-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JC3V484spGs7Cli+xIqop1d3Uy2yANwmvdpZY6GTDSO4qMKeUkIbqszXupgwdvUy 5TSmlieiHD6Qmws48ej88Q== 0000950137-98-002641.txt : 19980630 0000950137-98-002641.hdr.sgml : 19980630 ACCESSION NUMBER: 0000950137-98-002641 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 19980629 SROS: NYSE SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: ITT EDUCATIONAL SERVICES INC CENTRAL INDEX KEY: 0000922475 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-EDUCATIONAL SERVICES [8200] IRS NUMBER: 362061311 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: SEC FILE NUMBER: 005-44209 FILM NUMBER: 98657061 BUSINESS ADDRESS: STREET 1: 5975 CASTLE CREEK PKWY N DR STREET 2: PO BOX 50466 CITY: INDIANAPOLIS STATE: IN ZIP: 46250 BUSINESS PHONE: 3175949499 MAIL ADDRESS: STREET 1: 5975 CASTLE CREEK PKWY N DR STREET 2: P O BOX 50466 CITY: INDIANAPOLIS STATE: IN ZIP: 46250-0466 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: STARWOOD HOTEL & RESORTS WORLDWIDE INC CENTRAL INDEX KEY: 0000316206 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 521193298 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 2231 E CAMELBACK RD, 4TH FL STREET 2: SUITE 400 CITY: PHOENIX STATE: AZ ZIP: 85016 BUSINESS PHONE: 6028523900 MAIL ADDRESS: STREET 1: 2231 E CAMELBACK RD. 4TH FL STREET 2: SUITE 4O0 CITY: PHOENOX STATE: AZ ZIP: 85016 FORMER COMPANY: FORMER CONFORMED NAME: STARWOOD LODGING CORP DATE OF NAME CHANGE: 19950215 FORMER COMPANY: FORMER CONFORMED NAME: HOTEL INVESTORS CORP DATE OF NAME CHANGE: 19920703 SC 13D/A 1 AMENDMENT NO. 1 TO SCHEDULE 13D 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. ----------------------------------------------------------------------- (Name of Issuer) Common Stock, $.01 par value ----------------------------------------------------------------------- (Title of Class of Securities) 45068B 10 9 ----------------------------------------------------------- (CUSIP Number) Alan M. Schnaid Vice President and Corporate Controller Starwood Hotels & Resorts Worldwide, Inc. 2231 East Camelback Road, Suite 400, Phoenix, Arizona 85016 - -------------------------------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) June 9, 1998 ----------------------------------------------------------- (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) 2 SCHEDULE 13D - -------------------------------------------------------------------------------- CUSIP NO. 45068B 10 9 | PAGE 2 OF 7 PAGES ---------------------- | --- --- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) Starwood Hotels & Resorts Worldwide, Inc. - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ] (b) [ ] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* BK, OO - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Maryland - -------------------------------------------------------------------------------- 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% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* CO - -------------------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT! 3 SCHEDULE 13D - -------------------------------------------------------------------------------- CUSIP NO. 45068B 10 9 | PAGE 3 OF 7 PAGES ---------------------- | --- --- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 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) [ ] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* OO - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Nevada - -------------------------------------------------------------------------------- 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% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* CO - -------------------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT! 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). 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 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. * * * * * * 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 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 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 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 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 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 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 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. 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 EX-99.1 2 STOCKHOLDER AGREEMENT 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 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 2 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- 3 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. 4 5 (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 5 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 6 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 7 8 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 8 9 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 9 10 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 10 11 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, 11 12 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: 12 13 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. * * * * 13 14 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 14 EX-99.2 3 AMENDED & RESTATED REGISTRATION RIGHTS AGREEMENT 1 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. 2 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 2 3 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 3 4 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 4 5 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 5 6 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. 6 7 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). 7 8 (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. 8 9 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, 9 10 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 10 11 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: 11 12 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. * * * 12 13 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 ------------------------------- 13 -----END PRIVACY-ENHANCED MESSAGE-----