<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
(Rule 13d-101)
Information to be Included in Statements Filed Pursuant to 13d-1(a)
and Amendments Thereto Filed Pursuant to 13d-2(a)
(Amendment No. 1)*
ITT Educational Services, Inc.
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(Name of Issuer)
Common Stock, $.01 par value
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(Title of Class of Securities)
45068B 10 9
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(CUSIP Number)
Alan M. Schnaid
Vice President and Corporate Controller
Starwood Hotels & Resorts Worldwide, Inc.
2231 East Camelback Road, Suite 400, Phoenix, Arizona 85016
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(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications)
June 9, 1998
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [].
NOTE: Six copies of this statement, including all exhibits, should be filed
with the Commission. See Rule 13d-1(a) for other parties to whom copies are to
be sent.
* The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities,
and for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
(Continued on following page)
(Page 1 of 7 Pages)
<PAGE> 2
SCHEDULE 13D
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CUSIP NO. 45068B 10 9 | PAGE 2 OF 7 PAGES
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1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Starwood Hotels & Resorts Worldwide, Inc.
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [ ]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
BK, OO
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) [ ]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
Maryland
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7 SOLE VOTING POWER -
9,450,000
NUMBER OF ---------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY
OWNED BY -0-
EACH ---------------------------------------------------
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON
WITH 9,450,000
---------------------------------------------------
10 SHARED DISPOSITIVE POWER
-0-
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
9,450,000
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ]
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
35.0%
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14 TYPE OF REPORTING PERSON*
CO
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE> 3
SCHEDULE 13D
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CUSIP NO. 45068B 10 9 | PAGE 3 OF 7 PAGES
---------------------- | --- ---
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1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
ITT Corporation
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [ ]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
OO
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) [ ]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
Nevada
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7 SOLE VOTING POWER -
9,450,000
NUMBER OF ---------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY
OWNED BY -0-
EACH ---------------------------------------------------
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON
WITH 9,450,000
---------------------------------------------------
10 SHARED DISPOSITIVE POWER
-0-
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
9,450,000
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
35.0%
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14 TYPE OF REPORTING PERSON*
CO
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE> 4
Schedule 13D
Issuer: ITT Educational Services, Inc.
Page 4 of 7
Starwood Hotels & Resorts Worldwide, Inc. and ITT Corporation hereby amend
and supplement their statement on Schedule 13D relating to the common stock,
par value $.01 per share ("ESI Common Stock"), of ITT Educational Services,
Inc., a Delaware corporation ("ESI"), as originally filed with the Securities
and Exchange Commission (the "Commission") on March 5, 1998. This Schedule 13D
of Starwood Hotels & Resorts Worldwide, Inc. and ITT Corporation is hereinafter
referred to as the "Statement." ITT Corporation previously reported its
ownership in the securities covered by this Statement on its statement on
Schedule 13D originally filed with the Commission on October 17, 1995, as
amended by Amendment No. 1 thereto, filed with the Commission on March 17,
1997, Amendment No. 2 thereto, filed with the Commission on July 23, 1997, and
Amendment No. 3 thereto, filed with the Commission on November 19, 1997.
On February 23, 1998, Chess Acquisition Corp., a subsidiary of Starwood
Hotels & Resorts Worldwide, Inc. ("Merger Sub"), merged with ITT Corporation
(the "Merger") pursuant to an Amended and Restated Agreement and Plan of Merger
dated as of November 12, 1997 among Starwood Hotels & Resorts Worldwide, Inc.,
Merger Sub, Starwood Hotels & Resorts and ITT Corporation. As a result of the
Merger, Starwood Hotels & Resorts Worldwide, Inc. became the beneficial owner
of the 22,500,000 shares of ESI Common Stock then held by ITT Corporation.
ITEM 2. IDENTITY AND BACKGROUND.
Item 2 of the Statement is hereby amended to read in its entirety as
follows:
"The persons filing this statement are (1) Starwood Hotels & Resorts
Worldwide, Inc., a Maryland corporation (the "Corporation"), whose principal
business office is located at 777 Westchester Avenue, White Plains, NY 10604
and (2) ITT Corporation, a Nevada corporation and a wholly owned subsidiary of
the Corporation ("ITT"), whose principal business office is also located at 777
Westchester Avenue, White Plains, NY 10604. The Corporation is a hotel
management and operating company, whose shares of common stock are paired with
and trade together as a unit with shares of beneficial interest (together,
"Paired Shares") of Starwood Hotels & Resorts (the "Trust" and, together with
the Corporation, "Starwood Hotels"), a real estate investment trust. The
Corporation leases properties from the Trust and operates them directly,
through its subsidiaries or through third party management companies. The
information with respect to the directors and executive officers of the
Corporation is set forth on Appendix A attached hereto, and incorporated herein
by reference. The information with respect to the directors and executive
officers of ITT is set forth on Appendix B attached hereto, and incorporated
herein by reference.
Neither the Corporation nor ITT has been convicted in any criminal
proceeding (excluding traffic violations or similar misdemeanors) during the
past five years, nor, to the knowledge of the Corporation and ITT, has anyone
listed in the attached Appendices A and B been convicted in such a proceeding.
To the knowledge of the Corporation and ITT, during the past five years,
none of the Corporation, ITT or any of the persons listed on the attached
Appendices A and B was a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such
proceeding was or is subject to a judgment, decree or final order enjoining
future violations of, or prohibiting or mandating activities subject to,
federal or state securities laws or finding any violation with respect to such
laws."
ITEM 4. PURPOSE OF TRANSACTION.
Item 4 of the Statement is hereby amended to read in its entirety as
follows:
"As a result of the Merger, the Corporation became the beneficial owner of
the 22,500,000 shares of ESI Common Stock held by ITT. The Corporation has
previously announced that it is exploring a range of disposition strategies for
ESI. To that end, on February 13, 1998, ESI filed with the Commission a
registration statement on Form S-3 (as amended, the "Registration Statement")
for an underwritten public offering of 11,000,000 shares of the ESI Common
Stock held by ITT. The number of shares to be offered was subsequently
increased to 11,350,000. The Registration Statement also covered an additional
1,700,000 shares of the ESI Common Stock held by ITT to cover over-allotments,
if any. The Commission declared the Registration Statement effective on June
3, 1998, and on June 9, 1998, the Corporation closed the sale (the "Sale") of
the 11,350,000 shares of ESI Common Stock and the 1,700,000 shares subject to
the over-allotment (a total of 13,050,000 shares of ESI Common Stock).
<PAGE> 5
Schedule 13D
Issuer: ITT Educational Services, Inc.
Page 5 of 7
At the time the Merger was consummated, four of the ten members of the
Board of Directors of ESI (the "ESI Board") resigned, effective February 23,
1998. On February 25, 1998, the remaining members of the ESI Board elected
Tony Coelho, Robin Josephs, Merrick R. Kleeman and Barry S. Sternlicht to fill
the vacancies created by the foregoing resignations and to serve as directors
of ESI for terms expiring at the 2000, 1999, 2000 and 1998 Annual Meetings of
stockholders of ESI, respectively, and until such director's successor is duly
elected and qualified. Mr. Sternlicht was re-elected as a director at ESI's
1998 Annual Meeting of Shareholders for a term expiring at the 2001 Annual
Meeting of Shareholders.
A Stockholder Agreement (the "Stockholder Agreement") dated June 3, 1998
between ITT and ESI, among other things, provides that (a) the authorized
number of directors on the ESI Board shall not exceed 10, (b) the authorized
number of classes of directors of the ESI Board shall not exceed three, (c) in
connection with each annual meeting of ESI's shareholders the ESI Board shall
nominate and recommend such number of persons (rounded up to the next whole
number but not to exceed four) designated by ITT to be elected to the ESI Board
so that the total number of ITT designees on the ESI Board is in relative
proportion to the percentage of the outstanding shares of ESI Common Stock held
by ITT and its affiliates (collectively, the "ITT Group") and (d) the
membership of the standing Nominating Committee of the ESI Board shall be
limited to four members, two of whom must be directors who are ITT designees
until the number of ITT designees on the ESI Board is two, in which event only
one ITT designated director must be on the Nominating Committee, and if there
is one ITT designee on the ESI Board, such designee is not required to be on
the Nominating Committee (collectively, the "Board Rights"). The Stockholder
Agreement also provides that the Board Rights shall terminate when the ITT
Group holds less than 7.5% of the outstanding shares of ESI Common Stock. The
ITT Group may assign the Board Rights in whole, but not in part, to any one
transferee from the ITT Group of 10% or more of the outstanding shares of ESI
Common Stock (the "Rights Transferee"). The ITT designees currently on the ESI
Board are Mr. Coelho, Ms. Josephs, Mr. Kleeman and Mr. Sternlicht."
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
Item 5 of the Statement is hereby amended to read in its entirety as
follows:
"ITT owns 9,450,000 shares (35.0%) of ESI Common Stock. The Corporation
is not the record owner of any of ESI's capital stock.
ITT has sole power with respect to the voting and disposition of such
securities. The Corporation does not have any such power other than in its
current capacity as parent of ITT.
Other than the Sale, there have been no transactions by ITT or the
Corporation in the securities of ESI during the past sixty days.
To the knowledge of ITT and the Corporation, no executive officer or
director of ITT or the Corporation, except as indicated on Appendices A and B,
(a) owns any shares of ESI Common Stock; (b) has a right to acquire shares of
ESI Common Stock; or (c) has engaged in any transaction in ESI Common Stock
during the past sixty days."
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER.
Item 6 of the Statement is hereby amended to read in its entirety as
follows:
"An Amended and Restated Registration Rights Agreement (the "Registration
Rights Agreement") dated June 3, 1998 between ITT and ESI, among other things,
provides that, upon request of ITT, ESI will register under the Securities Act
of 1933, as amended (the "Securities Act"), any of the shares of ESI Common
Stock held by ITT for sale in accordance with ITT's intended method of
disposition thereof, and will take such other action necessary to permit the
sale thereof in other jurisdictions. ITT has the right to request two such
registrations after the Sale. ESI will pay all registration expenses (other
than underwriting discounts and commissions and ITT's legal, accounting and
advisors expenses) in connection with such registrations. ITT also has the
right, which it may exercise at any time and from time to time during the term
of the agreement, to include the shares of ESI Common Stock held by it in other
registrations of shares of ESI Common Stock initiated by ESI on its own behalf
or on behalf of any other person. ESI will pay all registration expenses
(other than underwriting discounts and commissions related to the shares of ESI
Common Stock sold by ITT, ITT's legal, accounting
<PAGE> 6
Schedule 13D
Issuer: ITT Educational Services, Inc.
Page 6 of 7
and advisors expenses, and the filing fees payable under the Securities Act for
the shares of ESI Common Stock sold by ITT) in connection with each such
registration. The rights of ITT under the Registration Rights Agreement are
transferable by ITT. The Registration Rights Agreement terminates five years
after the Sale.
The Registration Rights Agreement prohibits the holder of any shares of
ESI Common Stock registered by ESI pursuant to such agreement from disposing of
any such shares if the disposition would cause a change in control of ESI or
any of its ITT Technical Institutes, until ESI receives all of the required
prior approvals of certain accrediting commissions and federal and state
regulatory agencies.
The Stockholder Agreement prevents ESI as a result of any statutory
anti-takeover or other anti-takeover provisions adopted by ESI from (a)
significantly limiting or restricting the ability of the ITT Group or any
transferee from the ITT Group of 10% or more of the outstanding shares of ESI
Common Stock to transfer or vote the ESI Common Stock held by it or (b)
significantly adversely affecting the value of the shares of ESI Common Stock
currently owned by the ITT Group or any transferee from the ITT Group of 10% or
more of the outstanding shares of the ESI Common Stock. The Stockholder
Agreement also prevents ESI from taking any action that would subject any such
shares to any restriction, limitation or provision of law to which other
holders of ESI Common Stock are not subject. These restrictions will end when
the ITT Group holds less than 10% of the outstanding shares of Common Stock.
The Stockholder Agreement prohibits the ITT Group or the Rights Transferee
from transferring any of the shares of the ESI Common Stock if such transfer
would cause a change in control of ESI or any of the ITT Technical Institutes,
until ESI receives all of the required prior approvals of certain accrediting
commissions and federal and state regulatory agencies."
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
99.1 Stockholder Agreement dated as of June 3, 1998 between ITT
Corporation and ITT Educational Services, Inc.
99.2 Amended and Restated Registration Rights Agreement dated as of June
3, 1998 between ITT Corporation and ITT Educational Services, Inc.
* * * * * *
<PAGE> 7
Schedule 13D
Issuer: ITT Educational Services, Inc.
Page 7 of 7
SIGNATURES
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated as of June 29, 1998.
STARWOOD HOTELS & RESORTS ITT CORPORATION
WORLDWIDE, INC.
By: /s/ Ronald C. Brown By: /s/ Alan M. Schnaid
---------------------------- -------------------------------
Ronald C. Brown Alan M. Schnaid
Vice President and Vice President, Controller and
Chief Financial Officer Assistant Secretary
<PAGE> 8
Schedule 13D
Issuer: ITT Educational Services, Inc.
Page 1 of 6 Appendix A
Appendix A of the Statement is hereby amended and supplemented by deleting it
in its entirety and substituting the following:
APPENDIX A
DIRECTORS AND EXECUTIVE OFFICERS OF THE CORPORATION
(I) (a) Name:
Brenda C. Barnes (Director)
(b) Residence Address:
4230 Palmer Drive
Naperville, Illinois 60564
(c) Present Principal Occupation or Employment:
Member of the Boards of Directors of The New York Times Company,
229 West 43rd Street, New York, New York 10036; Sears, Roebuck and
Co., 3333 Beverly Road, Hoffman Estates, Illinois 60179; Avon
Products, Inc., 1345 Avenue of the Americas, New York, New York
10105; and the Corporation.
(d) Citizenship:
United States
(II) (a) Name:
Juergen Bartels (Director)
(b) Business Address:
Starwood Hotels & Resorts Worldwide, Inc.
777 Westchester Avenue
White Plains, New York 10604
(c) Present Principal Occupation or Employment:
Chief Executive Officer of the Hotel Group of the Corporation
(d) Citizenship:
Germany
<PAGE> 9
Schedule 13D
Issuer: ITT Educational Services, Inc.
Page 2 of 6 Appendix A
(III) (a) Name:
Jonathan D. Eilian (Director)
(b) Business Address:
Starwood Capital Group, L.L.C.
Three Pickwick Plaza, Suite 250
Greenwich, Connecticut 06830
(c) Present Principal Occupation or Employment:
Managing Director of Starwood Capital Group, L.L.C.
(d) Citizenship:
United States
(IV) (a) Name:
Bruce M. Ford (Director)
(b) Business Address:
Ford Management Corporation
104 East Park Drive, Suite 300
Brentwood, Tennessee 37027
(c) Present Principal Occupation or Employment:
President of F.K.B. Management Corporation, hotel and restaurant
management companies; President of Ford Management Corporation, a
hotel/motel management and development company; and member of
Gibson 25 Associates, LLC, a hotel developer.
(d) Citizenship:
United States
(V) (a) Name:
Graeme W. Henderson (Director)
(b) Residence Address:
1777 La Cresta Drive
Pasadena, California 91103
(c) Present Principal Occupation or Employment:
Private Investor
(d) Citizenship:
United States
<PAGE> 10
Schedule 13D
Issuer: ITT Educational Services, Inc.
Page 3 of 6 Appendix A
(VI) (a) Name:
Earle F. Jones (Director)
(b) Business Address:
MMI Hotel Group
1000 Red Fern Place
Flowood, Mississippi 39208
(c) Present Principal Occupation or Employment:
Co-Chairman of MMI Hotel Group/Dining Systems, a hotel company
(d) Citizenship:
United States
(VII) (a) Name:
Michael A. Leven (Director)
(b) Business Address:
U.S. Franchise Systems, Inc.
13 Corporate Square, Suite 250
Atlanta, Georgia 30329
(c) Present Principal Occupation or Employment:
Chairman of the Board, President and Chief Executive Officer of
U.S. Franchise Systems, a hotel franchising and development
company
(d) Citizenship:
United States
(VIII) (a) Name:
Daniel H. Stern (Director)
(b) Business Address:
Reservoir Capital Group, L. L.C.
153 East 53rd Street, 43rd Floor
New York, New York 10022
(c) Present Principal Occupation or Employment:
President of Reservoir Capital Group, L.L.C., a New York
based investment management firm
(d) Citizenship:
United States
<PAGE> 11
Schedule 13D
Issuer: ITT Educational Services, Inc.
Page 4 of 6 Appendix A
(IX) (a) Name:
Barry S. Sternlicht (Chairman of the Board of Directors)
(b) Business Address:
Starwood Capital Group, L.L.C.
Three Pickwick Plaza, Suite 250
Greenwich, Connecticut 06830
(c) Present Principal Occupation or Employment:
Chairman and Chief Executive Officer of the Trust and Chairman
of the Board of Directors of the Corporation; General Manager of
Starwood Capital Group, L.L.C. and President and Chief Executive
Officer of Starwood Capital Group, L.P.
(d) Citizenship
United States
(e) Ownership of ESI Common Stock
Mr. Sternlicht is the beneficial owner of 2,000 shares of ESI
Common Stock, all of which were purchased on June 4, 1998 in the
public offering by ITT described in Item 4 of this Statement.
(X) (a) Name:
Barry S. Volpert (Director)
(b) Business Address:
Goldman Sachs International Limited
Peterborough Court
133 Fleet Street, 7th Floor
London, England 3C4A 2BB
(c) Present Principal Occupation or Employment:
Managing Director in the Principal Investment Area of Goldman,
Sachs & Co.
(d) Citizenship:
United States
<PAGE> 12
Schedule 13D
Issuer: ITT Educational Services, Inc.
Page 5 of 6 Appendix A
(XI) (a) Name:
Daniel W. Yih (Director)
(b) Business Address:
c/o Chilmark Partners
875 North Michigan Avenue, #2100
Chicago, Illinois 60611
(c) Present Principal Occupation or Employment:
General Partner of Chilmark Partners, L.P., an investment firm
(d) Citizenship:
United States
(XII) (a) Name:
Susan Bolger (Executive Officer)
(b) Business Address:
Starwood Hotels & Resorts Worldwide, Inc.
777 Westchester Avenue
White Plains, New York 10604
(c) Present Principal Occupation or Employment:
Executive Vice President, Human Resources of the Corporation
(d) Citizenship:
United States
(XIII) (a) Name:
Ronald C. Brown (Executive Officer)
(b) Business Address:
Starwood Hotels & Resorts Worldwide, Inc.
2231 East Camelback Road, Suite 400
Phoenix, Arizona 85016
(c) Present Principal Occupation or Employment:
Executive Vice President and Chief Financial Officer of the
Corporation
(d) Citizenship:
Canada
<PAGE> 13
Schedule 13D
Issuer: ITT Educational Services, Inc.
Page 6 of 6 Appendix A
(XIV) (a) Name:
Theodore W. Darnall (Executive Officer)
(b) Business Address:
Starwood Hotels & Resorts Worldwide, Inc.
777 Westchester Avenue
White Plains, New York 10604
(c) Present Principal Occupation or Employment:
Executive Vice President and Chief Operating Officer of the
Corporation
(d) Citizenship:
United States
(XV) (a) Name:
Richard D. Nanula (Director and Executive Officer)
(b) Business Address:
Starwood Hotels & Resorts Worldwide, Inc.
777 Westchester Avenue
White Plains, New York 10604
(c) Present Principal Occupation or Employment:
President and Chief Executive Officer of the Corporation
(d) Citizenship:
United States
<PAGE> 14
Schedule 13D
Issuer: ITT Educational Services, Inc.
Page 1 of 2 Appendix B
Appendix B of the Statement is hereby amended and supplemented by deleting it
in its entirety and substituting the following:
APPENDIX B
DIRECTORS AND EXECUTIVE OFFICERS OF ITT
(I) (a) Name:
Peter G. Boynton (Director and Executive Officer)
(b) Business Address:
Caesars World, Inc.
3800 Howard Hughes Parkway
Suite 1600
Las Vegas, Nevada 89109
(c) Present Principal Occupation or Employment:
Chairman and Chief Executive Officer of Caesars World, Inc.,
a subsidiary of ITT
(d) Citizenship:
United States
(II) (a) Name:
Barry S. Sternlicht (Director)
(b) Business Address:
Starwood Capital Group, L.L.C.
Three Pickwick Plaza, Suite 250
Greenwich, Connecticut 06830
(c) Present Principal Occupation or Employment:
Chairman and Chief Executive Officer of the Trust and Chairman
of the Board of Directors of the Corporation; General Manager of
Starwood Capital Group, L.L.C. and President and Chief Executive
Officer of Starwood Capital Group, L.P.
(d) Citizenship
United States
(e) Ownership of ESI Common Stock
Mr. Sternlicht is the beneficial owner of 2,000 shares of ESI
Common Stock, all of which were purchased on June 4, 1998 in the
public offering by ITT described in Item 4 of this Statement.
<PAGE> 15
Schedule 13D
Issuer: ITT Educational Services, Inc.
Page 2 of 2 Appendix B
(III) (a) Name:
Daniel P. Weadock (Executive Officer)
(b) Business Address:
ITT Sheraton Corporation
60 State Street
Boston, Massachusetts 02109
(c) Present Principal Occupation or Employment:
Special Assistant to the Chairman of the Corporation
(d) Citizenship:
United States
<PAGE> 1
EXHIBIT 99.1
STOCKHOLDER AGREEMENT
THIS STOCKHOLDER AGREEMENT (this "Agreement") is made as of June 3, 1998
between ITT CORPORATION, a Nevada corporation ("ITT"), and ITT EDUCATIONAL
SERVICES, INC., a Delaware corporation (the "Company").
WHEREAS, ITT is a wholly-owned subsidiary of Starwood Hotels & Resorts
Worldwide, Inc., a Maryland corporation ("Starwood, Inc." and, together with
Starwood Hotels & Resorts, a Maryland real estate investment trust,
"Starwood");
WHEREAS, ITT is currently the owner of 22,500,000, or approximately 83%,
of the issued and outstanding shares of the common stock (the "Common Stock")
of the Company;
WHEREAS, ITT is offering and selling to the public by means of a
Registration Statement (File No. 333-46267) first filed with the Securities and
Exchange Commission ("SEC") on Form S-3 on February 13, 1998 (the "Registration
Statement") shares of the Common Stock (the "Offering"); and
WHEREAS, ITT (as the successor to ITT Industries, Inc., an Indiana
corporation formerly a Delaware corporation known as ITT Corporation) and the
Company are parties to (i) a Intercompany Agreement, dated as of December 19,
1994 (the "Intercompany Agreement"), (ii) an Employee Benefits and
Administrative Services Agreement, dated as of December 19, 1994 (the "Benefits
Agreement") and (iii) a Treasury Services and Credit Facilities Agreement,
dated as of August 15, 1994 (the "Treasury Agreement");
NOW, THEREFORE, in consideration of the mutual covenants contained herein
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties to this Agreement hereby agree as follows:
1. Certain Definitions.
"Affiliate" of any Person means any other Person controlling, controlled
by or under common control with such first Person, where "control" means the
possession, directly or indirectly, of the power to direct the management and
policies of a Person whether through the ownership of voting securities,
contract or otherwise. Without limiting the generality of the foregoing,
Starwood is an Affiliate of ITT as of the date hereof.
"Designated Representatives" means each person designated by ITT pursuant
to paragraphs 3(a) and 3(b) hereof. The parties agree that as of the date
hereof the Designated Representatives are Tony Coehlo, Robin Josephs, Merrick
R. Kleeman and Barry S. Sternlicht.
1
<PAGE> 2
"ITT Board Seats" means, at any time, the lesser of four or the number
equal to the product of (a) the authorized number of directors on the Board and
(b) a fraction, the numerator of which is the aggregate number of shares of
issued and outstanding shares of Common Stock held by the ITT Group (as defined
in paragraph 3(c)) and the denominator of which is the aggregate number of
issued and outstanding shares of Common Stock; provided, however, that if the
product of such calculation does not equal a whole number, the result shall be
rounded to the next highest whole number.
"Person" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
2. Effectiveness of this Agreement. This Agreement shall take effect upon
the closing (the "Closing Date") of the sale of shares of Common Stock offered
by ITT pursuant to the Registration Statement.
3. Nomination of Members of Board of Directors; Nominating Committee.
(a) From and after the Closing Date, unless the prior written
consent of ITT is obtained, the Company covenants and agrees that it shall
take, or cause to be taken, all necessary or desirable actions, so that:
(i) subject to paragraph 3(d) below, the authorized number of
directors on the Company's board of directors (the "Board") shall not
exceed 10 and the authorized number of classes of directors shall not
exceed three;
(ii) subject to paragraph 3(d) below, the authorized number of
directors comprising the nominating committee, or any successor committee
which may be performing similar functions (the "Nominating Committee"),
of the Board shall not exceed four directors;
(iii) subject to paragraph 3(d) below, prior to each annual meeting
of the Company's stockholders, the Company shall cause to be nominated
for, and recommend election to, the Board the number of persons
designated by ITT equal to the ITT Board Seats minus the aggregate number
of Designated Representatives (A) who are then serving on the Board and
(B) whose terms are not expiring at such annual meeting of the Company's
stockholders; and
(iv) subject to paragraph 3(d) below, the Company shall cause two of
the Designated Representatives who serve on the Board to be appointed to
the Nominating Committee; provided, however, that at such time as the ITT
Board Seats equal (a) two, the Company shall only be required to cause
one of the Designated Representatives who serve on the Board to be
appointed to the Nominating Committee, and (b) one, the Company shall
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<PAGE> 3
not be required to cause the Designated Representative who serves on the
Board to be appointed to the Nominating Committee.
(b) In the event that any of the Designated Representatives ceases to
serve as a member of the Board during his or her term of office, the Company
shall cause a person designated by ITT to fill the resulting vacancy on the
Board; provided, that, if causing a person designated by ITT to fill the
resulting vacancy on the Board would cause the number of Designated
Representatives serving on the Board to exceed the ITT Board Seats, the Company
shall have no obligation under this paragraph 3(b).
(c) The rights of ITT under this paragraph 3 shall terminate at such
time as ITT and its Affiliates (together with ITT, the "ITT Group") hold in the
aggregate less than 7.5% of the issued and outstanding shares of the Common
Stock; provided, however, that if the ITT Group sells, transfers, assigns,
pledges or otherwise disposes of, in the aggregate, 10% or more of the issued
and outstanding Common Stock to any one transferee (including any Affiliate of
such transferee), ITT Group's rights under this paragraph 3 may be assigned, in
whole but not in part, to any such transferee at the time of such transfer (the
transferee of such rights and its Affiliates, the "Rights Transferee"). The
extent of the rights of the Rights Transferee under this paragraph 3 shall be
determined solely by the number of issued and outstanding shares of Common
Stock received by the Rights Transferee from the ITT Group in such transfer.
Subject to paragraph 3(d) below, in connection with the transfer of rights to
the Rights Transferee, to the extent of the rights of the Rights Transferee,
the Company shall cause the person(s) designated by the Rights Transferee to be
appointed to the Board to fill any vacancy on the Board resulting from the
resignation of any Designated Representative. The rights of the Rights
Transferee under this paragraph 3 shall terminate at such time as the number of
shares of Common Stock received by transfer from the ITT Group and held by the
Rights Transferee constitutes in the aggregate less than 7.5% of the issued and
outstanding Common Stock.
(d) Notwithstanding anything to the contrary contained in this
paragraph 3, the Company shall have no obligation to take, or cause to be
taken, any action under paragraphs 3(a) or 3(b) hereof, if such action taken,
or caused to be taken, would or reasonably could, in the written opinion of
outside counsel to the Company, violate any of the Company's directors'
fiduciary duties.
4. No Transfer Restrictions.
(a) The Company covenants and agrees that it will not, without the
prior written consent of ITT, take, or cause to be taken, after the date
hereof, any action that has the effect of subjecting the ITT Group, or any
transferee (including any Affiliate of such transferee) from the ITT Group of
10% or more of the issued and outstanding Common Stock (a "Ten-Percent
Transferee") to any anti-takeover provision of the General Corporation Law of
the State of Delaware or of any other state, the Company's certificate of
incorporation or by-laws or any stockholder rights or similar plan adopted by
the Company to which the ITT Group is not currently subject, if such anti-
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<PAGE> 4
takeover provision(s) would have the effect of significantly limiting or
restricting the free transferability of the Common Stock owned by the ITT Group
or any Ten-Percent Transferee or would significantly limit or restrict the
right of the ITT Group or any Ten-Percent Transferee to vote the shares of
Common Stock or would otherwise significantly adversely affect the value of the
shares of Common Stock currently owned by the ITT Group or any such shares of
Common Stock transferred to any Ten-Percent Transferee. In furtherance of the
foregoing covenant, the Company agrees to make any available elections, to
approve in advance any proposed transfers and to include provisions in any
stockholder rights or similar plans so as not to adversely affect the free
transferability or the voting rights of the Common Stock currently owned by the
ITT Group or any such shares of Common Stock transferred to any Ten Percent
Transferee or otherwise significantly adversely affect the value of the shares
of Common Stock currently owned by the ITT Group or any such shares of Common
Stock transferred to any Ten-Percent Transferee. The Company shall not take, or
cause to be taken, any action which would have the effect, directly or
indirectly, of subjecting the shares of Common Stock currently owned by the ITT
Group or any such shares of Common Stock transferred to any Ten-Percent
Transferee to any restriction, limitation or provision of law that the other
holders of Common Stock are not subject.
(b) The obligations of the Company under this paragraph 4 shall
terminate at such time as the ITT Group holds in the aggregate less than 10%
of the issued and outstanding shares of Common Stock.
5. Regulatory Approvals.
(a) If any sale, transfer, assignment, pledge or other disposition of
shares by any member of the ITT Group would cause a change in ownership or
control of the Company or any of its ITT Technical Institutes under any of the
laws, regulations and/or standards of the U.S. Department of Education, the
state education authorities that regulate the Company's ITT Technical
Institutes or the accrediting commissions that accredit the Company's ITT
Technical Institutes (collectively, the "Regulators"), ITT shall give written
notice to the Company of the date of such sale, transfer, assignment, pledge or
other disposition (the "Transfer Date") at least 120 days prior to the proposed
Transfer Date. Promptly upon receipt of such notice, the Company shall take,
or cause to be taken, all actions, and do, or cause to be done, all things,
necessary, proper or advisable under applicable laws and regulations to obtain
as promptly as practicable all the required prior approvals from such
Regulators prior to the Transfer Date; provided, however, to the extent that
any Regulator's approval is not obtained prior to the Transfer Date or is not
required prior to the Transfer Date, the Company's obligation to obtain such
Regulator's approval shall continue after the Transfer Date until such time as
such Regulator's approval is obtained. No member of the ITT Group shall make
such sale, transfer, assignment, pledge or other disposition until the Company
receives all of the required prior approvals. ITT (as to itself and on behalf
of the ITT Group) and the Company agree to cooperate to obtain the approval of
the Regulators for such sale, transfer, assignment, pledge or other
disposition.
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(b) As a condition to any transfer by the ITT Group of rights under
paragraph 3(c) hereof, the ITT Group shall require the Rights Transferee to
agree to be bound by the obligations of the ITT Group under paragraph 5(a)
hereof.
6. Intercompany Agreements.
(a) The parties confirm that the Intercompany Agreement has been
terminated, except that (i) the obligations of the Company described in clause
(i) and (ii) of the last sentence of Section 3.3 of the Intercompany Agreement
shall survive as set forth therein and (ii) the obligations of the parties
under Section 4 of the Intercompany Agreement shall continue.
(b) The parties confirm that the Benefits Agreement and the Treasury
Agreement have been terminated.
7. Indemnification.
7.1. Offering Indemnification.
(a) ITT hereby agrees to indemnify and hold harmless the Company and
its officers, directors, employees, agents and representatives from and
against any and all liabilities, claims, damages, losses or expenses,
including, without limitation, any special, indirect, incidental or
consequential damages (collectively, "Losses"), relating to, arising out of or
due to any (i) untrue statement or alleged untrue statement of any material
fact contained in the Registration Statement, any preliminary prospectus or
final prospectus included therein, or any amendment or supplement thereto, or
any document incorporated by reference therein (collectively, the "Offering
Documents") or (ii) any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, but only insofar as any such untrue statement or
alleged untrue statement or omission or alleged omission was made in reliance
upon, and in conformity with, written information furnished to the Company by
or on behalf of ITT or any of its Affiliates (other than the Company and its
subsidiaries, employees, agents and representatives) specifically for use in
the Offering Documents.
(b) The Company hereby agrees to indemnify and hold harmless ITT, its
officers and directors, each Person who controls ITT and each of their
respective directors and officers and all employees, agents and representatives
of any of the foregoing from and against any and all Losses relating to,
arising out of or due to any (i) untrue statement or alleged untrue statement
of any material fact contained in the Offering Documents or (ii) any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading; provided,
however, that the Company will not be liable in any such case to the extent
that any such Losses arise out of or are based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in such Offering
Documents in reliance upon and in conformity with written information furnished
to the Company by or on behalf of ITT or any of
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<PAGE> 6
its Affiliates (other than the Company and its subsidiaries, employees, agents
and representatives) specifically for use in the Offering Documents.
7.2. Litigation Indemnification.
(a) The Company hereby agrees to indemnify and hold harmless ITT and
its officers, directors, stockholders, affiliates and employees, and agents and
representatives of any of the foregoing from and against any and all Losses
relating to, arising out of or due to any litigation, arbitration or other
proceeding arising out of or related to the conduct of the business or
operations of the Company and its subsidiaries (whether before or after the
Closing Date), including, without limitation, the matters described in the
Registration Statement under the caption "Business -- Legal Proceedings" and
other proceedings in which Persons allege similar claims of misrepresentations
and violations of law. Nothing in the foregoing sentence shall require the
Company to reimburse ITT for any amount on account of any such Losses paid by
ITT prior to the Closing Date.
(b) ITT hereby agrees to indemnify and hold harmless the Company and
its officers, directors, stockholders, affiliates and employees, and agents and
representatives of any of the foregoing from and against any and all Losses
relating to, arising out of or due to any litigation, arbitration or other
proceeding arising out of or related to the conduct of the business or
operations of ITT (whether before or after the Closing Date), excluding any
Losses relating to, arising out of or due to any of the matters for which
indemnification is provided pursuant to paragraph 7.2(a) with respect to the
conduct of the business or operations of the Company and its subsidiaries.
Nothing in the foregoing sentence shall require ITT to reimburse the Company
for any amount on account of any such Losses paid by the Company prior to the
Closing Date.
7.3. Indemnification Procedure. Promptly after receipt by an indemnified
party under this paragraph 7 of notice of the commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made against an
indemnifying party under paragraphs 7.1 or 7.2, notify the indemnifying party
of the commencement thereof; provided, however, that any failure to give such
notice will not waive any rights of the indemnified party except to the extent
the rights of the indemnifying party were materially prejudiced. In case any
such action is brought against any indemnified party and it notifies the
indemnifying party of the commencement thereof, the indemnifying party will be
entitled to participate therein and, to the extent that it may wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel reasonably satisfactory to such indemnified party, and
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party will not
(except as described below) be liable to such indemnified party under this
paragraph 7 for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
out-of-pocket costs of investigation. The indemnified party will have the
right to employ its counsel in any such action, but the fees and expenses of
such counsel will be at the expense of such indemnified party unless (a) the
employment of counsel by the indemnified party has been authorized in writing
by the indemnifying party, (b) the indemnified
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<PAGE> 7
party has reasonably concluded that there may be legal defenses available to
it or other indemnified parties that are different from or in addition to those
available to the indemnifying party (in which case the indemnifying party will
not have the right to direct the defense of such action on behalf of the
indemnified party) or (c) the indemnifying party has not in fact employed
counsel to assume the defense of such action within a reasonable time after
receiving notice of the commencement of the action, in each of which cases the
reasonable fees and expenses of counsel will be at the expense of the
indemnifying party or parties. All such fees and expenses and other fees and
expenses reasonably incurred in connection with investigating or defending such
action or other claim for which indemnification is sought under this paragraph
7 will be reimbursed promptly as they are incurred. An indemnifying party will
not be liable for the fees and expenses of more than one separate counsel for
all indemnified parties in connection with any proceeding or related
proceedings in the same jurisdiction. If the indemnifying party shall elect to
control the defense of any such action, it shall not settle any such action
without the consent of the indemnified party, which consent may not be
unreasonably withheld, and in all events may not be withheld if such
indemnifying party agrees fully to indemnify such other party in connection
therewith. If the indemnifying party shall not control the defense of any such
action, the indemnified party shall be entitled to take whatever action it
deems necessary or appropriate to resolve or settle such action, but in no
event shall it have any obligation to defend any such action or to appeal any
adverse finding or determination. ITT and the Company agree to cooperate with
each other in the defense of any action for which indemnification is sought
under this paragraph 7, including providing access to information, employees
and records under paragraph 8 hereof.
7.4. Effect on Underwriting Documents. Notwithstanding anything to the
contrary herein contained or set forth in the underwriting agreement relating
to the Offering:
(a) the provisions of this paragraph 7 shall govern and control the
indemnification arrangements, and any claims or Losses arising thereunder,
between the Company and ITT with respect to liabilities arising under the
Registration Statement or the other Offering Documents; and
(b) the provisions of such underwriting agreement shall govern and
control the indemnification arrangements, and any claims or Losses arising
thereunder, between the Company and the underwriters.
8. Access to Information.
8.1. Access to Information.
(a) From and after the date hereof, each of the Company and ITT shall
afford to the other and its representatives, reasonable access and duplicating
rights during normal business hours to all information within such party's
possession relating to such other party's businesses, assets or liabilities,
insofar as such access is reasonably required by such other party and is
subject to additional confidentiality provisions as the disclosing party deems
appropriate. Without
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limiting the generality of the foregoing, information may be requested under
this paragraph 8.1 for audit, accounting, claims, ITT corporate policy
compliance, litigation, regulatory and tax purposes, as well as for purposes of
fulfilling disclosure and reporting obligations as such party may reasonably
request. In the case of information provided under circumstances giving rise
to a legally cognizable privilege from disclosure, neither the Company nor ITT
shall waive such privilege without the consent of the other party.
(b) Without limiting the generality of the foregoing paragraph, with
respect to any period that any member of the ITT Group is required to account
for its investment in the Company under the equity method of accounting
(determined in accordance with generally accepted accounting principles
consistently applied), with reasonable promptness, but in no event later than
30 days after the end of each of the first three fiscal quarters in each fiscal
year of the Company and 75 days after the end of each fiscal year, the Company
shall deliver to ITT such financial and other information and data with respect
to the Company and its business, properties, financial position, results of
operations as ITT may from time to time reasonably request in connection with
the preparation of consolidated financial statements or filings with the SEC by
any member of the ITT Group.
(c) If the Rights Transferee is required to account for its
investment in the Company under the equity method of accounting (determined in
accordance with generally accepted accounting principles consistently applied),
any assignment of the ITT Group's rights to the Rights Transferee under
paragraph 3(c) hereof shall also have the effect of assigning the ITT Group's
rights under paragraph 8(b).
8.2. Access to Employees. Each of the Company and ITT and their
respective representatives shall use reasonable efforts to make available to
the other, upon written request, its directors, officers, employees, agents and
representatives as witnesses to the extent that any such person may reasonably
be required (giving consideration to business demands of such persons) in
connection with any legal, administrative or other proceedings in which the
requesting party may from time to time be involved.
8.3. Retention of Records. Except as otherwise required by law or
agreed in writing, each of the Company and ITT shall use reasonable efforts to
accommodate the other with respect to retention and provision of copies of any
significant information in such party's possession or under its control
relating to the business, assets or liabilities of the other party.
9. Insurance Matters.
9.1. Policies and Rights Transfer. Subject, in each case, to the terms
of such Policies (as defined below) and any limitations or obligations of the
Company contemplated by this paragraph 9 or Schedule 9.1(a), ITT hereby agrees
that the Company will access, as a named or named additional insured party,
under each of the insurance policies (the "Policies") set forth on Schedule
9.1(a) hereto and all predecessor policies thereto, specifically including
rights of indemnity
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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 during the period from
December 20, 1995 through the Closing Date unless otherwise indicated on the
schedule in or in connection with the conduct of the business of the Company
(the "Educational Business") or, to the extent any claim is made against the
Company or any of its subsidiaries, the conduct of the business of ITT, 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 Policies; provided, however, that nothing in this clause
shall be deemed to constitute (or to reflect) an assignment of such Policies,
or any of them, to the Company.
9.2. Claims. If, subsequent to the date hereof, 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 during the period from December 20, 1995 through the Closing
Date in or in connection with the conduct of 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 business of ITT, 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 Policies, ITT 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 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
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 paragraph 9.2 shall be deemed to constitute (or to
reflect) an assignment of the Policies, or any of them, to the Company;
provided further, however, that, with respect to those Policies set forth on
Schedule 9.1(a) hereto for which the Company has payment obligations as
reflected on such Schedule, the Company and its subsidiaries shall only have
the rights as reflected on such Schedule, the Company and its subsidiaries
shall only have the rights set forth under this paragraph 9.2 with respect to
such Policies if such payment obligations have been satisfied by the Company at
the relevant time as contemplated by Schedule 9.1(a).
9.3. Administration: Other Matters.
(a) Administration. Except as otherwise provided in paragraph 9.2
hereof, from and after the date hereof, ITT shall be responsible for (i)
insurance administration of the Policies and (ii) claims administration under
such Policies with respect to all liabilities; provided that the retention of
such responsibilities by ITT is in no way intended to limit, inhibit or
preclude any right to insurance coverage for any insured claim of a named
insured under such Policies as contemplated by the terms of this Agreement; and
provided further that ITT's retention of the administrative
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responsibilities for the 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 ITT) or of
such party's authority to settle (within the periods specified in Schedule
9.1(a) in the cases of the Policies numbered 1,3 and 4 on Schedule 9.1(a)) any
such insured claim. ITT may discharge its administrative responsibilities
under this paragraph 9.3 by contracting for the provision of services by
independent parties. Except as contemplated by Schedule 9.1(a) hereto or this
Agreement, each of the parties, hereto shall administer and pay any costs
relating to defending its respective insured claims under the 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 Policies. The disbursements,
out-of-pocket expenses and direct and indirect costs of employees or agents of
ITT relating to claims administration and insurance administration contemplated
by this paragraph 9.3(a) shall be the responsibility of the Company.
(b) Access to Specified Policies. Where liabilities are specifically
covered under the Policies set forth on Schedule 9.1(a) hereto numbered 18 and
19 for periods on or before the Closing Date or under any such Policy covering
claims made after the Closing Date with respect to an occurrence during the
period commencing December 20, 1995 through the Closing Date, then after the
Closing Date the Company may claim coverage for insured claims under such
Policy as and to the extent that such insurance is available up to the full
extent of the applicable limits of liability of such Policy (and may receive
any insurance proceeds with respect thereto and contemplated by paragraph 9.2
or paragraph 9.3(d) hereof).
(c) Liability Limitation. Except as specifically contemplated by
lettered items under Schedule 9.1(a) or as specifically provided in this
Agreement, the Company and ITT shall not be liable to one another for claims
not reimbursed by insurers for any reason not within the control of the Company
or ITT, 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,
Policy limitations or restrictions, any coverage disputes or any defect in such
claim or its processing.
(d) Allocation of Insurance Proceeds. Except as otherwise provided
in paragraph 9.2, insurance proceeds received with respect to claims, costs and
expenses under the Policies shall be paid to ITT in trust, and ITT shall
thereafter administer the Policies by paying the insurance proceeds, as
appropriate, to the Company in accordance with this paragraph 9 within five (5)
business days. Payment of the allocable portions of indemnity costs of
insurance proceeds resulting from such Policies will be made by ITT to the
appropriate party upon receipt from the insurance carrier within five business
days. In the event that the aggregate limits on any 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. The parties agreed to use commercially reasonable
efforts to maximize available coverage under the Policies applicable to it, and
to take all commercially reasonable steps to recover from all other responsible
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parties in respect of an insured claim to the extent coverage limits under the
Policy have been exceeded or would be exceeded as a result of such insured
claim.
9.4. Agreement for Waiver of Conflict and Shared Defense. In the event
that insured claims of ITT 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 paragraph 9.4 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.
9.5. Cooperation. The parties agreed 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 ITT or the Company is a named or named additional insured party).
9.6. Directors and Officers Liability Insurance. The Company agrees
that from and after the date hereof it will maintain in full force and effect
at its expense a policy or policies of directors liability insurance naming as
an insured party each Designated Representative who may serve on the Board.
Such policy or policies shall have the same terms and conditions and the same
limits of liability as the directors liability insurance maintained by the
Company for its other directors who serve concurrently with the Designated
Representatives.
10. Confidential Information. ITT and the Company hereby covenant and
agree to hold in trust and confidence all Confidential Information relating to
the other party or its Affiliates. For the purpose hereof, "Confidential
Information" shall mean all non-public information not otherwise subject to a
legally cognizable privilege from disclosure which is disclosed by either party
to the other in connection with this Agreement. Confidential Information may
include, without limitation, technical, economic and business data, know-how,
flow sheets, drawings, business plans, computer software and databases and
other similar materials. Without prejudice to the rights and remedies of any
party to this Agreement, a party disclosing any Confidential Information to the
other party shall be entitled to equitable relief including injunctive relief
in order to protect its Confidential Information from unauthorized disclosure.
11. Amendment. This Agreement may not be amended or modified in any
respect except by a written agreement signed by the parties hereto.
12. Waiver. No waiver by either party hereto of any term or condition of
this Agreement, in any one or more instances, shall operate as a waiver of such
term or condition at any other time.
13. Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
the validity,
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legality or enforceability of any other provision of this Agreement in such
jurisdiction or affect the validity, legality or enforceability of any
provision in any other jurisdiction, but this Agreement shall be reformed,
construed and enforced in such jurisdiction as if such invalid, illegal or
unenforceable provision had never been contained herein.
14. Entire Agreement. Except as otherwise expressly set forth herein,
this Agreement embodies the complete agreement and understanding among the
parties hereto with respect to the subject matter hereof and supersedes and
preempts any prior understandings, agreements or representations by or among
the parties, written or oral, that may have related to the subject matter
hereof in any way.
15. Successors and Assigns; No Third-Party Beneficiaries. Except as
otherwise provided herein, this Agreement shall bind and inure to the benefit
of and be enforceable by the parties hereto and their respective successors and
permitted assigns. Notwithstanding anything to the contrary contained in this
Agreement, ITT shall not have the right to freely assign, in whole or in part,
this Agreement, except to other members of the ITT Group and except with
respect to rights transferred to the Rights Transferee as expressly permitted
hereunder. Except as otherwise provided herein, nothing contained in this
Agreement, except as expressly set forth, is intended to confer upon any other
Person, other than the parties hereto and their respective successors and
permitted assigns, any rights or remedies.
16. Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be an original and all of which taken
together shall constitute one and the same agreement.
17. Remedies. The Company and ITT shall be entitled to enforce their
rights under this Agreement specifically, to recover damages by reason of any
breach of any provision of this Agreement and to exercise all other rights
existing in their favor. The parties hereto agree and acknowledge that money
damages would not be an adequate remedy for any breach of the provisions of
this Agreement and that the Company and ITT, in their sole discretion, may
apply to any court of law or equity of competent jurisdiction for specific
performance and/or injunctive relief (without posting a bond or other security)
in order to enforce or prevent any violation of the provisions of this
Agreement.
18. Notices. All notices, requests, demands and other communications under
this Agreement shall be in writing and shall be deemed to have been duly given:
(a) on the date of service if served personally on the party to whom notice is
to be given; (b) on the day of transmission if sent via facsimile transmission
to the facsimile number given below, and telephonic confirmation of receipt is
obtained promptly after completion of transmission; (c) on the day after
delivery to Federal Express or similar overnight courier or the Express Mail
service maintained by the United States Postal Service; or (d) on the fifth day
after mailing, if mailed to the party to whom notice is to be given, by first
class mail, registered or certified, postage prepaid and properly addressed, to
the party as follows:
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If to ITT:
ITT Corporation
777 Westchester Avenue
White Plains, New York 10604
Attn: General Counsel
Facsimile: (914) 640-8260
If to the Company:
ITT Educational Services, Inc.
5975 Castle Creek Parkway N. Drive
P.O. Box 50466
Indianapolis, Indiana 46250-0466
Attn: General Counsel
Facsimile: (317) 594-4301
Any party may change its address for the purpose of this paragraph 18
by giving the other party written notice of its new address in the manner set
forth above.
19. Governing Law. The corporate law of the State of Delaware shall
govern all issues and questions concerning the relative rights of the Company
and its stockholders. All other issues and questions concerning the
construction, validity, interpretation and enforceability of this Agreement
shall be governed by, and construed in accordance with, the laws of the State
of Indiana, without giving effect to any choice of law or conflict of law rules
or provisions (whether of the State of Indiana or any other jurisdiction) that
would cause the application of the laws of any jurisdiction other than the
State of Indiana.
20. Descriptive Headings. The descriptive headings of this Agreement are
inserted for convenience only and do not constitute a part of this Agreement.
* * * *
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
ITT CORPORATION
By__/s/ Alan M. Schnaid________
Its__Vice President____________
ITT EDUCATIONAL SERVICES, INC.
By__/s/ Clark D. Elwood_______
Its__Senior Vice President, General
Counsel and Secretary
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EXHIBIT 99.2
AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT
AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT (this "Agreement"),
dated as of June 3, 1998, between ITT Corporation, a Nevada corporation
("ITT"), and ITT Educational Services, Inc., a Delaware corporation (the
"Company").
WHEREAS, ITT is the owner of 22,500,000, or approximately 83%, of the
issued and outstanding shares of the common stock (the "Common Stock") of the
Company;
WHEREAS, ITT is offering and selling to the public by means of a
Registration Statement (File No. 333-46267) first filed with the Securities and
Exchange Commission (the "SEC") on Form S-3 on February 13, 1998 (the
"Registration Statement") shares of the Common Stock;
WHEREAS, ITT (as the successor to ITT Industries, Inc., an Indiana
corporation formerly a Delaware corporation known as ITT Corporation) and the
Company are parties to a Registration Rights Agreement, dated as of December
19, 1994 (the "Original Registration Rights Agreement"), that provides for
certain registration rights with respect to the shares of the Common Stock held
by ITT (the "Shares"); and
WHEREAS, ITT and the Company desire to amend and restate in its entirety
the Original Registration Rights Agreement as set forth herein;
NOW THEREFORE, in consideration of the mutual covenants and agreements set
forth herein and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereby agree as
follows:
Section 1. Effectiveness of Agreement; Term.
1.1 Closing Date. This Agreement shall take effect upon the closing (the
"Closing Date") of the sale of shares of Common Stock offered by ITT pursuant
to the Registration Statement.
1.2 Term. ITT and its Permitted Transferees (as defined in Section 2.4)
(ITT and such Permitted Transferees each referred to herein as a "Holder" and
collectively, the "Holders") shall be entitled to exercise registration rights
pursuant to Section 2 and to participate in registrations pursuant to Section 3
until that date (the "Termination Date") which is five years after the Closing
Date; provided, however, that any registration of shares under Section 2 or
Section 3 which commenced prior to the Termination Date shall continue
notwithstanding the occurrence of the Termination Date.
Section 2. Demand Registration.
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2.1 Notice. Upon the terms and subject to the conditions set forth
herein, upon written notice of any Holder requesting that the Company effect
the registration under the Securities Act of 1933, as amended (the "Securities
Act"), of any or all of the Shares held by it, which notice shall specify the
intended method or methods of disposition of such Shares (which methods may
include, without limitation, a Shelf Registration, a Convertible Registration
or an Exchange Registration (as such terms are defined in Section 2.5)), the
Company will promptly give written notice of the proposed registration to all
other Holders and will use its best efforts to effect (at the earliest
reasonable date) the registration under the Securities Act of such Shares (and
the Shares of any other Holders joining in such request as are specified in a
written notice received by the Company within 20 days after receipt of the
Company's written notice of the proposed registration) for disposition in
accordance with the intended method or methods of disposition stated in such
request (each registration request pursuant to this Section 2.1 is sometimes
referred to herein as a "Demand Registration"); provided, however, that:
(a) if the Company shall have previously effected a registration with
respect to Shares pursuant to Section 3, the Company shall not be required to
effect a registration pursuant to this Section 2 until 120 days shall have
elapsed from the effective date of the most recent such previous registration
(or, if later, until the termination of the holdback period required from the
Company by any underwriters in connection with such previous registration under
Section 3, but in no event more than 180 days from such effective date);
(b) if, upon receipt of a registration request pursuant to this Section 2,
the Company is advised in writing, with a copy to the Holders of Shares
proposed to be included in the offering (the "Selling Holders"), by a
recognized independent investment banking firm(s) selected by the Company and
reasonably acceptable to the Selling Holders that, in such firm's opinion, a
registration at the time and on the terms requested would adversely affect any
public offering of securities by the Company, other than in connection with
employee benefit and similar plans (a "Company Offering") that had been
contemplated by the Company prior to the notice by the Holders requesting
registration, the Company shall not be required to effect a registration
pursuant to this Section 2 until, as applicable, (i) the expiration of four
months after the completion of such Company Offering (or, if later, the
expiration of the holdback period required from the Company by any underwriters
in connection with such Company Offering, but in no event more than six months
after the completion of such Company Offering) or (ii) promptly after
abandonment of such Company Offering, provided, however, that in no event shall
the Company's obligation to effect a registration statement pursuant to this
Section 2 be suspended for more than six months from the date of written notice
by the Holders requesting registration;
(c) if, while a registration request is pending pursuant to this Section
2, the Company determines in the good faith judgment of the general counsel of
the Company that the filing of a registration statement would require the
disclosure of material information which the Company has a bona fide business
purpose for preserving as confidential and the disclosure of which would have a
material adverse effect on the Company or the Company is unable to comply with
SEC requirements, the Company shall not be required to effect a registration
pursuant to this Section 2
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until the earlier of (i) the date upon which such material information is
disclosed to the public or ceases to be material or (ii) 120 days after the
Company makes such good faith determination;
(d) from after the Closing Date, Holders shall have the right to exercise
registration rights pursuant to this Section 2 up to a number of times equal to
two plus the number of Blackout Termination Rights provided for by Section
4.3(b); and
(e) except in the case of a Convertible Registration or an Exchange
Registration, the number of the Shares registered pursuant to any registration
requested pursuant to this Section 2.1 shall (i) represent not less than 15% of
the Shares then held by the Holders and (ii) have an aggregate expected
offering price of at least $20 million.
2.2 Registration Expenses. All Registration Expenses (as defined in
Section 8) for any registration requested pursuant to this Section 2 shall be
paid by the Company on behalf of any Holders; provided, however, that if any
securities are registered for sale for the account of any Person (as such term
is defined in Section 2(2) of the Securities Act) other than the Selling
Holders pursuant to Section 2.3, each such other Person shall bear its pro rata
share of the Registration Expenses (or such other amount as shall be determined
by the Company and such Person) and the Company shall bear the remaining share
of the Registration Expenses.
2.3 Third Person Shares. The Company shall have the right to cause the
registration of securities for sale for the account of any Person (other than
the Selling Holders) (the "Third Person Shares") in any registration of the
Shares requested pursuant to this Section 2 so long as the Third Person Shares
are disposed of in accordance with the intended method or method of disposition
requested pursuant to Section 2; provided, however, that the Company shall not
have the right to cause the registration of such securities of such other
Persons if:
(a) the Selling Holders are advised in writing (with a copy to the
Company) by a recognized independent investment banking firm selected by the
Selling Holders and reasonably acceptable to the Company that, in such firm's
opinion, registration of such securities would adversely affect in a
significant manner the offering and sale of Shares then contemplated by the
Selling Holders;
(b) the Selling Holders do not receive assurances reasonably satisfactory
to them that such other Person for whose account such securities are being
registered will pay a pro rata share of the Registration Expenses pursuant to
Section 2.2 (provided that for purposes of this clause (b), the guarantee by
the Company to the Selling Holders of payment of such share of the Registration
Expenses shall constitute satisfactory assurance to the Selling Holders); or
(c) the registration requested pursuant to this Section 2 is a Convertible
Registration or an Exchange Registration.
2.4 Permitted Transferees. As used in this Agreement, "Permitted
Transferees" shall mean any transferee, whether direct or indirect, of Shares
designated by ITT in a written notice to
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the Company as provided for in Section 9.5. Such written notice shall be
signed by both ITT and the Permitted Transferees so designated and shall
include an undertaking by the Permitted Transferees to comply with the terms
and conditions of this Agreement applicable to ITT.
2.5 Shelf Registration; Convertible Registration; Exchange Registration.
With respect to any Demand Registration, the requesting Holders may request the
Company to effect a registration of the Shares (a) under a registration
statement on Form S-3 pursuant to Rule 415 under the Securities Act (or any
successor form or rule) (a "Shelf Registration"); (b) in connection with such
Holders' registration under the Securities Act of securities (the "Convertible
Securities") convertible into, exercisable for or otherwise related to the
Shares (a "Convertible Registration"); or (c) in connection with such Holders'
offer to exchange the Shares for any debt or equity securities of such Holders,
a subsidiary or affiliate thereof or any other Person (an "Exchange
Registration").
Section 3. Incidental Registration.
3.1 Notice and Registration. If the Company proposes to register any of
the Common Stock ("Other Securities") for public sale under the Securities Act
(whether proposed to be offered for sale by the Company or any other Person),
on a form and in a manner which would permit registration of the Shares for
sale to the public under the Securities Act, it will give prompt written notice
to the Holders of its intention to do so, and upon the written request of any
or all of the Holders delivered to the Company within 10 business days after
the giving of any such notice (which request shall specify the Shares intended
to be disposed of by such Holders) the Company will use its best efforts to
effect, in connection with the registration of the Other Securities, the
registration under the Securities Act of all of the Shares which the Company
has been so requested to register by such Holders (which shall then become
Selling Holders), to the extent required to permit the disposition (in
accordance with the same method of disposition as the Company proposes to use
to dispose of the Other Securities) of the Shares so to be registered;
provided, however, that:
(a) if, at any time after giving such written notice of its intention to
register any Other Securities and prior to the effective date of the
registration statement filed in connection with such registration, the Company
shall determine for any reason not to register the Other Securities, the
Company may, at its election, give written notice of such determination to the
Selling Holders (or, if prior to delivery of the Holders, written request
described above in this Section 3.1, the Holders) and thereupon the Company
shall be relieved of its obligation to register such Shares in connection with
the registration of such Other Securities (but not from its obligation to pay
Registration Expenses to the extent incurred in connection therewith as
provided in Section 3.2), without prejudice, however, to the rights (if any) of
any Selling Holders immediately to request (subject to the terms and conditions
of Section 2) that such registration be effected as a registration under
Section 2;
(b) the Company will not be required to effect any registration pursuant
to this Section 3 if the Company shall have been advised in writing (with a
copy to the Selling Holders (or, if prior to delivery of the Holders' written
request described above in this Section 3.1, the Holders)) by a recognized
independent investment banking firm selected by the Company and reasonably
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acceptable to the Selling Holders (or, if prior to delivery of the Holders'
written request described above in this Section 3.1, the Holders) that, in such
firm's opinion, a registration at that time would adversely affect the Company
Offering; and
(c) the Company shall not be required to effect any registration of the
Shares under this Section 3 incidental to the registration of any of its
securities in connection with mergers, acquisitions, exchange offers,
subscription offers, dividend reinvestment plans or stock option or other
employee benefit plans of the Company.
No registration of the Shares effected under this Section 3 shall relieve
the Company of its obligation to effect a registration of Shares pursuant to
Section 2.
3.2 Registration Expenses. The Company will pay all of the Registration
Expenses in connection with any registration pursuant to this Section 3.
Section 4. Registration Procedures.
4.1 Registration and Qualification. If and whenever the Company is
required to use its best efforts to effect the registration of any of the
Shares under the Securities Act as provided in Sections 2 and 3, the Company
will as promptly as is practicable:
(a) prepare, file and use its best efforts to cause to become effective a
registration statement under the Securities Act regarding the Shares to be
offered;
(b) except in the case of a Shelf Registration or Convertible
Registration, prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection therewith as
may be necessary to keep such registration statement effective and to comply
with the provisions of the Securities Act with respect to the disposition of
all of the Shares until the earlier of (i) such time as all of such Shares have
been disposed of in accordance with the intended methods of disposition set
forth in such registration statement or (ii) the expiration of nine months
after such registration statement becomes effective;
(c) in the case of a Shelf Registration (but not including any Convertible
Registration), prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection therewith as
may be necessary to keep such registration statement effective and to comply
with the provisions of the Securities Act with respect to the disposition of
all Shares subject thereto for a period ending on the earlier of (i) 18 months
after the effective date of such registration statement and (ii) the date on
which all the Shares subject thereto have been sold pursuant to such
registration statement (the "Shelf Effective Period");
(d) in the case of a Convertible Registration or an Exchange Registration,
prepare and file with the SEC such amendments and supplements to such
registration statement and the prospectus used in connection therewith as may
be necessary to keep such registration statement effective and to comply with
the provisions of the Securities Act with respect to the disposition of
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all of the Shares subject thereto until such time as the rules, regulations and
requirements of the Securities Act and the terms of the Convertible Securities
no longer require such Shares to be registered under the Securities Act (the
"Convertible Effective Period");
(e) furnish to the Selling Holders and to any underwriter of such Shares
such number of conformed copies of such registration statement and of each such
amendment and supplement thereto (in each case including all exhibits), such
number of copies of the prospectus included in such registration statement
(including each preliminary prospectus and any summary prospectus), in
conformity with the requirements of the Securities Act, such documents
incorporated by reference in such registration statement or prospectus, and
such other documents as the Selling Holders or such underwriter may reasonably
request;
(f) use its best efforts to register or qualify all of the Shares covered
by such registration statement under such other securities or blue sky laws of
such United States jurisdictions as the Selling Holders or any underwriter of
such Shares shall reasonably request, and do any and all other acts and things
which may be necessary or advisable to enable the Selling Holders or any
underwriter to consummate the disposition in such jurisdictions of the Shares
covered by such registration statement, except that the Company shall not for
any such purpose be required to qualify generally to do business as a foreign
corporation in any Jurisdiction where it is not so qualified, or to subject
itself to taxation in any such jurisdiction, or to consent to general service
of process in any such jurisdiction;
(g) (i) furnish to the Selling Holders, addressed to them, an opinion of
counsel for the Company, dated the date of the closing under the underwriting
agreement, and (ii) use its best efforts to furnish to the Selling Holders,
addressed to them, a "cold comfort" letter signed by the independent public
accountants who have certified the Company's financial statements included in
such registration statement, covering substantially the same matters with
respect to such registration statement (and the prospectus included therein)
and, in the case of such accountants' letter, with respect to events subsequent
to the date of such financial statements, as are customarily covered in
opinions of issuer's counsel and in accountants' letters delivered to
underwriters in underwritten public offerings of securities and such other
matters as the Selling Holders may reasonably request, in each case, in form
and substance reasonably satisfactory to the Selling Holders; and
(h) immediately notify the Selling Holders, at any time when a prospectus
relating to a registration pursuant to Section 2 or 3 is required to be
delivered under the Securities Act, of the happening of any event as a result
of which the prospectus included in such registration statement, as then in
affect, includes an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, and at the request of the Selling Holders prepare and furnish to
the Selling Holders a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such Shares, such prospectus shall not include
an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they are made, not misleading.
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The Company may require the Selling Holders to furnish the Company with
such information regarding the Selling Holders and the distribution of such
Shares as the Company may from time to time reasonably request in writing and
as shall be required by law, the SEC or any securities exchange on which any
shares of Common Stock are then listed for trading in connection with any
registration.
4.2 Underwriting. If requested by the underwriters for any underwritten
offering in connection with a registration requested hereunder (including any
registration under Section 3 which involves, in whole or in part, an
underwritten offering), the Company will enter into an underwriting agreement
with such underwriters for such offering, such agreement to contain such
representations and warranties by the Company and such other terms and
provisions as are customarily contained in underwriting agreements with respect
to secondary distributions, including, without limitation, indemnities and
contribution to the effect and to the extent provided in Section 6 and the
provision of opinions of counsel and accountants' letters to the effect and to
the extent provided in Section 4.1(g). The Company may require that the Shares
requested to be registered pursuant to Section 3 be included in such
underwriting on the same terms and conditions as shall be applicable to the
Other Securities being sold through underwriters under such registration. The
Selling Holders of the Shares to be distributed by such underwriters shall be
parties to any such underwriting agreement, and the representations and
warranties by, and the other agreements on the part of, the Company to and for
the benefit of such underwriters shall also be made to and for the benefit of
such Selling Holders.
4.3 Blackout Periods.
(a) At any time when a registration statement effected pursuant to
Section 2 relating to the Shares is effective, upon written notice from the
Company to the Selling Holders that the Company determines in the good faith
judgment of the general counsel of the Company that the Selling Holders sale of
the Shares pursuant to the registration statement would require disclosure of
material information which the Company has a bona fide business purpose for
preserving as confidential and the disclosure of which would have a material
adverse effect on the Company or the Company is unable to comply with SEC
requirements (an "Information Blackout"), the Selling Holders shall suspend
sales of the Shares pursuant to such registration statement until the earlier
of (i) the date upon which such material information is disclosed to the public
or ceases to be material, (ii) 120 days after the general counsel of the
Company makes such good faith determination or (iii) such time as the Company
notifies the Selling Holders that sales pursuant to such registration statement
may be resumed (the number of days from such suspension of sales of the Selling
Holders until the day when such sales may be resumed hereunder is hereinafter
called a "Sales Blackout Period").
(b) Any delivery by the Company of notice of an Information Blackout
during the 90 days immediately following effectiveness of any registration
statement effected pursuant to Section 2 shall give the Selling Holders the
right, by notice to the Company within 20 days after the end of such blackout
period, to cancel such registration and obtain for the Holders one additional
registration right (a "Blackout Termination Right") under Section 2.1(d).
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(c) If there is an Information Blackout and the Selling Holders do not
exercise the cancellation right, if any, pursuant to clause (b) of this Section
4.3, or, if such cancellation right is not available, the period set forth in
Section 4.1(b)(ii) or Section 4.1(c)(i), as applicable, shall be extended for a
number of days equal to the number of days in the Sales Blackout Period.
4.4 Listing. In connection with the registration of any offering of the
Shares pursuant to this Agreement, the Company agrees to use its best efforts
to effect the listing of such Shares on any securities exchange on which any
shares of the Common Stock are then listed or otherwise facilitate the public
trading of such Shares.
4.5 Holdback Agreements.
(a) The Company shall not effect any public sale or distribution of its
equity securities, or any securities convertible into or exchangeable or
exercisable for such securities, during the seven days prior to and during the
90-day period beginning on the effective date of any registration statement in
connection with a Demand Registration (other than a Shelf Registration), except
pursuant to registrations on Form S-8 or any successor form or unless the
underwriters managing any such public offering otherwise agree.
(b) If the Holders of Shares notify the Company in writing that they
intend to effect an underwritten sale of Shares registered pursuant to a Shelf
Registration pursuant to Section 2 hereof, the Company shall not effect any
public sale or distribution of its equity securities, or any securities
convertible into or exchangeable or exercisable for its equity securities,
during the seven days prior to and during the 90-day period beginning on the
date such notice is received, except pursuant to registrations on Form S-8 or
any successor form or unless the underwriters managing any such public offering
otherwise agree.
4.6 Eligibility. The Company represents and warrants that it currently is
eligible to use Form S-3 under the Securities Act and covenants that it shall
use its reasonable best efforts to remain so eligible until the later of (i)
the Termination Date, (ii) the end of any Shelf Registration Period and (ii)
the end of any Convertible Registration Period.
4.7 Regulatory Approvals. If the disposition of the Shares subject to any
registration hereunder would cause a change in ownership or control of the
Company or any of its ITT Technical Institutes under any of the laws,
regulations and/or standards of the U.S. Department of Education, the state
education authorities that regulate the Company's ITT Technical Institutes or
the accrediting commissions that accredit the Company's ITT Technical
Institutes (collectively, the "Regulators"), the Selling Holders shall not
dispose of any such Shares until the Company obtains all of the required prior
approvals of the change in ownership or control from the Regulators. The
Company shall take, or cause to be taken, all actions, and do, or cause to be
done, all things, necessary, proper or advisable under applicable laws and
regulations to obtain, as promptly as practicable, all the required prior
approvals from the Regulators prior to such disposition. The Company and the
Selling Holders shall cooperate with each other in seeking all approvals from
the Regulators.
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Section 5. Preparation; Reasonable Investigation. In connection with the
preparation and filing of each registration statement registering the Shares
under the Securities Act and each sale of the Shares thereunder, the Company
will give the Selling Holders and the underwriters, if any, and their
respective counsel and accountants, such reasonable and customary access to its
books and records and such opportunities to discuss the business of the Company
with its officers and the independent public accountants who have certified its
financial statements as shall be necessary, in the opinion of the Selling
Holders and such underwriters or their respective counsel, to conduct a
reasonable investigation within the meaning of the Securities Act.
Section 6. Indemnification and Contribution.
(a) In the event of any registration of any of the Shares hereunder, the
Company will enter into customary indemnification arrangements to indemnify and
hold harmless each of the Selling Holders, each of their respective directors
and officers, each Person (as defined in (d) below) who participates as an
underwriter in the offering or sale of such securities, each officer and
director of each underwriter, and each Person, if any, who controls each such
Selling Holder or any such underwriter within the meaning of the Securities Act
(collectively, the "Covered Persons") against any losses, claims, damages,
liabilities and expenses, joint or several, to which such Person may be subject
under the Securities Act or otherwise insofar as such losses, claims, damages,
liabilities or expenses (or actions or proceedings in respect thereof) arise
out of are based upon (i) any untrue statement or alleged untrue statement of
any material fact contained in any related registration statement filed under
the Securities Act, any preliminary prospectus or final prospectus included
therein, or any amendment or supplement thereto, or any document incorporated
by reference therein, or (ii) any omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, and the Company will reimburse each such
Covered Person, as incurred, for any legal or any other expenses reasonably
incurred by such Covered Person in connection with investigating or defending
any such loss, claim, liability, action or proceeding; provided, however, that
the Company shall not be liable in any such case to the extent that any such
loss, claim, damage, liability (or action or proceeding in respect thereof) or
expense arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in such registration statement,
any such preliminary prospectus or final prospectus, amendment or supplement in
reliance upon and in conformity with written information furnished to the
Company by such Selling Holder or such underwriter specifically for use in the
preparation thereof. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of any such Covered Person
and shall survive the transfer of such securities by the Selling Holders. The
Company also shall agree to provide for contribution as shall reasonably be
requested by the Selling Holders or any underwriters in circumstances where,
such indemnity is held unenforceable.
(b) Each of the Selling Holders, by virtue of exercising its respective
registration rights hereunder, agree and undertake to enter into customary
indemnification arrangements to indemnify and hold harmless (in the same manner
and to the same extent as set forth in clause (a) of this Section 6) the
Company, its directors and officers, each Person who participates as an
underwriter in the offering or sale of such securities, each officer and
director of each underwriter,
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and each Person, if any, who controls the Company or any such underwriter
within the meaning of the Securities Act, with respect to any statement
in or omission from such registration statement, any preliminary
prospectus or final prospectus included therein, or any amendment or supplement
thereto, if such statement or omission was made in reliance upon and in
conformity with written information furnished by such Selling Holder to the
Company specifically for inclusion in such registration statement or
prospectus. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of the Company or any such director,
officer or Person and shall survive the transfer of the registered securities
by the Selling Holders. The Selling Holders also shall agree to provide for
contribution as shall reasonably be requested by the Company or any
underwriters in circumstances where such indemnity is held unenforceable.
(c) Indemnification and contribution similar to that specified in the
preceding subdivisions of this Section 6 (with appropriate modifications) shall
be given by the Company and the Selling Holders with respect to any required
registration or other qualification of such Shares under any federal or state
law or regulation of governmental authority other than the Securities Act.
(d) "Person" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization and a governmental entity, or any
department, agency or political subdivision thereof.
Section 7. Benefits and Termination of Registration Rights. The Holders
may jointly exercise the registration rights granted hereunder in such manner
and proportions as they shall agree among themselves; provided, however, any
Permitted Transferees of the Shares shall be subject to and bound by all of the
terms and conditions hereof applicable to ITT (in addition to those terms and
conditions expressly applicable to Holders or Selling Holders). The
registration rights hereunder shall cease to apply to any particular Shares
when: (a) a registration statement with respect to the sale of such Shares
shall have become effective under the Securities Act and such Shares shall have
been disposed of in accordance with such registration statement; (b) such
Shares shall have been sold to the public pursuant to Rule 144 under the
Securities Act (or any successor provision); (c) such Shares shall have been
otherwise transferred, new certificates for them not bearing a legend
restricting further transfer shall have been delivered by the Company and
subsequent public distribution of them shall not require registration or
qualification of them under the Securities Act or any similar state law then in
force; or (d) such Shares shall have ceased to be outstanding.
Section 8. Registration Expenses. As used in this Agreement, the term
"Registration Expenses" means all expenses incident to the Company's
performance of or compliance with the registration requirements set forth in
this Agreement including, without limitation, the following: (a) the fees,
disbursements and expenses of the Company's counsel and accountants in
connection with the registration of the Shares to be disposed of under the
Securities Act; (b) all expenses in connection with the preparation, printing
and filing of the registration statement, any preliminary prospectus or final
prospectus, any other offering document and amendments and supplements thereto
and the mailing and delivering of copies thereof to the underwriters and
dealers; (c) the cost of printing and producing any agreements among
underwriters, underwriting agreements, and blue sky or legal investment
memoranda, any selling agreements and any amendments thereto or other
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documents in connection with the offering, sale or delivery of the Shares to be
disposed of; (d) all expenses in connection with the qualification of
the Shares to be disposed of for offering and sale under state securities laws,
including the fees and disbursements of counsel for the underwriters in
connection with such qualification and in connection with any blue sky and
legal investment surveys; (e) the filing fees incident to securing any required
review by the New York Stock Exchange and any other securities exchange on
which the Common Stock is then traded or listed of the terms of the sale of
the Shares to be disposed of and the trading or listing of all such Shares on
each such exchange; (f) the costs of preparing stock certificates; and (g) the
costs and charges of the Company's transfer agent and registrar. Registration
Expenses shall not include (x) underwriting discounts and underwriters'
commissions attributable to the Shares being registered for sale on behalf of
the Selling Holders, (y) the fees, disbursements and expenses of the Selling
Holders' counsel, accountants and advisors and (z) in the case of a
registration pursuant to Section 3, the filing fees payable under the
Securities Act for the Shares being registered for sale on behalf of the
Selling Holders, which costs and expenses in clauses (x), (y) and (z) of this
Section 8 shall be paid by the Selling Holders.
Section 9. Miscellaneous.
9.1 No Inconsistent Agreements. The Company shall not on or after the
date of this Agreement enter into any agreement with respect to its securities
that violates the rights expressly granted to the Holders in this Agreement.
9.2 Assignment. This Agreement shall be binding on and inure to the
benefit of and be enforceable by the parties hereto and with respect to the
Company, its respective successors and assigns, and any Permitted Transferees.
9.3 Governing Law. This Agreement shall be construed, performed and
enforced in accordance with, and governed by, the laws of the State of New York
applicable to contracts executed in and to be performed in that State.
9.4 Severability. In the event that any part of this Agreement is declared
by a court or other judicial or administrative body to be null, void or
unenforceable, said provision shall survive to the extent it is not so
declared, and all of the other provisions of this Agreement shall remain in
full force and effect.
9.5 Notices. All notices, requests, demands and other communications
under this Agreement shall be in writing and shall be deemed to have been duly
given: (a) on the date of service if served personally on the party to whom
notice is to be given; (b) on the day of transmission if sent via facsimile
transmission to the facsimile number given below, and telephonic confirmation
of receipt is obtained promptly after completion of transmission; (c) on the
day after delivery to Federal Express or similar overnight courier or the
Express Mail service maintained by the United States Postal Service; or (d) on
the fifth day after mailing, if mailed to the party to whom notice is to be
given, by first class mail, registered or certified, postage prepaid and
properly addressed, to the party as follows:
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If to ITT or any other Holder:
ITT Corporation
777 Westchester Avenue
White Plains, New York 10604
Attn: General Counsel
Facsimile: (914) 640-8260
If to the Company:
ITT Educational Services, Inc.
5975 Castle Creek Parkway N. Drive
P.O. Box 50466
Indianapolis, Indiana 46250-0466
Attn: General Counsel
Facsimile: (317) 594-4384
Any party may change its address for the purpose of this Section 9.5 by
giving the other party written notice of its new address in the manner set
forth above.
9.6 Amendments; Waivers. This Agreement may be amended or modified, and
any of the terms, covenants or conditions hereof may be waived, only by a
written instrument executed by the parties hereto, or in the case of a waiver,
by the party waiving compliance. Any waiver by any party of any condition, or
of the breach of any provision, term or covenant, contained in this Agreement,
in any one or more instances, shall not be deemed to be nor construed as a
furthering or continuing waiver of any such condition, or of the breach of any
other provision, term or covenant of this Agreement.
9.7 Section and Paragraph Headings. The section and paragraph headings in
this Agreement are for reference purposes only and shall not affect the meaning
or interpretation of this Agreement.
9.8 Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which shall constitute the same
instrument.
* * *
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the date
first above written.
ITT EDUCATIONAL SERVICES, INC.
By /s/ Clark D. Elwood
-----------------------------------
Name: Clark D. Elwood
--------------------------------
Title: Senior Vice President, General
Counsel and Secretary
------------------------------
ITT CORPORATION
By /s/ Alan M. Schnaid
-----------------------------------
Name: Alan M. Schnaid
--------------------------------
Title: Vice President
-------------------------------
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