the coverage which would otherwise have been provided for the benefit
of the Indemnitee pursuant to the insurance policies in effect at
January 1, 1995.
4. Limitations on Additional Indemnity. No indemnity pursuant to
Section 3 hereof shall be paid by the Corporation:
(1) except to the extent the aggregate of losses to be indemnified
thereunder exceed the amount of such losses for which the Indemnitee is
indemnified or insured pursuant to either Section 1 or 2 hereof;
(2) in respect of remuneration paid to, or indemnification of, the
Indemnitee, if it shall be determined by a final judgment or other final
adjudication that such remuneration or indemnification was or is
prohibited by applicable law;
(3) for any transaction from which the Indemnitee derived an
improper personal benefit;
(4) for any breach of the Indemnitee's duty to act in good faith
and in a manner he or she reasonably believed to be in or not opposed to
the best interest of the Corporation; or
(5) in respect of acts or omissions which involve intentional
misconduct or a knowing violation of law by the Indemnitee.
5. Continuation of Indemnity. All agreements and obligations of the
Corporation contained herein shall continue during the period the
Indemnitee is a Director of the Corporation and shall continue thereafter
so long as the Indemnitee shall be subject to any possible claim or
threatened, pending or completed action, suit or proceeding, whether civil,
criminal or investigative (including an action by or in the right of the
Corporation), by reason of the fact that the Indemnitee was a Director of
the Corporation or a Designated Director.
6. Notification and Defense of Claim. Promptly after receipt by the
Indemnitee of notice of the commencement of any action, suit or proceeding,
the Indemnitee shall, if a claim in respect thereof is to be made against
the Corporation under this Agreement, notify the Corporation of the
commencement thereof; but an omission so to notify the Corporation will not
relieve it from any liability which it may have to the Indemnitee otherwise
than under this Agreement, including, without limitation, its liability
under the Corporation's Restated Articles of Incorporation and Amended and
Restated Bylaws. With respect to any such action, suit or proceeding:
(1) the Corporation shall be entitled to participate therein at its
own expense;
(2) except as otherwise provided below, to the extent that it may
wish, the Corporation jointly with any other indemnifying party shall be
entitled to assume the defense thereof, with counsel satisfactory to the
Indemnitee. After notice from the Corporation to the Indemnitee of its
election so to assume the defense thereof, the Corporation will not be
liable to the Indemnitee under this Agreement for any legal or other
expenses subsequently incurred by the Indemnitee in connection with the
defense thereof other than reasonable costs of investigation or as
otherwise provided below. The Indemnitee shall have the right to employ
its counsel in such action, suit or proceeding but the fees and expenses
of such counsel incurred after notice from the Corporation of its
assumption of the defense thereof shall be at the expense of the
Indemnitee unless (i) the employment of counsel by the Indemnitee has
been authorized by the Corporation, (ii) the Indemnitee shall have
reasonably concluded that there may be a conflict of interest between
the Corporation and the Indemnitee in the conduct of the defense of such
action, or (iii) the Corporation shall not in fact have employed counsel
to assume the defense of such action, in each of which cases the fees
and expenses of counsel shall be at the expense of the Corporation. The
Corporation shall not be entitled to assume the defense of any action,
suit or proceeding brought by or on behalf of the Corporation or as to
which the Indemnitee shall have made the conclusion provided for in (ii)
above; and
2
<PAGE> 3
(3) the Corporation shall not be liable to indemnify the Indemnitee
under this Agreement for any amounts paid in settlement of any action or
claim effected without its written consent. The Corporation shall not
settle any action or claim in any manner that would impose any penalty
or limitation on the Indemnitee without the Indemnitee's written
consent. Neither the Corporation nor the Indemnitee will unreasonably
withhold their consent to any proposed settlement.
7. Advancement and Repayment of Expenses. Expenses incurred in
connection with any action, suit or proceeding involving the Indemnitee and
in respect of which a claim is made against the Corporation under this
Agreement shall be paid promptly by the Corporation in advance of the final
disposition of such action, suit or proceeding. The Indemnitee agrees that
the Indemnitee will reimburse the Corporation for all reasonable expenses
advanced, paid or incurred by the Corporation on behalf of the Indemnitee
in respect of a claim against the Corporation under this Agreement in the
event and only to the extent that it shall be ultimately determined that
the Indemnitee is not entitled to be Indemnified by the Corporation for
such expenses under the provisions of Chapter 78 of the Nevada Revised
Statutes, the Corporation's Restated Articles of Incorporation, the
Corporation's Amended and Restated Bylaws, this Agreement or otherwise.
8. Enforcement. If a claim under this Agreement is not paid in full
by the Corporation within ninety days after a written claim has been
received by the Corporation, the Indemnitee may at any time thereafter
bring suit against the Corporation to recover the unpaid amount of the
claim and, if successful in whole or in part, the Indemnitee shall also be
entitled to be reimbursed for all expenses actually and reasonably incurred
by the Indemnitee in connection with the prosecution of such claim.
9. Severability. If any provision of this Agreement shall be held to
be or shall, in fact, be invalid, inoperative or unenforceable as applied
to any particular case or in any particular jurisdiction, for any reason,
such circumstances shall not have the effect of rendering the provision in
question invalid, inoperative or unenforceable in any other distinguishable
case or jurisdiction, or of rendering any other provision or provisions
herein contained invalid, inoperative or unenforceable to any extent
whatsoever. The invalidity, inoperability or unenforceability of any one or
more phrases, sentences, clauses or Sections contained in this Agreement
shall not affect any other remaining part of this Agreement.
10. Governing Law; Binding Effect; Amendment or Termination.
(a) This Agreement shall be governed by and interpreted in
accordance with the laws of the State of Nevada.
(b) This Agreement shall be binding upon the Indemnitee and upon the
Corporation and its successors and assigns, and shall inure to the benefit
of the Indemnitee and his or her heirs, personal representatives, executors
and administrators, and to the benefit of the Corporation and its
successors and assigns.
(c) No amendment, modification, termination or cancellation of this
Agreement shall be effective unless in writing signed by both parties
hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
ITT DESTINATIONS, INC.
By
--------------------------------------
Executive Vice President
and General Counsel
--------------------------------------
Indemnitee
3
<PAGE> 1
EXHIBIT 10.10
ITT CORPORATION
SENIOR EXECUTIVE SEVERANCE PAY PLAN
1. PURPOSE
The purpose of this ITT Senior Executive Severance Pay Plan ("Plan") is to
assist in occupational transition by, providing severance pay, for employees
covered by this Plan whose employment is terminated under conditions set forth
in this Plan.
2. COVERED EMPLOYEES
Covered employees under this Plan ("Executives") are full-time, regular
salaried employees of ITT Corporation ("ITT" or the "Company") and of any ITT
subsidiary company ("ITT Subsidiary") (collectively or individually as the
context requires "Company") who are United States citizens, or who are employed
in the United States, in salary, grade 26 and above at any time within the two
year period immediately preceding the date the Company selects as the
Executive's last day of active employment ("Effective Date") and such other
employees of the Company or any ITT Subsidiary who shall be designated as
covered employees hereunder by the Compensation and Personnel Committee (the
"Compensation Committee") of the Company's Board of Directors (the "Board").
Change in Control Rule. Following a "change in control of the Company",
(which, for purposes of this Plan, shall have the same meaning as an
"Acceleration Event" under Section 9 of the Company's 1995 Incentive Stock Plan
as in effect on February 11, 1997) (as used herein, the occurrence of an
Acceleration Event shall be referred to as a "Change in Control"), special rules
provided herein shall apply to those Executives designated by the Compensation
Committee whose names are designated on Schedule A or B hereto ("Special
Severance Executives"). Notwithstanding the preceding sentence, any spin-off of
all or a portion of the assets or operations of the Company or any subsidiary
which has been approved by a majority of the directors serving on the Board as
of the date hereof, or by directors approved by the vote of two-thirds of the
directors then still in office who were directors as of the date hereof, shall
not be deemed a "Change in Control".
3. SEVERANCE PAY UPON TERMINATION OF EMPLOYMENT
If the Company terminates an Executive's employment, the Executive shall be
provided severance pay in accordance with the terms of this Plan except where
the Executive:
- is terminated for cause,
- accepts employment or refuses comparable employment with a purchaser as
provided in Section 8, "Divestiture",
- is terminated with an Effective Date on or after the Executive's Normal
Retirement Date as defined herein, or
- terminates employment with the Company prior to the Effective Date.
No severance pay will be provided under this Plan where the Executive
terminates employment by:
- voluntarily resigning,
- voluntarily retiring, or
- failing to return from an approved leave of absence (including a medical
leave of absence).
No severance pay will be provided under this Plan upon any termination of
employment as a result of the Executive's death or disability.
<PAGE> 2
"Normal Retirement Date" shall mean the first of the month which coincides
with or follows the Executive's 65th birthday.
Change in Control Rule. The foregoing provisions of this Section 3 shall
not apply to Special Severance Executives following a Change in Control. In lieu
thereof, if, within two years following the occurrence of a Change in Control, a
Special Severance Executive is terminated by the Company other than for Cause,
death or Incapacity or the Special Severance Executive terminates for Good
Reason, he shall receive the benefits set forth in Schedule A or B, as
applicable. Following a Change in Control, "Cause", "Disability" and "Good
Reason" shall have the respective meanings set forth on Schedule D hereto.
4. SCHEDULE OF SEVERANCE PAY
Severance pay will be provided in accordance with the following Schedule of
Severance Pay which sets forth the months of Base Pay which is provided to an
Executive based upon the Executive's Years of Service as of the Effective Date.
<TABLE>
<CAPTION>
YEARS OF SERVICE MONTHS OF BASE PAY
------------------------------------------------------------ ------------------
<S> <C>
Less than 4................................................ 12
4.............................................. 13
5.............................................. 14
6.............................................. 15
7.............................................. 16
8.............................................. 17
9.............................................. 18
10............................................... 19
11............................................... 20
12............................................... 21
13............................................... 22
14............................................... 23
15 or more....................................... 24
</TABLE>
"Base Pay" shall mean the annual base salary rate payable to the Executive
at the Effective Date divided by twelve (12) months. Such annual base salary
rate shall in no event be less than the highest annual base salary rate paid to
the Executive at any time during the twenty-four month (24) period immediately
preceding the Effective Date.
"Years of Service" shall mean the total number of completed years of
employment since the Executive's ITT system service date to the Effective Date,
rounded to the nearest whole year. The ITT system service date is the date from
which employment in the ITT system is recognized for purposes of determining
eligibility for vesting under the applicable Company retirement plan covering
the Executive on the Effective Date.
Notwithstanding the above Schedule of Severance Pay, (i) in no event shall
months of Base Pay provided to an Executive exceed the number of months
remaining between the Effective Date and the Executive's Normal Retirement Date
or (ii) shall severance pay exceed the equivalent of twice the Executive's total
annual compensation during the year immediately preceding the Effective Date.
Change in Control Rule. The foregoing provisions of this Section 4 shall
not apply to Special Severance Executives following a Change in Control. In lieu
thereof, severance pay will be provided in accordance with Schedule A or B, as
applicable.
5. FORM OF PAYMENT OF SEVERANCE PAY
Severance pay shall be paid in the form of periodic payments according to
the regular payroll schedule ("Salary Continuation"), provided that ITT reserves
the right at any time to pay the remaining severance pay in the form of a
discounted lump sum.
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<PAGE> 3
Any discounted lump sum paid under this Plan shall be equal to the present
value of the remaining periodic payments of severance pay as determined by ITT
using an interest rate equal to the prime rate at Citibank in effect on the date
ITT notifies the Executive that it is exercising its right to pay severance in
the discounted lump sum.
Salary Continuation will commence or the discounted lump sum will be paid
on the next day following the Effective Date except that where ITT exercises its
right to pay the discounted lump sum after the commencement of Salary
Continuation, it will be paid promptly after ITT exercises such right.
In the event of an Executive's death during the period the Executive is
receiving Salary Continuation, the amount of severance pay remaining shall be
paid in a discounted lump sum to the Executive's spouse or to such other
beneficiary, or beneficiaries designated by the Executive in writing, or, if the
Executive is not married and failing such designation, to the estate of the
Executive.
If an Executive is receiving Salary Continuation, the Executive must
continue to be available to render to the Company reasonable assistance,
consistent with the level of the Executive's prior position with the Company, at
times and locations that are mutually acceptable. In requesting such services,
the Company will take into account any other commitments which the Executive may
have. After the Effective Date and normal wind up of the Executive's former
duties, the Executive will not be required to perform any regular services for
the Company. In the event the Executive secures other employment during the
period the Executive is receiving Salary Continuation, the Executive must
promptly notify the Company.
Salary Continuation will cease if an Executive is rehired by the Company.
Change in Control Rule. The foregoing provisions of this Section 5 shall
not apply to Special Severance Executives following a Change in Control. In lieu
thereof, severance pay will be provided in accordance with Schedule A or B, as
applicable.
6. BENEFITS DURING SEVERANCE PAY
As long as an Executive is receiving Salary Continuation, except as
provided in this Section, the Executive will continue to be eligible for
participation in Company employee benefit plans, including without limitation,
any nonqualified excess or supplemental benefit plans, in accordance with the
provisions of such plans as in effect on the Effective date. An Executive will
not be eligible to participate in any Company short-term or long-term disability
plans, the Company business travel accident plan or any new employee benefit
plan or any improvement to any existing employee benefit plan adopted by the
Company after the Effective Date.
Change in Control Rule. Except as provided in the last sentence of this
paragraph, the foregoing provisions of this Section 6 shall not apply to Special
Severance Executives following a Change in Control. In lieu thereof, benefits
will be provided in accordance with Schedule A or B, as applicable.
Notwithstanding the foregoing, any rights that a Special Severance Executive has
under any Company employee benefit plan to receive health or life insurance
coverage following termination of employment shall continue in effect and not be
affected hereby.
7. EXCLUDED EXECUTIVE COMPENSATION PLANS, PROGRAMS, ARRANGEMENTS, AND
PERQUISITES
During the period an Executive is receiving Salary Continuation, the
Executive will not be eligible to accrue any vacation or participate in any (i)
bonus program, (ii) special termination programs, (iii) tax or financial
advisory services, (iv) new awards under any stock option or stock related plans
for executives (provided that the Executive will be eligible to exercise any
outstanding stock options in accordance with the terms of any applicable stock
option plan), (v) new or revised executive compensation programs that may be
introduced after the Effective Date and (vi) any other executive compensation
program, plan, arrangement, practice, policy or perquisites unless specifically
authorized by ITT in writing. The period during which an Executive is receiving
Salary Continuation does not count as service for the purpose of any ITT long
term incentive award program including, but not limited to, the ITT Restricted
Stock Award Plan (1984) and any similar plan, and the ITT Long-Term Performance
Plan and any similar plan.
3
<PAGE> 4
Change in Control Rule. The foregoing provisions of this Section 7 shall
not apply to Special Severance Executives following a Change in Control. In lieu
thereof, executive compensation plans, programs, arrangements and perquisites
shall be provided in accordance with Schedule A or B, as applicable.
8. DIVESTITURE
If an ITT Subsidiary or division of ITT or a portion thereof at which an
Executive is employed is sold or divested and if (i) the Executive accepts
employment or continued employment with the purchaser or (ii) refuses employment
or continued employment with the purchaser on terms and conditions substantially
comparable to those in effect immediately preceding the sale or divestiture, the
Executive shall not be provided severance pay under this Plan. The provisions of
this Section 8 apply to divestitures accomplished through sales of assets or
through sales of corporate entities.
Change in Control Rule. The foregoing provisions of this Section 8 shall
not apply to Special Severance Executives following a Change in Control.
9. DISQUALIFYING CONDUCT
If during the period an Executive is receiving Salary Continuation, the
Executive, (i) engages in any activity which is inimical to the best interests
of the Company; (ii) disparages the Company; (iii) fails to comply with any
Company Covenant Against Disclosure and Assignment of Rights to Intellectual
Property; (iv) without ITT's prior consent, induces any employees of the Company
to leave their Company employment; (v) without ITT's prior consent, engages in,
becomes affiliated with, or becomes employed by any business competitive with
the Company; or (vi) fails to comply with applicable provisions of the ITT Code
of Conduct or applicable ITT Corporate Policies or any applicable ITT Subsidiary
Code or policies, then the Company will have no further obligation to provide
severance pay.
Change in Control Rule. The foregoing provisions of this Section 9 shall
not apply to Special Severance Executives following a Change in Control. The
only basis upon which the compensation and benefits shall not be provided to a
Special Severance Executive involuntarily terminated by the Company following a
Change in Control of the Company is upon an involuntary termination of
employment for Cause as defined in Schedule C hereto.
10. RELEASE
No severance pay will be provided under this Plan unless the Executive
executes and delivers to ITT a release, satisfactory to ITT, in which the
Executive discharges and releases the Company and the Company's directors,
officers, employees and employee benefit plans from all claims (other than for
benefits to which Executive is entitled under any Company employee benefit plan)
arising out of Executive's employment or termination of employment.
Change in Control Rule. The foregoing provisions of this Section 10 shall
not apply to Special Severance Executives following a Change in Control.
11. ADMINISTRATION OF PLAN
This Plan shall be administered by ITT, who shall have the exclusive right
to interpret this Plan, adopt any rules and regulations for carrying out this
Plan as may be appropriate and decide any and all matters arising under this
Plan, including but not limited to the right to determine appeals. Subject to
applicable Federal and state law, all interpretations and decisions by ITT shall
be final, conclusive and binding on all parties affected thereby.
Change in Control Rule. Following a Change in Control, if there is any
dispute between a Special Severance Executive and the Company as to the
validity, enforceability and/or interpretation of any right or benefit afforded
by this Plan, at the Special Severance Executive's option, any other agreement
or policy notwithstanding, such dispute shall be resolved by binding arbitration
proceedings in accordance with the rules of the American Arbitration
Association. The arbitrators shall presume that the rights and/or benefits
4
<PAGE> 5
afforded by this Plan which are in dispute are valid and enforceable and that
the Special Severance Executive is entitled to such rights and/or benefits. The
Company shall be precluded from asserting that such rights and/or benefits are
not valid, binding and enforceable and shall stipulate before such arbitrators
that the Company is bound by all the provisions of this Plan. The burden of
overcoming by clear and convincing evidence the presumption that the Special
Severance Executive is entitled to such rights and/or benefits shall be on the
Company. The results of any arbitration shall be conclusive on both parties and
shall not be subject to judicial interference or review on any ground
whatsoever, including without limitation any claim that the Company was
wrongfully induced to enter into this Plan to arbitrate such a dispute.
The Company shall pay the cost of any arbitration proceedings under this
Plan. The Special Severance Executive shall be entitled (within two business
days of requesting such advance) to an advance of the actual legal fees and
expenses incurred by the Special Severance Executive in connection with such
proceedings and the Special Severance Executive shall be obligated to reimburse
the Company for such fees and expenses in connection with such arbitration
proceedings only if it is finally and specifically determined by the arbitrators
that the Special Severance Executive's position in initiating the arbitration
was frivolous and completely without merit. The arbitrators shall have
discretion to award punitive damages to the Special Severance Executive if it is
found that the Company's actions or failures to act which led to the Special
Severance Executive submitting a dispute to arbitration and/or the Company's
actions or failures to act during the pendency of the arbitration proceeding
make such an award appropriate in the circumstances.
In the event the Special Severance Executive is required to defend in any
legal action or other proceeding the validity or enforceability of any right or
benefit afforded by this Plan, the Company will pay any and all actual legal
fees and expenses incurred by the Special Severance Executive regardless of the
outcome of such action and, if requested by the Special Severance Executive,
shall (within two business days of such request) advance such fees and expenses
to the Special Severance Executive. The Company shall be precluded from
asserting in any judicial or other proceeding commenced with respect to any
right or benefit afforded by this Plan that such rights and benefits are not
valid, binding and enforceable and shall stipulate in any such proceeding that
the Company is bound by all the provisions of this Plan.
12. TERMINATION OR AMENDMENT
ITT may terminate or amend this Plan ("Plan Change") at any time except
that no such Plan Change may reduce or adversely affect severance pay for any
Executive whose employment terminates within two years of the effective date of
such Plan Change provided that the Executive was a covered employee under this
Plan on the date of such Plan Change.
Change in Control Rule. Following a Change in Control, no Plan Change that
would adversely affect any Special Severance Executive may be made without the
prior written consent of such Special Severance Executive affected thereby.
13. OFFSET
Any severance pay provided to an Executive under this Plan shall be offset
by reducing such severance pay by any severance pay, salary continuation,
termination pay or similar pay or allowance which Executive receives or is
entitled to receive (i) under any other Company plan, policy, practice, program,
arrangement; (ii) pursuant to any employment agreement or other agreement with
the Company; (iii) by virtue of any law, custom or practice. Any severance pay
provided to Executive under this Plan shall also be offset by reducing such
severance pay by any severance pay, salary continuation pay, termination pay or
similar pay or allowance received by the Executive as a result of any prior
termination of employment with the Company.
Coordination of severance pay with any pay, or benefits provided by any
applicable ITT short-term or long-term disability plan shall be in accordance
with the provisions of those plans.
Change in Control Rule. Following a Change in Control, a Special Severance
Executive who becomes eligible for severance pay and benefits under this Plan
shall be entitled to receive the greater of (x) the severance pay and benefits
provided on Schedule A or B (as applicable) or (y) the severance pay and
benefits
5
<PAGE> 6
provided under any plans or arrangements otherwise afforded by the Company or
any ITT Subsidiary to such Special Severance Executive. Accordingly, if the
amount under clause (x) is greater than the amount under clause (y), the amount
payable under this Plan shall be reduced by any amount of severance pay and
benefits provided under such other plans or arrangements.
14. MISCELLANEOUS
Except as provided in this Plan, the Executive shall not be entitled to any
notice of termination or pay in lieu thereof.
In cases where severance pay is provided under this Plan, pay in lieu of
any unused current year vacation entitlement will be paid to the Executive in a
lump sum.
Benefits under this Plan are paid for entirely by the Company from its
general assets.
This Plan is not a contract of employment, does not guarantee the Executive
employment for any specified period and does not limit the right of the Company
to terminate the employment of the Executive at any time.
The section headings contained in this Plan are included solely for
convenience of reference and shall not in any way affect the meaning of any
provision of this Plan.
15. ADOPTION DATE AND AMENDMENTS
This Plan was originally adopted by ITT's predecessor on December 12, 1989
("Adoption Date") and became applicable to ITT on December 19, 1995. This Plan
does not apply to any termination of employment which occurred or which was
communicated to the Executive prior to the Adoption Date. The Plan was most
recently amended effective as of August 14, 1997.
6
<PAGE> 1
EXHIBIT 10.12
[FORM OF AGREEMENT FOR NINE EXECUTIVES]
AMENDED AND RESTATED EXECUTIVE AGREEMENT dated as of February 11,
1997, between ITT Corporation, a Nevada corporation ("the Company"), and
[name of executive] (the "Executive").
WHEREAS the Company considers it essential to the best interests of its
shareholders to foster the continuous employment of key management personnel;
and
WHEREAS the Board of Directors of the Company (the "Board") recognizes
that, as is the case with many publicly-held corporations, the possibility of a
Change in Control (as defined in Section 1(d) hereof) exists and that such
possibility, and the uncertainty and questions which it may raise among
management, may result in the departure or distraction of management personnel
to the detriment of the Company and its shareholders; and
WHEREAS the Board has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of members of the
Company's management, including the Executive, to their assigned duties without
distraction in the face of potential disturbing circumstances arising from the
possibility of a Change in Control;
NOW THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the Company and the Executive agree as follows:
SECTION 1. Definitions. As used in this Agreement:
(a) "Affiliate" has the meaning ascribed thereto in Rule 12b-2
pursuant to the Securities Exchange Act of 1934, as amended (the "Act").
(b) "Board" means the Board of Directors of the Company.
(c) "Cause" means (i) the willful and continued failure of the
Executive to perform substantially the Executive's duties owed to the
Company or its Affiliates after a written demand for substantial
performance is delivered to the Executive which specifically identifies the
nature of such non-performance, or (ii) conviction of the Executive for a
felony.
No act or omission on the part of the Executive shall be considered
"willful" unless it is done or omitted in bad faith or without reasonable
belief that the action or omission was in the best interests of the
Company.
(d) A "Change in Control" shall be deemed to have occurred if:
(i) a report on Schedule 13D shall be filed with the Securities and
Exchange Commission pursuant to Section 13(d) of the Securities Exchange
Act of 1934 (the "Act") disclosing that any person (within the meaning
of Section 13(d) of the Act), other than the Company or a subsidiary of
the Company or any employee benefit plan sponsored by the Company or a
subsidiary of the Company, is the beneficial owner directly or
indirectly of twenty percent of more of the outstanding common stock, no
par value ("Stock"), of the Company;
(ii) any person (within the meaning of Section 13(d) of the Act),
other than the Company or a subsidiary of the Company or any employee
benefit plan sponsored by the Company or a subsidiary of the Company,
shall purchase shares pursuant to a tender offer or exchange offer to
acquire any Stock of the Company (or securities convertible into Stock)
for cash, securities or any other consideration, provided that after
consummation of the offer, the person in question is the beneficial
owner (as such term is defined in Rule 13d-3 under the Act), directly or
indirectly, of fifteen percent or more of the outstanding Stock of the
Company (calculated as provided in paragraph (d) of Rule 13d-3 under the
Act in the case of rights to acquire Stock);
<PAGE> 2
(iii) the stockholders of the Company shall approve (A) any
consolidation or merger of the Company in which the Company is not the
continuing or surviving corporation or pursuant to which shares of Stock
of the Company would be converted into cash, securities or other
property, other than a merger of the Company in which holders of Stock
of the Company immediately prior to the merger have the same
proportionate ownership of common stock of the surviving corporation
immediately after the merger as immediately before, or (B) any sale,
lease, exchange or other transfer in one transaction or a series of
related transactions of all or substantially all the assets of the
Company; or
(iv) there shall have been a change in a majority of the members of
the Board within a 12-month period unless the election or nomination for
election by the Company stockholders of each new director during such
12-month period was approved by the vote of two-thirds of the directors
then still in office who were directors at the beginning of such
12-month period.
Notwithstanding the foregoing, any spin-off of all or a portion of the
assets or operations of the Company or any subsidiary which has been
approved by a majority of the directors serving on the Board as of the date
hereof or by directors approved by the vote of two-thirds of the directors
then still in office who were directors as of the date hereof, shall not be
deemed a "Change in Control".
(e) "Good Reason" means:
(i) without the Executive's express written consent and excluding
for this purpose an isolated, insubstantial and inadvertent action not
taken in bad faith and which is remedied by the Company or its
Affiliates promptly after receipt of notice thereof given by the
Executive, (A) a reduction in the Executive's Annual Base Salary and
Annual Bonus (each as defined herein) or any reduction in any material
compensation or benefits arrangement, (B) the assignment to the
Executive of any duties inconsistent in any respect with the Executive's
position (including status, offices, titles and reporting requirements),
authority, duties or responsibilities as contemplated by Section 3(a)
hereof, (C) any other action by the Company or any of its Affiliates
which results in a diminution in the Executive's position, authority,
duties or responsibilities, or (D) any failure by the Company to comply
with any of the provisions of Section 3(b) hereof;
(ii) without the Executive's express written consent, the Company's
requiring the Executive's work location to be other than within
twenty-five (25) miles of the location set forth in Section 3(a)(i);
(iii) any failure by the Company to comply with and satisfy Section
8(a).
For purposes hereof, a determination by the Executive that he has
"Good Reason" hereunder shall be final and binding on the parties hereto
absent a showing of bad faith on the Executive's part.
(f) "Incapacity" means any physical or mental illness or disability of
the Executive which continues for a period of six consecutive months or
more and which at any time after such six-month period the Board shall
reasonably determine renders the Executive incapable of performing his or
her duties during the remainder of the Term.
(g) "Operative Date" means the date on which a Change in Control shall
have occurred.
SECTION 2. Term of Agreement. This Agreement shall become operative on
the Operative Date and shall remain in effect until the second anniversary of
the Operative Date (the "Term") unless further extended or sooner terminated as
hereinafter provided. Commencing on the second anniversary of the Operative
Date, and each anniversary date thereafter (each, an "Anniversary Date"), the
Term shall automatically be extended for one additional year, unless, not later
than 30 days prior to such Anniversary Date, the Company shall have given notice
to the Executive that it does not wish to extend this Agreement.
SECTION 3. Terms of Employment. (a) Position and Duties. (i) During the
Term: (A) the Executive's position (including status, offices, titles and
reporting requirements), authority, duties and responsibilities shall be at
least commensurate in all material respects with the most significant of those
held,
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<PAGE> 3
exercised and assigned immediately prior to the Operative Date, and (B) the
Executive's services shall be performed at the location at which the Executive
was based on the Operative Date and the Company shall not require the Executive
to travel on Company business to a substantially greater extent than required
immediately before the Operative Date, except for travel and temporary
assignments which are reasonably required for the full discharge of the
Executive's responsibilities and which are consistent with the Executive's being
so based.
(ii) During the Term, and excluding any periods of vacation and sick leave
to which the Executive is entitled in accordance with Company policy, the
Executive agrees to devote reasonable attention and time during normal business
hours to the business and affairs of the Company and, to the extent necessary to
discharge the responsibilities assigned to the Executive hereunder, to use the
Executive's reasonable best efforts to perform faithfully and efficiently such
responsibilities.
(b) Compensation. (i) Salary and Bonus. During the first year of the
Term, the Executive will receive compensation at an annual rate equal to the sum
of (A) an annual salary not less than the Executive's annualized salary in
effect immediately prior to the Operative Date (such annualized salary, as may
be increased on or after the Operative Date, the "Annual Base Salary"), plus (B)
a bonus not less than the aggregate amount of the Executive's highest bonus
award under the ITT Annual Performance-Based Incentive Plan for Executive
Officers or any substitute or successor plan in respect of the last three
calendar years preceding the Operative Date ("Annual Bonus"). During the Term,
on each anniversary of the Operative Date, the Executive's compensation in
effect on such anniversary date shall be increased for the following
twelve-month period by not less than the higher of (A) 5% or (B) 80% of the
percentage change in the Consumer Price Index (All Urban Consumers) for the
twelve-month period ended immediately prior to the month in which such
anniversary date occurs.
(ii) Employee Benefit Plans. During the Term, the Executive will be
entitled to (A) continue to participate in all 401(k)/savings and retirement
plans, welfare plans, incentive plans, equity-based plans and all other plans,
programs, policies and arrangements applicable to the Executive prior to the
Operative Date (the "Company Plans"), or (B) participate in employee benefit
plans, programs, policies and arrangements of any successor to the Company which
have benefits that are not less favorable to the Executive.
SECTION 4. Termination of Employment. (a) Death or Incapacity. This
Agreement shall terminate automatically upon the Executive's death during the
Term. This Agreement shall cease and terminate on the date of determination by
the Board that the Incapacity of the Executive has occurred during the Term
("Incapacity Effective Date").
(b) Cause. The Company may terminate the Executive's employment for Cause,
as defined herein. Termination of the Executive for Cause shall not be effective
unless the Board has passed a resolution, duly adopted by the affirmative vote
of not less than three-quarters (3/4) of the entire membership of the Board at
a meeting of the Board which was called and held for the purpose of considering
such termination (after reasonable notice to the Executive and an opportunity
for the Executive, together with the Executive's counsel, to be heard before the
Board, finding that, in the good faith opinion of the Board, the Executive was
guilty of conduct set forth in clause (i) or (ii) of the definition of Cause
herein, and specifying the particulars thereof in detail.
(c) Good Reason. The Executive may terminate his or her employment for
Good Reason, as defined herein.
(d) Notice of Termination. Any termination by the Company for Cause or
Incapacity, or by the Executive for Good Reason, shall be communicated by Notice
of Termination to the other party hereto given in accordance with Section 10 of
this Agreement. For purposes of this Agreement, a "Notice of Termination" means
a written notice which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
the Executive's employment under the provision so indicated, (iii) in the case
of termination by the Company for Cause or for Incapacity, confirms that such
termination is pursuant to a resolution of the Board (which, in the case of
Cause, is pursuant to Section 4(b) hereof), and (iv) if the Date
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<PAGE> 4
of Termination (as defined below) is other than the date of receipt of such
notice, specifies the termination date (which date shall be not more than 30
days after the giving of such notice). The failure by the Executive or the
Company to set forth in the Notice of Termination any fact or circumstance which
contributes to a showing of Good Reason, Incapacity or Cause shall not serve to
waive any right of the Executive or the Company, respectively, hereunder or
preclude the Executive or the Company, respectively, from asserting such fact or
circumstance in enforcing the Executive's or the Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means (i) if the
Executive's employment is terminated by the Company for Cause or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified therein, as the case may be, (ii) if the Executive's
employment is terminated by the Company other than for Cause or Incapacity, the
Date of Termination shall be the date on which the Company notifies the
Executive of such termination, and (iii) if the Executive's employment is
terminated by reason of death or Incapacity, the Date of Termination shall be
the date of death of the Executive or the Incapacity Effective Date, as the case
may be.
SECTION 5. Obligations of the Company Upon Termination. (a) Termination
for Good Reason or for Reasons Other Than for Cause, Death or Incapacity. If,
during the Term, the Company shall terminate the Executive's employment other
than for Cause or Incapacity or the Executive shall terminate his or her
employment for Good Reason:
(i) the Company shall pay to the Executive in a lump sum in cash,
within five business days after the Date of Termination, the aggregate of
the following amounts:
(A) the sum of (1) the Executive's currently effective Annual Base
Salary through the Date of Termination to the extent not theretofore
paid, (2) any compensation previously deferred by the Executive
(together with any accrued interest or earnings thereon) and any accrued
vacation pay, in each case to the extent not theretofore paid (the sum
of the amounts described in clauses (1) and (2) shall be hereinafter
referred to as the "Accrued Obligations"); and
(B) the amount equal to the product of (1) three(1) and (2) the sum
of (x) the Executive's Annual Base Salary and (y) his or her Annual
Bonus;
(ii) for three years(2) after the Executive's Date of Termination, or
such longer period as may be provided by the terms of the appropriate
Company Plan, the Company shall continue health and life insurance
benefits, perquisites and fringe benefits to the Executive and the
Executive's eligible family members at least equal to those which would
have been provided to them in accordance with the Company Plans if the
Executive's employment had not been terminated or, if more favorable to the
Executive, as in effect generally at any time thereafter, provided,
however, that if the Executive becomes reemployed with another employer and
is eligible to receive health or life insurance benefits, perquisites and
fringe benefits under another employer's plans, the Company's obligations
under this Section 5(a)(ii) shall cease;
(iii) the Company shall, at its sole expense as incurred, provide the
Executive with reasonable outplacement services for a period of up to one
year from the Date of Termination, the provider of which shall be selected
by the Executive in his or her sole discretion; and
(iv) to the extent not theretofore paid or provided, the Company shall
timely pay or provide to the Executive any other amounts or benefits
required to be paid or provided or which the Executive is eligible to
receive under any Company Plan, including earned but unpaid stock and
similar compensation (such other amounts and benefits shall be hereinafter
referred to as the "Other Benefits").
- ---------------
(1) For three of the nine executives covered by individual agreements, the
multiplier will be two, rather than three. The executives covered, respectively,
by the 3x and 2x multipliers are set forth on Schedule A hereto.
(2) Two years for three of the nine executives.
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<PAGE> 5
(b) Certain Additional Payments by the Company. (i) Anything in this
Agreement to the contrary notwithstanding, if it shall be determined that any
payment or distribution to or for the benefit of the Executive (whether paid or
payable or distributed or distributable) pursuant to the terms of this Agreement
or otherwise (the "Payment") would be subject to the excise tax imposed by
Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code", and
such excise tax, the "Excise Tax"), then the Executive shall be entitled to
receive from the Company an additional payment (the "Gross-Up Payment") in an
amount such that the net amount of Payment and Gross-Up Payment retained by the
Executive, after the calculation and deduction of all Excise Taxes (including
any interest or penalties imposed with respect to such taxes) on the Payment and
all federal, state and local income tax, employment tax and Excise Tax
(including any interest or penalties imposed with respect to such taxes) on the
Gross-Up Payment provided for in this Section, shall be equal to the Payment.
(ii) Subject to the provisions of Section 5(b)(iii), all determinations
required to be made under this Section 5(b), including whether and when the
Gross-Up Payment is required and the amount of such Gross-Up Payment, and the
assumptions to be utilized in arriving at such determinations shall be made by a
nationally recognized certified public accounting firm as may be jointly
designated by the Executive and the Company (the "Accounting Firm") which shall
provide detailed supporting calculations both to the Company and the Executive
within 15 business days of the receipt of notice from the Executive that there
has been a Payment, or such earlier time as is requested by the Company. All
fees and expenses of the Accounting Firm shall be borne solely by the Company.
Any Gross-Up Payment shall be paid by the Company to the Executive within five
days of the receipt of the Accounting Firm's determination. Any determination by
the Accounting Firm shall be binding upon the Company and the Executive. As a
result of uncertainty in the application of section 4999 of the Code at the time
of the initial determination by the Accounting Firm hereunder, it is possible
that the Gross-Up Payment made will have been an amount less than the Company
should have paid pursuant to this Section 5(b)(ii) (the "Underpayment"). In the
event that the Company exhausts its remedies pursuant to Section 5(b)(iii) and
the Executive thereafter is required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the Underpayment and any such
Underpayment shall be promptly paid by the Company to or for the benefit of the
Executive.
(iii) The Executive shall notify the Company in writing of any claim by the
Internal Revenue Service that, if successful, would require the payment by the
Company of the Gross-Up Payment. Such notification shall be given as soon as
practicable after the Executive is informed in writing of such claim and shall
apprise the Company of the nature of such claim and the date on which such claim
is requested to be paid. The Executive shall not pay such claim prior to the
expiration of the 30-day period following the date on which he or she gives such
notice to the Company (or such shorter period ending on the date that any
payment of taxes, interest and/or penalties with respect to such claim is due).
If the Company notifies the Executive in writing prior to the expiration of such
period that it desires to contest such claim, the Executive shall:
(A) give the Company any information reasonably requested by the
Company relating to such claim,
(B) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such
claim by an attorney reasonably selected by the Company,
(C) cooperate with the Company in good faith in order to effectively
contest such claim, and
(D) permit the Company to participate in any proceedings relating to
such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify the Executive for and hold the Executive
harmless from, on an after-tax basis, any Excise Tax or income tax (including
interest and penalties with respect thereto) imposed as a result of such
representation and payment of all related costs and expenses. Without limiting
the foregoing provisions of this Section 5(b)(iii), the Company shall control
all proceedings taken in connection with such contest and, at its sole option,
may pursue or forgo any and all administrative appeals, proceedings, hearings
and conferences with the taxing authority in respect of such
5
<PAGE> 6
claim and may, at its sole option, either direct the Executive to pay the tax
claimed and sue for a refund or contest the claim in any permissible manner, and
the Executive agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine; provided, however, that if the
Company directs the Executive to pay such claim and sue for a refund, the
Company shall advance the amount of such payment to the Executive, on an
interest- free basis, and shall indemnify the Executive for and hold the
Executive harmless from, on an after-tax basis, any Excise Tax or income tax
(including interest or penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with respect to such advance
(including as a result of any forgiveness by the Company of such advance); and
further provided that any extension of the statute of limitations relating to
the payment of taxes for the taxable year of the Executive with respect to which
such contested amount is claimed to be due is limited solely to such contested
amount. Furthermore, the Company's control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder and
the Executive shall be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other taxing
authority.
(iv) If, after the receipt by the Executive of an amount advanced by the
Company pursuant to Section 5(b)(iii), the Executive becomes entitled to receive
any refund with respect to such claim, the Executive shall (subject to the
Company's complying with the requirements of Section 5(b)(iii)) promptly pay to
the Company the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after the receipt by the
Executive of an amount advanced by the Company pursuant to Section 5(b)(iii), a
determination is made that the Executive shall not be entitled to any refund
with respect to such claim and the Company does not notify the Executive in
writing of its intent to contest such denial of refund prior to the expiration
of 30 days after such determination, then such advance shall be forgiven and
shall not be required to be repaid and the amount of such advance shall offset,
to the extent thereof, the amount of Gross-Up Payment or other indemnity payment
required to be paid.
(c) Death or Incapacity. If the Executive's employment is terminated by
reason of the Executive's death or Incapacity during the Employment Period, this
Agreement shall terminate without further obligations to the Executive's legal
representatives under this Agreement, other than for (i) timely payment of
Accrued Obligations and Other Benefits, and (ii) provision by the Company of
death benefits or disability benefits for termination due to death or
Incapacity, respectively, in accordance with the Company Plans as in effect
immediately prior to the Operative Date or, if more favorable to the Executive,
at the Executive's Date of Termination.
(d) Cause; Other than for Good Reason. If the Executive's employment shall
be terminated for Cause during the Term, this Agreement shall terminate without
further obligations to the Executive other than timely payment to the Executive
of (x) the Executive's currently effective Annual Base Salary through the Date
of Termination, (y) the amount of any compensation previously deferred by the
Executive, and (z) Other Benefits, in each case to the extent theretofore
unpaid. If the Executive voluntarily terminates employment during the Term,
excluding a termination for Good Reason, this Agreement shall terminate without
further obligations to the Executive, other than for the timely payment of
Accrued Obligations and Other Benefits.
SECTION 6. Non-exclusivity of Rights. Nothing in this Agreement shall
prevent or limit the Executive's continuing or future participation in any
Company Plan and for which the Executive may qualify, nor, subject to Section
14(c), shall anything herein limit or otherwise affect such rights as the
Executive may have under any contract or agreement with the Company or any of
its Affiliates. Amounts which are vested benefits or which the Executive is
otherwise entitled to receive under any Company Plan at or subsequent to the
Date of Termination shall be payable in accordance with such plan, policy,
practice or program or contract or agreement except as explicitly modified by
this Agreement.
SECTION 7. Full Settlement. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against the
Executive or others. In no event shall the Executive be obligated to seek other
employment or take any other
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<PAGE> 7
action by way of mitigation of the amounts payable to the Executive under any of
the provisions of this Agreement and such amounts shall not be reduced, whether
or not the Executive obtains other employment. The Company agrees to pay as
incurred, to the full extent permitted by law, all legal fees and expenses which
the Executive may reasonably incur as a result of any contest (regardless of the
outcome thereof) by the Company, the Executive or others of the validity or
enforceability of, or liability under, any provision of this Agreement or any
guarantee of performance thereof.
SECTION 8. Successors; Binding Agreement. (a) The Company will require
any successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business or assets of the Company,
by agreement, in form and substance satisfactory to the Executive, expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform if no such succession had
taken place. Failure of the Company to obtain such assumption and agreement
prior to the effectiveness of any such succession will be a breach of this
Agreement and entitle the Executive to compensation from the Company in the same
amount and on the same terms as the Executive would be entitled to hereunder had
the Company terminated the Executive for any reason other than Cause or
Incapacity on the succession date (and assuming a Change in Control of the
company had occurred prior to such succession date). As used in this Agreement,
"the Company" means the Company as defined in the preamble to this Agreement or
any successor to its business or assets which executes and delivers the
agreement provided for in this Section 8 or which otherwise becomes bound by all
the terms and provisions of this Agreement by operation of law or otherwise.
Notwithstanding the foregoing, it is expressly acknowledged by the Executive and
the Company that, if the distribution of the stock of ITT Destinations, Inc., a
Nevada corporation, to the Company's stockholders shall occur prior to the
occurrence of a Change in Control of the Company, ITT Destinations, Inc. shall
be required to automatically assume and agree to perform this Agreement in the
same manner and to the same extent that the Company would be required to perform
if no such succession had taken place, and following such distribution, all
references herein to "the Company" shall be deemed to refer to ITT Destinations,
Inc.
(b) This Agreement shall be enforceable by the Executive's personal or
legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees.
SECTION 9. Non-assignability. This Agreement is personal in nature and
neither of the parties hereto shall, without the consent of the other, assign or
transfer this Agreement or any rights or obligations hereunder, except as
provided in Section 8 hereof. Without limiting the foregoing, the Executive's
right to receive payments hereunder shall not be assignable or transferable,
whether by pledge, creation of a security interest or otherwise, other than a
transfer by his or her will or by the laws of descent or distribution, and, in
the event of any attempted assignment or transfer by the Executive contrary to
this Section, the Company shall have no liability to pay any amount so attempted
to be assigned or transferred.
SECTION 10. Notices. For the purpose of this Agreement, notices and all
other communications provided for herein shall be in writing and shall be deemed
to have been duly given when delivered or mailed by United States registered or
certified mail, return receipt requested, postage prepaid, addressed as follows:
<TABLE>
<S> <C>
If to the Executive: [name]
[address]
If to the Company: ITT Corporation
1330 Avenue of the Americas
New York, NY 10019-5490
Attention: General Counsel
</TABLE>
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
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<PAGE> 8
SECTION 11. Operation of Agreement. This Agreement shall be effective
immediately upon its execution and continue to be effective until the Term
expires so long as the Executive is employed by the Company or any of its
Affiliates as of the Operative Date. The provisions of this Agreement do not
take effect until the Operative Date.
SECTION 12. Governing Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of New
York without reference to principles of conflict of laws.
SECTION 13. Settlement of Disputes; Arbitration. If there has been a
Change in Control and any dispute arises between the Executive and the Company
as to the validity, enforceability and/or interpretation of any right or benefit
afforded by this Agreement, at the Executive's option, any other agreement or
policy notwithstanding, such dispute shall be resolved by binding arbitration
proceedings in accordance with the rules of the American Arbitration
Association. The arbitrators shall presume that the rights and/or benefits
afforded by this Agreement which are in dispute are valid and enforceable and
that the Executive is entitled to such rights and/or benefits. The Company shall
be precluded from asserting that such rights and/or benefits are not valid,
binding and enforceable and shall stipulate before such arbitrators that the
Company is bound by all the provisions of this Agreement. The burden of
overcoming by clear and convincing evidence the presumption that the Executive
is entitled to such rights and/or benefits shall be on the Company. The results
of any arbitration shall be conclusive on both parties and shall not be subject
to judicial interference or review on any ground whatsoever, including without
limitation any claim that the Company was wrongfully induced to enter into this
Agreement to arbitrate such a dispute.
The Company shall pay the cost of any arbitration proceedings under this
Agreement. The Executive shall be entitled (within two business days of
requesting such advance) to an advance of the actual legal fees and expenses
incurred by the Executive in connection with such proceedings and the Executive
shall be obligated to reimburse the Company for such fees and expenses in
connection with such arbitration proceedings only if it is finally and
specifically determined by the arbitrators that the Executive's position in
initiating the arbitration was frivolous and completely without arguable merit.
The arbitrators shall have discretion to award punitive damages to the Executive
if it is found that the Company's actions or failures to act which led to the
Executive submitting a dispute to arbitration and/or the Company's actions or
failures to act during the pendency of the arbitration proceeding make such an
award appropriate in the circumstances.
In the event the Executive is required to defend in any legal action or
other proceeding the validity or enforceability of any right or benefit afforded
by this Agreement, the Company will pay any and all actual legal fees and
expenses incurred by the Executive regardless of the outcome of such action and,
if requested by the Executive, shall (within two business days of such request)
advance such fees and expenses to the Executive. The Company shall be precluded
from asserting in any judicial or other proceeding commenced with respect to any
right or benefit afforded by this Agreement that such rights and benefits are
not valid, binding and enforceable and shall stipulate in any such proceeding
that the Company is bound by all the provisions of this Agreement.
SECTION 14. Miscellaneous. (a) This Agreement contains the entire
understanding with the Executive with respect to the subject matter hereof and
supersedes any and all prior agreements or understandings, written or oral,
relating to such subject matter. No provisions of this Agreement may be
modified, waived or discharged unless such modification, waiver or discharge is
agreed to in writing signed by the Executive and the Company.
(b) The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement.
(c) Except as provided herein, this Agreement shall not be construed to
affect in any way any rights or obligations in relation to the Executive's
employment by the Company or any of its Affiliates prior to the Operative Date
or subsequent to the end of the Term.
(d) This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original but all of which together will
constitute one and the same Agreement.
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<PAGE> 9
(e) The Company may withhold from any benefits payable under this Agreement
all Federal, state, city or other taxes as shall be required pursuant to any law
or governmental regulation or ruling.
(f) The captions of this Agreement are not part of the provisions hereof
and shall have no force or effect.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
and delivered as of the day and year first above set forth.
ITT CORPORATION
by
--------------------------------------
Name:
Title:
--------------------------------------
[Name of Executive]
9
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF ITT DESTINATIONS, INC.
<TABLE>
<CAPTION>
WHOLLY OWNED DIRECT
OR INDIRECT
SUBSIDIARIES OF ITTD
CARRYING ON THE SAME
LINE OF BUSINESS AS
NAMED SUBSIDIARIES
---------------------
PERCENTAGE OPERATING
OF IN OPERATING
JURISDICTION VOTING THE IN
IN WHICH SECURITIES UNITED FOREIGN
NAME ORGANIZED PARENT OWNED STATES COUNTRIES
- ------------------------------------------ ------------ ------ ---------- --------- ---------
<S> <C> <C> <C> <C> <C>
ITT Destinations, Inc. ("ITTD")........... Nevada -- -- 83 1
ITT-Dow Jones Television.................. Delaware ITTD 50 -- --
ITT Sheraton Corporation ("ITTSC")........ Delaware ITTD 100 -- --
Caesars World, Inc........................ Florida ITTD 100 57 --
ITT Flight Operations, Inc................ Pennsylvania ITTD 100 -- --
ITT MSG Inc. ("ITTMSG")................... Delaware ITTD 100 -- --
Madison Square Garden, L.P................ Delaware ITTMSG 10.2 -- --
Sheraton International, Inc. ("SII")...... Delaware ITTD 100 -- 42
Ciga S.p.A................................ Italy SII 70.3 -- 34
</TABLE>
- ---------------
Note: The names of some consolidated wholly owned subsidiaries of ITTD carrying
on the same lines of business as other subsidiaries named above have been
omitted, the number of such omitted subsidiaries operating in the United
States and in foreign countries being shown. Also omitted from the list
are the names of other subsidiaries since, if considered in the aggregate
as a single subsidiary, they would not constitute a significant
subsidiary.
